<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1996
REGISTRATION NO. 333-13627
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PROGENICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 13-3379479
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
777 OLD SAW MILL RIVER ROAD
TARRYTOWN, NEW YORK 10591
(914) 789-2800
(Address, including zip code and telephone number, including area
code, of registrant's principal executive offices)
PAUL J. MADDON, M.D., PH.D.
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
PROGENICS PHARMACEUTICALS, INC.
777 OLD SAW MILL RIVER ROAD
TARRYTOWN, NEW YORK 10591
(914) 789-2800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE, SHOULD BE SENT TO:
MARK R. BAKER, ESQ. DAVID E. REDLICK, ESQ.
DEWEY BALLANTINE HALE AND DORR
1301 AVENUE OF THE AMERICAS 60 STATE STREET
NEW YORK, NEW YORK 10019 BOSTON, MASSACHUSETTS 02109
(212) 259-8000 (617) 526-6000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 25, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
<PAGE>
2,000,000 SHARES
[COMPANY LOGO]
Progenics Pharmaceuticals, Inc.
COMMON STOCK
--------------
All of the shares of Common Stock offered hereby are being sold by Progenics
Pharmaceuticals, Inc. ("Progenics" or the "Company"). Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
anticipated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market, upon notice of
issuance, under the symbol "PRGN."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.......................................... $ $ $
Total(3)........................................... $ $ $
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.
(2) Before deducting expenses of the offering payable by the Company estimated
at $750,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to 300,000 additional shares of
Common Stock at the Price to Public per share, less the Underwriting
Discount, for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
-------------------
The shares of Common Stock are offered severally by the Underwriters when,
as and if delivered to and accepted by them, subject to their right to withdraw,
cancel or reject orders in whole or in part and subject to certain other
conditions. It is expected that delivery of the certificates representing the
shares will be made against payment on or about , 1996 at the office
of Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Center, New York,
New York 10281.
-------------------
OPPENHEIMER & CO., INC. VECTOR SECURITIES INTERNATIONAL, INC.
The date of this Prospectus is , 1996
<PAGE>
GMK GANGLIOSIDE CONJUGATE VACCINE IS PROGENICS' LEAD CANCER THERAPEUTIC
CANDIDATE.
GMK HAS ENTERED PIVOTAL PHASE III CLINICAL TRIALS FOR THE TREATMENT OF MALIGNANT
MELANOMA.
[DIAGRAM DEPICTING THE COMPANY'S GANGLIOSIDE CONJUGATE VACCINE, GMK]
------------------------
The Company was incorporated in December 1986. Its principal executive
offices are located at 777 Old Saw Mill River Road, Tarrytown, New York 10591
and its telephone number is (914) 789-2800.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS:
(I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION; (II) GIVES
EFFECT TO A THREE-FOR-FOUR REVERSE STOCK SPLIT WITH RESPECT TO THE COMPANY'S
COMMON STOCK, PAR VALUE $.0013 (THE "COMMON STOCK"), TO BE EFFECTED PRIOR TO THE
COMPLETION OF THIS OFFERING; AND (III) GIVES EFFECT TO THE AUTOMATIC CONVERSION
OF ALL OUTSTANDING SHARES OF THE COMPANY'S PREFERRED STOCK, PAR VALUE $.001 PER
SHARE (THE "PREFERRED STOCK"), INTO AN AGGREGATE OF 4,259,878 SHARES OF COMMON
STOCK. SEE "CAPITALIZATION," "DESCRIPTION OF CAPITAL STOCK" AND "NOTES TO
FINANCIAL STATEMENTS." INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A
HIGH DEGREE OF RISK.
THE COMPANY
Progenics Pharmaceuticals, Inc. ("Progenics" or the "Company") is a
biopharmaceutical company focusing on the development and commercialization of
innovative products for the treatment and prevention of cancer and viral
diseases. The Company applies its immunology expertise to develop
biopharmaceuticals that induce an immune response or that mimic natural immunity
in order to fight cancers, such as malignant melanoma, and viral diseases, such
as human immunodeficiency virus ("HIV") infection. Progenics' most advanced
product candidate, GMK, is a therapeutic vaccine that is undergoing pivotal
Phase III clinical trials for the treatment of melanoma, a deadly form of skin
cancer. Progenics' second vaccine product, MGV, is being developed for the
treatment of various cancers, and recently entered Phase I/II clinical trials.
Based on its participation in the discoveries of two major receptors for HIV,
the Company is engaged in research and development of several therapeutic
products designed to block entry of the virus into human immune system cells.
Progenics has completed preclinical studies on two HIV product candidates, PRO
542 and PRO 367, and plans to initiate Phase I/II clinical trials of these
products in 1997.
Progenics' most advanced product candidates are based on two proprietary
technologies: ganglioside conjugate vaccine technology, which the Company uses
in its cancer program; and universal antiviral binding agent ("UnAB")
technology, which the Company uses in its HIV program. The Company has
exclusively licensed from Memorial Sloan-Kettering Cancer Center
("Sloan-Kettering") several ganglioside conjugate vaccines designed to stimulate
the immune system to destroy cancer cells. The Company applies its UnAB
technology to produce antibody-like molecules designed to neutralize or destroy
HIV or HIV-infected cells.
CANCER THERAPEUTICS
GMK is a therapeutic cancer vaccine designed to prevent recurrence of
melanoma in patients who are at risk of relapse after surgery. Developed at
Sloan-Kettering, GMK is composed of a ganglioside antigen which is abundant in
melanoma cells, conjugated to an immunogenic carrier protein and combined with
an adjuvant (an immunological stimulator). In August 1996, the Company commenced
the first of three pivotal, randomized, multicenter Phase III clinical trials of
GMK. These studies are being conducted in the United States by the Eastern
Cooperative Oncology Group ("ECOG") and the Southwest Oncology Group ("SWOG"),
which are cooperative cancer research groups supported by the National Cancer
Institute ("NCI"). Two international Phase III clinical trials will be initiated
in 1997 and will be conducted in Europe by the Institute of Cancer Research
("ICR") of the United Kingdom and the European Organization for Research and
Treatment of Cancer ("EORTC").
MGV, the Company's second ganglioside conjugate vaccine, incorporates two
ganglioside antigens that are abundant in a wide range of cancer cells. These
cancers include colorectal cancer, lymphoma, small cell lung cancer, sarcoma,
gastric cancer, neuroblastoma and melanoma. In September 1996, MGV entered Phase
I/II clinical trials at Sloan-Kettering.
3
<PAGE>
HIV THERAPEUTICS
The Company is pursuing two approaches based on its HIV receptor technology
in the research and development of products designed to block viral entry into
human immune system cells. The Company's UnAB approach is based on the CD4
receptor while its HIV fusion approach is based on a recently discovered second
receptor for the virus, CC-CKR-5 ("CKR-5").
Progenics is developing PRO 542 to selectively target HIV and prevent it
from infecting healthy cells by binding to the sites on the virus that are
required for entry into the cell. PRO 542 is based on Progenics' UnAB technology
and has been shown IN VITRO to recognize a wide range of HIV strains, including
those most prevalent in the United States and the rest of the world. PRO 542 is
being developed as an immunotherapy to treat HIV-positive individuals and as an
immunoprophylactic treatment to prevent infection of individuals who have been
exposed to the virus. The Company plans to file an investigational new drug
application ("IND") covering PRO 542 by the end of 1996 and initiate Phase I/II
clinical trials in 1997.
Progenics is developing PRO 367 as a therapeutic agent designed to kill
HIV-infected cells. PRO 367 consists of a UnAB molecule linked to a therapeutic
radioisotope and is designed to bind to and destroy HIV-infected cells by
delivering a lethal dose of radioactivity. The Company plans to begin Phase I/II
clinical trials of PRO 367 in 1997.
In June 1996, the Company's scientists in collaboration with researchers at
The Aaron Diamond AIDS Research Center ("ADARC") described in an article
published in NATURE the discovery of a second receptor for HIV, CKR-5. This
receptor enables fusion of HIV with the cell membrane, entry of the viral
genetic information into the cell and initiation of viral replication. The
Company is using its proprietary ProSys assay in a program to discover novel
therapeutics that specifically inhibit the interaction of HIV with the CKR-5
receptor, thereby blocking viral fusion and entry.
BUSINESS STRATEGY
The Company's business strategy is to develop and commercialize innovative
products for cancer and viral diseases which the Company believes would meet a
significant need of those individuals suffering from these diseases and which
the Company also believes have the potential to generate substantial revenues.
The Company intends to accomplish this strategy by capitalizing on its
proprietary technologies and its expertise in product development and clinical
trials. Key elements of this strategy include: collaborating with leading
academic and government-supported institutions and clinical groups to control
the Company's research and clinical trial expenditures; licensing from
institutions and other companies promising technologies and product candidates
to minimize basic research costs and overhead; and, maximizing the Company's
share of revenues from products that are brought to market by initiating
clinical trials of product candidates, when appropriate, prior to establishing
collaborations with pharmaceutical companies. Consistent with this strategy,
Progenics has limited its corporate infrastructure and operating costs while
developing four product candidates that have entered, or are about to enter,
clinical trials.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,000,000 shares
Common Stock to be outstanding after the
offering................................... 8,554,553 shares (1)
Use of proceeds.............................. To fund clinical trials of its leading
product candidates, research and development,
in-licensing of late-stage technology and for
working capital and general corporate
purposes.
Proposed Nasdaq National Market symbol....... PRGN
Risk Factors................................. This offering involves a high degree of risk.
See "Risk Factors."
</TABLE>
- ------------------------
(1) Based on the number of shares outstanding at September 30, 1996. Excludes
2,051,691 shares of Common Stock reserved as of such date for issuance
pursuant to outstanding options under the Company's stock option plans and
pursuant to outstanding warrants and 62,775 shares subject to options to be
granted prior to the completion of this offering at an exercise price equal
to the initial public offering price. See "Capitalization" and "Description
of Capital Stock."
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 1,
NINE MONTHS ENDED 1986
(INCEPTION)
YEARS ENDED DECEMBER 31, SEPTEMBER 30, THROUGH
------------------------------- -------------------- SEPTEMBER 30,
1993 1994 1995 1995 1996 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Research grants..................................... $ 84 $ 504 $ 725 $ 502 $ 268 $ 1,735
Product sales....................................... 50 52 50 40 67 358
Interest income..................................... 53 108 46 44 91 633
--------- --------- --------- --------- --------- -------------
Total revenues.................................... 187 664 821 586 426 2,726
--------- --------- --------- --------- --------- -------------
Expenses:
Research and development............................ 1,547 2,859 3,853 2,585 2,654 15,505
General and administrative.......................... 748 878 1,094 790 984 6,257
Interest expense.................................... 38 50 87 53 40 440
Depreciation and amortization....................... 249 289 291 229 230 1,663
--------- --------- --------- --------- --------- -------------
Total expenses.................................... 2,582 4,076 5,325 3,657 3,908 23,865
--------- --------- --------- --------- --------- -------------
Net loss.............................................. $ (2,395) $ (3,412) $ (4,504) $ (3,071) $ (3,482) $ (21,139)
--------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- -------------
Pro forma net loss per common share(2)................ $ (0.73) $ (0.57)
--------- ---------
--------- ---------
Pro forma weighted average common shares
outstanding(2)...................................... 6,135 6,135
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(3)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 1,746 $ 23,316
Working capital.......................................................................... 894 22,464
Total assets............................................................................. 2,841 24,411
Capital lease obligations and deferred lease liability, long-term portion................ 181 181
Total stockholders' equity............................................................... 1,668 23,238
</TABLE>
- ------------------------
(2) See Note 2 to the Company's Financial Statements for information concerning
computation of the pro forma per share data.
(3) As adjusted to reflect the sale of 2,000,000 shares of Common Stock offered
by the Company hereby, assuming an initial public offering price of $12.00
per share, and the receipt of the net proceeds therefrom after deducting the
underwriting discount and estimated offering expenses. See "Use of
Proceeds."
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY IS SPECULATIVE IN
NATURE AND INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE
SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT
STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS.
FOR EXAMPLE, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS," "INTENDS"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THERE ARE A NUMBER OF IMPORTANT FACTORS, INCLUDING THE RISK FACTORS SET FORTH
BELOW, THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
EARLY STAGE OF PRODUCT DEVELOPMENT; TECHNOLOGICAL UNCERTAINTIES
The Company is in the development stage, and the development of any products
will require significant further research, development, testing and regulatory
approvals and additional investment prior to commercialization. Substantially
all of the Company's resources have been, and for the foreseeable future will
continue to be, dedicated to the development of products for cancer and viral
diseases, most of which are still in the early stages of development and
testing. There are a number of technological challenges that the Company must
successfully address to complete most of its development efforts. In addition,
the product development programs conducted by the Company and its collaborators
are subject to the risks of failure inherent in the development of product
candidates based on new technologies. These risks include the possibility that
the technologies used by the Company will prove to be ineffective or any or all
of the Company's product candidates will prove to be unsafe or otherwise fail to
receive necessary regulatory approvals; that the product candidates, if safe and
effective, will be difficult to manufacture on a large scale or uneconomical to
market; that the proprietary rights of third parties will preclude the Company
or its collaborators from marketing the products utilizing the Company's
technologies; or that third parties will market superior or equivalent products.
To the Company's knowledge, no cancer or therapeutic vaccine and no genetically
engineered antibody for the treatment of HIV infection has been approved for
marketing and there can be no assurance that any of the Company's products will
be successfully developed. The commercial success of the Company's products,
when and if approved for marketing by the U.S. Food and Drug Administration (the
"FDA"), will depend upon their acceptance by the medical community and third
party payors as clinically useful, cost-effective and safe. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Product Development," "--Manufacturing," "--Government Regulation"
and "--Competition."
UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING
The grant of regulatory approvals for the commercial sale of any of the
Company's potential products will depend on the Company successfully conducting
extensive preclinical and clinical testing to demonstrate their safety and
efficacy in humans. The results of preclinical studies by the Company and/or its
collaborators may be inconclusive and may not be indicative of results that will
be obtained in human clinical trials. In addition, results attained in early
human clinical trials relating to the products under development by the Company
may not be indicative of results that will be obtained in later clinical trials.
As results of particular preclinical studies and clinical trials are received by
the Company, the Company may abandon projects which it might otherwise have
believed to be promising, some of which may be described in this Prospectus.
Although human clinical trials have commenced with respect to the
development of GMK and MGV, the Company is developing other therapeutic
products, including PRO 542 and PRO 367, on which it plans to file INDs with the
FDA or make equivalent filings outside of the U.S., and there can be no
assurance that necessary preclinical studies on these products will be completed
satisfactorily or that the Company otherwise will be able to make its intended
filings. Further, there can be no assurance that the Company
6
<PAGE>
will be permitted to undertake and complete human clinical trials of any of the
Company's potential products, either in the U.S. or elsewhere, or, if such
trials are permitted, that such products will not have undesirable side effects
or other characteristics that may prevent them from being approved or limit
their commercial use if approved. Clinical testing is very expensive and the
Company will have to devote substantial resources for the payment of clinical
trial expenses.
The rate of completion of the Company's human clinical trials, if permitted,
will be dependent upon, among other factors, the rate of patient enrollment.
Patient enrollment is a function of many factors, including the size of the
patient population, the nature of the protocol, the availability of alternative
treatments, the proximity to clinical sites and the eligibility criteria for the
study. Delays in planned patient enrollment might result in increased costs and
delays, which could have a material adverse effect on the Company. The Company
or the FDA or other regulatory agencies may suspend clinical trials at any time
if the subjects or patients participating in such trials are being exposed to
unacceptable health risks. In addition, clinical trials are often conducted with
patients having the most advanced stages of disease. During the course of
treatment, these patients can suffer adverse medical effects or die for reasons
that may not relate to the product being tested, but which can nevertheless
affect adversely the clinical trials. In addition, there can be no assurance
that clinical trials of products under development will demonstrate safety and
efficacy at all or to the extent necessary to obtain regulatory approvals.
Companies in the biotechnology industry have suffered significant setbacks in
advanced clinical trials, even after obtaining promising results in earlier
trials. Consequently, the period of time necessary to complete clinical testing
and receive regulatory approval can be quite extensive and involve many years.
The failure to adequately demonstrate the safety and efficacy of a therapeutic
product under development could delay or prevent regulatory approval of the
product and would have a material adverse effect on the Company.
Lastly, the Company has limited experience in conducting clinical trials.
The Company relies, in part, on academic institutions and on clinical research
organizations to conduct and monitor certain clinical trials. There can be no
assurance that such entities will conduct the clinical trials successfully. In
addition, certain clinical trials for the Company's products will be conducted
by government-sponsored agencies. Because the conduct of such trials will be
dependent on government participation and funding, the Company will have less
control over such trials than if the Company were the sole sponsor thereof. As a
result, there can be no assurance that these trials will commence or be
completed as planned. See "Business--Product Development," "--Cancer
Therapeutics," "--HIV Therapeutics" and "--Government Regulation."
HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT; NO PRODUCT REVENUE AND
UNCERTAINTY OF FUTURE PROFITABILITY
The Company has incurred substantial losses in each year since its
inception. As of September 30, 1996, the Company had an accumulated deficit of
approximately $21 million. Such losses have resulted principally from costs
incurred in the Company's research and development programs and general and
administrative costs associated with the Company's development. The Company has
derived only limited revenues from federal research grants and from the sale of
research reagents. No revenues have been generated by the Company from product
sales (other than for research purposes) or royalties and no product sales
(other than sales of research reagents) or royalties are likely for a number of
years, if ever. The Company expects to incur additional operating losses over at
least the next several years and expects losses in the future to increase
significantly as the Company expands development and clinical trial efforts. The
Company expects that losses will fluctuate from quarter to quarter and that such
fluctuations may be substantial. The Company's ability to achieve profitability
is dependent in part on obtaining regulatory approvals for products and entering
into agreements for commercialization of such products. There can be no
assurance that such regulatory approvals will be obtained or such agreements
will be entered into. Further, there can be no assurances that the Company's
operations will become profitable even if products
7
<PAGE>
under development by the Company or any collaborators are commercialized. See
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
NEED FOR ADDITIONAL FINANCING AND UNCERTAIN ACCESS TO CAPITAL FUNDING
Progenics' current development projects require substantial capital. The
Company believes that the net proceeds of this offering, together with the
Company's present capital resources, should be sufficient to fund operations
through the end of 1998 based on the Company's current operating plan. No
assurance can be given that there will be no change that would consume the
Company's liquid assets before such time. Thereafter, the Company will require
substantial funds in addition to the net proceeds of this offering to conduct
development activities, preclinical studies, clinical trials and other
activities relating to the commercialization of any potential products. The
Company anticipates that these funds will be obtained from external sources and
intends to seek additional financing to fund future operations. There can be no
assurance, however, that the Company will be able to negotiate such arrangements
or obtain the additional funds it will require on acceptable terms, if at all.
In addition, the Company's cash requirements may vary materially from those now
planned because of results of research and development, results of product
testing, potential relationships with in-licensors and collaborators, changes in
the focus and direction of the Company's research and development programs,
competitive and technological advances, the cost of filing, prosecuting,
defending and enforcing patent claims, the regulatory approval process,
manufacturing, marketing and other costs associated with the commercialization
of products following receipt of regulatory approvals and other factors.
If adequate funds are not available, the Company may be required to delay,
reduce the scope of or eliminate one or more of its programs; to obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would otherwise seek to develop or commercialize
itself; or to license the rights to such products on terms that are less
favorable to the Company than might otherwise be available. If the Company
raises additional funds by issuing equity securities, further dilution to
stockholders may result and new investors could have rights superior to existing
stockholders. The Company has no established banking arrangements through which
it can obtain debt financing. See "Use of Proceeds," "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
COMPETITION AND TECHNOLOGICAL CHANGE
Competition in the biopharmaceutical industry is intense. The Company faces
competition from many companies and major universities and research institutions
in the United States and abroad. Many of the Company's competitors have
substantially greater resources, experience in conducting preclinical studies
and clinical trials and obtaining regulatory approvals for their products,
operating experience, research and development and marketing capabilities and
production capabilities than those of the Company. There can be no assurance
that the Company's competitors will not develop technologies and products that
are safer or more effective than any being developed by the Company or which
would render the Company's technology and products obsolete and noncompetitive,
and the Company's competitors may succeed in obtaining FDA approval for products
more rapidly than the Company. The Company will face competition from companies
marketing existing products or developing new products for diseases targeted by
the Company's technologies. The development of new products for those diseases
for which the Company is developing products could render the Company's product
candidates noncompetitive and obsolete. There can be no assurance that the
products under development by the Company and its collaborators will be able to
compete successfully with existing products or products under development by
other companies, universities and other institutions or that they will attain
regulatory approval in the United States or elsewhere. With respect to the
Company's products for the treatment of HIV infection, two classes of products
made by competitors of the Company have been approved for marketing by the FDA
for the
8
<PAGE>
treatment of HIV infection and AIDS: reverse transcriptase inhibitors and
protease inhibitors. Both types of drugs are inhibitors of viral enzymes and
have shown efficacy in reducing the concentration of HIV in the blood and
prolonging asymptomatic periods in HIV-positive individuals, especially when
administered in combination. However, it is not known whether HIV will develop
resistance to these drugs over time. In addition, the use of these drugs
presents problems of toxic side effects and compliance for some patients.
A significant amount of research in the biopharmaceutical field is also
being carried out at academic and government institutions. The Company's
strategy is to in-license technology and product candidates from academic and
government institutions. These institutions are becoming increasingly aware of
the commercial value of their findings and are becoming more aggressive in
pursuing patent protection and negotiating licensing arrangements to collect
royalties for use of technology that they have developed. These institutions may
also market competitive commercial products on their own or in collaboration
with competitors and will compete with the Company in recruiting highly
qualified scientific personnel. Any resulting increase in the cost or decrease
in the availability of technology or product candidates from these institutions
may affect the Company's business strategy.
If the Company receives regulatory approvals to commence commercial sales of
products, the Company will also be competing with respect to commercial scale
manufacturing and marketing capabilities, areas in which the Company has limited
or no experience. See "Business--Manufacturing" and "--Sales and Marketing."
LIMITED MANUFACTURING CAPABILITIES
In order to successfully commercialize its product candidates, Progenics
must be able to manufacture its products in commercial quantities, in compliance
with regulatory requirements, at acceptable costs and in a timely manner. The
manufacture of the types of biopharmaceutical products being developed by the
Company presents several risks and difficulties. For example, the manufacture of
recombinant proteins used in certain of the Company's current HIV products in
development is complex, can be difficult to accomplish even in small quantities,
can be difficult to scale-up when large scale production is required and can be
subject to delays, inefficiencies and poor or low yields of quality products.
Although Progenics has constructed two pilot-scale manufacturing facilities
which it believes will be sufficient to meet the Company's initial needs for
clinical trials, these facilities may be insufficient for all of its late-stage
clinical trials and for its commercial-scale manufacturing requirements.
Accordingly, the Company expects to expand its manufacturing staff and
facilities and obtain new facilities or to contract with third parties to assist
with production. Manufacture of some of Progenics' initial products for
commercialization is expected to require third party contract manufacturers at a
significant cost to the Company. In employing third party manufacturers,
Progenics will not control all aspects of the manufacturing process. There can
be no assurance that the Company will be able to obtain from third party
manufacturers adequate supplies in a timely fashion for commercialization, or
that commercial quantities of any such products, if approved for marketing, will
be available from contract manufacturers at acceptable costs. In the event the
Company decides to establish a full-scale commercial manufacturing facility, the
Company will require substantial additional funds and will be required to hire
and train significant numbers of employees and comply with the extensive
regulations applicable to such a facility. There is no assurance that Progenics
will be able to develop a current Good Manufacturing Practices ("cGMP")
manufacturing facility sufficient for all clinical trials or commercial-scale
manufacturing. The cost of manufacturing certain products may make them
prohibitively expensive. In addition, in order to successfully commercialize its
product candidates, the Company may be required to reduce the cost of
production, and there can be no assurance that the Company will be able to do
so. See "Business--Manufacturing."
AVAILABILITY OF MATERIALS
Although Progenics has not experienced any significant difficulties in
obtaining the raw materials necessary to perform its research, development and
manufacturing activities to date, there can be no
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assurance that sufficient quantities of these materials will be available to
support continued research, development or commercial manufacture of any of the
Company's planned products. The Company currently obtains supplies of critical
materials used in production of GMK and MGV from single sources. Specifically,
commercialization of the Company's GMK and MGV cancer vaccine candidates
requires a certain adjuvant from Aquila Biopharmaceuticals Inc. ("Aquila"). The
Company has entered into a license and supply agreement with Aquila pursuant to
which Aquila agreed to supply the Company with all of its requirements for the
QS-21 adjuvant for use in certain ganglioside-based cancer vaccines, including
GMK and MGV. The agreement grants to the Company a license to use Aquila's
patented technology to develop, manufacture and sell certain cancer vaccines
using QS-21 and, if Aquila is unable to supply the Company with sufficient
quantities of QS-21, the Company has the right to manufacture QS-21 itself or
purchase it from third parties for so long as Aquila is unable to supply the
Company with sufficient quantities. There can be no assurance that Aquila will
be able to supply sufficient quantities of QS-21 to the Company. See
"Business--Manufacturing."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The Company and its products are subject to comprehensive regulation by the
FDA in the United States and by comparable authorities in other countries. These
national agencies and other federal, state, and local entities regulate, among
other things, the preclinical and clinical testing, safety, effectiveness,
approval, manufacture, labeling, marketing, export, storage, record keeping,
advertising, and promotion of the Company's products. See "--Uncertainty
Associated with Preclinical and Clinical Testing."
Among other requirements, FDA approval of the Company's products, including
a review of the manufacturing processes and facilities used to produce such
products, will be required before such products may be marketed in the United
States. In order to obtain FDA approval of a product, the Company must
demonstrate to the satisfaction of the FDA that such product is safe and
effective for its intended uses and that the Company is capable of manufacturing
the product with procedures that conform to the FDA's cGMP regulations, which
must be followed at all times. The process of obtaining FDA approvals can be
costly, time consuming, and subject to unanticipated delays and the Company has
had only limited experience in filing and pursuing applications necessary to
gain regulatory approvals. There can be no assurance that such approvals will be
granted on a timely basis, or at all.
The Company's analysis of the results of its clinical studies is subject to
review and interpretation by the FDA, which may differ from the Company's
analysis. There can be no assurance that the Company's data or its
interpretation of data will be accepted by the FDA. In addition, delays or
rejections may be encountered based upon changes in applicable law or FDA policy
during the period of product development and FDA regulatory review. Any failure
to obtain, or delay in obtaining, FDA approvals would adversely affect the
ability of the Company to market its proposed products. Moreover, even if FDA
approval is granted, such approval may include significant limitations on
indicated uses for which a product could be marketed.
Both before and after approval is obtained, a product, its manufacturer and
the holder of the New Drug Application ("NDA") or Product License Application
("PLA") for the product are subject to comprehensive regulatory oversight.
Violations of regulatory requirements at any stage, including the preclinical
and clinical testing process, the approval process, or post-approval marketing
activities may result in various adverse consequences, including the FDA's delay
in approving or refusal to approve a product, withdrawal of an approved product
from the market, and/or the imposition of criminal penalties against the
manufacturer and/or the holder of the marketing approval for the product. In
addition, later discovery of previously unknown problems relating to a marketed
product may result in restrictions on such product, manufacturer, or the holder
of the marketing approval for the product, including withdrawal of the product
from the market. Also, new government requirements may be established that could
delay or prevent regulatory approval of the Company's products under
development.
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The Company is also subject to numerous and varying foreign regulatory
requirements governing the design and conduct of clinical trials and the
manufacturing and marketing of its products. The approval procedure varies among
countries and can involve additional testing, and the time required to obtain
approval may differ from that required to obtain FDA approval. The foreign
regulatory approval process may include all of the risks associated with
obtaining FDA approval set forth above, and there can be no assurance that
foreign regulatory approvals will be obtained on a timely basis, if at all.
Approval by the FDA does not ensure approval by regulatory authorities in other
foreign countries. There can be no assurance that the Company or its partners
will file for regulatory approvals or receive necessary approvals to
commercialize its product candidates in any market. Delays in receipt of or
failure to receive regulatory approvals, or the loss of previously received
approvals, would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company relies, in part, on academic institutions and on clinical
research organizations to conduct and monitor certain of its clinical trials.
There can be no assurance that such entities will conduct the clinical trials
successfully. In addition, certain clinical trials for the Company's products
will be conducted by government-sponsored agencies. Because the conduct of such
trials will be dependent on government participation and funding, the Company
will have less control over such trials than if the Company were the sole
sponsor. As a result, there can be no assurance that these trials will commence
or be completed as planned. See "Business--Government Regulation."
DEPENDENCE ON THIRD PARTIES
The Company relies heavily on third parties for a variety of functions,
including certain functions relating to research and development, manufacturing,
clinical trials management and regulatory affairs. As of September 30, 1996, the
Company had only 27 full-time employees. The Company is party to several
collaborative research agreements which place substantial responsibility on the
Company's partners for clinical development of products. The Company also
in-licenses technology from medical and academic institutions in order to
minimize investments in early research and enters into collaboration
arrangements with certain of these entities with respect to clinical trials of
product candidates.
To date, the Company has derived most of its revenues from federal research
grants. The govern-
ment's obligation to make payments under these grants is subject to
appropriation by the United States Congress for funding in each year. Moreover,
it is possible that Congress or the government agencies that administer these
government research programs will determine to scale back these programs or
terminate them or that the government will award future grants to competitors of
the Company instead of the Company. In addition, there can be no assurances that
the Company will be awarded any such grants in the future or that any amounts
derived therefrom will not be less than those received to date. Certain of the
Company's clinical trials will be partially paid for by government funds. Any
future reduction in the funding the Company receives either from federal
research grants or with respect to clinical trials could adversely affect the
Company's business, financial condition and results of operations.
Progenics' business strategy includes entering into strategic alliances or
licensing arrangements with corporate partners, primarily pharmaceutical and
biotechnology companies, relating to the development and commercialization of
certain of its potential products. There can be no assurance that such
collaborations will be available to the Company on acceptable terms, if at all,
or that any such relationships, if established, will be scientifically or
commercially successful. The Company expects that under certain of these
arrangements, the collaborative partner will have the responsibility for
conducting human clinical trials and the submission for regulatory approval of
the product candidate with the FDA and certain other regulatory agencies. Should
the collaborative partner fail to develop a marketable product, the Company's
business may be materially adversely affected.
There can be no assurance that Progenics will be able to establish and
maintain any of the corporate, academic or government relationships described
above on terms acceptable to the Company, that the
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Company can enter into these arrangements without undue delays or expenditures,
or that these arrangements will allow the Company to compete successfully
against other companies.
LACK OF SALES AND MARKETING EXPERIENCE
If FDA and other approvals are obtained with respect to any of its products,
Progenics expects to market and sell its products through co-marketing,
co-promotion or other licensing arrangements with third parties. Progenics has
no experience in sales, marketing or distribution and its current management and
staff are not trained in these areas. To the extent that the Company enters into
co-marketing, co-promotion or other licensing arrangements for the marketing and
sale of its products, any revenues received by the Company will be dependent on
the efforts of third parties. The Company would not control the amount and
timing of resources such third parties would devote to the Company's products.
If any of such parties were to breach or terminate its agreement with the
Company or otherwise fail to conduct its collaborative activities successfully
and in a timely manner, the commercialization of product candidates would be
delayed or terminated. Any such delay or termination could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, if the Company markets products directly, significant
additional expenditures and management resources would be required to develop an
internal sales force. There can be no assurance that the Company will be able to
establish a successful sales force. See "Business--Business Strategy."
DEPENDENCE ON AND UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
Progenics' policy is to protect its proprietary technology, and the Company
considers the protection of such rights to be important to its business. In this
regard, under a license agreement with Sloan-Kettering, the Company has obtained
worldwide, exclusive rights to certain technology relating to ganglioside
conjugate vaccines, including GMK and MGV, and their use to treat or prevent
cancer. In addition, the Company has licensed from Columbia University
worldwide, exclusive rights to certain technology relating to CD4 and its use to
treat or prevent HIV infection including patents and patent applications.
Progenics has also filed a number of U.S. and foreign patent applications on its
UnAB, ProSys and ProVax technologies and uses of these technologies. The Company
is required to make substantial cash payments and achieve certain milestones and
requirements, including, without limitation, filing INDs, obtaining product
approvals and introducing products, to maintain its rights under these licenses.
In the past, the Company did not achieve a milestone under the Columbia
University agreement and the Company and Columbia agreed to a modification of
the agreement. There is no assurance that the Company will be able to make
required cash payments when due or achieve the milestones and requirements in
order to maintain its rights under these licenses. Termination of any of such
licenses could result in the Company being unable to continue development of its
product candidates and production and marketing of approved products, if any.
Consequently, termination of the licenses could have a material adverse effect
on the business, financial condition and results of operations of the Company.
There can be no assurance that patent applications owned by or licensed to
the Company will result in patents being issued or that, if issued, the patents
will afford protection against competitors with similar technology. Although a
patent has a statutory presumption of validity in the United States, the
issuance of a patent is not conclusive as to such validity or as to the
enforceable scope of the claims of the patent. There can be no assurance that
the Company's issued patents or any patents subsequently issued to or licensed
by the Company will not be successfully challenged in the future. The validity
or enforceability of a patent after its issuance by the patent office can be
challenged in litigation. The cost of litigation to uphold the validity of
patents and to prevent infringement can be substantial. If the outcome of the
litigation is adverse to the owner of the patent, third parties may then be able
to use the invention covered by the patent without payment. There can be no
assurance that the Company's patents will not be infringed or successfully
avoided through design innovation.
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The Company may not retain all rights to developments, inventions, patents
and other proprietary information resulting from its collaborative arrangements,
whether in effect as of the date hereof or which may be entered into at some
future time with third parties. As a result, the Company may be required to
license such developments, inventions, patents or other proprietary information
from such third parties, possibly at significant cost to the Company. The
Company's failure to obtain any such licenses could have a material adverse
effect on the business, financial condition and results of operations of the
Company.
There may be patent applications and issued patents belonging to competitors
that may require the Company to alter its products, pay licensing fees or cease
certain activities. If the Company's products conflict with patents that have
been or may be granted to competitors, universities or others, such other
persons could bring legal actions against the Company claiming damages and
seeking to enjoin manufacturing and marketing of the affected products. If any
such actions are successful, in addition to any potential liability for damages,
the Company could be required to obtain a license in order to continue to
manufacture or market the affected products. There can be no assurance that the
Company would prevail in any such action or that any license required under any
such patent would be made available on acceptable terms or at all. There is
significant litigation in the industry regarding patent and other intellectual
property rights. If the Company becomes involved in such litigation, it could
consume substantial resources.
Progenics has also filed a number of U.S. and foreign patent applications
(one of which is owned jointly with ADARC) relating to the discovery of a second
HIV receptor, CKR-5. In addition to the risks described above, the Company is
aware that other groups have claimed discoveries similar to that covered by the
Company's patent applications. These groups may have made their discoveries
prior to the discoveries covered by the Company's patent applications and may
have filed their applications prior to the Company's patent applications. The
Company does not expect to know for several years the relative strength of its
patent position as compared to these other groups.
In addition to the patents, patent applications, licenses and intellectual
property processes described above, the Company also relies on unpatented
technology, trade secrets and information. No assurance can be given that others
will not independently develop substantially equivalent information and
techniques or otherwise gain access to the Company's technology or disclose such
technology, or that the Company can meaningfully protect its rights in such
unpatented technology, trade secrets and information. The Company requires each
of its employees, consultants and advisors to execute a confidentiality
agreement at the commencement of an employment or consulting relationship with
the Company. The agreements generally provide that all inventions conceived by
the individual in the course of employment or in providing services to the
Company and all confidential information developed by, or made known to, the
individual during the term of the relationship shall be the exclusive property
of the Company and shall be kept confidential and not disclosed to third parties
except in limited specified circumstances. There can be no assurance, however,
that these agreements will provide meaningful protection for the Company's
information in the event of unauthorized use or disclosure of such confidential
information. See "Business--Patents and Proprietary Technology."
DEPENDENCE UPON KEY PERSONNEL
Progenics is dependent upon certain key management and scientific personnel.
In particular, the loss of Dr. Maddon could have a materially adverse effect on
Progenics, unless a qualified replacement could be found. Progenics maintains a
key-man life insurance policy on Dr. Maddon in the amount of $2.5 million. The
Company's employment agreement with Dr. Maddon expires in 1998, and there can be
no assurance that it will be renewed by the parties thereto. See
"Management--Executive Compensation."
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ATTRACTION AND RETENTION OF PERSONNEL
Competition for qualified employees among companies in the biopharmaceutical
industry is intense. Progenics' future success depends upon its ability to
attract, retain and motivate highly skilled employees. Although Progenics has
established relationships with the scientists who serve on its Scientific
Advisory Boards, these individuals do not devote a substantial portion of their
time to Progenics-related activities and do not participate directly in the
development of Progenics' products on a daily basis. Attracting desirable
employees will require Progenics to offer competitive compensation packages,
including stock options. In order to successfully commercialize its products,
the Company must substantially expand its personnel, particularly in the areas
of manufacturing, clinical trials management, regulatory affairs, business
development and marketing. There can be no assurance that the Company will be
successful in hiring or retaining qualified personnel. Managing the integration
of new personnel and Company growth generally could pose significant risks to
the Company's development and progress. The addition of such personnel may
result in significant changes in the Company's utilization of cash resources and
its development schedule. See "Business--Human Resources."
UNCERTAINTY RELATED TO HEALTH CARE REFORM MEASURES AND REIMBURSEMENT
In recent years, there have been numerous proposals to change the health
care system in the United States. Some of these proposals have included measures
that would limit or eliminate payments for certain medical procedures and
treatments or subject the pricing of pharmaceuticals to government control.
Significant changes in the health care system in the United States or elsewhere
might have a substantial impact on the manner in which the Company conducts its
business. Such changes also could have a material adverse effect on the
Company's ability to raise capital. Furthermore, the Company's ability to
commercialize products may be adversely affected to the extent that such
proposals have a material adverse effect on the business, financial condition
and profitability of other companies that are collaborators or prospective
collaborators of the Company.
In addition, significant uncertainty exists as to the reimbursement status
of newly-approved health care products. The Company's and its collaborators'
success in generating revenue from sales of products may depend, in part, on the
extent to which reimbursement for the costs of such products will be available
from third-party payors, such as government health administration authorities,
private health insurers and health maintenance organizations ("HMOs"). In
addition, the trend towards managed health care in the United States and the
concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reduce government insurance programs, may all
result in lower prices for products and could affect the market for products. If
the Company succeeds in bringing one or more products to market, there can be no
assurance that such products will be considered cost-effective or that adequate
third-party insurance coverage will be available for the Company to establish
and maintain price levels sufficient for realization of an appropriate return on
its investment in product development. Third-party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement of new products approved for marketing by the FDA. If adequate
coverage and reimbursement levels are not provided by government and third-party
payors for uses of the Company's products, the market acceptance of such
products would be adversely affected.
RISK OF PRODUCT LIABILITY; LIMITED AVAILABILITY OF INSURANCE
The Company's business exposes it to potential product liability risks which
are inherent in the testing, manufacturing, marketing and sale of human vaccine
and therapeutic products, and there can be no assurance that the Company will be
able to avoid significant product liability exposure. Product liability
insurance for the biopharmaceutical industry in generally expensive, if
available at all. The Company has obtained product liability insurance coverage
in the amount of $5 million per occurrence, subject to a $5 million aggregate
limitation. However, there can be no assurance that the Company's present
insurance
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coverage is now or will continue to be adequate as the Company further develops
products. In addition, certain of the Company's license and collaborative
agreements require the Company to obtain product liability insurance and it is
possible that license and collaborative agreements which the Company may enter
into in the future may also include such a requirement. There can be no
assurance that in the future adequate insurance coverage will be available in
sufficient amounts or at a reasonable cost, or that a product liability claim or
recall would not have a material adverse effect on the Company.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
The Company's research and development work and manufacturing processes
involve the use of hazardous, controlled and radioactive materials. The Company
is subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Although the Company maintains safety procedures for handling and
disposing of such materials that it believes comply with the standards
prescribed by such laws and regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any such liability could exceed the resources of the Company. Although the
Company believes that it is in compliance in all material respects with
applicable environmental laws and regulations, there can be no assurance that
the Company will not be required to incur significant costs to comply with
environmental laws and regulations in the future, or that the operations,
business or assets of the Company will not be materially or adversely affected
by current or future environmental laws or regulations.
The research and development efforts sponsored by the Company involve
laboratory animals. The Company may be adversely affected by changes in laws,
regulations or accepted clinical procedures or by social pressures that would
restrict the use of animals in testing or by actions against the Company or its
collaborators by groups or individuals opposed to such testing.
ABSENCE OF PRIOR TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there is no assurance that an active market will develop or be
sustained after this offering or that the market price of the Common Stock will
not decline below the initial public offering price. The initial public offering
price will be determined by negotiation between the Company and the
representatives of the Underwriters and may bear no relationship to the price at
which the Common Stock will trade after completion of this offering. See
"Underwriting" for factors to be considered in determining such offering price.
The market price of the shares of Common Stock, like that of the common stock of
many other biopharmaceutical companies, is likely to be highly volatile. Factors
such as the results of preclinical studies and clinical trials by the Company or
its competitors, other evidence of the safety or efficacy of products of the
Company or its competitors, announcements of technological innovations or new
commercial products by the Company or its competitors, governmental regulation,
changes in reimbursement policies, health care legislation, developments in
patent or other proprietary rights, developments in the Company's relationships
with existing and future collaborative partners, if any, public concern as to
the safety and efficacy of products developed by the Company, fluctuations in
the Company's operating results, and general market conditions may have a
significant impact on the market price of the Common Stock.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Upon the completion of this offering, certain current stockholders of the
Company, including Dr. Maddon and stockholders affiliated with Tudor Investment
Corporation and Weiss, Peck & Greer, will beneficially own or control a
substantial portion of the outstanding shares of Common Stock and therefore may
have the ability, acting together, to elect all of the Company's directors, to
determine the outcome of most corporate actions requiring stockholder approval
and otherwise control the business of the Company. Such control could have the
effect of delaying or preventing a change in control of the Company and
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consequently adversely affect the market price of the Common Stock. In addition,
the Company's Board of Directors is authorized to issue from time to time shares
of Preferred Stock, without stockholder authorization, in one or more designated
series or classes. The issuance of Preferred Stock, as well as certain
provisions in certain of the Company's stock options which provide for
acceleration of exercisability upon a change of control of the Company and
certain provisions of the Delaware General Corporation Law (Section 203, in
particular), could make the possible takeover of the Company or the removal of
the Company's management more difficult, discourage hostile bids for control of
the Company in which stockholders may receive a premium for their shares of
Common Stock or otherwise dilute the rights of holders of Common Stock and
depress the market price of the Common Stock. See "Principal Stockholders" and
"Description of Capital Stock."
FUTURE SALES OF COMMON STOCK; REGISTRATION RIGHTS; POSSIBLE ADVERSE EFFECT ON
FUTURE MARKET PRICE
A substantial number of outstanding shares of Common Stock and shares of
Common Stock issuable upon exercise of outstanding options and warrants will
become eligible for future sale in the public market at prescribed times. Sales
of substantial numbers of shares of Common Stock in the public market following
this offering could adversely affect prevailing market prices. The Securities
and Exchange Commission (the "Commission") has proposed an amendment to Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"), that if
adopted, would permit certain shares to be sold one year earlier than otherwise
provided by the current version of Rule 144. Commencing one year after the date
of this Prospectus, each stockholder who purchased shares of the Company's stock
prior to this offering (which stockholders hold, as of September 30, 1996,
6,554,553 shares of Common Stock and have the right to acquire 260,455 shares of
Common Stock upon the exercise of outstanding warrants) is entitled to certain
rights with respect to the registration of such shares of Common Stock for offer
or sale to the public. The Company plans to file a Form S-8 registration
statement registering shares issuable pursuant to the Company's stock option
plans. Any sales by existing shareholders or holders of options or warrants may
have an adverse effect on the Company's ability to raise needed capital and may
adversely affect the market price of the Common Stock. See "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting."
DILUTION
The initial public offering price will be substantially higher than the net
tangible book value per share of the Company which, at September 30, 1996, was
$0.25 per share. Investors purchasing shares of Common Stock in this offering
will suffer immediate, substantial net tangible book value dilution of $9.28 per
share, assuming an initial public offering price of $12.00 per share. In
addition, this dilution will be increased to the extent that holders of
outstanding options and warrants to purchase Common Stock at prices below the
net tangible book value per share of the Company after this offering exercise
such options or warrants. See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain earnings, if any, for the development of its
business. In addition, the Company has entered into certain capitalized leases
that contain covenants which indirectly restrict the Company's ability to pay
dividends. See "Dividend Policy."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby, at an assumed initial public offering price of
$12.00 per share and after deducting the underwriting discount and estimated
expenses payable by the Company, are estimated to be approximately $21,570,000
($24,918,000 if the Underwriters' over-allotment option is exercised in full).
The Company expects to use up to $14,000,000 of the net proceeds to fund
clinical trials of its leading product candidates and research and development
and the balance to fund in-licensing of late-stage technology and for working
capital and general corporate purposes.
The Company believes that the net proceeds of this offering, together with
the Company's present capital resources, should be sufficient to fund operations
through the end of 1998 based on the Company's current operating plan. No
assurance can be given that there will be no change that would consume the
Company's liquid assets before such time. Thereafter, the Company will require
substantial funds in addition to the proceeds of this offering to conduct
development activities, preclinical studies, clinical trials and other
activities relating to the commercialization of any potential products. The
Company cannot currently estimate with any accuracy the amount of these
additional funds because it may vary significantly depending on results of
research and development and product testing, potential relationships with in-
licensors and collaborators, changes in the focus and direction of the Company's
research and development programs, competitive and technological advances, the
cost of filing, prosecuting, defending and enforcing patent claims, the
regulatory approval process, manufacturing, marketing and other costs associated
with commercialization of products following receipt of regulatory approvals and
other factors. The Company anticipates that these funds will be obtained from
external sources, such as future offerings of equity or debt securities or
agreements with corporate partners and collaborators with respect to the
development of the Company's technology, and intends to seek additional
financing to fund future operations. There can be no assurance, however, that
the Company will be able to negotiate such arrangements or obtain the additional
funds it will require on acceptable terms, if at all.
In addition, the amount of the proceeds from this offering that the Company
will devote to each of the purposes described herein may vary significantly
because of results of research and development and product testing, potential
relationships with in-licensors and collaborators, changes in the focus and
direction of the Company's research and development programs, competitive and
technological advances, the cost of filing, prosecuting, defending and enforcing
patent claims, the regulatory approval process, manufacturing, marketing and
other costs associated with commercialization of products following receipt of
regulatory approvals and other factors. The Company's lease for all of its
facilities expires in April 1998. If the Company elects to move to a new
location, it may incur substantial expenses for leasehold improvements and
relocation costs which the Company estimates will cost up to approximately
$2,000,000. If the Company renews its current lease, certain costs will be
incurred to enhance its manufacturing capabilities which the Company estimates
will cost approximately $500,000.
Pending such uses, the net proceeds from this offering will be temporarily
invested by the Company in short-term, interest bearing investment grade
securities.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and presently
anticipates that all earnings, if any, will be retained for development of the
Company's business and that no dividends on its Common Stock will be declared in
the foreseeable future. In addition, under the terms of certain equipment lease
financing agreements, the Company is required to maintain a minimum level of
tangible net worth of $625,000 and consequently would be prohibited from paying
dividends which would reduce tangible net worth below such amount.
17
<PAGE>
CAPITALIZATION
The following table sets forth the actual, the pro forma and the pro forma
as adjusted capitalization of the Company at September 30, 1996 as described
below. This table should be read in conjunction with the Company's Financial
Statements and related Notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
---------- ------------- --------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term portion of capital lease obligations......................... $ 155 $ 155 $ 155
---------- ------------- --------------
Stockholders' equity:
Preferred Stock, $.001 par value; 20,000,000 shares authorized:
Series A Preferred Stock; 4,000,000 shares designated; 2,308,000
shares issued and outstanding, actual; and no shares issued and
outstanding, pro forma and pro forma as adjusted................... 2 -- --
Series B Preferred Stock; 2,500,000 shares designated; 1,982,830
shares issued and outstanding, actual; and no shares issued and
outstanding, pro forma and pro forma as adjusted................... 2 -- --
Series C Preferred Stock; 3,750,000 shares designated; 1,388,996
shares issued and outstanding, actual; and no shares issued and
outstanding, pro forma and pro forma as adjusted................... 1 -- --
Common Stock, $.0013 par value, 40,000,000 shares authorized, 2,294,675
shares issued and outstanding, actual; 6,554,553 shares issued and
outstanding, pro forma; and 8,554,553 shares issued and outstanding,
pro forma as adjusted(3)............................................. 3 8 11
Additional paid-in capital............................................. 22,799 22,799 44,366
Deficit accumulated during the development stage....................... (21,139) (21,139) (21,139)
---------- ------------- --------------
Total stockholders' equity........................................... 1,668 1,668 23,238
---------- ------------- --------------
Total capitalization............................................... $ 1,823 $ 1,823 $ 23,393
---------- ------------- --------------
---------- ------------- --------------
</TABLE>
- ------------------------
(1) Assumes the conversion of all outstanding shares of the Company's Preferred
Stock into an aggregate of 4,259,878 shares of Common Stock pursuant to
their terms. See "Description of Capital Stock."
(2) Assumes (i) the sale of 2,000,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $12.00 per share and the receipt
of the net proceeds therefrom after deducting the underwriting discount and
estimated offering expenses and (ii) conversion of all outstanding shares of
the Company's Preferred Stock into an aggregate of 4,259,878 shares of
Common Stock pursuant to their terms. See "Use of Proceeds" and "Description
of Capital Stock."
(3) Excludes as of September 30, 1996: (i) 1,791,236 shares subject to
outstanding options at a weighted average exercise price of $4.86 per share,
of which options to purchase 686,552 shares at a weighted average exercise
price of $4.16 per share were exercisable; (ii) 260,455 shares of Common
Stock reserved for issuance upon the exercise of outstanding warrants at an
exercise price of $6.67 per share, all of which were exercisable; (iii)
62,775 shares subject to options to be granted prior to the completion of
this offering at an exercise price equal to the initial public offering
price; and, (iv) 750,000 shares available for future issuance under the
Company's stock option plans.
18
<PAGE>
DILUTION
The net tangible book value of the Company as of September 30, 1996 was
$1,668,000 or $0.25 per share. Net tangible book value per share is determined
by dividing the net tangible book value of the Company (total tangible assets
less total liabilities) by the number of shares of Common Stock outstanding (on
a pro forma basis to give effect to the conversion of all outstanding shares of
Preferred Stock). Without taking into account any changes in the net tangible
book value after September 30, 1996, other than to give effect to the sale of
the 2,000,000 shares of Common Stock offered hereby (at an assumed initial
public offering price of $12.00 per share) and the application of the net
proceeds therefrom, the pro forma net tangible book value of the Company at
September 30, 1996 would have been $23,238,000, or $2.72 per share. This
represents an immediate increase in net tangible book value of $2.47 per share
to existing stockholders and an immediate dilution in net tangible book value of
$9.28 per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $ 12.00
Net tangible book value per share before offering.......... $ 0.25
Increase in net tangible book value per share attributable
to
new investors............................................ 2.47
---------
Pro forma net tangible book value per share after offering... 2.72
---------
Dilution per share to new investors.......................... $ 9.28
---------
---------
</TABLE>
The following table sets forth, on the pro forma basis described above, as
of September 30, 1996 the number and percentage of shares of Common Stock
purchased from the Company, the total cash consideration (with respect to the
new investors, at an assumed initial public offering price of $12.00 per share),
and percentage of total cash consideration paid to the Company and the average
price per share paid by existing stockholders and new investors:
<TABLE>
<CAPTION>
TOTAL CASH CONSIDERATION
SHARES PURCHASED
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................ 6,554,553 76.6% $ 22,781,000 48.7% $ 3.48
New investors.................................... 2,000,000 23.4 24,000,000 51.3 12.00
---------- ----- ------------- -----
Total...................................... 8,554,553 100.0% $ 46,781,000 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
The foregoing tables do not assume the exercise of outstanding options or
warrants. At September 30, 1996, there were outstanding options to purchase
1,791,236 shares of Common Stock under the Company's stock option plans at a
weighted average exercise price of $4.86 per share, and outstanding warrants to
purchase 260,455 shares of Common Stock at a price of $6.67 per share. The
exercise of such options and warrants would result in further dilution to new
investors. In addition, (i) effective prior to the completion of this offering,
the Company plans to grant options to purchase 62,775 shares to employees having
an exercise price equal to the initial public offering price in this offering
and (ii) following the completion of this offering, there will be 750,000 shares
of Common Stock reserved for future issuance under the Company's stock option
plans. See "Capitalization," "Management--Stock Option Plans" and "Description
of Capital Stock."
19
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data presented below with respect to the balance
sheet data as of December 31, 1994 and 1995 and September 30, 1996 and with
respect to the statement of operations data for each of the three years in the
period ended December 31, 1995, for the nine months ended September 30, 1996 and
for the period from December 1, 1986 (inception) to September 30, 1996 are
derived from the Company's financial statements, included elsewhere in this
Prospectus, which have been audited by Coopers & Lybrand L.L.P. The selected
financial data presented below with respect to the balance sheet data as of
December 31, 1991, 1992 and 1993 and with respect to the statement of operations
data for each of the years ended December 31, 1992, and November 30, 1991 and
the one month ended December 31, 1991 are derived from the Company's audited
financial statements, not included in this Prospectus. The selected financial
data presented below with respect to the statement of operations data for the
nine months ended September 30, 1995 have been derived from the Company's
unaudited financial statements included elsewhere in this Prospectus. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of results that may be expected for the entire year ending December
31, 1996. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and related Notes included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ONE MONTH
ENDED ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30,
NOVEMBER 30, DECEMBER 31, ------------------------------------------ --------------------
1991 1991(1) 1992 1993 1994 1995 1995 1996
------------- ------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Research grants.......... $ 55 $ 8 $ 67 $ 84 $ 504 $ 725 $ 502 $ 268
Product sales............ 77 -- 38 50 52 50 40 67
Interest income.......... 86 7 32 53 108 46 44 91
------------- ------------- --------- --------- --------- --------- --------- ---------
Total revenues......... 218 15 137 187 664 821 586 426
------------- ------------- --------- --------- --------- --------- --------- ---------
Expenses:
Research and
development............ 957 53 1,207 1,547 2,859 3,853 2,585 2,654
General and
administrative......... 665 45 942 748 878 1,094 790 984
Interest expense......... 62 4 59 38 50 87 53 40
Depreciation and
amortization........... 207 9 151 249 289 291 229 230
------------- ------------- --------- --------- --------- --------- --------- ---------
Total expenses......... 1,891 111 2,359 2,582 4,076 5,325 3,657 3,908
------------- ------------- --------- --------- --------- --------- --------- ---------
Net loss................... $ (1,673) $ (96) $ (2,222) $ (2,395) $ (3,412) $ (4,504) $ (3,071) $ (3,482)
------------- ------------- --------- --------- --------- --------- --------- ---------
------------- ------------- --------- --------- --------- --------- --------- ---------
Pro forma net loss per
common share(2).......... $ (0.73) $ (0.57)
--------- ---------
--------- ---------
Pro forma weighted average
common shares
outstanding(2)........... 6,135 6,135
<CAPTION>
DECEMBER 1,
1986
(INCEPTION)
TO
SEPTEMBER 30,
1996
-------------
<S> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Research grants.......... $ 1,735
Product sales............ 358
Interest income.......... 633
-------------
Total revenues......... 2,726
-------------
Expenses:
Research and
development............ 15,505
General and
administrative......... 6,257
Interest expense......... 440
Depreciation and
amortization........... 1,663
-------------
Total expenses......... 23,865
-------------
Net loss................... $ (21,139)
-------------
-------------
Pro forma net loss per
common share(2)..........
Pro forma weighted average
common shares
outstanding(2)...........
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 1,640 $ 1,351 $ 2,137 $ 2,275 $ 559
Working capital................................................. 1,412 837 1,882 2,019 19
Total assets.................................................... 2,366 1,976 2,858 3,489 1,736
Capital lease obligations and deferred lease liability,
long-term portion............................................. 250 105 75 235 213
Total stockholders' equity...................................... 1,864 1,547 2,523 2,827 852
<CAPTION>
SEPTEMBER 30,
1996
---------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 1,746
Working capital................................................. 894
Total assets.................................................... 2,841
Capital lease obligations and deferred lease liability,
long-term portion............................................. 181
Total stockholders' equity...................................... 1,668
</TABLE>
- ------------------------
(1) Effective January 1, 1992, the Company changed its fiscal year end from
November 30 to December 31.
(2) See Note 2 to the Company's Financial Statements for information concerning
computation of the pro forma per share data.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Progenics is a biopharmaceutical company focusing on the development and
commercialization of innovative products for the treatment and prevention of
cancer and viral diseases. The Company commenced principal operations in late
1988 and since that time has been engaged primarily in research and development
efforts, development of its manufacturing capabilities and organizational
efforts, including recruitment of scientific and management personnel and
raising capital. In order to commercialize the principal products that the
Company has under development, the Company will need to address a number of
technological challenges and comply with comprehensive regulatory requirements.
Accordingly, it is not possible to predict the amount of funds that will be
required or the length of time that will pass before the Company receives
revenues from sales of any of its products. To date, product sales have
consisted solely of limited revenues from the sale of research reagents. The
Company expects that sales of research reagents in the future will not
significantly increase over current levels. The Company's other sources of
revenues to date have been research grants related to the Company's HIV programs
and interest income.
To date, substantially all of the Company's expenditures have been for
research and development activities. The Company expects that its research and
development expenses will be significantly higher during the balance of 1996 and
in future years as its principal research and development programs progress and
the Company makes filings for related regulatory approvals. The Company has
incurred losses since its inception and had an accumulated deficit of
$21,139,000 at September 30, 1996. The Company has financed its operations
primarily through the private sale and issuance of equity securities. The
Company will require additional funds to complete the development of its
products, to fund the cost of clinical trials, and to fund operating losses
which are expected to continue for the foreseeable future. The Company does not
expect its products under development to be commercialized for the next several
years.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
Revenues from research grants decreased from $502,000 for the nine months
ended September 30, 1995 to $268,000 for the nine months ended September 30,
1996. The decrease resulted from a fewer number of grants in the nine months
ended September 30, 1996. Sales of research reagents increased from $40,000 for
the nine months ended September 30, 1995 to $67,000 for the nine months ended
September 30, 1996 resulting from increased orders for such reagents during the
first three quarters of 1996. Interest income increased from $44,000 for the
nine months ended September 30, 1995 to $91,000 for the nine months ended
September 30, 1996 primarily due to the investment of $5,675,000 in net proceeds
received from the Company's sale of preferred stock and warrants in the fourth
quarter of 1995 and the first quarter of 1996.
Research and development expenses increased from $2,585,000 for the nine
months ended September 30, 1995 to $2,654,000 for the nine months ended
September 30, 1996. The increase was principally due to additional costs of
manufacturing GMK in 1996 for the Company's Phase III clinical trials, partially
offset by reductions in scientific staff in the Company's HIV department and by
a decrease in consulting expenses relating to procedures for manufacturing GMK.
General and administrative expenses increased from $790,000 for the nine
months ended September 30, 1995 to $984,000 for the nine months ended September
30, 1996. The increase was principally due to an increase in payroll and related
costs to support the Company's growth. Interest expense incurred on the
Company's capital lease obligations decreased from $53,000 for the nine months
ended September 30, 1995 to $40,000 for the nine months ended September 30,
1996. Depreciation and amortization remained
21
<PAGE>
relatively unchanged from $229,000 for the nine months ended September 30, 1995
to $230,000 for the nine months ended September 30, 1996.
The Company's net loss for the nine months ended September 30, 1995 was
$3,071,000 compared to a net loss of $3,482,000 for the nine months ended
September 30, 1996.
YEARS ENDED DECEMBER 31, 1994 AND 1995
Revenues from research grants increased from $504,000 in 1994 to $725,000 in
1995. The increase for 1995 resulted from a greater number of grants in that
year. Sales of research reagents remained relatively unchanged from $52,000 in
1994 to $50,000 in 1995. Interest income decreased from $108,000 in 1994 to
$46,000 in 1995 due to the reduction of cash available for investing as the
Company continued to fund its operations.
Research and development expenses increased from $2,859,000 for 1994 to
$3,853,000 for 1995. The increase in 1995 primarily resulted from the Company's
preparation for clinical trials for GMK, including outside consulting expenses.
The Company hired a new Vice President of Medical Affairs in October 1994 and,
during 1995, hired a Manager of Clinical Trials and other related staff. In
addition, the Company incurred expenses in 1995 related to a new license and
supply agreement with Aquila. Rent expense also increased by $115,000 in 1995
resulting from occupation of the Company's expanded laboratory space for the
full fiscal year; the expanded space was occupied at the end of the second
quarter of 1994. These increases were partially offset by a reduction in
scientific staff in the Company's HIV department during the second half of 1995.
General and administrative expenses increased from $878,000 in 1994 to
$1,094,000 for 1995. The increase in 1995 was principally due to additional
legal fees of $120,000 relating to in-licensing activities, filing new patent
applications and personnel expenses, additional rent expense of $35,000
resulting from the expansion of the Company's office space at the end of the
second quarter of 1994, and increased insurance costs related, in part, to
coverage for the Company's clinical trials. Interest expense increased from
$50,000 in 1994 to $87,000 in 1995 due, in part, to the financing of additional
equipment under capitalized leases during 1994 and 1995. The Company also
recognized interest expense of $24,000 on amounts advanced to the Company during
1995 in the aggregate principal amount of $1,200,000. Depreciation and
amortization remained relatively unchanged from $289,000 in 1994 to $291,000 in
1995.
The Company's net loss in 1994 was $3,412,000 compared to a net loss of
$4,504,000 in 1995.
YEARS ENDED DECEMBER 31, 1993 AND 1994
Revenues from research grants increased from $84,000 in 1993 to $504,000 in
1994, primarily due to an increase in the number of research grants from which
the Company earned grant revenue in 1994. Interest income increased from $53,000
in 1993 to $108,000 in 1994, primarily due to the investment of $3,597,000 in
net proceeds received from the exercise of Series B Preferred Stock warrants
during 1994.
Research and development expenses increased from $1,547,000 in 1993 to
$2,859,000 in 1994. Sales of research reagents remained relatively unchanged
from $50,000 in 1993 to $52,000 in 1994. The increase in 1994 was partly due to
the expansion of the Company's research and development program to include the
development of cancer vaccine products. The Company also intensified its HIV
program efforts during 1994, adding additional scientific and quality
assurance/quality control staff, including a Vice President of Medical Affairs
in October 1994, purchased more laboratory supplies, entered into new consulting
agreements and incurred additional rent expense of $124,000 by expanding its
laboratory space at the end of the second quarter of 1994.
General and administrative expenses increased from $748,000 in 1993 to
$878,000 in 1994. In 1994, the Company incurred additional rent expense of
$41,000 due to the expansion of its office space at the end of the second
quarter of 1994, and incurred additional administrative expenses of $89,000 to
support
22
<PAGE>
the Company's increased level of research and development. Interest expense
increased from $38,000 in 1993 to $50,000 in 1994, primarily due the acquisition
of additional equipment through capitalized leases as the Company expanded its
facilities. Depreciation and amortization increased from $249,000 in 1993 to
$289,000 in 1994 primarily due to the expansion of the Company's laboratory
facilities and the acquisition of additional equipment.
The Company's net loss in 1993 was $2,395,000 compared to a net loss of
$3,412,000 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations since inception primarily through
private placements of equity securities, which provided aggregate cash proceeds
of $22,781,000 (including loans that were subsequently converted into equity
securities). Through September 30, 1996, the Company had also received cash
proceeds of $1,656,000 from research grants, $633,000 from interest on
investments and $349,000 from the sale of research reagents. Through September
30, 1996, the Company had financed $1,228,000 of equipment purchases through
capitalized leases and a promissory note.
During the fourth quarter of 1995 and the first quarter of 1996, the Company
raised $897,000 and $4,777,000 in net proceeds from the sale of approximately
44,900 units and 241,203 units, respectively, in a private placement of shares
of the Company's Series C Preferred Stock in a unit offering. Each $20.00 unit
("Series C Unit") consisted of four shares of Series C Preferred Stock and one
warrant entitling the holder to purchase one share of Series C Preferred Stock
for $5.00 any time within five years of the date of issuance ("Series C
Warrant"). In addition, during December 1995, a note payable in the aggregate
principal amount of $1,200,000, plus accrued and unpaid interest of $24,000 was
converted into approximately 61,200 Series C Units. At September 30, 1996, there
were 347,249 Series C Warrants outstanding which if exercised in full would
result in $1,736,000 of net proceeds to the Company and the issuance of 347,249
shares of Series C Preferred Stock or, if exercised subsequent to the offering,
260,455 shares of Common Stock.
As of September 30, 1996, the Company had cash and cash equivalents totaling
$1,746,000 compared with $559,000 at December 31, 1995. Planned operations for
the remainder of 1996 currently contemplate expenditures for capital assets of
approximately $150,000, mainly consisting of laboratory equipment and leasehold
improvements to expand the Company's manufacturing capabilities. The Company
plans to finance a significant portion of equipment purchases through
capitalized leases. However, there can be no assurance that the Company will
successfully enter into such new arrangements. The Company's lease for all of
its facilities expires in April 1998. If the Company elects to move to a new
location, it may incur substantial expenses for leasehold improvements and
relocation costs. If the Company renews its current lease, certain costs will be
incurred to enhance its manufacturing capabilities.
The Company believes that the net proceeds of this offering, together with
the Company's present capital resources, should be sufficient to fund operations
through the end of 1998 based on the Company's current operating plan. No
assurance can be given that there will be no change that would consume the
Company's liquid assets before such time. Thereafter, the Company will require
substantial funds to conduct development activities, preclinical studies,
clinical trials and other activities relating to the commercialization of any
potential products. In addition, the Company's cash requirements may vary
materially from those now planned because of results of research and development
and product testing, potential relationships with in-licensors and
collaborators, changes in the focus and direction of the Company's research and
development programs, competitive and technological advances, the cost of
filing, prosecuting, defending and enforcing patent claims, the regulatory
approval process, manufacturing and marketing and other costs associated with
the commercialization of products following receipt of regulatory approvals and
other factors.
After the completion of the offering, the Company will have no committed
external sources of capital, and, as discussed above, expects no significant
product revenues for a number of years as it will take at
23
<PAGE>
least that much time to bring the Company's products to the commerical marketing
stage. Therefore, the Company intends to seek additional financing, such as
through future offerings of equity or debt securities or agreements with
corporate partners and collaborators with respect to the development of the
Company's technology, to fund future operations. There can be no assurance,
however, that the Company will be able to obtain the additional funds it will
require on acceptable terms, if at all. If adequate funds are not available, the
Company may be required to delay, reduce the scope of or eliminate one or more
of its research or development programs; to obtain funds through arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself; or to license the
rights to such products on terms that are less favorable to the Company than
might otherwise be available. See "Risk Factors--History of Operating Losses and
Accumulated Deficit; No Product Revenue and Uncertainty of Future Profitability"
and "--Need for Additional Financing and Uncertain Access to Capital Funding."
IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARD
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") in October 1995. See Note 2 to the Company's Financial Statements included
elsewhere in this Prospectus for a discussion of the impact of adoption of SFAS
123.
24
<PAGE>
BUSINESS
OVERVIEW
Progenics is a biopharmaceutical company focusing on the development and
commercialization of innovative products for the treatment and prevention of
cancer and viral diseases. The Company applies its immunology expertise to
develop biopharmaceuticals that induce an immune response or that mimic natural
immunity in order to fight cancers, such as malignant melanoma, and viral
diseases, such as HIV infection. Progenics' most advanced product candidate,
GMK, is a therapeutic vaccine that is undergoing pivotal Phase III clinical
trials for the treatment of melanoma, a deadly form of skin cancer. Progenics'
second vaccine product, MGV, is being developed for the treatment of various
cancers, and recently entered Phase I/II clinical trials. Based on its
participation in the discoveries of two major receptors for HIV, the Company is
engaged in research and development of several therapeutic products designed to
block entry of the virus into human immune system cells. Progenics has completed
preclinical studies on two HIV product candidates, PRO 542 and PRO 367, and
plans to initiate Phase I/II clinical trials of these products in 1997.
Progenics' most advanced product candidates are based on two proprietary
technologies: ganglioside conjugate vaccine technology, which the Company uses
in its cancer program; and UnAB technology, which the Company uses in its HIV
program. The Company has exclusively licensed from Sloan-Kettering several
ganglioside conjugate vaccines designed to stimulate the immune system to
destroy cancer cells. The Company applies its UnAB technology to produce
antibody-like molecules designed to neutralize or destroy HIV or HIV-infected
cells.
CANCER THERAPEUTICS
GMK is a therapeutic cancer vaccine designed to prevent recurrence of
melanoma in patients who are at risk of relapse after surgery. Developed at
Sloan-Kettering, GMK is composed of a ganglioside antigen which is abundant in
melanoma cells, conjugated to an immunogenic carrier protein and combined with
an adjuvant (an immunological stimulator). In August 1996, the Company commenced
the first of three pivotal, randomized, multicenter Phase III clinical trials of
GMK. These studies are being conducted in the United States by ECOG and SWOG,
which are cooperative cancer research groups supported by the NCI. Two
international Phase III clinical trials will be initiated in 1997 and will be
conducted in Europe by the ICR of the United Kingdom and the EORTC.
MGV, the Company's second ganglioside conjugate vaccine, incorporates two
ganglioside antigens that are abundant in a wide range of cancer cells. These
cancers include colorectal cancer, lymphoma, small cell lung cancer, sarcoma,
gastric cancer, neuroblastoma and melanoma. In September 1996, MGV entered Phase
I/II clinical trials at Sloan-Kettering.
HIV THERAPEUTICS
The Company is pursuing two approaches based on its HIV receptor technology
in the research and development of products designed to block viral entry into
human immune system cells. The Company's UnAB approach is based on the CD4
receptor while its HIV fusion approach is based on a recently discovered second
receptor for the virus, CKR-5.
Progenics is developing PRO 542 to selectively target HIV and prevent it
from infecting healthy cells by binding to the sites on the virus that are
required for entry into the cell. PRO 542 is based on Progenics' UnAB technology
and has been shown IN VITRO to recognize a wide range of HIV strains, including
those most prevalent in the United States and the rest of the world. PRO 542 is
being developed as an immunotherapy to treat HIV-positive individuals and as an
immunoprophylactic treatment to prevent infection of individuals who have been
exposed to the virus. The Company plans to file an IND covering PRO 542 by the
end of 1996 and initiate Phase I/II clinical trials in 1997.
25
<PAGE>
Progenics is developing PRO 367 as a therapeutic agent designed to kill
HIV-infected cells. PRO 367 consists of a UnAB molecule linked to a therapeutic
radioisotope and is designed to bind to and destroy HIV-infected cells by
delivering a lethal dose of radioactivity. The Company plans to begin Phase I/II
clinical trials of PRO 367 in 1997.
In June 1996, the Company's scientists in collaboration with researchers at
ADARC described in an article published in NATURE the discovery of a second
receptor for HIV, CKR-5. This receptor enables fusion of HIV with the cell
membrane, entry of the viral genetic information into the cell and initiation of
viral replication. The Company is using its proprietary ProSys assay in a
program to discover novel therapeutics that specifically inhibit the interaction
of HIV with the CKR-5 receptor, thereby blocking viral fusion and entry.
THE HUMAN IMMUNE SYSTEM
The human immune system functions to protect the body from disease by
specifically recognizing and destroying foreign invaders, including viruses and
bacteria. In addition, the immune system is capable of recognizing and
eliminating abnormal cells in the body, such as cancer cells and cells infected
with viruses and bacteria. White blood cells, particularly B and T lymphocytes,
have the ability to recognize antigens made by these infectious agents and
abnormal cells and react to them. For example, B lymphocytes produce antibodies
that recognize specific antigens. Antibodies can bind to these antigens and
neutralize or eliminate infectious agents and cancer cells. Vaccines can induce
the production of antibodies against antigens on infectious agents and abnormal
cells and thereby protect the body from illness. Vaccines are also being
developed as therapeutics to fight ongoing diseases. In addition, genetic
engineering techniques have enabled the production of antibodies or
antibody-like molecules in the laboratory. These genetically designed antibody
molecules may function in situations where the immune response is failing or not
present by mimicking the body's own immune response.
PRODUCT DEVELOPMENT
The Company applies its expertise in immunology to the development of
therapeutic biopharmaceuticals that use components of the immune system,
particularly antibodies, to fight diseases. The Company's two principal programs
are directed towards cancer and HIV. In the case of cancer, the Company is
developing vaccine products that are designed to induce specific antibody
responses to cancer antigens in order to fight certain cancers. In the case of
HIV, the Company is developing therapeutic products by genetically engineering
molecules that function as antibodies and selectively target HIV and
HIV-infected cells for neutralization or destruction. The Company also is
actively engaged in research and discovery of therapeutic products based on a
second HIV receptor, CKR-5, and its role in viral fusion and entry.
26
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The following table summarizes the status of the principal development
programs, product candidates and products of the Company:
<TABLE>
<CAPTION>
PROGRAM/PRODUCT INDICATION/USE STATUS(1)
- ---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
CANCER THERAPEUTICS
GMK Vaccine for melanoma Pivotal Phase III clinical trials
ongoing
MGV Vaccine for colorectal cancer, Phase I/II clinical trials ongoing
lymphoma, small cell lung cancer,
sarcoma, gastric cancer,
neuroblastoma and melanoma
HIV THERAPEUTICS
PRO 542 HIV therapy/prophylaxis Phase I/II clinical trials
expected to commence in 1997
PRO 367 HIV therapy Phase I/II clinical trials
expected to commence in 1997
CKR-5/Fusion HIV therapy Research
(using ProSys)
ProVax HIV vaccine Research
ASSAYS, DRUG SCREENING PROGRAM AND
REAGENTS
ONCOTECT GM Clinical assay for cancer In clinical investigational use
prognosis
HIV Attachment Drug Screen High-throughput screening to In use
identify small-molecule drugs to
treat HIV infection
sCD4 Research reagent On market
gp120 Research reagent On market
</TABLE>
--------------------------
(1) "Research" includes initial research related to specific molecular
targets, synthesis of new chemical entities and assay development for
the identification of lead compounds.
Phase I-III clinical trials denote safety and efficacy tests in humans
as follows:
Phase I: Evaluation of safety.
Phase II: Evaluation of safety, dosage and efficacy.
Phase III: Larger scale evaluation of safety and efficacy potentially
requiring larger patient numbers, depending on
the clinical indication for which marketing approval is sought.
"In clinical investigation use" means being used by the Company to
measure antibody levels of patients in clinical trials.
"In use" means being used by a collaborator of the Company to identify
novel small-molecule therapeutics.
See "Business--Government Regulation" and "--Assays, Drug Screening
Program and Reagents."
27
<PAGE>
CANCER THERAPEUTICS
The Company is currently developing two therapeutic cancer vaccines, one
specifically for melanoma and one for a variety of cancers, including colorectal
cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer, neuroblastoma
and melanoma.
To date, the principal therapies for cancer have been surgery, radiation and
chemotherapy. In contrast to these invasive and toxic approaches, cancer
vaccines are now being developed to stimulate the natural defense mechanisms of
the immune system to fight cancer. Unlike traditional infectious disease
vaccines that are used to prevent infection in the general population, most
cancer vaccines are therapeutic, meaning that they are being developed to
prevent recurrence of cancer in people whose cancer is in remission. In some
cases, cancer vaccines are also being designed for use in the prevention of
cancer in individuals who are at high risk for the disease.
A major challenge in cancer vaccine development is that the natural human
immune response generally does not produce sufficient antibodies to fight cancer
cells because the immune system often does not recognize the difference between
normal cells and cancer cells. Consequently, a primary objective in the
development of cancer vaccines is to train the immune system to recognize cancer
cells as a threat. If this can be achieved and the immune system can produce
sufficient antibodies to the cancer, then the recurrence of the cancer may be
prevented. Most cancer vaccines of parties other than the Company that are in
clinical development consist of dead cancer cells or crude extracts from cancer
cells. Unlike the Company's vaccine technology, the limitations of these
approaches include the inability to identify the active components of the
vaccine and to measure specific immune responses.
PROGENICS' TECHNOLOGY: GANGLIOSIDE CONJUGATE VACCINES
Progenics' cancer vaccine program is different from other approaches in that
it involves the use of purified gangliosides as cancer antigens. Gangliosides
are chemically-defined molecules which are composed of carbohydrate and lipid
components. Certain gangliosides are usually found in low amounts in normal
human tissue, but are abundant in certain cancers, such as melanoma, colorectal
cancer, lymphoma, small cell lung cancer, sarcoma, gastric cancer and
neuroblastoma.
Gangliosides alone, however, do not normally trigger an immune response in
humans. To overcome this, Progenics attaches gangliosides to large, highly
immunogenic carrier proteins to form "conjugate" vaccines designed to trigger
specific immune responses to ganglioside antigens. The technique of conjugating
carbohydrate molecules to carrier proteins has been successfully used by others
in the past to create effective vaccines for certain infectious diseases. For
example, conjugate vaccines have been approved for marketing by the FDA and are
currently administered to infants and children to prevent certain bacterial
infections. To further augment the immune response to gangliosides, Progenics
adds a potent immunological stimulator known as an "adjuvant" to its
ganglioside-carrier protein conjugate. The following diagram illustrates the
components of the Company's ganglioside conjugate vaccines.
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[LOGO]
The Company's ganglioside conjugate vaccines stimulate the immune system to
produce specific antibodies to ganglioside antigens. These antibodies have been
shown IN VITRO to recognize and destroy cancer cells. Based on these tests and
the clinical trial results described below, the Company believes that
vaccination of cancer patients with ganglioside conjugate vaccines will prevent
recurrence of cancer and prolong overall survival.
The Company's cancer vaccines use known amounts of chemically-defined
antigens, not dead cancer cells or crude extracts from cancer cells. As a
result, Progenics is able to measure specific immune responses to the
gangliosides in its vaccines. The Company also believes that there is a reduced
likelihood of variability in its products as compared to vaccines which are
prepared from dead cancer cells or crude extracts from cancer cells or which
require complicated manufacturing processes.
GMK: THERAPEUTIC VACCINE FOR MALIGNANT MELANOMA
Progenics' most advanced product under development is GMK, a proprietary
therapeutic vaccine for melanoma that is currently in pivotal Phase III clinical
trials. GMK is the first cancer vaccine based on a defined cancer antigen to
enter Phase III clinical trials. GMK was initially developed at Sloan-Kettering
and is exclusively licensed to the Company. GMK is designed to prevent
recurrence of melanoma in patients who are at risk of relapse after surgery. GMK
is composed of the ganglioside GM2 conjugated to the carrier protein KLH
(keyhole limpet hemocyanin) and combined with the adjuvant QS-21. QS-21 is the
lead compound in the Stimulon-TM- family of adjuvants developed and owned by
Aquila.
TARGET MARKET
Melanoma is a highly lethal cancer of the skin cells that produce the
pigment melanin. In early stages melanoma is limited to the skin, but in later
stages it spreads to the lungs, liver, brain and other organs. The Company
estimates that there are 300,000 melanoma patients in the U.S. today. The
American Cancer Society estimates that 38,000 patients in the U.S. will be newly
diagnosed with melanoma in 1996. In the U.S., the incidence of melanoma is
increasing at a rate of approximately 6% per year, an increase in incidence that
is faster than that of any other cancer in men and second only to lung cancer in
women. It is estimated that one in 87 Americans will develop melanoma in their
lifetime. Increased exposure to the
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<PAGE>
ultraviolet rays of the sun may be an important factor contributing to the
increase in new cases of melanoma.
Melanoma patients are categorized according to the following staging system:
MELANOMA STAGING
<TABLE>
<CAPTION>
STAGE I STAGE II STAGE III STAGE IV
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
- - lesion less than - lesion greater - metastasis to - distant
1.5 mm thickness than 1.5 mm regional draining metastasis
thickness lymph nodes
- - no apparent - local spread from - regional spread
metastasis primary cancer from primary
site cancer site
</TABLE>
GMK is designed for the treatment of patients with Stage II or Stage III
melanoma. It is estimated that these patients comprise about 50% of the total
number of melanoma patients and, accordingly, the Company estimates that there
are currently 150,000 Stage II and III melanoma patients in the U.S. According
to the American Cancer Society, an estimated 60% to 80% of Stage III melanoma
patients will experience recurrence of their cancer and die within five years
after surgery.
CURRENT THERAPIES
Standard treatment for all melanoma patients includes surgical removal of
the cancer. Thereafter, therapy varies depending on the stage of the disease.
For Stage I and II melanoma patients, treatment generally consists of close
monitoring for recurrence. The only approved treatment for Stage III melanoma
patients is high-dose alpha interferon, which received FDA marketing approval
for this indication in December 1995. In a recently reported study, the median
recurrence-free survival period after surgery for patients treated with
high-dose alpha interferon was 20 months versus 12 months for patients who
received no treatment. In addition, the median overall survival period after
surgery was 46 months for the treated group versus 34 months for the untreated
group. However, treatment with high-dose alpha interferon causes substantial
toxicities, requires an intensive treatment over twelve months (intravenous
injections five days a week for the first month followed by subcutaneous
injections three times a week for the remaining eleven months) and costs about
$35,000 per year.
Other approaches for treatment of Stage II or III melanoma patients are
currently under investigation, but none has been approved for marketing. These
experimental therapies include chemotherapy, low-dose alpha interferon and other
vaccines.
CLINICAL TRIALS
GMK entered pivotal Phase III clinical trials in the United States in August
1996. In addition, Progenics plans to initiate two international Phase III
clinical trials of GMK in 1997. GMK is administered in the studies by 12
subcutaneous injections over a two-year period on an out-patient basis.
The ongoing U.S. Phase III trial compares GMK with high-dose alpha
interferon in Stage IIb (advanced Stage II) and Stage III melanoma patients who
have undergone surgery but are at high risk for recurrence. This randomized
trial, which is expected to enroll 850 patients, is being conducted nationally
by ECOG in conjunction with SWOG and other major cancer centers, cooperative
cancer research groups, hospitals and clinics. ECOG and SWOG are leading
cooperative cancer research groups supported by the NCI and are comprised of
several hundred participating hospitals and clinics in the United States. The
primary endpoint of the trial is to compare the recurrence of melanoma in
patients receiving GMK versus in patients receiving high-dose alpha interferon.
The study will also compare quality of life and overall survival of patients in
both groups.
30
<PAGE>
The second Phase III clinical trial will be a double-blind,
placebo-controlled study in Stage IIb and Stage III melanoma patients who have
undergone surgery but are at high risk for recurrence. This trial will be
conducted by major cancer centers, hospitals and clinics in Europe, Australia,
and New Zealand. In the United Kingdom, the study will be conducted by the ICR,
a major government-sponsored cancer research organization. Patients will be
randomized to receive either GMK or a placebo (because high-dose alpha
interferon has not been approved for use in melanoma in the countries involved
in this trial). The primary endpoint of the trial is to compare the recurrence
of melanoma in patients receiving GMK versus in patients receiving placebo. The
study will also compare overall survival of patients in both groups.
The third Phase III clinical trial will be a randomized study exclusively in
Stage II melanoma patients who have undergone surgery but are at intermediate
risk for recurrence. This trial will be conducted in Europe by the EORTC, the
major cooperative cancer research group in Europe, and in the United States by
ECOG. Patients will be randomized to receive either GMK or observation with no
treatment. The primary endpoint of the trial is to compare the recurrence of
melanoma in patients receiving GMK versus in patients receiving observation with
no treatment. The study will also compare overall survival of patients in both
groups.
A predecessor of GMK, called GM2-BCG, which combined GM2 ganglioside with
the adjuvant BCG, underwent clinical testing at Sloan-Kettering in the late
1980s. In a double-blind, randomized Phase II study in 122 Stage III melanoma
patients, subjects in the treated group received GM2-BCG for six months after
surgery; subjects in the control group received the same regimen with BCG alone.
The median recurrence-free survival period after surgery for patients treated
with GM2-BCG was 33 months versus 17 months for the patients in the control
group. In addition, the median overall survival period after surgery for
patients in the treated group was 70 months versus 30 months for patients in the
control group. Approximately 85% of treated patients developed antibodies to GM2
ganglioside. The presence of these antibodies significantly correlated with
improved recurrence-free and overall survival of patients.
Phase I/II clinical trials of GMK under institutional INDs were conducted at
Sloan-Kettering over the last five years. In these studies, approximately 120
patients, most of whom had Stage III melanoma, were treated with GMK. All
patients receiving GMK at the dose level being used in the current Phase III
trials of GMK developed antibodies to GM2 ganglioside. Patients treated with GMK
had levels of antibody to GM2 ganglioside that were on average four times higher
and also were longer lasting than in patients treated with GM2-BCG in the
GM2-BCG Phase II trial. In addition, GMK was well tolerated by all patients in
these studies, and no clinically significant side effects attributable to the
vaccine were observed.
MGV: THERAPEUTIC VACCINE FOR CERTAIN CANCERS
Progenics' second ganglioside conjugate vaccine in development, MGV, is a
proprietary therapeutic vaccine for cancers which express GD2 or GM2
gangliosides. These cancers include colorectal cancer, lymphoma, small cell lung
cancer, sarcoma, gastric cancer, neuroblastoma and melanoma. MGV has three
components: (i) GM2-KLH (GM2 ganglioside conjugated to KLH); (ii) GD2-KLH (GD2
ganglioside conjugated to KLH); and, (iii) QS-21 adjuvant. MGV is designed to
prevent recurrence of cancer and prolong overall survival of patients after
their cancer has been removed by surgery or reduced by chemotherapy or radiation
therapy.
CLINICAL TRIALS
MGV entered Phase I/II clinical trials in September 1996 under an
institutional IND at Sloan-Kettering. The primary objectives of the study are to
establish the safety of MGV and the ability of the vaccine to induce specific
immune responses to both GD2 and GM2 gangliosides in patients with different
cancer types, beginning with melanoma patients. In addition, a goal of the study
is to optimize the ratio of GD2 and GM2 gangliosides in MGV to be used in future
clinical trials.
The GM2-KLH/QS-21 (GMK) and GD2-KLH/QS-21 components of MGV have each
undergone separate clinical testing. The results of clinical studies with GMK
are discussed above. To date, six
31
<PAGE>
melanoma patients have received GD2-KLH/QS-21 alone in Phase I/II clinical
trials under an institutional IND at Sloan-Kettering. All six subjects developed
antibodies to GD2 ganglioside following vaccination. In addition, the vaccine
was well tolerated and no clinically significant side effects attributable to
the vaccine were observed. Therefore, the Company expects that patients
receiving MGV will develop antibodies to both GD2 and GM2 gangliosides.
HIV THERAPEUTICS
HIV infection causes a slowly progressive deterioration of the immune system
which results in AIDS. AIDS is characterized by a general collapse of the immune
system leading to a wasting syndrome, frequent opportunistic infections, rare
forms of cancer, central nervous system degeneration, and eventual death. HIV
infection is unusual in that individuals testing positive for the virus can
survive for many years without symptoms of the disease. There are three major
routes of transmission of the virus: sexual contact, exposure to
HIV-contaminated blood or blood products and mother-to-child transmission.
HIV specifically infects cells that have the CD4 receptor on their surface
("CD4+"). CD4+ cells are critical components of the immune system, and include T
lymphocytes, monocytes, macrophages and dendritic cells. The deleterious effects
of HIV are largely due to the replication of the virus in CD4+ T lymphocytes and
the resulting destruction of these cells.
HIV-positive individuals display both antibodies and other immune system
responses which are specific to the virus. However, the high fatality rate of
this disease makes it clear that these natural immune system responses do not
provide adequate long-term protection. There are two reasons why these natural
responses are inadequate. First, as described above, the CD4+ T lymphocytes
required to mount an effective immune response against HIV are destroyed,
leaving the immune system too weak to eliminate the virus. Second, HIV displays
a remarkable degree of variability as a result of high rates of mutation that
permit different strains of the virus to escape the immune system response and
progressively replicate throughout the body.
The Company's scientists and their collaborators have made important
discoveries in understanding how HIV enters human cells and initiates viral
replication. In the 1980s, Company scientists in collaboration with researchers
at Columbia University, the ICR and the Centers for Disease Control and
Prevention ("CDC") demonstrated that the initial step of HIV infection involves
the specific attachment of the virus to the CD4 receptor on the surface of human
immune system cells. These researchers also showed that the gp120 glycoprotein
located on the HIV envelope binds with high affinity to the CD4 receptor.
Although these researchers demonstrated that CD4 was necessary for HIV
attachment, this step is not sufficient to enable the virus to enter the cell
and initiate viral replication.
In June 1996, Company scientists in collaboration with researchers at ADARC
described in an article in NATURE the discovery of a second receptor for HIV on
the surface of human immune system cells. This receptor, CKR-5, enables fusion
of HIV with the cell membrane after binding of the virus to the CD4 receptor.
This fusion step results in entry of the viral genetic information into the cell
and subsequent viral replication. Recently, Company scientists in collaboration
with researchers at ADARC demonstrated that it is the gp120 glycoprotein that
binds to the newly discovered CKR-5 receptor as well as to the CD4 receptor.
This process is shown below.
32
<PAGE>
[DIAGRAM DEPICTING THE GP120 GLYCOPROTEIN BINDING TO THE NEWLY DISCOVERED
CKR-5 RECEPTOR AND THE CD4 RECEPTOR AND ALSO THE FUSION OF THE VIRUS WITH
THE HUMAN CELL MEMBRANE]
PROGENICS' HIV RECEPTOR TECHNOLOGIES: UNABS AND CKR-5/FUSION
Based on the Company's participation in the discoveries of two major
receptors for HIV, Progenics is pursuing two approaches in the research and
development of products designed to block entry of HIV into human immune system
cells. The Company's UnAB approach is based on the CD4 receptor while its HIV
fusion approach is based on a recently discovered second receptor, CKR-5.
Because HIV must first attach to the CD4 receptor to infect human cells, the
Company believes that the part of the gp120 glycoprotein that attaches to the
CD4 receptor must remain constant across all strains of the virus. The gp120
glycoprotein is located on the exterior of both HIV and HIV-infected cells.
Progenics' UnABs incorporate a part of the CD4 receptor into
genetically-engineered molecules that function like antibodies and are designed
to bind specifically to the gp120 glycoprotein of HIV or HIV-infected cells. In
IN VITRO tests, the Company's UnABs have demonstrated the ability to bind with
high affinity to gp120 glycoproteins from a wide range of HIV strains, including
the strains most prevalent in the U.S. and the rest of the world. Because the
Company's UnAB technology is targeted to a part of HIV that must remain constant
in order for the virus to enter cells, the Company believes that its technology
may address the obstacles presented by the high mutation rate of the virus.
Two of the Company's HIV products under development are based on its
proprietary UnAB technology, although they employ the technology in different
ways. PRO 542 is designed to bind to the gp120 glycoprotein located on the virus
itself, thereby preventing it from infecting healthy cells. PRO 367 is designed
to bind to the gp120 glycoprotein located on the exterior of HIV-infected cells
and destroy those cells by delivering a lethal dose of radioactivity. The two
products also differ in that each molecule of PRO 542 has four binding sites for
HIV while each molecule of PRO 367 has two binding sites. See the inside back
cover of this Prospectus for diagrams of these products. In the area of HIV
fusion, the Company is using its proprietary ProSys assay in a program to
discover novel therapeutics that specifically inhibit the interaction of HIV
with the CKR-5 receptor, thereby blocking viral fusion and entry.
TARGET MARKET
Progenics' therapeutic product candidates are designed primarily for use in
asymptomatic HIV-positive individuals. Accordingly, the target population for
these products is patients who are aware of their infection but do not yet have
AIDS. Although there are few signs of disease in an HIV-positive individual
during the asymptomatic period, the virus is replicating in the body by
infecting healthy cells. The World Health Organization estimated that in 1994
more than 700,000 people in the U.S. and 17,000,000 people worldwide were
infected with HIV. The CDC estimated that as of December 1995 more than 190,000
people in the U.S. had AIDS. AIDS is currently the leading cause of death in the
U.S. in men between the ages of 25 and 44 and the third leading cause of death
in the U.S. in women between those ages.
33
<PAGE>
An additional potential market for the Company's HIV product candidates
consists of individuals who are at risk of becoming HIV-positive because they
have been exposed to the virus, such as: (i) health care workers exposed to
HIV-contaminated body fluids through accidental needlestick injuries; and (ii)
babies born to HIV-positive women. According to a recent academic study, in 1990
there were over 250,000 percutaneous needlestick injuries among U.S. hospital
employees. The CDC reported that in 1993 there were approximately 7,000 children
born to HIV-positive women in the U.S.
CURRENT THERAPIES
At present, two classes of products have received FDA marketing approval for
the treatment of HIV infection and AIDS: reverse transcriptase inhibitors and
protease inhibitors. Both types of drugs are inhibitors of viral enzymes and
have shown efficacy in reducing the concentration of HIV in the blood and
prolonging asymptomatic periods in HIV-positive individuals, especially when
administered in combination. However, it is not known whether HIV will develop
resistance to these drugs over time. In addition, the use of these drugs
presents problems of toxic side effects and compliance for some patients.
PRO 542: HIV THERAPY/PROPHYLAXIS
Progenics is developing PRO 542 for the treatment and post-exposure
prevention of HIV infection. PRO 542 is a proprietary UnAB-based product with
four binding sites for the gp120 glycoprotein on HIV. PRO 542 is designed to
neutralize infectious HIV through one of two mechanisms: (i) binding to and
thereby blocking the gp120 glycoprotein; or (ii) binding to and detaching the
gp120 glycoprotein from the virus.
In IN VITRO and EX VIVO tests conducted by Progenics in collaboration with
scientists at ADARC and the CDC, PRO 542 potently neutralized a wide variety of
clinical strains of HIV as well as viruses in the plasma of HIV-positive
individuals. In comparative IN VITRO studies at ADARC using a panel of
neutralizing antibodies to HIV, PRO 542 was found to be more potent and broadly
neutralizing than the antibodies to which it was compared. In further studies at
ADARC, PRO 542 protected severe combined immune deficient ("SCID") mice
transplanted with human peripheral blood lymphocytes against infection by the
three HIV strains tested, including strains of the virus isolated from
HIV-positive individuals.
Progenics plans to file an IND for PRO 542 in 1996 and, subject to its IND
becoming effective, initiate two dose-escalation Phase I/II clinical trials in
1997. The first study will be conducted in HIV-positive adult patients at Mount
Sinai Medical Center and the Bronx V.A. Medical Center, both in New York City.
The second trial will be conducted in HIV-positive children at Baylor College of
Medicine in Houston by the AIDS Clinical Trials Group, ("ACTG"), a leading
cooperative HIV research group supported by the National Institute of Allergy
and Infectious Diseases ("NIAID"). Both trials will measure safety,
pharmacokinetics and antiviral activity of PRO 542.
PRO 367: HIV THERAPY
Progenics is developing PRO 367 as a therapeutic agent designed to destroy
HIV-infected cells. PRO 367 is composed of a proprietary UnAB molecule with two
binding sites for the gp120 glycoprotein linked to a therapeutic radioisotope.
PRO 367 is designed to specifically bind with high affinity to the gp120
glycoprotein on HIV-infected cells and to destroy these cells by delivering a
lethal dose of radioactivity.
The Company plans to initiate dose-escalation Phase I/II clinical trials of
PRO 367 in 1997, subject to obtaining necessary regulatory approvals. The PRO
367 study will be conducted by the French Association Nationale de Recherches
contre le SIDA at the Pitie-Salpetriere Hospital in Paris. The study will assess
safety, pharmacokinetics, biodistribution and antiviral effects of PRO 367 in
HIV-positive adult patients.
In IN VITRO tests, PRO 367 specifically bound with high affinity to the
gp120 glycoprotein on the cell surface. In addition, a pilot Phase I clinical
trial in AIDS patients of a trace-labelled precursor of PRO 367
34
<PAGE>
is being conducted under an institutional IND at Sloan-Kettering. This trial is
assessing the safety, pharmacology and biodistribution of the compound with low
doses of iodine-131. To date, the compound has been well tolerated by all
patients and no clinically significant side effects attributable to the compound
have been observed.
CKR-5/FUSION (USING PROSYS): HIV THERAPY
The Company's first application of its CKR-5 receptor technology is a
proprietary assay known as ProSys. ProSys models fusion of HIV with human cells
by means of a rapid, automated and sensitive assay that does not involve the use
of infectious virus. Progenics is using ProSys in a program to discover novel
biologic and small-molecule therapeutics that specifically inhibit the
interaction between HIV and the CKR-5 receptor, thereby blocking viral fusion
and entry. Progenics is currently seeking pharmaceutical company collaborators
for this program.
PROVAX: HIV VACCINE
Progenics is conducting research with respect to ProVax, a vaccine candidate
which it believes will be useful as a preventative or a therapeutic treatment
for HIV-positive individuals. Progenics is currently performing
government-funded research and development of ProVax in collaboration with
ADARC, the Southwest Foundation for Biomedical Research in San Antonio and the
University of Oklahoma Medical Center.
ASSAYS, DRUG SCREENING PROGRAM AND REAGENTS
Through its immunology expertise, Progenics has developed certain assays
which are used both independently and in collaboration with partners, as well as
certain reagents which are being sold for research use only.
ONCOTECT GM
Progenics has developed ONCOTECT GM, a clinical assay for assessing
prognosis in patients with melanoma and other cancers. ONCOTECT GM measures the
levels of antibody to GM2 ganglioside in the blood. In clinical trials of a
therapeutic vaccine for melanoma, the presence of these antibodies significantly
correlated with improved recurrence-free and overall survival of patients. The
Company is currently using ONCOTECT GM in its cancer vaccine clinical trials.
HIV ATTACHMENT DRUG SCREEN
Progenics, as part of a collaborative development project with American
Cyanamid Company ("American Cyanamid"), a subsidiary of American Home Products
Corporation ("American Home Products"), has developed a proprietary drug
screening assay designed to identify novel small-molecule therapeutics for HIV
infection which inhibit attachment of the virus to the CD4 receptor. This assay
has been used in a high-throughput screening program. The Company and American
Cyanamid have agreed that all discoveries made in the course of their
collaboration will be jointly owned. Progenics and the Wyeth-Ayerst Research
Division of American Home Products plan to perform additional studies to
evaluate the antiviral activity of the compounds discovered in the course of the
screening program.
RESEARCH REAGENTS: SCD4 AND GP120
Progenics manufactures the research reagents sCD4 and gp120 which it sells
to DuPont de Nemours & Company ("DuPont") and Intracel Corporation ("Intracel")
for resale. DuPont markets and sells gp120 and sCD4 under both the Progenics and
the DuPont names. Intracel markets and sells gp120 and sCD4 under both the
Progenics and Intracel names. These products are sold worldwide for research
use. While the Company's only customers for these reagents are DuPont and
Intracel, in light of the
35
<PAGE>
limited revenues received from sales of these reagents, the Company does not
believe that the loss of either of these customers would have a material adverse
effect on the Company.
BUSINESS STRATEGY
Progenics' strategy is to develop innovative products for the treatment and
prevention of cancer and viral diseases based upon its expertise in immunology.
Key elements of the Company's strategy are as follows:
LEVERAGE CORE PROPRIETARY TECHNOLOGIES. Progenics is developing a portfolio
of therapeutic cancer vaccines and HIV treatments utilizing its proprietary
ganglioside conjugate vaccine, UnAB and CKR-5/fusion technologies. Progenics has
recently commenced pivotal Phase III clinical trials of GMK and Phase I/II
clinical trials of MGV, and plans to initiate clinical trials of its HIV
products in 1997. The Company also is actively involved in research based on the
discovery of a second HIV receptor, CKR-5, and its role in viral fusion and
entry. The Company is exploring additional applications of these existing core
technologies. For example, the Company is continuing to screen additional
cancers for the presence of specific gangliosides in order to develop vaccines
to treat a variety of cancers and continues to perform additional research into
the mechanism of HIV entry into the cell.
IN-LICENSE ADDITIONAL PRODUCT CANDIDATES AND TECHNOLOGIES. The Company
intends to continue to in-license technologies and product candidates that
complement its existing capabilities. Sources for these technologies range from
academic institutions and research organizations to other biotechnology and
pharmaceutical companies. In particular, the Company's license agreement with
Sloan-Kettering covers certain future developments in the cancer vaccine field
resulting from work performed in a laboratory at Sloan-Kettering. The Company
believes this in-licensing strategy will enable it to bring products to market
more quickly, efficiently and at lower cost while it focuses its expertise on
product development and pre-clinical and clinical trial design and
implementation.
ESTABLISH COLLABORATIONS TO MINIMIZE DEVELOPMENT COSTS AND ACCESS
EXPERTISE. Progenics has carefully controlled its expenditures on early stage
research, clinical trials and related infrastructure by establishing
collaborations with leading research institutions and clinical research
organizations. For example, Progenics currently has collaborations with academic
and government institutions such as Sloan-Kettering, ADARC and the CDC, and
clinical research groups such as ECOG, SWOG, ICR and EORTC. Many of the costs of
basic research and clinical trials are funded directly by these organizations,
which enables the Company to substantially reduce its financing requirements. In
addition, collaboration with these groups allows the Company to access their
substantial expertise. These organizations generally undertake this funding
because they are academic and government institutions dedicated to advancing
medical research. Consequently, the Company has not generally been obligated to
give any consideration, either in the form of money or rights to its products,
to these organizations in exchange for their assistance with the funding of the
costs of basic research and clinical trials. Finally, Progenics has funded, and
plans to continue to fund, a significant portion of certain of its programs with
government research grants and contracts.
SELECT AN APPROPRIATE COMMERCIALIZATION STRATEGY FOR EACH
PRODUCT. Progenics will determine what it believes to be the most expedient and
cost-effective way to commercialize each product that it develops. Progenics may
undertake to manufacture, market and sell the product itself, or may undertake
one or more of these functions in conjunction with third-party manufacturers,
marketers, distributors, representatives, licensors or others. To date,
Progenics has retained all commercial rights to its four principal products, all
of which have entered, or are about to enter, human clinical trials. As a
result, the Company believes that it will be able to retain a greater share of
the economic value of these products which it, or a collaborator selected by it,
is able to bring to market. The key factors that will guide Progenics in making
each of these decisions are the nature of the product, the facilities and skills
required to manufacture the product, the anticipated distribution channels and
required marketing capabilities and the resources and skills of prospective
collaborators.
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LICENSES
The Company is a party to license arrangements under which it has obtained
rights to use certain technologies in its cancer and HIV programs. Set forth
below is a summary of those licenses that the Company believes to be important
to its business.
The Company is party to a license agreement with Sloan-Kettering under which
the Company obtained the worldwide, exclusive rights to certain technology
relating to ganglioside conjugate vaccines, including GMK and MGV, and their use
to treat or prevent cancer. The Sloan-Kettering license terminates upon the
expiration of the last of the licensed patents or 15 years from the date of the
first commercial sale of a licensed product pursuant to the agreement, whichever
is later. In addition to patent applications, the Sloan-Kettering license
includes the exclusive rights to use certain relevant technical information and
know-how, as well as rights to certain future developments. A number of
Sloan-Kettering physician-scientists also serve as consultants to the Company.
The Company is party to a license agreement with The Regents of the
University of California under which the Company obtained the exclusive rights
to an issued U.S. patent covering certain ganglioside conjugate vaccines. The
license agreement terminates upon the expiration of the patent.
The Company is party to a license agreement with Columbia University under
which the Company has obtained exclusive, worldwide rights to certain technology
and materials relating to CD4 and its use to treat or prevent HIV infection. The
license agreement will terminate upon the expiration of the last of the licensed
patents.
The Company has entered into a license and supply agreement with Aquila
pursuant to which Aquila agreed to supply the Company with all of its
requirements for the QS-21 adjuvant for use in certain ganglioside-based cancer
vaccines, including GMK and MGV. The agreement grants to the Company a license
to use Aquila's patented technology to develop, manufacture and sell certain
cancer vaccines using QS-21 and, if Aquila is unable to supply the Company with
sufficient quantities of QS-21, the Company has the right to manufacture QS-21
itself or purchase it from third parties for so long as Aquila is unable to
supply the Company with sufficient quantities of QS-21. QS-21 is the lead
compound in the Stimulon-TM- family of adjuvants developed and owned by Aquila.
The license terminates upon the expiration of the last of the licensed patents.
The licenses to which the Company is a party impose various milestone,
commercialization, sublicensing, royalty and other payment, insurance and other
obligations on the Company. Failure by the Company to comply with these
requirements could result in the termination of the applicable agreement, which
could have a material adverse effect on the Company's business.
RESEARCH AND DEVELOPMENT COLLABORATIONS
The Company has entered into collaborative agreements with various parties
relating to its cancer and HIV programs. Set forth below is a summary of those
collaborations that the Company believes to be important to its business.
The Company is working on a collaborative basis with ADARC with respect to
the development of certain of the Company's HIV products. Under the agreement
with ADARC, the Company is obligated to pay the salary of an ADARC technician
who works on scientific projects of mutual interest to the Company and ADARC.
The Company is party to a cooperative research and development agreement
with the CDC to conduct collaborative research on certain of the Company's HIV
products. Under the agreement with the CDC, the Company provides researchers
with certain materials for investigation at the CDC. The agreement with the CDC
terminates when the research plan, as described in the agreement, is completed,
unless earlier terminated by the parties.
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<PAGE>
In general, the Company's collaborative research agreements require the
payment by Progenics of various amounts in support of the research to be
conducted. If the collaborator creates any invention during the course of its
efforts, solely or jointly with the Company, the Company generally has an option
to negotiate an exclusive, royalty-bearing license of the collaborator's rights
in the invention for the purpose of commercializing any product incorporating
such invention. Inventions developed solely by the Company's scientists as part
of the collaboration generally are owned exclusively by the Company. Most of
these collaborative agreements are non-exclusive and can be cancelled on
relatively short notice.
The Company has also entered into collaborative arrangements with
Sloan-Kettering, ECOG, SWOG, ICR and EORTC with respect to its clinical trials.
See "Business--Cancer Therapeutics--GMK: Therapeutic Vaccine for Malignant
Melanoma--Clinical Trials" and "--Cancer Therapeutics--MGV: Therapeutic Vaccine
for Certain Cancers--Clinical Trials."
GOVERNMENT GRANTS
Through September 30, 1996, the Company had been awarded government grants,
aggregating approximately $2,359,000 under the Small Business Innovation
Research ("SBIR") program of the NIH for the Company's commercial development of
PRO 542, PRO 367, ProVax and ProSys. Through September 30, 1996 the Company had
recognized approximately $1,298,000 of such amount as revenue. In addition, the
Company has been awarded a $812,000 multi-year grant under a contract with the
Department of Defense for work related to ProVax. Through September 30, 1996 the
Company had recognized approximately $437,000 of such amount as revenue.
Under the terms of these grants, the Company has, subject to certain rights
of the government described below, all right, title and interest to all patents,
copyrights and data pertaining to any product developed. However, under existing
regulations, the government receives a royalty-free license for federal
government use with respect to patents developed by grant recipients. In
addition, the government may, in certain circumstances, require the Company to
license technology resulting from the funded projects to third parties and may
require that the Company manufacture substantially all of the products resulting
from a particular grant in the United States.
The government's obligation to make payments under these grants is subject
to appropriation by the United States Congress for funding in each such year.
Moreover, it is possible that Congress or the government agencies that
administer these government research programs will determine to scale back these
programs or terminate them or that the government will award future grants to
competitors of the Company instead of the Company. In addition, while Progenics
intends to pursue additional government grants related to its areas of research
and development, there can be no assurances that the Company will be awarded any
such grants in the future or that any amounts derived therefrom will not be less
than those received to date.
PATENTS AND PROPRIETARY TECHNOLOGY
Progenics' policy is to protect its proprietary technology, and the Company
considers the protection of such rights to be important to its business. In
addition to seeking U.S. patent protection for many of its inventions, the
Company generally files patent applications in Canada, Japan, Western European
countries and additional foreign countries on a selective basis in order to
protect the inventions deemed to be important to the development of its foreign
business.
Under a license agreement with Sloan-Kettering, Progenics obtained
worldwide, exclusive rights to certain technology relating to ganglioside
conjugate vaccines, including GMK and MGV, and their use to treat or prevent
cancer. This technology is the subject of a patent application filed by
Sloan-Kettering in the U.S. and 14 foreign countries claiming composition of
matter and methods of production and use of certain ganglioside conjugate
vaccines for the treatment or prevention of human cancer.
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<PAGE>
Under a license agreement with Columbia University, Progenics obtained
worldwide, exclusive rights to certain technology relating to CD4 and its use to
treat or prevent HIV infection. This technology is the subject of issued U.S.
and European patents and several related U.S. and foreign patent applications
filed by Columbia University. The issued patents and the patent applications
claim composition of matter and methods of production and use of certain
CD4-based products for the treatment or prevention of HIV infection. Progenics
has also filed a number of U.S. and foreign patent applications on its UnAB,
ProSys and ProVax technologies and clinical uses of these technologies.
There can be no assurance that patent applications owned by or licensed to
the Company will result in patents being issued or that, if issued, the patents
will afford protection against competitors with similar technology. Although a
patent has a statutory presumption of validity in the United States, the
issuance of a patent is not conclusive as to such validity or as to the
enforceable scope of the claims of the patent. There can be no assurance that
the Company's issued patents or any patents subsequently issued to or licensed
by the Company will not be successfully challenged in the future. The validity
or enforceability of a patent after its issuance by the patent office can be
challenged in litigation. The cost of litigation to uphold the validity of
patents and to prevent patent infringement can be substantial. If the outcome of
the litigation is adverse to the owner of the patent, third parties may then be
able to use the invention covered by the patent without payment. There can be no
assurance that the Company's patents will not be infringed or successfully
avoided through design innovation.
There may be patent applications and issued patents belonging to competitors
that may require the Company to alter its products, pay licensing fees or cease
certain activities. If the Company's products conflict with patents that have
been or may be granted to competitors, universities or others, such other
persons could bring legal actions against the Company claiming damages and
seeking to enjoin manufacturing and marketing of the affected products. If any
such actions are successful, in addition to any potential liability for damages,
the Company could be required to obtain a license in order to continue to
manufacture or market the affected products. There can be no assurance that the
Company would prevail in any such action or that any license required under any
such patent would be made available on acceptable terms or at all. The Company
believes that there may be significant litigation in the industry regarding
patent and other intellectual property rights. If the Company becomes involved
in such litigation, it could consume substantial resources.
Progenics has also filed a number of U.S. and foreign patent applications
(one of which is owned jointly with ADARC) relating to the discovery of a second
HIV receptor, CKR-5. In addition to the risks described above, the Company is
aware that other groups have claimed discoveries similar to that covered by the
Company's patent applications. These groups may have made their discoveries
prior to the discoveries covered by the Company's patent applications and may
have filed their applications prior to the Company's patent applications. The
Company does not expect to know for several years the relative strength of its
patent position as compared to these other groups.
The enactment of the legislation implementing the General Agreement on
Tariffs and Trade has resulted in certain changes to United States patent laws
that became effective on June 8, 1995. Most notably, the term of patent
protection for patent applications filed on or after June 8, 1995 is no longer a
period of seventeen years from the date of grant. The new term of United States
patents will commence on the date of issuance and terminate twenty years from
the earliest effective filing date of the application. Because the time from
filing to issuance of patent applications is often more than three years, a
twenty-year term from the effective date of filing may result in a substantially
shortened term of patent protection, which may adversely impact the Company's
patent position.
In addition to the patents, patent applications, licenses and intellectual
property processes described above, the Company also relies on unpatented
technology, trade secrets and information. No assurance can be given that others
will not independently develop substantially equivalent information and
techniques or otherwise gain access to the Company's technology or disclose such
technology, or that the
39
<PAGE>
Company can meaningfully protect its rights in such unpatented technology, trade
secrets and information. The Company requires each of its employees, consultants
and advisors to execute a confidentiality agreement at the commencement of an
employment or consulting relationship with the Company. The agreements generally
provide that all inventions conceived by the individual in the course of
employment or in providing services to the Company and all confidential
information developed by, or made known to, the individual during the term of
the relationship shall be the exclusive property of the Company and shall be
kept confidential and not disclosed to third parties except in limited specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's information in the event of
unauthorized use or disclosure of such confidential information.
GOVERNMENT REGULATION
The Company and its products are subject to comprehensive regulation by the
FDA in the United States and by comparable authorities in other countries. These
national agencies and other federal, state, and local entities regulate, among
other things, the preclinical and clinical testing, safety, effectiveness,
approval, manufacture, labeling, marketing, export, storage, record keeping,
advertising, and promotion of the Company's products.
FDA approval of the Company's products, including a review of the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the United States. The process
of obtaining approvals from the FDA can be costly, time consuming, and subject
to unanticipated delays. There can be no assurance that approvals of the
Company's proposed products, processes, or facilities will be granted on a
timely basis, or at all. Any failure to obtain or delay in obtaining such
approvals would adversely affect the ability of the Company to market its
proposed products. Moreover, even if regulatory approval is granted, such
approval may include significant limitations on indicated uses for which a
product could be marketed.
The process required by the FDA before the Company's products may be
approved for marketing in the United States generally involves (i) preclinical
laboratory and animal tests, (ii) submission to the FDA of an IND, which must
become effective before clinical trials may begin, (iii) adequate and
well-controlled human clinical trials to establish the safety and efficacy of
the drug for its intended indication, (iv) submission to the FDA of an NDA or
PLA and (v) FDA review of the NDA or PLA in order to determine, among other
things, whether the drug or product is safe and effective for its intended uses.
There is no assurance that the FDA review process will result in product
approval on a timely basis, or at all.
An IND is a submission which the sponsor of a clinical trial of an
investigational new drug must make to the FDA, and which must become effective
before clinical trials may commence. The IND submission must include, among
other things, a description of the sponsor's investigational plan; protocols for
each planned study; chemistry, manufacturing, and control information;
pharmacology and toxicology information; and a summary of previous human
experience with the investigational drug.
A NDA is an application to the FDA to market a new drug. The NDA must
contain, among other things, information on chemistry, manufacturing, and
controls; nonclinical pharmacology and toxicology; human pharmacokinetics and
bioavailability; and clinical data. The new drug may not be marketed in the
United States until the FDA has approved the NDA.
A PLA is an application to the FDA to market a biological product. The PLA
must contain, among other things, data derived from nonclinical laboratory and
clinical studies which demonstrate that the product meets prescribed standards
of safety, purity and potency, and a full description of manufacturing methods.
The biological product may not be marketed in the United States until a product
license is issued, and until the establishment where the product is to be
manufactured has been issued an establishment license.
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<PAGE>
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to gain preliminary information of a product's pharmacology and
toxicology and to identify any safety problems that would preclude testing in
humans. Products must generally be manufactured according to cGMP and
preclinical safety tests must be conducted by laboratories that comply with FDA
regulations regarding good laboratory practices. The results of the preclinical
tests are submitted to the FDA as part of an IND application and are reviewed by
the FDA prior to the commencement of human clinical trials. Unless the FDA
objects to, or makes comments or raises questions concerning, an IND, the IND
will become effective 30 days following its receipt by the FDA and initial
clinical studies may begin, although companies often obtain affirmative FDA
approval before beginning such studies. There can be no assurance that
submission of an IND will result in FDA authorization to commence clinical
trials. See "Risk Factors-- Uncertainty Associated with Preclinical and Clinical
Testing."
Clinical trials involve the administration of the investigational new drug
to healthy volunteers and to patients under the supervision of a qualified
principal investigator. Clinical trials must be conducted in accordance with the
FDA's Good Clinical Practice requirements under protocols that detail, among
other things, the objectives of the study, the parameters to be used to monitor
safety, and the effectiveness criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND. Further, each clinical study must be
conducted under the auspices of an Institutional Review Board ("IRB"). The IRB
will consider, among other things, ethical factors, the safety of human
subjects, the possible liability of the institution and the informed consent
disclosure which must be made to participants in the clinical trial.
Clinical trials are typically conducted in three sequential phases, although
the phases may overlap. During Phase I, when the drug is initially administered
to human subjects, the product is tested for safety, dosage tolerance,
absorption, metabolism, distribution, and excretion. Phase II involves studies
in a limited patient population to (i) evaluate preliminarily the efficacy of
the product for specific, targeted indications, (ii) determine dosage tolerance
and optimal dosage, and (iii) identify possible adverse effects and safety
risks. When a new product is found to have an effect and to have an acceptable
safety profile in Phase II evaluation, Phase III trials are undertaken in order
to further evaluate clinical efficacy and to further test for safety within an
expanded patient population. The FDA may suspend clinical trials at any point in
this process if it concludes that clinical subjects are being exposed to an
unacceptable health risk.
The results of the preclinical studies and clinical studies, the chemistry
and manufacturing data, and the proposed labelling, among other things, are
submitted to the FDA in the form of an NDA or PLA, approval of which must be
obtained prior to commencement of commercial sales. The FDA may refuse to accept
the NDA or PLA for filing if certain administrative and content criteria are not
satisfied, and even after accepting the NDA or PLA for review, the FDA may
require additional testing or information before approval of the NDA or PLA. In
any event, the FDA must deny an NDA or PLA if applicable regulatory requirements
are not ultimately satisfied. Moreover, if regulatory approval of a product is
granted, such approval may be made subject to various conditions, including
post-marketing testing and surveillance to monitor the safety of the product, or
may entail limitations on the indicated uses for which it may be marketed.
Finally, product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
Under current FDA regulations, in addition to the licensing of a vaccine
product itself through the PLA process, any establishment used to manufacture a
vaccine product must also be licensed. To obtain the necessary establishment
license, an establishment license application ("ELA") describing the facilities,
equipment, processes, and personnel used to manufacture the product in question
must be filed with the FDA. The establishment license will be granted only after
the FDA inspects the establishment and determines that the establishment
complies with all applicable standards, including, but not limited to,
compliance with cGMP and the ability to consistently manufacture the product at
the establishment in accordance with the PLA. FDA approval of both the PLA and
ELA must be received prior to marketing of a vaccine product. Therefore, any
delay in FDA's approval of the ELA, or refusal to approve the ELA, would delay
or prevent the marketing of the product in question.
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On May 14, 1996, the FDA adopted a new regulation, effective May 24, 1996,
regarding the license application process for certain biological products. Those
biological products that fall within the regulation will be reviewed on the
basis of a single biologics license application ("BLA"), rather than a PLA/ELA.
The BLA includes the same information as the current PLA, but certain of the
data now required as part of the ELA do not have to be submitted or reviewed
during the approval process. This new rule is intended, at least in part, to
lessen the regulatory burden on manufacturers of certain biologics and
accelerate the approval process. There can be no assurance, however, that the
FDA will consider the new regulation applicable to any of the Company's
products, or that the BLA process, if applicable to the Company's products, will
have the intended effect of reducing review times.
Both before and after approval is obtained, a product, its manufacturer, and
the holder of the NDA or PLA for the product are subject to comprehensive
regulatory oversight. Violations of regulatory requirements at any stage,
including the preclinical and clinical testing process, the approval process, or
thereafter (including after approval) may result in various adverse
consequences, including FDA delay in approving or refusal to approve a product,
withdrawal of an approved product from the market and/or the imposition of
criminal penalties against the manufacturer and/or NDA or PLA holder. In
addition, later discovery of previously unknown problems may result in
restrictions on such product, manufacturer, or NDA or PLA holder, including
withdrawal of the product from the market. Also, new government requirements may
be established that could delay or prevent regulatory approval of the Company's
products under development.
The FDA has implemented accelerated approval procedures for certain
pharmaceutical agents that treat serious or life-threatening diseases and
conditions, and that provide meaningful therapeutic benefit over existing
treatments. The Company believes that certain of its products in development may
qualify for accelerated approval. The Company cannot predict the ultimate
impact, however, of the FDA's accelerated approval procedures on the timing or
likelihood of approval of any of its potential products or those of any
competitor. In addition, the approval of a product under the accelerated
approval procedures is subject to various conditions, including the requirement
to verify clinical benefit in postmarketing studies, and the authority on the
part of the FDA to withdraw approval under streamlined procedures if such
studies do not verify clinical benefit or under various other circumstances.
Whether or not FDA approval has been obtained, approval of a pharmaceutical
product by comparable government regulatory authorities in foreign countries
must be obtained prior to marketing such product in such countries. The approval
procedure varies from country to country, and the time required may be longer or
shorter than that required for FDA approval. Although there are some procedures
for unified filing for certain European countries, in general, each country has
its own procedures and requirements. The Company does not currently have any
facilities or personnel outside of the United States.
In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future federal, state or local
regulations. The Company's research and development involves the controlled use
of hazardous materials, chemicals, viruses and various radioactive compounds.
Although the Company believes that its safety procedures for storing, handling,
using and disposing of such materials comply with the standards prescribed by
applicable regulations, the risk of accidental contaminations or injury from
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could have a material adverse effect of the Company. See "Risk
Factors --Government Regulation; No Assurance of Regulatory Approval" and
"--Hazardous Materials; Environmental Matters."
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MANUFACTURING
Progenics has considerable expertise in the manufacture of its proprietary
ganglioside conjugate vaccines and recombinant proteins. The Company currently
manufactures GMK, MGV, PRO 542 and PRO 367 in its pilot production facilities in
Tarrytown, New York. The Company believes that its existing production
facilities will be sufficient to meet the Company's initial needs for clinical
trials. However, these facilities may be insufficient for all of the Company's
late-stage clinical trials and for its commercial-scale requirements.
Accordingly, the Company expects to be required in the future to expand its
manufacturing staff and facilities and obtain new facilities or to contract with
third parties to assist with production. In general, Progenics plans to retain
manufacturing rights and control during clinical trials and commercialization.
In the event the Company decides to establish a full-scale commercial
manufacturing facility, the Company will require substantial additional funds
and will be required to hire and train significant numbers of employees and
comply with the extensive cGMP regulations applicable to such a facility. In
addition, if any of the Company's products produced at its facilities were
regulated as biologics, the Company could be required to file an ELA and obtain
an establishment license for its facilities.
SALES AND MARKETING
Progenics plans to market products for which it obtains regulatory approval
through co-marketing, co-promotion, licensing and distribution arrangements with
third party collaborators. The Company believes that this approach will both
increase market penetration and commercial acceptance of its products and enable
the Company to avoid expending significant funds to develop a large sales and
marketing organization. The Company has entered into collaborative marketing
arrangements with DuPont and Intracel with respect to the sCD4 and gp120
research reagents.
COMPETITION
Competition in the biopharmaceutical industry is intense. The Company faces
competition from many companies, major universities and research institutions in
the United States and abroad. Many of the Company's competitors have
substantially greater resources, experience in conducting preclinical studies
and clinical trials and obtaining regulatory approvals for their products,
operating experience, research and development and marketing capabilities and
production capabilities than those of the Company. The Company will face
competition from companies marketing existing products or developing new
products for diseases targeted by the Company's technologies. The development of
new products for those diseases for which the Company is developing products
could render the Company's product candidates noncompetitive and obsolete.
A significant amount of research in this industry is also being carried out
at academic and government institutions. These institutions are becoming
increasingly aware of the commercial value of their findings and are becoming
more aggressive in pursuing patent protection and negotiating licensing
arrangements to collect royalties for use of technology that they have
developed. These institutions may also market competitive commercial products on
their own or in collaboration with competitors. Any resulting increase in the
cost or decrease in the availability of technology or product candidates from
these institutions may affect the Company's business strategy.
Competition with respect to the Company's technologies and product
candidates is and will be based, among other things, on effectiveness, safety,
reliability, availability, price and patent position. Another important factor
will be the timing of market introduction of the Company's or competitive
products. Accordingly, the speed with which Progenics can develop products,
complete the clinical trials and approval processes and ultimately supply
commercial quantities of the products to the market is expected to be an
important competitive factor. The Company's competitive position will also
depend upon its
43
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ability to attract and retain qualified personnel, to obtain patent protection
or otherwise develop proprietary products or processes, and to secure sufficient
capital resources for the often substantial period between technological
conception and commercial sales.
PRODUCT LIABILITY
The testing, manufacturing and marketing of the Company's products involves
an inherent risk of product liability attributable to unwanted and potentially
serious health effects. To the extent the Company elects to test, manufacture or
market products independently, it will bear the risk of product liability
directly. If the Company enters into collaborative agreements with third parties
regarding commercialization of any products based on the Company's technologies,
the Company will seek to obtain indemnification agreements from such partners,
however there can be no assurance that corporate sponsors, if any, would agree
to fully indemnify the Company against losses resulting from such collaborative
efforts. The Company has obtained insurance in the amount of $5,000,000 against
the risk of product liability. This insurance is subject to certain deductibles
and coverage limitations. There is no guarantee that insurance will continue to
be available at a reasonable cost, or at all, or that the amount of such
insurance will be adequate.
HUMAN RESOURCES
At September 30, 1996, the Company had 27 full-time employees, four of whom
hold Ph.D. degrees or foreign equivalents and two of whom hold M.D. degrees.
Twenty-one employees are engaged in research and development, medical and
regulatory affairs and manufacturing activities and six are engaged in finance,
administration and business development. The Company considers its relations
with its employees to be good. None of its employees is covered by a collective
bargaining agreement.
FACILITIES
Progenics leases approximately 23,000 square feet of laboratory,
manufacturing and office space in Westchester County, New York, approximately
twenty-five miles north of New York City. The Company leases this space under an
operating lease which terminates in April 1998. Progenics has two pilot
production facilities within its leased facilities for the manufacture of
products for clinical trials. The Company believes that its current facilities
are adequate for its current needs, but the Company is considering a move to new
facilities or an upgrading of its current facilities at the end of its current
lease term to enhance its manufacturing capabilities.
LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings.
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SCIENTIFIC ADVISORY BOARDS
An important component of Progenics' scientific strategy is its
collaborative relationship with leading researchers in cancer and virology.
Certain of these researchers are members of the Company's two Scientific
Advisory Boards (each an "SAB"), one in cancer and one in virology. The members
of each SAB attend periodic meetings and provide Progenics with specific
expertise in both research and clinical development. In addition, Progenics has
collaborative research relationships with certain individual SAB members. All
members of the SABs are employed by employers other than the Company and may
have commitments to or consulting or advisory agreements with other entities
that may limit their availability to the Company. These companies may also be
competitors of Progenics. Several members of the SABs have, from time to time,
devoted significant time and energy to the affairs of the Company. However, no
member is regularly expected to devote more than a small portion of his time to
Progenics. In general, Progenics' scientific advisors are granted stock options
in the Company and receive financial remuneration for their services.
CANCER SCIENTIFIC ADVISORY BOARD
<TABLE>
<CAPTION>
NAME POSITION/AFFILIATION
- --------------------------------------------- ---------------------------------------------
<S> <C>
Alan N. Houghton, M.D. (Chairman)............ Chairman, Immunology Program, Sloan-Kettering
and Professor, Cornell University Medical
College ("CUMC")
Angus G. Dalgleish, M.D., Ph.D............... Chairman and Professor of Medical Oncology,
St. George's Hospital, London
David W. Golde, M.D.......................... Physician-in-Chief, Sloan-Kettering and
Professor, CUMC
David R. Klatzmann, M.D., Ph.D............... Professor of Immunology, Pitie-Salpetriere
Hospital, Paris
Philip O. Livingston, M.D.................... Associate Member, Sloan-Kettering and
Associate Professor, CUMC
John Mendelsohn, M.D......................... President, The University of Texas M.D.
Anderson Cancer Center
David A. Scheinberg, M.D., Ph.D.............. Chief, Leukemia Service, Sloan-Kettering and
Associate Professor, CUMC
</TABLE>
VIROLOGY SCIENTIFIC ADVISORY BOARD
<TABLE>
<CAPTION>
NAME POSITION/AFFILIATION
- --------------------------------------------- ---------------------------------------------
<S> <C>
Stephen P. Goff, Ph.D. (Chairman)............ Professor of Biochemistry, Columbia
University
Mark Alizon, M.D., Ph.D...................... Director of Research, Institut Cochin, Paris
Lawrence A. Chasin, Ph.D..................... Professor of Biological Sciences, Columbia
University
Leonard Chess, M.D........................... Professor of Medicine, Columbia University
Wayne A. Hendrickson, Ph.D................... Professor of Biochemistry, Columbia
University
Israel Lowy, M.D., Ph.D...................... Assistant Professor of Medicine, Mount Sinai
Medical Center
J. Steven McDougal, M.D...................... Chief, Immunology Branch, CDC, Atlanta
Luc Montagnier, M.D.......................... Professor and Chairman of Virology, Pasteur
Institute, Paris
Sherie L. Morrison, Ph.D..................... Professor of Microbiology, UCLA
Robin A. Weiss, Ph.D......................... Professor and Director of Research, ICR,
Royal Cancer Hospital, London
</TABLE>
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGEMENT
The directors, executive officers and key management of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Paul J. Maddon, M.D., Ph.D........................... 37 Chairman of the Board, Chief Executive Officer,
President and Chief Science Officer
Robert J. Israel, M.D................................ 39 Vice President, Medical Affairs
Robert A. McKinney................................... 40 Vice President, Finance and Operations and Treasurer
Joel D. Sendek....................................... 29 Senior Director, Corporate Development and Investor
Relations
Graham P. Allaway, Ph.D.............................. 41 Associate Scientific Director and Head, Therapeutic
Development Group
Patricia C. Fazio.................................... 37 Director, Health & Safety and Project Management
Charles A. Baker (1)................................. 64 Director
Mark F. Dalton (1)................................... 46 Director
Stephen P. Goff, Ph.D. (2)........................... 45 Director
Elizabeth M. Greetham (2)............................ 47 Director
Paul F. Jacobson (1)................................. 42 Director
David A. Scheinberg, M.D., Ph.D. (2)................. 40 Director
</TABLE>
- ------------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
PAUL J. MADDON, M.D., PH.D. is the founder of the Company and has served in
various capacities since its inception, including Chairman of the Board of
Directors, Chief Executive Officer, President and Chief Science Officer. From
1981 to 1988, Dr. Maddon performed research at the Howard Hughes Medical
Institute at Columbia University in the laboratory of Dr. Richard Axel. He
received a B.A. in biochemistry and mathematics and an M.D. and a Ph.D. in
biochemistry and molecular biophysics from Columbia University. Dr. Maddon has
been an Adjunct Assistant Professor of Medicine at Columbia University since
1989.
ROBERT J. ISRAEL, M.D. joined the Company in October 1994 and has been Vice
President, Medical Affairs since that time. From 1991 to 1994, Dr. Israel was
Director, Clinical Research-Oncology and Immunohematology at Sandoz
Pharmaceuticals Corporation, a pharmaceutical company. From 1988 to 1991, he was
Associate Director, Oncology Clinical Research at Schering-Plough Corporation, a
pharmaceutical company. Dr. Israel is a licensed physician and is board
certified in both internal medicine and medical oncology. He received a B.A. in
physics from Rutgers University and an M.D. from the University of Pennsylvania
and completed an oncology fellowship at Sloan-Kettering. Dr. Israel has been a
consultant to the Solid Tumor Service at Sloan-Kettering since 1987.
46
<PAGE>
ROBERT A. MCKINNEY joined the Company in September 1992. Mr. McKinney served
as Director, Finance and Operations and Treasurer from 1992 to January 1993,
when he was appointed Vice President, Finance and Operations and Treasurer of
Progenics. From 1991 to 1992, he was Corporate Controller at VIMRx
Pharmaceuticals, Inc., a biotechnology research company. From 1990 to 1991, Mr.
McKinney was Manager, General Accounting at Micrognosis, Inc., a software
integration company. From 1985 to 1990, he was an audit supervisor at Coopers &
Lybrand L.L.P., an international accounting firm. Mr. McKinney studied finance
at the University of Michigan, received a B.B.A. in accounting from Western
Connecticut State University, and is a Certified Public Accountant.
JOEL D. SENDEK joined the Company in July 1992. Mr. Sendek has served in
various management positions at Progenics, most recently as Senior Director,
Corporate Development and Investor Relations. From 1989 to 1992, he was an
investment banker in the health care group of the Corporate Finance Department
at Goldman, Sachs & Co., an international investment bank. Mr. Sendek received a
B.A. in biochemistry from Rice University.
GRAHAM P. ALLAWAY, PH.D. joined the Company in July 1990. Dr. Allaway has
served in various management positions at Progenics, most recently as Associate
Scientific Director and Head, Therapeutic Development Group. From 1984 to 1990,
he was a Visiting Fellow and Visiting Associate at the NIH in the laboratory of
Dr. Abner Notkins. From 1982 to 1984, Dr. Allaway performed post-doctoral
research at Memorial University of Newfoundland, Canada. He received an M.A. in
zoology from Oxford University and a Ph.D. in virology from the University of
London. Dr. Allaway has been an Adjunct Associate Professor of Microbiology and
Immunology at New York Medical College since 1996.
PATRICIA C. FAZIO joined the Company in August 1992. Ms. Fazio has served in
various management positions at Progenics, most recently as Director, Health &
Safety and Project Management. From 1987 to 1992, she was Senior Research
Technician and Laboratory Manager at the Howard Hughes Medical Institute at
Columbia University. From 1982 to 1987, Ms. Fazio was Chief Laboratory
Technologist in the Department of Pathology at Columbia Presbyterian Medical
Center. She received a B.A. in biology and chemistry at the College of New
Rochelle.
CHARLES A. BAKER has been a Director of the Company since January 1994. Mr.
Baker has been the Chairman, President and Chief Executive Officer of The
Liposome Company, Inc., a biotechnology company located in Princeton, NJ, since
1989. Mr. Baker is currently a director of Regeneron Pharmaceuticals, Inc., a
biotechnology company. He serves on the Scientific Advisory Council of Rutgers
University and is a member of the Council of Visitors of the Marine Biological
Laboratory at Woods Hole, MA. Mr. Baker has more than 30 years of pharmaceutical
industry experience, and has held senior management positions at Pfizer, Abbott
Laboratories, Squibb Corporation, and A.L. Laboratories. Mr. Baker received a
B.A. from Swarthmore College and a J.D. from Columbia University.
MARK F. DALTON has been a Director of the Company since July 1990. Mr.
Dalton has been the President, Chief Operating Officer and a director of Tudor
Investment Corporation, an investment advisory company, and its affiliates since
1988. From 1979 to 1988, he served in various senior management positions at
Kidder, Peabody & Co. Incorporated, including Chief Financial Officer. Mr.
Dalton is currently a director of several private companies in the U.S., Europe
and Asia. Mr. Dalton received a B.A. from Denison University and a J.D. from
Vanderbilt University.
STEPHEN P. GOFF, PH.D. has been a Director of the Company since February
1993. Dr. Goff has been a member of the Virology Scientific Advisory Board since
1988 and has been its Chairman since April 1991. Dr. Goff has been the Higgins
Professor in the Departments of Biochemistry and Microbiology at Columbia
University since June 1990. He received an A.B. in biophysics from Amherst
College and a Ph.D. in biochemistry from Stanford University. Dr. Goff performed
post-doctoral research at the Massachusetts Institute of Technology in the
laboratory of Dr. David Baltimore.
47
<PAGE>
ELIZABETH M. GREETHAM has been a Director of the Company since January 1994.
Ms. Greetham has been the Portfolio Manager for Weiss, Peck & Greer ("WPG") Life
Sciences Fund, L.P. and WPG Institutional Life Sciences Fund, L.P. since 1992
and was a Health Care Analyst at WPG, L.L.C. from 1990 to 1992. Ms. Greetham is
also a director of Repligen Corporation and Guilford Pharmaceuticals, both of
which are biopharmaceutical companies, and ChiRex Inc. and Access
Pharmaceuticals, Inc., both of which are pharmaceutical companies. She received
an M.A. in Economics from Edinburgh University.
PAUL F. JACOBSON has been a Director of the Company since July 1990. Mr.
Jacobson has been a Managing Director of fixed income securities at Deutsche
Bank since January 1996. He was President of Jacobson Capital Partners from 1993
to 1996. From 1986 to 1993, Mr. Jacobson was a partner at Goldman, Sachs, where
he was responsible for government securities trading activities. Mr. Jacobson
received a B.A. from Vanderbilt University and an M.B.A. from Washington
University.
DAVID A. SCHEINBERG, M.D., PH.D. has been a Director of the Company since
May 1996 and a member of the Cancer Scientific Advisory Board since January
1994. Dr. Scheinberg has been associated with Sloan-Kettering since 1986, where
he has held the positions of Associate Professor (since 1994) and Chief (since
1992), Leukemia Service, Member of the Clinical Immunology Service (since 1987)
and Head, Laboratory of Hematopoietic Cancer Immunochemistry, Sloan-Kettering
Institute (since 1989). He also has held the position of Associate Professor of
Medicine and Molecular Pharmacology, Cornell University Medical College (since
1994). He received a B.A. from Cornell University, and an M.D. and a Ph.D. in
pharmacology and experimental therapeutics from The Johns Hopkins University.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed. There are no family relationships among any of the
executive officers or directors of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company, establishes and approves salaries and incentive
compensation for certain senior officers and employees and administers and
grants stock options pursuant to the Company's stock option plans, and an Audit
Committee, which reviews the annual financial statements of the Company prior to
their submission to the Board of Directors, consults with the Company's
independent auditors, and examines and considers such other matters in relation
to the internal and external audit of the Company's account and in relation to
the financial affairs of the Company and its accounts, including the selection
and retention of independent auditors.
COMPENSATION OF DIRECTORS
Directors do not receive compensation in their capacities as directors. All
of the directors are reimbursed for their expenses in connection with their
attendance at Board and committee meetings. In addition, Dr. Goff and Dr.
Scheinberg receive annual compensation in the amounts of $30,000 and $18,000,
respectively, for their services as members of the Company's Virology Scientific
Advisory Board and Cancer Scientific Advisory Board, respectively. See "Certain
Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's Board of Directors
or Compensation Committee and the board of directors or compensation committee
of any other company, nor has any such interlocking relationship existed in the
past. The members of the Compensation Committee are Charles A. Baker, Mark F.
Dalton and Paul F. Jacobson.
48
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information regarding compensation
paid and accrued during fiscal 1995 to the Company's Chief Executive Officer and
the other Executive Officers of the Company whose base compensation for fiscal
1996 equals or exceeds $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------
<S> <C> <C> <C> <C>
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ---------------------------------------------------------- --------- ---------- ------------ -------------
Paul J. Maddon, M.D., Ph.D................................ 1996 $ 165,000 (1) (1)
Chairman of the Board, Chief Executive Officer, 1995 150,000 $ 20,000(2) $ 1,662(3)
President and Chief Science Officer
Robert J. Israel, M.D..................................... 1996 175,000 (1) (1)
Vice President, Medical Affairs 1995 165,000 17,500 --
Robert A. McKinney........................................ 1996 1995 100,000 (1) (1)
Vice President, Finance and Operations and Treasurer 80,641 7,000 --
</TABLE>
- ------------------------
(1) Bonuses and other annual compensation for fiscal 1996 have not yet been
determined.
(2) In addition, Dr. Maddon was awarded a bonus of $35,000, the payment of which
is contingent upon the Company's achievement of certain milestones.
(3) Represents the premium paid by the Company on a long-term disability policy.
OPTION GRANTS
The Company did not grant any options during fiscal 1995 to any of the Named
Executive Officers.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers on
December 31, 1995. No options were exercised by these individuals in fiscal
1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul J. Maddon, M.D., Ph.D.(2)............................ 225,000 525,000 $ 274,398 $ 685,432
Robert J. Israel, M.D.(3)................................. 11,250 45,000 15,075 60,300
Robert A. McKinney(3)..................................... 28,500 24,000 75,540 57,060
</TABLE>
- ------------------------------
(1) The value of the unexercised, in-the-money options on December 31, 1995 is
based on the difference between the fair market value per share of the
Common Stock at such date as determined by the Board of Directors ($6.67),
and the per share option exercise price, multiplied by the number of shares
of Common Stock underlying the options.
(2) The exercisability of 150,000 of these options will be accelerated upon the
effectiveness of this offering (assuming an initial public offering price of
$12.00 per share) and the exercisibility of all of these options shall be
accelerated in the event of a change in control of the Company.
(3) On May 15, 1996, additional options to purchase 18,750 shares of Common
Stock were granted to Dr. Israel and additional options to purchase 15,000
shares of Common Stock were granted to Mr. McKinney. These options have an
exercise price of $6.67 per share and are not reflected in the above table.
49
<PAGE>
EMPLOYMENT AGREEMENTS
Pursuant to the terms of the Employment Agreement (the "Employment
Agreement") dated December 15, 1993 between the Company and Dr. Maddon, the
Company has retained Dr. Maddon as Chairman of the Board, President, Chief
Executive Officer and Chief Science Officer of the Company at an annual salary
of $150,000. The Employment Agreement expires on December 15, 1998 but is
automatically renewed annually thereafter for up to five successive one-year
periods, unless either the Company or Dr. Maddon gives notice to the other party
of its or his intention not to renew at least 90 days before the end of the
initial term or any renewal term. Under the Employment Agreement, each year
following the closing of this offering, Dr. Maddon's salary then in effect shall
be increased at the rate of 10% per year, although the Board of Directors has
authority to grant additional compensation increases. In addition, Dr. Maddon
will be paid a bonus of not less than $15,000 per year. If Dr. Maddon's
employment is terminated without "cause" (as defined in the Employment
Agreement), he will be entitled to receive his annual salary for a period of two
years (but in no event after December 14, 1998) and any of the 750,000 options
granted to him under the 1993 Executive Stock Option Plan that have not
previously vested will vest. Dr. Maddon is also bound by certain non-competition
obligations.
Pursuant to the terms of a letter dated August 25, 1994 between the Company
and Robert J. Israel, M.D., the Company has retained Dr. Israel as Vice
President of Medical Affairs of the Company at an annual salary of $165,000 per
year. In addition, the Company paid Dr. Israel a $10,000 bonus upon his hire.
Under the Letter Agreement, Dr. Israel is entitled to nine months salary if his
employment is terminated without cause.
STOCK OPTION PLANS
The Company has historically maintained stock option plans as an integral
component of its compensation program for key employees, directors and
consultants. The Company believes that such plans provide long-term incentives
to such persons and encourage the ownership of the Company's Common Stock. In
May 1996, the Company adopted the 1996 Stock Incentive Plan (the "1996 Plan"),
which provides for the grant of stock options as well as other types of stock
and incentive awards. Outstanding stock options that were granted under the
Company's previous stock incentive plans will remain subject to the terms and
conditions of the plan pursuant to which they were originally granted. Stock
options and other awards granted following the offering will be pursuant to the
1996 Plan.
1989 NON-QUALIFIED STOCK OPTION PLAN
The Company's 1989 Non-Qualified Stock Option Plan (the "1989 Option Plan")
was adopted by the Company in April 1989. The 1989 Option Plan provided for the
grant of stock options to employees, consultants, directors of the Company and
other individuals who render services to the Company. Under the 1989 Option
Plan, the Company could grant options not intended to qualify as incentive stock
options within the meaning of Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code"). A total of 375,000 shares of Common Stock were
originally authorized for issuance under the 1989 Option Plan. As of September
30, 1996 options to purchase 354,011 shares of Common Stock at exercise prices
ranging from $1.33 to $5.33 per share were outstanding under the 1989 Option
Plan, of which options to purchase 276,386 shares were exercisable. No options
have been exercised to date and options outstanding expire at various dates
through January 28, 2011.
Payment of the option exercise price may be made in cash, shares of Common
Stock, a combination of cash or stock or by any other method. Options are not
assignable or transferable except by will or under the laws of descent and
distribution. For a period of ten years following the termination for any reason
of an optionee's employment or active involvement with the Company, as
determined by the Board of Directors, the Company has the right to repurchase
from the optionee any or all shares of Common Stock
50
<PAGE>
held by the optionee and/or any or all of the vested but unexercised portion of
any option granted under the 1989 Option Plan at a purchase price defined
therein.
The 1989 Option Plan terminated on April 1, 1994. However any options
granted prior to such termination shall continue in effect until such option is
exercised or expires in accordance with its terms and the terms of the 1989
Option Plan.
1993 STOCK OPTION PLAN
The Company's 1993 Stock Option Plan (the "1993 Option Plan") was adopted by
the Company in December 1993. The 1993 Option Plan provided for the grant of
stock options to key employees (including officers who may be members of the
Company's Board of Directors), directors who are not employees and other
individuals who render services of a special importance to the management,
operation or development of the Company. Under the 1993 Option Plan, the Company
could grant options intended to qualify as incentive stock options within the
meaning of Section 422 of the Code and options not intended to qualify as
incentive stock options. A total of 750,000 shares of Common Stock were
originally authorized for issuance under the 1993 Option Plan. As of September
30, 1996, options to purchase a total of 687,225 shares of Common Stock at
exercise prices ranging from $5.33 to $6.67 per share were outstanding under the
1993 Option Plan, of which options to purchase 185,166 shares were exercisable.
No options have been exercised to date and options outstanding expire at various
dates through December 31, 2005. The remaining 62,775 shares of Common Stock
available for grant under the 1993 Stock Option Plan (which includes certain
options that expired prior to September 30, 1996 and which became available for
regrant under the 1993 Stock Option Plan) will be granted to employees of the
Company, prior to the completion of this offering, at an option price equal to
the initial public offering price in this offering.
Payment of the option exercise price may be made in cash, shares of Common
Stock, a combination of cash or stock or by any other method. Options are not
assignable or transferable except by will or under the laws of descent and
distribution and, in the case of nonqualified options, to a designated
transferee, subject to approval by the Compensation Committee. For a period of
ten years following the termination for any reason of an optionee's employment
or active involvement with the Company, as determined by the Board of Directors,
the Company shall have the right to repurchase from the optionee any or all
shares of Common Stock acquired under the 1993 Option Plan and held by the
optionee and/or any or all of the vested but unexercised portion of any option
granted under the 1993 Option Plan at a purchase price defined therein. In
addition, the Company has certain rights of first refusal with respect to
transfers of optionees' vested and unvested stock except in the case of a
registered public offering.
Following this offering, no further shares will be available for grant under
the 1993 Option Plan and the Company does not anticipate that there will be any
further grants of options under the 1993 Option Plan. However, any option
outstanding under the 1993 Option Plan shall remain outstanding until such
option is exercised or expires in accordance with its terms and the terms of the
1993 Option Plan.
1993 EXECUTIVE STOCK OPTION PLAN
The Company's 1993 Executive Stock Option Plan (the "1993 Executive Option
Plan") was adopted by the Company in December 1993. The 1993 Executive Option
Plan provided for the grant of stock options to senior executive employees
(including officers who may be members of the Company's Board of Directors).
Under the 1993 Executive Option Plan, the Company may grant incentive stock
options or nonqualified options. A total of 750,000 shares of Common Stock were
originally authorized for issuance upon the exercise of options granted under
the 1993 Executive Option Plan. As of September 30, 1996, options to purchase a
total of 750,000 shares of Common Stock at exercise prices of $5.33 or $5.87 per
share were outstanding under the 1993 Executive Option Plan, of which options to
purchase 225,000 shares
51
<PAGE>
were exercisable. No options have been exercised to date and options outstanding
expire at various dates through December 15, 2007.
Payment of the option exercise price may be made in cash, shares of Common
Stock, a combination of cash or stock or by any other method. Options are not
assignable or transferable except by will or under the laws of descent and
distribution.
No further shares are available for grant under the 1993 Executive Option
Plan and the Company does not anticipate that there will be any further grants
of options under the 1993 Executive Option Plan. However, any option outstanding
under the 1993 Executive Option Plan shall remain outstanding until such option
is exercised or expires in accordance with its terms and the terms of the 1993
Executive Option Plan.
1996 STOCK INCENTIVE PLAN
The 1996 Plan was adopted by the Company in May 1996. The 1996 Plan permits
the Compensation Committee of the Board of Directors to make awards to
employees, advisors and consultants of the Company and its subsidiaries. The
1996 Plan provides for grant of stock options, including both incentive stock
options and nonqualified options, as well as stock appreciation rights,
restricted stock, performance shares and phantom stock, as described below. All
awards under the 1996 Plan are nontransferable by the participant, except upon
the participant's death in accordance with his will or applicable law. To date
no awards of options have been made under the 1996 Plan.
STOCK OPTIONS. The 1996 Plan authorizes the grant of nonqualified stock
options to employees, consultants and advisors of the Company and its
subsidiaries. Incentive stock options may only be granted to employees of the
Company and its subsidiaries. The exercise price of a nonqualified stock option
may be determined by the Compensation Committee in its discretion. The exercise
price of an incentive stock option may not be less than the fair market value of
the Common Stock on the date of grant (110% of the fair market value in the case
of an incentive stock option granted to a stockholder owning in excess of 10% of
the Common Stock). The value of Common Stock (determined at the time of grant)
that may be subject to incentive stock options that become exercisable by any
one employee in any one year is limited by the Code to $100,000. The maximum
term of stock options granted under the 1996 Plan is 10 years from the date of
grant. The Compensation Committee shall determine the extent to which an option
shall become and/or remain exercisable in the event of the termination of
employment or service of a participant under certain circumstances, including
retirement, death or disability, subject to certain limitations for incentive
stock options. Under the 1996 Plan, the exercise price of an option is payable
by the participant in cash or, in the discretion of the Compensation Committee,
in Common Stock or a combination of cash and Common Stock.
STOCK APPRECIATION RIGHTS. A stock appreciation right may be granted in
connection with an option, either at the time of grant or at any time thereafter
during the term of the option. A stock appreciation right granted in connection
with an option entitles the holder, upon exercise, to surrender the related
option and receive a payment based on the difference between the exercise price
of the related option and the fair market value of the Company's Common Stock on
the date of exercise. A stock appreciation right granted in connection with an
option is exercisable only at such time or times as the related option is
exercisable and expires no later than the time when the related option expires.
A stock appreciation right also may be granted without relationship to an option
and will be exercisable as determined by the Compensation Committee, but in no
event after ten years from the date of grant. A stock appreciation right granted
without relationship to an option entitles the holder, upon exercise, to a
payment based on the difference between the base price assigned to the stock
appreciation right by the Compensation Committee on the date of grant and the
fair market value of the Company's Common Stock on the date of exercise. Payment
to the holder in connection with the exercise of a stock appreciation right may
be in cash or shares of Common Stock or in a combination of cash and shares.
52
<PAGE>
RESTRICTED STOCK AWARDS. The Committee may award shares of Common Stock to
participants under the 1996 Plan, subject to such restrictions on transfer and
conditions of forfeiture as it deems appropriate. Such conditions may include
requirements as to the continued service of the participant with the Company,
the attainment of specified performance goals or any other conditions determined
by the Compensation Committee. Subject to the transfer restrictions and
forfeiture restrictions relating to the restricted stock award, the participant
will otherwise have the rights of a stockholder of the Company, including all
voting and dividend rights, during the period of restriction.
PERFORMANCE AWARDS. The Compensation Committee may grant performance awards
denominated in specified dollar units ("Performance Units") or in shares of
Common Stock ("Performance Shares"). Performance awards are payable upon the
achievement of performance goals established by the Compensation Committee at
the beginning of the performance period, which may not exceed ten years from the
date of grant. At the time of grant, the Compensation Committee establishes the
number of units or shares, the duration of the performance period, the
applicable performance goals and, in the case of performance units, the
potential payment or range of payments for the performance awards. At the end of
the performance period, the Compensation Committee determines the payment to be
made based on the extent to which the performance goals have been achieved. The
Compensation Committee may consider significant unforeseen events during the
performance period when making the final award. Payments may be made in cash or
shares of Common Stock or in a combination of cash and shares.
PHANTOM STOCK. An award of phantom stock gives the participant the right to
receive cash at the end of a fixed vesting period based on the value of a share
of Common Stock at that time. Phantom stock units are subject to such
restrictions and conditions to payment as the Compensation Committee determines
are appropriate. At the time of grant, the Compensation Committee determines, in
its sole discretion, the number of units and the vesting period of the units,
and it may also set a maximum value of a unit. If the participant remains
employed by the Company throughout the applicable vesting period, he is entitled
to receive payment of a cash amount for each phantom stock unit equal in value
to the fair market value of one share of Common Stock on the last day of the
vesting period, subject to any maximum value limitation.
ADMINISTRATION. The 1996 Plan shall be administered by the Compensation
Committee of the Board of Directors, or such other committee as may be appointed
by the Board. Subject to the limitations set forth in the 1996 Plan, the
Compensation Committee has the authority to determine the persons to whom awards
will be granted, the time at which awards will be granted, the number of shares,
units or other rights subject to each award, the exercise, base or purchase
price of an award (if any), the time or times at which the award will become
vested, exercisable or payable and the duration of the award. The Compensation
Committee may provide for the acceleration of the vesting or exercise period of
an award at any time prior to its termination or upon the occurrence of
specified events. With the consent of the affected participant, the Compensation
Committee has the authority to cancel and replace awards previously granted with
new options for the same or a different number of shares and having a higher or
lower exercise or base price, and may amend the terms of any outstanding awards
to provide for an exercise or base price that is higher or lower than the
current exercise or base price.
RESERVATION OF SHARES. The Company has authorized and reserved 750,000
shares of Common Stock for issuance under the 1996 Plan. The shares may be
unissued shares or treasury shares. If any shares of Common Stock that are the
subject of an award are not issued or transferred and cease to be issuable or
transferable for any reason, such shares will no longer be charged against such
maximum share limitation and may again be made subject to awards under the 1996
Plan. In the event of certain corporate reorganizations, recapitalizations, or
other specified corporate transactions affecting the Company or the Common
Stock, proportionate adjustments may be made to the number of shares available
for grant and to the number of shares and prices under outstanding awards made
before the event.
TERM AND AMENDMENT. The 1996 Plan has a term of 10 years, subject to
earlier termination or amendment by the Board of Directors. All awards granted
under the 1996 Plan prior to its termination
53
<PAGE>
remain outstanding until exercised, paid or terminated in accordance with their
terms. The Board of Directors may amend the 1996 Plan at any time, except that
shareholder approval is required for certain amendments to the extent necessary
for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
401(K) SAVINGS AND RETIREMENT PLAN
In 1993 the Company adopted the provisions of the amended and restated
Progenics 401(k) Plan (the "401(k) Plan"), a tax-qualified plan covering all
eligible employees, as defined therein. Each eligible employee may elect to
reduce his or her current compensation by 15%, subject to the statutory limit (a
maximum of $9,500 in 1996) and have the amount of the reduction contributed to
the 401(k) Plan. The Company has agreed to match 25% of up to the first 8% of
compensation that eligible employees contribute to the 401(k) Plan. In addition,
the Company may also make a discretionary contribution, as defined in the 401(k)
Plan, each year on behalf of all participants who are non-highly compensated
employees, as defined therein. The Company made matching contributions in an
aggregate amount of approximately $12,000 to eligible employees under the 401(k)
Plan in 1995. No matching contributions were made in 1995 to any of the Named
Executive Officers.
54
<PAGE>
CERTAIN TRANSACTIONS
During 1995, the Company borrowed under a note an aggregate of $1,200,000
from certain affiliates of Tudor Investment Corporation, a shareholder of the
Company. The note provided for the accrual of interest at the rate of 10% per
annum, with interest and principal payable on demand. In December 1995, the
principal amount of the note plus accrued interest of approximately $24,000 were
exchanged for approximately 61,200 Series C Units. See "Principal Stockholders"
and "Description of Capital Stock."
Since January 1, 1993, the Company has sold securities in the following
transactions with the following directors, officers, and stockholders who
beneficially own more than 5% of the outstanding Common Stock of the Company
("5% Stockholders"), and affiliates of such directors, officers and 5%
Stockholders.
<TABLE>
<CAPTION>
SERIES B
PREFERRED STOCK
ISSUED UPON
SERIES B EXERCISE OF SERIES C TOTAL
NAME UNITS(1) WARRANTS(2) UNITS(3) CONSIDERATION
- ------------------------------------------------------- ---------- ----------------- ---------- -------------
<S> <C> <C> <C> <C>
Entities affiliated with Tudor Investment
Corporation(4)........................................ 758,750 375,000 180,000 $ 8,510,000
Entities affiliated with Weiss, Peck & Greer
L.L.C.(5)............................................. 125,000 125,000 20,000 1,525,000
Paul F. Jacobson(6).................................... 12,500 12,500 5,000 212,500
David A. Scheinberg, M.D., Ph.D.(7).................... -- -- 1,250 25,000
---------- -------- ---------- -------------
Total.................................................. 896,250 512,500 206,250 $ 10,272,500
---------- -------- ---------- -------------
---------- -------- ---------- -------------
</TABLE>
- ------------------------------
(1) Each Series B Unit consisted of one share of Series B Preferred Stock and
one warrant to purchase one share of Series B Preferred Stock ("Series B
Warrant"). The purchase price per unit was $4.00. The sale of all the Series
B Units occurred in 1993.
(2) Shares issued upon exercise of Series B Warrants for an exercise price of
$5.00 per share. The issuance of shares of Series B Preferred Stock upon
exercise of Series B Warrants occurred in 1994.
(3) Each Series C Unit consists of four shares of Series C Preferred Stock and
one warrant to purchase one share of Series C Preferred Stock ("Series C
Warrant"). The purchase price per unit was $20.00. The Series C Warrants
remain outstanding. Except for 100,000 Series C Units sold during the fourth
quarter of 1995, the Series C Units were sold in 1996.
(4) The 180,000 Series C Units includes approximately 61,200 units issued in
exchange for the note plus accrued interest held by Tudor Investment
Corporation described above. Mr. Dalton, a director of the Company, is
associated with Tudor Investment Corporation. See "Management."
(5) Ms. Greetham, a director of the Company, is associated with Weiss, Peck &
Greer. See "Management."
(6) Mr. Jacobson is a director of the Company. See "Management."
(7) Mr. Scheinberg is a director of the Company. See "Management."
Various directors, officers, 5% Stockholders of the Company and affiliates
of such persons are entitled to certain registration rights with respect to
their securities of the Company. See "Shares Eligible for Future Sale."
The Company believes that the transactions described above were entered into
on terms no less favorable to the Company than could be obtained from third
parties on an arm's length basis.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the aggregate number of shares of Common
Stock beneficially owned as of September 30, 1996, assuming conversion of all
shares of the Company's Preferred Stock into an aggregate of 4,259,878 shares of
Common Stock upon the closing of this offering, by: (i) each person (or group of
affiliated persons) known by the Company to be a beneficial owner of more than
5% of the outstanding Common Stock of the Company; (ii) each director of the
Company; (iii) each of the Named Executive Officers; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
NUMBER OF SHARES OWNED(1)(2)(3)
BENEFICIALLY ------------------------
OWNED BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER (1)(2)(3) OFFERING OFFERING
- -------------------------------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Entities affiliated with Tudor Investment Corporation(4)(5)
600 Steamboat Road
Greenwich, CT 06830..................................................... 2,314,314 34.6% 26.6%
Paul J. Maddon, M.D., Ph.D.(6)
777 Old Saw Mill River Road
Tarrytown, NY 10591..................................................... 1,125,000 16.2% 12.6%
Paul Tudor Jones, II(4)(5)
600 Steamboat Road
Greenwich, CT 06830..................................................... 488,625 7.4% 5.7%
Charles A. Baker(7)....................................................... 33,750 * *
Mark F. Dalton(8)......................................................... 51,000 * *
Stephen P. Goff, Ph.D.(9)................................................. 56,250 * *
Elizabeth M. Greetham(10)................................................. 262,500 4.0% 3.1%
Paul F. Jacobson(11)...................................................... 189,039 2.9% 2.2%
David A. Scheinberg, M.D., Ph.D.(12)...................................... 47,545 * *
Robert J. Israel, M.D.(13)................................................ 22,500 * *
Robert A. McKinney(14).................................................... 36,000 * *
All directors and executive officers as a group (9 persons)(15)........... 1,823,584 25.6% 20.0%
</TABLE>
- ------------------------
* Less than 1%
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder possesses sole voting
and investment power with respect to the shares of Common Stock listed.
(2) The number of shares of Common Stock beneficially owned includes the shares
issuable pursuant to stock options and warrants that may be exercised within
60 days after September 30, 1996. Shares issuable pursuant to such options
and warrants are deemed outstanding for computing the percentage of
beneficial ownership of the person holding such options and warrants but are
not deemed outstanding for computing the percentage of beneficial ownership
of any other person. The number of shares of Common Stock outstanding after
this offering includes the 2,000,000 shares of Common Stock being offered
for sale by the Company in this offering. Share amounts of the Company's
Preferred Stock convertible into Common Stock (all of which will be
converted to Common Stock upon the closing of this offering) are stated on
an as converted basis.
(3) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(4) The number of shares owned by entities affiliated with Tudor Investment
Corporation ("TIC") consists of 1,704,501 shares held of record by Tudor BVI
Futures, Ltd., an international business company organized under the law of
the British Virgin Islands ("Tudor BVI"), 88,251 shares of Common Stock
issuable to Tudor BVI upon the exercise of currently exercisable warrants,
287,813 shares held of record by TIC, 164,499 shares held of record by Tudor
Arbitrage Partners L.P. ("TAP") and 41,125 shares of Common Stock issuable
to TAP upon the exercise of currently exercisable warrants, 22,500 shares of
record held by Tudor Proprietary Trading, L.L.C., a UK-based limited
liability corporation ("TPT"), and 5,625 shares of Common Stock issuable to
TPT upon the exercise of currently exercisable warrants. In addition,
because TIC provides investment advisory services to Tudor BVI, it may be
deemed to beneficially own the shares held by such entity. TIC disclaims
beneficial ownership of such shares.
56
<PAGE>
(5) The shares held by Mr. Jones consist of 461,625 shares held of record by Mr.
Jones and 27,000 shares subject to stock options held by Mr. Jones
exercisable within 60 days of the date of this table. In addition, Mr. Jones
is the Chairman and principal stockholder of TIC, the Chairman and indirect
principal equity owner of the general partner of TAP, and the Chairman and
indirect principal equity owner of TPT. Mr. Jones may be deemed to
beneficially own the shares beneficially owned, or deemed beneficially
owned, by such entities. Mr. Jones disclaims beneficial ownership of such
shares.
(6) Includes 225,000 shares subject to stock options held by Dr. Maddon
exercisable within 60 days of the date of this table and an additional
150,000 shares subject to stock options which will accelerate upon the
effectiveness of this offering (assuming an initial public offering price of
$12.00 per share).
(7) Includes 3,750 shares of Common Stock issuable to the Baker Family Limited
Partnership ("BFLP") upon the exercise of currently exercisable warrants,
15,000 shares owned by the BFLP, and 15,000 shares subject to stock options
held by Mr. Baker exercisable within 60 days of the date of this table.
(8) Includes 34,500 shares held of record directly by Mr. Dalton and 16,500
shares of record held by DF Partners, a family partnership of which Mr.
Dalton is the managing general partner with a 5% interest. The remaining 95%
interest is held by trusts for the benefit of Mr. Dalton's children. As to
such 95% interest, Mr. Dalton disclaims beneficial interest. See "Management
-- Directors, Executive Officers and Key Management."
(9) Includes 18,750 shares subject to stock options held by Dr. Goff exercisable
within 60 days of the date of this table.
(10) Consists of 131,250 shares held of record by Weiss, Peck & Greer ("WPG")
Life Sciences Fund, L.P. ("WPGLSF") and 9,375 shares of Common Stock
issuable to WPGLSF upon the exercise of currently exercisable warrants and
116,250 shares held of record by WPG Institutional Life Sciences Fund, L.P.
("WPGILSF") and 5,625 shares of Common Stock issuable to WPGILSF upon the
exercise of currently exercisable warrants. Ms. Greetham, who is the
Portfolio Manager for both WPGLSF and WPGILSF, disclaims beneficial
ownership of all such shares except to the extent of her beneficial interest
in WPGLSF.
(11) Includes 3,750 shares of Common Stock issuable to Mr. Jacobson upon the
exercise of currently exercisable warrants and 27,000 shares subject to
stock options held by Mr. Jacobson exercisable within 60 days of the date of
this table.
(12) Includes 938 shares of Common Stock issuable to Dr. Scheinberg upon the
exercise of currently exercisable warrants and 42,857 shares subject to
stock options held by Dr. Scheinberg exercisable within 60 days of the date
of this table.
(13) Consists of 22,500 shares subject to stock options held by Dr. Israel
exercisable within 60 days of the date of this table.
(14) Consists of 36,000 shares subject to stock options held by Mr. McKinney
exercisable within 60 days of the date of this table.
(15) Includes shares held by affiliated entities as set forth in the above
table, 387,107 shares subject to stock options held by all officers and
directors exercisable within 60 days of the date of this table, 150,000
shares subject to stock options held by an officer and director which will
accelerate upon the effectiveness of this offering (assuming an initial
public offering price of $12.00 per share) and 23,438 shares issuable upon
the exercise of currently exercisable warrants beneficially owned by certain
directors.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED STOCK; ISSUED AND OUTSTANDING SHARES
Upon the completion of this offering, the authorized capital stock of the
Company will consist of 40,000,000 shares of Common Stock, par value $.0013 per
share, and 20,000,000 shares of Preferred Stock, par value $.001 per share.
In October 1996 the Board of Directors and shareholders of the Company
approved a three-for-four reverse stock split of the Company's Common Stock. All
information in this Prospectus has been adjusted to reflect the reverse stock
split.
As of September 30, 1996, 2,294,675 shares of Common Stock and 5,679,826
shares of Preferred Stock were outstanding. Simultaneously with the closing of
this offering, each outstanding share of Preferred Stock will automatically be
converted into .75 shares of Common Stock, or an aggregate of 4,259,878 shares
of Common Stock, pursuant to its terms.
COMMON STOCK
Assuming conversion of all outstanding Preferred Stock, at September 30,
1996 there were 6,554,553 shares of Common Stock outstanding held by
approximately 130 stockholders of record. Holders of Common Stock are entitled
to one vote for each share held of record on any matters voted upon by
stockholders and do not have any cumulative voting rights. Subject to
preferences that may be applicable to any outstanding Preferred Stock, holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preferences of any
outstanding Preferred Stock. Holders of Common Stock have no preemptive rights
and no right to convert their Common Stock into any other securities. There are
no redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of this offering will be, validly issued, fully paid
and nonassessable. All shares of Common Stock issuable upon conversion of the
Preferred Stock and upon exercise of warrants will be, upon such conversion or
exercise, validly issued, fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future.
PREFERRED STOCK
Upon the closing of this offering, the conversion of the outstanding Series
A, Series B and Series C Preferred Stock and the filing of a Certificate of
Amendment to Certificate of Incorporation removing the designation of those
Series, the Company's Certificate of Incorporation will authorize the issuance
of up to 20,000,000 shares of Preferred Stock, $.001 par value per share, and
none of those shares will be outstanding or designated into any series. Under
the terms of the Certificate of Incorporation, the Board of Directors is
authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue such shares of Preferred Stock in one or more series. Each
such series of Preferred Stock shall have such rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by the
Board of Directors.
The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
58
<PAGE>
WARRANTS
The Company has issued warrants (the "Warrants") to purchase 347,249 shares
of Series C Preferred Stock. Each Warrant entitles the holder to purchase one
share of Series C Preferred Stock at a purchase price of $5.00 per share
(subject to adjustment in certain circumstances) during the five-year period
commencing on the warrant issuance date (December 8, 1995 or February 23, 1996).
Following the closing of this offering, the Warrants will become exercisable for
260,455 shares of Common Stock at a purchase price of $6.67 per share of Common
Stock (subject to adjustment in certain circumstances). If at any time after the
date of this offering but before December 31, 1996 the Company issues: (i)
additional shares of Common Stock; (ii) securities that are convertible into or
exchangeable for shares of Common Stock; or (iii) warrants or other rights to
subscribe for shares of Common Stock (collectively, "Additional Shares"), at a
price lower than the current exercise price of the Warrant, then the exercise
price of the Warrant will be reduced to such lower price and the number of
shares subject to the Warrant shall be proportionally increased. After December
31, 1996, if the Company issues Additional Shares at a price per share that is
lower than the then current market price (as defined) per share of the Common
Stock, then the exercise price of the Warrant will be reduced to a price equal
to (a) the sum of (i) the total number of shares of the Company outstanding
immediately prior to the issuance of the Additional Shares multiplied by the
then current exercise price of the Warrant, plus (ii) the consideration received
by the Company for the Additional Shares, divided by (b) the total number of
shares of capital stock of the Company outstanding immediately after the
issuance of the Additional Shares. In such case the number of shares subject to
the Warrant shall be proportionally increased. In no event is any adjustment of
the exercise price of the Warrant or the number of shares subject to the Warrant
required upon the grant of stock options or other stock incentives to employees
of the Company or upon the exercise of such options or incentives.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of a corporation's
voting stock.
The Certificate of Incorporation contains certain provisions permitted under
the General Corporation Law of Delaware relating to the liability of directors.
The provisions eliminate a director's liability for monetary damages for a
breach of fiduciary duty, except in certain circumstances involving wrongful
acts, such as the breach of a director's duty of loyalty or acts or omissions
which involve intentional misconduct or a knowing violation of law. Further, the
Certificate of Incorporation contains provisions to indemnify the Company's
directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware. The Company believes that these provisions will
assist the Company in attracting and retaining qualified individuals to serve as
directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, based upon the number of shares
outstanding at September 30, 1996, there will be 8,554,553 shares of Common
Stock of the Company outstanding (exclusive of 947,007 shares covered by vested
options and warrants outstanding at September 30, 1996 and including 4,259,878
shares of Common Stock to be issued upon the automatic conversion of the
outstanding shares of Preferred Stock upon consummation of this offering). Of
these outstanding shares (and without taking into account the lock-up agreements
described below), approximately 4,504,095 shares, including the 2,000,000 shares
of Common Stock sold in this offering, will be immediately eligible for resale
in the public market without restriction under the Securities Act, except that
any shares purchased in this offering by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"), may
generally only be resold in compliance with applicable provisions of Rule 144.
Beginning approximately 90 days after the date of this Prospectus (and without
taking into account the lock-up agreements described below), approximately
2,963,711 additional shares of Common Stock and approximately 779,486 shares
covered by options exercisable within the 90-day period following the date of
this Prospectus will become eligible for immediate resale in the public market,
subject to compliance as to certain of such shares with applicable provisions of
Rules 144 and 701.
The Company, the executive officers and directors of the Company, and
certain securityholders, which executive officers, directors and securityholders
in the aggregate hold approximately 8,353,912 shares of Common Stock and shares
issuable upon the exercise of outstanding options and warrants (including
946,098 shares of Common Stock that may be acquired pursuant to the exercise of
vested options or warrants held by them) at September 30, 1996, have agreed
pursuant to certain agreements that they will not, without the prior written
consent of Oppenheimer & Co., Inc., offer, sell or otherwise dispose of the
shares of Common Stock beneficially owned by them for a period of 180 days from
the date of this Prospectus (120 days with respect to 45,000 of such shares).
The shares subject to the lock-up agreements include 2,189,897 of the shares of
Common Stock that would otherwise have become immediately eligible for resale in
the public market upon completion of this offering and approximately 2,963,711
of the shares of Common Stock and 778,577 of the shares covered by options
exercisable within the 90-day period following the date of this Prospectus that
would otherwise have become eligible for resale in the public market beginning
approximately 90 days after the date of this Prospectus, subject to compliance
as to certain of such shares with the applicable provisions of Rules 144 and
701.
In general, under Rule 144 as currently in effect, beginning approximately
90 days after the effective date of the Registration Statement of which this
Prospectus is a part, a stockholder, including an Affiliate, who has
beneficially owned his or her restricted securities (as that term is defined in
Rule 144) for at least two years from the later of the date such securities were
acquired from the Company or (if applicable) the date they were acquired from an
Affiliate is entitled to sell, within any three-month period, a number of such
shares that does not exceed the greater of 1% of the then outstanding shares of
Common Stock (approximately 85,546 shares immediately after this offering) or
the average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least three years has elapsed between the later of the date
restricted securities were acquired from the Company or (if applicable) the date
they were acquired from an Affiliate of the Company, a stockholder who is not an
Affiliate of the Company at the time of sale and has not been an Affiliate of
the Company for at least three months prior to the sale is entitled to sell the
shares immediately without compliance with the foregoing requirements under Rule
144. The Commission has proposed an amendment to Rule 144 which would reduce the
holding period required for shares subject to Rule 144 to become eligible for
sale in the public market from two years to one year, and from three years to
two years in the case of Rule 144(k).
60
<PAGE>
Rule 701 under the Securities Act provides an exemption from the
registration requirements of the Securities Act for offers and sales of
securities issued pursuant to certain compensatory benefit plans, such as the
Company's stock option and stock incentive plans, of a company not subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act.
Securities issued pursuant to Rule 701 are defined as restricted securities for
purposes of Rule 144. However, 90 days after the issuer becomes subject to the
reporting provisions of the Exchange Act, the Rule 144 resale restrictions,
except for the broker's transaction requirement, are inapplicable for
non-affiliates. Affiliates are subject to all Rule 144 restrictions after this
90-day period, but without a holding period. In addition, the Company plans to
file a Form S-8 registration statement registering shares of stock issuable
pursuant to the Company's stock option plans.
Commencing on the first anniversary of the date of this Prospectus, all of
the stockholders of the Company who purchased shares prior to this offering will
be entitled to certain rights with respect to the registration under the
Securities Act of a total of approximately 6,815,000 shares of Common Stock (the
"Registrable Shares"), including 260,455 shares of Common Stock that may be
acquired pursuant to the exercise of outstanding warrants, under the terms of
agreements with the Company (the "Registration Agreements"). The holders of 20%
of the Registrable Shares (the "Minimum Number of Holders") may trigger the
obligation of the Company to use its best efforts to effect no more than two
public offerings on Forms S-1 or S-2, provided that the offering price per share
is at least $6.67 and the aggregate offering price to the public is at least $5
million. In addition, the Minimum Number of Holders shall have the right to
demand an unlimited number of registrations on Form S-3, provided that the
aggregate proposed public offering price of the securities to be included in
such registration shall be at least $1 million. In addition, if the Company
files a registration statement with the Commission, stockholders may elect to
include therein their respective Registrable Shares. There is no limit with
respect to the number of times holders of Registrable Shares may exercise such
"piggyback" registration rights. In addition, pursuant to the Employment
Agreement between the Company and Dr. Maddon, the Company granted to Dr. Maddon
separate "piggyback" registration rights which may be exercised at any time with
respect to his shares of Common Stock or shares of Common Stock issuable upon
exercise of any options (as of September 30, 1996, Dr. Maddon held options to
purchase 750,000 shares of Common Stock, of which options to purchase 225,000
shares of Common Stock were exercisable on that date or within 60 days
thereafter). Aquila also has been granted "piggyback" registration rights with
respect to the registration of shares of the Company's securities held by it,
which rights may be exercised at any time. The Company's obligation to register
shares pursuant to exercise of any of the foregoing "demand" or "piggyback"
registration rights is subject in any underwritten offering to the right of the
underwriters to exclude shares necessary to avoid interfering with the
successful marketing of the underwritten offering. The Company is generally
obligated to bear the expenses, other than underwriting discounts and
commissions, of all of these registrations.
Prior to this offering, there has been no public market for the Common
Stock. No precise prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of the Common Stock prevailing from time to time. The Company is unable to
estimate the number of shares that may be sold in the public market pursuant to
Rule 144, since this will depend on the market price of the Common Stock, the
personal circumstances of the sellers and other factors. Nevertheless, sales of
significant amounts of the Common Stock of the Company in the public market
could adversely affect the market price of the Company's Common Stock and could
impair the Company's ability to raise capital through an offering of its equity
securities.
61
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters, for whom Oppenheimer & Co., Inc. and Vector Securities
International, Inc. are acting as Representatives, has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite the name of each Underwriter below.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Oppenheimer & Co., Inc...........................................................
Vector Securities International, Inc.............................................
----------
Total...................................................................... 2,000,000
----------
----------
</TABLE>
The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of $ per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain other
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may, from time to time,
be varied by the Representatives. The Underwriters are obligated to take and pay
for all of the shares of Common Stock offered hereby (other than those covered
by the over-allotment option described below), if any are taken.
The Company has granted to the Underwriters an option, exercisable for up to
30 days after the date of this Prospectus, to purchase up to an aggregate of
300,000 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise such option, the Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them bears to the
2,000,000 shares of Common Stock offered hereby. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the shares of Common Stock offered hereby. The Representatives have advised the
Company that the Underwriters do not intend to confirm sales in excess of 5% of
the shares offered hereby to any account over which they exercise discretionary
authority.
The Company has agreed to indemnify the Representatives of the Underwriters
and the several Underwriters against certain liabilities, including, without
limitation, liabilities under the Securities Act.
The Company's officers and directors and certain stockholders who own an
aggregate of 8,353,912 shares of Common Stock (including shares issuable upon
exercise of outstanding options and warrants) have agreed that they will not
directly or indirectly, sell, offer, contract to sell, make a short sale, pledge
or otherwise dispose of any shares of Common Stock (or any securities
convertible into or exchangeable or exercisable for any other rights to purchase
or acquire Common Stock other than shares of Common Stock issuable upon exercise
of outstanding options) owned by them, for a period of 180 days after the date
of this Prospectus (120 days with respect to one stockholder who owns 45,000
shares of Common Stock), without the prior written consent of Oppenheimer & Co.,
Inc., subject to certain limited exceptions. The
62
<PAGE>
Company has also agreed not to issue, sell or register with the Commission for
its own account or otherwise dispose of, directly or indirectly, any equity
securities of the Company (or any securities convertible into or exercisable or
exchangeable for equity securities of the Company) for a period of 180 days
after the date of this Prospectus, without the prior written consent of
Oppenheimer & Co., Inc., subject to certain limited exceptions.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated between the Company
and the Representatives. Among the factors to be considered in determining the
initial public offering price of the Common Stock, in addition to prevailing
market conditions, will be the Company's historical performance, capital
structure, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and consideration of the
above factors in relation to market values of companies in related businesses.
63
<PAGE>
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon
for the Company by Dewey Ballantine, 1301 Avenue of the Americas, New York, New
York 10019, and for the Underwriters by Hale and Dorr, 60 State Street, Boston,
Massachusetts 02109.
EXPERTS
The balance sheets as of December 31, 1994, 1995 and September 30, 1996 and
the statements of operations, stockholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1995, for the nine
months ended September 30, 1996 and for the period from December 1, 1986
(inception) to September 30, 1996, included in this Prospectus, have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and the schedules thereto. For further
information with respect to the Company and such Common Stock, reference is made
to the Registration Statement and exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and, with respect to any
contract or other document filed as an exhibit to the Registration Statement,
each such statement is qualified in all respects by reference to such exhibit.
Copies of the Registration Statement and the exhibits thereto are on file at the
offices of the Commission and may be obtained upon payment of the prescribed fee
or may be examined without charge at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the
Commission's Regional Offices at Seven World Trade Center, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained in person
from the Public Reference Section of the Commission at its principal office
located at 450 Fifth Avenue, N.W., Washington, D.C. 20549, upon payment of the
prescribed fees. In addition, the Company is required to file electronic
versions of these documents with the Commission through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
Upon completion of the offering, the Company will be subject to the
reporting requirements of the Exchange Act and in accordance therewith will file
annual and quarterly reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected, and copies of such material may be obtained upon payment of the
prescribed fees, at the Commission's Public Reference Section at the addresses
set forth above.
64
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Financial Statements:
Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996................................... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995, for the nine months ended
September 30, 1995 (unaudited) and 1996 and for the period from December 1, 1986 (inception) to
September 30, 1996..................................................................................... F-4
Statements of Stockholders' Equity (Deficit) for the period from December 1, 1986 (inception) to
September 30, 1996, including the years ended December 31, 1993, 1994 and 1995 and the nine months
ended September 30, 1996............................................................................... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995, for the nine months ended
September 30, 1995 (unaudited) and 1996 and for the period from December 1, 1986 (inception) to
September 30, 1996..................................................................................... F-7
Notes to Financial Statements............................................................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Progenics Pharmaceuticals, Inc.:
We have audited the accompanying balance sheets of PROGENICS
PHARMACEUTICALS, INC. (the "Company") (a development stage enterprise) as of
December 31, 1994 and 1995 and September 30, 1996, and the related statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1995, for the nine months ended September
30, 1996 and for the period from December 1, 1986 (inception) to September 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1994 and 1995 and September 30, 1996, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, for the nine months ended September 30, 1996 and for the period from
December 1, 1986 (inception) to September 30, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
October 28, 1996.
F-2
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ SEPTEMBER 30,
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents...................................... $ 2,275,236 $ 559,294 $ 1,745,776
Certificates of deposit........................................ 103,850 -- --
Grant revenue receivable....................................... -- 112,749 79,638
Other current assets........................................... 67,967 18,445 60,370
-------------- -------------- --------------
Total current assets....................................... 2,447,053 690,488 1,885,784
Fixed assets, at cost, net of accumulated depreciation and
amortization................................................... 959,136 966,118 890,391
Security deposits and other assets............................... 83,284 79,118 64,636
-------------- -------------- --------------
Total assets............................................... $ 3,489,473 $ 1,735,724 $ 2,840,811
-------------- -------------- --------------
-------------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses.......................... $ 209,341 $ 487,089 $ 874,628
Capital lease obligations, current portion..................... 218,494 184,344 117,092
-------------- -------------- --------------
Total current liabilities.................................. 427,835 671,433 991,720
Capital lease obligations........................................ 204,916 162,824 154,687
Deferred lease liability......................................... 29,782 49,740 26,420
-------------- -------------- --------------
Total liabilities.......................................... 662,533 883,997 1,172,827
-------------- -------------- --------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value; 20,000,000 shares authorized:
Series A Preferred Stock, convertible; 4,000,000 shares
designated; shares issued and outstanding--
2,308,000 in 1994, 1995 and 1996 (liquidation value,
$6,055,750)................................................ 2,308 2,308 2,308
Series B Preferred Stock, convertible; 2,500,000 shares
designated; shares issued and outstanding-- 1,982,830 in
1994, 1995 and 1996 (liquidation value, $8,650,630)........ 1,983 1,983 1,983
Series C Preferred Stock, convertible; 3,750,000 shares
designated; shares issued and outstanding--424,184 in 1995
and 1,388,996 in 1996 (liquidation value, $2,120,920 in
1995 and $6,944,980 in 1996)............................... -- 424 1,389
-------------- -------------- --------------
Total preferred stock...................................... 4,291 4,715 5,680
Common Stock, $.0013 par value; 40,000,000 shares authorized;
shares issued and outstanding--2,249,675 in 1994 and
2,294,675 in 1995 and 1996................................... 2,924 2,983 2,983
Additional paid-in capital..................................... 15,974,008 18,501,808 22,798,674
Deficit accumulated during the development stage............... (13,154,283) (17,657,779) (21,139,353)
-------------- -------------- --------------
Total stockholders' equity................................. 2,826,940 851,727 1,667,984
-------------- -------------- --------------
Total liabilities and stockholders' equity................. $ 3,489,473 $ 1,735,724 $ 2,840,811
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 1, 1986
YEARS ENDED DECEMBER 31, SEPTEMBER 30, (INCEPTION)
---------------------------------- ---------------------- THROUGH
1993 1994 1995 1995 1996 SEPTEMBER 30, 1996
---------- ---------- ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Research grants................... $ 84,000 $ 503,518 $ 725,348 $ 502,109 $ 267,606 $ 1,735,152
Product sales..................... 49,715 51,971 49,752 40,252 67,422 358,335
Interest income................... 53,500 108,036 46,378 43,663 91,300 632,719
---------- ---------- ---------- ---------- ---------- ------------------
Total revenues................ 187,215 663,525 821,478 586,024 426,328 2,726,206
---------- ---------- ---------- ---------- ---------- ------------------
Expenses:
Research and development.......... 1,546,965 2,858,547 3,853,001 2,584,997 2,654,460 15,504,947
General and administrative........ 747,425 877,906 1,093,821 790,185 984,191 6,257,002
Interest expense.................. 38,071 50,399 87,279 52,347 39,564 440,717
Depreciation and amortization..... 249,371 288,407 290,873 229,135 229,687 1,662,893
---------- ---------- ---------- ---------- ---------- ------------------
Total expenses................ 2,581,832 4,075,259 5,324,974 3,656,664 3,907,902 23,865,559
---------- ---------- ---------- ---------- ---------- ------------------
Net loss...................... $(2,394,617) $(3,411,734) $(4,503,496) $(3,070,640) $(3,481,574) $(21,139,353)
---------- ---------- ---------- ---------- ---------- ------------------
---------- ---------- ---------- ---------- ---------- ------------------
Pro forma net loss per share data:
Pro forma net loss per share
(unaudited)..................... $(0.73) $(0.57)
---------- ----------
---------- ----------
Pro forma weighted average common
shares outstanding
(unaudited)..................... 6,134,721 6,134,721
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 1, 1986 (INCEPTION) TO SEPTEMBER 30, 1996,
INCLUDING THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
---------------------- ---------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ---------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of Common Stock for cash ($.0013
per share)............................ 4,875,000 $ 6,338 $ 162 $ 6,500
Sale of Common Stock for cash ($.13 per
share)................................ 180,000 234 23,766 24,000
Net loss for the year ended November 30,
1987.................................. $ (33,642) (33,642)
---------- ---------- ----------- ------------ ----------
Balance at November 30, 1987........ 5,055,000 6,572 23,928 (33,642) (3,142)
Sale of Common Stock during May 1988 to
an employee/stockholder for cash of
$150 and services at estimated value
($1.07 per share)..................... 112,500 146 120,004 120,150
Sale of Common Stock for cash ($1.07 per
share)................................ 1,026,574 1,335 1,093,665 1,095,000
Conversion of note payable to
stockholder........................... 27,500 27,500
Purchase of treasury stock during June
for cash of $20,000 and issuance of a
note payable ($.53 per share)......... (75,000) (98) (39,902) (40,000)
Sale of Common Stock during November in
consideration for services rendered at
estimated value ($1.33 per share)..... 2,476 3 3,297 3,300
Net loss for the year ended November 30,
1988.................................. (461,879) (461,879)
---------- ---------- ----------- ------------ ----------
Balance at November 30, 1988........ 6,121,550 7,958 1,228,492 (495,521) 740,929
Sale of Series A Preferred Stock units
for cash ($2.50 per unit)............. 1,037,000 $ 1,037 2,591,463 2,592,500
Net loss for the year ended November 30,
1989.................................. (1,151,167) (1,151,167)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at November 30, 1989........ 1,037,000 1,037 6,121,550 7,958 3,819,955 (1,646,688) 2,182,262
Purchase of treasury stock during
February for cash of $231,328 and
issuance of a note payable (average
$.08 per share)....................... (3,825,000) (4,973) (297,884) (302,857)
Sale of Series A Preferred Stock units
for cash ($2.50 per unit)............. 128,000 128 319,872 320,000
Net loss for the year ended November 30,
1990.................................. (1,709,728) (1,709,728)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at November 30, 1990........ 1,165,000 1,165 2,296,550 2,985 3,841,943 (3,356,416) 489,677
Purchase of treasury stock for cash
($.0016 per share).................... (46,875) (61) (14) (75)
Exercise of Series A Preferred Stock
warrants for cash ($2.75 per share)... 1,143,000 1,143 3,142,107 3,143,250
Net loss for the year ended November 30,
1991.................................. (1,673,439) (1,673,439)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at November 30, 1991........ 2,308,000 2,308 2,249,675 2,924 6,984,036 (5,029,855) 1,959,413
Net loss for the one-month period ended
December 31, 1991..................... (95,675) (95,675)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at December 31, 1991........ 2,308,000 2,308 2,249,675 2,924 6,984,036 (5,125,530) 1,863,738
</TABLE>
F-5
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
---------------------- ---------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ---------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of Series B Preferred Stock units
for cash, net of expenses ($4.00 per
unit)................................. 428,750 $ 429 $ 1,714,271 $1,714,700
Compensation expense in connection with
the issuance of stock options......... 190,926 190,926
Net loss for the year ended December 31,
1992.................................. $ (2,222,402) (2,222,402)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at December 31, 1992........ 2,736,750 2,737 2,249,675 $ 2,924 8,889,233 (7,347,932) 1,546,962
Sale of Series B Preferred Stock units
for cash, net of expenses ($4.00 per
unit)................................. 834,770 835 3,333,245 3,334,080
Compensation expense in connection with
the issuance of stock options......... 36,637 36,637
Net loss for the year ended December 31,
1993.................................. (2,394,617) (2,394,617)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at December 31, 1993........ 3,571,520 3,572 2,249,675 2,924 12,259,115 (9,742,549) 2,523,062
Exercise of Series B Preferred Stock
warrants for cash ($5.00 per share)... 719,310 719 3,595,831 3,596,550
Compensation expense in connection with
the issuance of stock options......... 119,062 119,062
Net loss for the year ended December 31,
1994.................................. (3,411,734) (3,411,734)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at December 31, 1994........ 4,290,830 4,291 2,249,675 2,924 15,974,008 (13,154,283) 2,826,940
Sale of Series C Preferred Stock units
for cash ($20.00 per unit)............ 179,450 179 897,070 897,249
Compensation expense in connection with
the issuance of stock options......... 107,363 107,363
Conversion of note payable and accrued
interest of $23,671 into Series C
Preferred Stock units ($20.00 per
unit)................................. 244,734 245 1,223,426 1,223,671
Issuance of Common Stock in
consideration for obtaining a license
and supply agreement at estimated
value ($6.67 per share)............... 45,000 59 299,941 300,000
Net loss for the year ended December 31,
1995.................................. (4,503,496) (4,503,496)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at December 31, 1995........ 4,715,014 4,715 2,294,675 2,983 18,501,808 (17,657,779) 851,727
Sale of Series C Preferred Stock units
for cash, net of expenses ($20.00 per
unit)................................. 964,812 965 4,776,359 4,777,324
Compensation expense in connection with
the issuance of stock options......... 98,523 98,523
Deferred equity issuance costs.......... (578,016) (578,016)
Net loss for the nine months ended
September 30, 1996.................... (3,481,574) (3,481,574)
---------- ---------- ---------- ---------- ----------- ------------ ----------
Balance at September 30, 1996....... 5,679,826 $ 5,680 2,294,675 $ 2,983 $22,798,674 $(21,139,353) $1,667,984
---------- ---------- ---------- ---------- ----------- ------------ ----------
---------- ---------- ---------- ---------- ----------- ------------ ----------
</TABLE>
Securities issued for non-cash consideration were valued based upon the
Board of Directors' estimate of fair value of the securities issued at the time
the services were rendered.
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER
YEARS ENDED DECEMBER 31, 30,
---------------------------------------- ------------
1993 1994 1995 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net loss during development stage.............................. $ (2,394,617) $ (3,411,734) $ (4,503,496) $ (3,070,640)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.............................. 249,371 288,407 290,873 229,135
Compensation expense recognized in connection with issuance
of stock options......................................... 36,637 119,062 107,363 80,522
Loss on disposal of fixed assets........................... -- -- -- --
Noncash operating expenses................................. -- -- -- --
Common stock issued in consideration for operating
expenses................................................. -- -- 323,671 --
Changes in assets and liabilities:
(Increase) decrease in grant revenue receivable.......... -- -- (112,749) --
(Increase) decrease in other current assets.............. (5,100) (62,867) 49,522 50,765
(Increase) decrease in security deposits and other
assets................................................. (21,782) (2,663) (5,834) (4,428)
Increase (decrease) in accounts payable and accrued
expenses............................................... 18,615 69,165 273,399 159,102
(Decrease) increase in deferred lease liability.......... (19,646) 18,323 24,307 18,230
------------ ------------ ------------ ------------
Net cash used in
operating activities................................. (2,136,522) (2,982,307) (3,552,944) (2,537,314)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Proceeds on sale of fixed assets............................... -- -- -- --
Capital expenditures........................................... (229,710) (323,426) (158,445) (114,408)
Redemption of certificates of deposit.......................... -- 10,000 113,850 113,850
Purchase of certificates of deposit............................ -- (10,000) -- --
Other.......................................................... -- -- -- --
------------ ------------ ------------ ------------
Net cash used in
investing activities................................. (229,710) (323,426) (44,595) (558)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of equity securities, less offering
expenses..................................................... 3,334,080 3,596,550 897,249 --
Payment of deferred equity issuance costs...................... -- -- -- --
Payment of capital lease obligations........................... (107,895) (132,414) (215,652) (166,281)
Proceeds from notes payable.................................... -- -- 1,200,000 800,000
Repayments of notes payable.................................... (73,923) (20,638) -- --
Borrowings from stockholder.................................... -- -- -- --
Repayment of borrowings from stockholder....................... -- -- -- --
Payments to acquire treasury shares............................ -- -- -- --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities.... 3,152,262 3,443,498 1,881,597 633,719
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents... 786,030 137,765 (1,715,942) (1,904,153)
Cash and cash equivalents at beginning of period................. 1,351,441 2,137,471 2,275,236 2,275,236
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period............. $ 2,137,471 $ 2,275,236 $ 559,294 $ 371,083
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplemental disclosure of cash flow information:
Cash paid for interest....................................... $ 38,071 $ 47,618 $ 90,060 $ 55,128
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
<CAPTION>
DECEMBER 1, 1986
(INCEPTION)
THROUGH
1996 SEPTEMBER 30, 1996
------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss during development stage.............................. $ (3,481,574) $ (21,139,353)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.............................. 229,687 1,662,893
Compensation expense recognized in connection with issuance
of stock options......................................... 98,523 552,511
Loss on disposal of fixed assets........................... -- 17,550
Noncash operating expenses................................. -- 51,766
Common stock issued in consideration for operating
expenses................................................. -- 446,971
Changes in assets and liabilities:
(Increase) decrease in grant revenue receivable.......... 33,111 (79,638)
(Increase) decrease in other current assets.............. (41,925) (60,370)
(Increase) decrease in security deposits and other
assets................................................. 14,482 (64,636)
Increase (decrease) in accounts payable and accrued
expenses............................................... (137,545) 345,195
(Decrease) increase in deferred lease liability.......... (3,262) 50,827
------------ ------------------
Net cash used in
operating activities................................. (3,288,503) (18,216,284)
------------ ------------------
Cash flows from investing activities:
Proceeds on sale of fixed assets............................... -- 22,500
Capital expenditures........................................... (73,303) (1,336,287)
Redemption of certificates of deposit.......................... -- 182,850
Purchase of certificates of deposit............................ -- (182,850)
Other.......................................................... -- (29,326)
------------ ------------------
Net cash used in
investing activities................................. (73,303) (1,343,113)
------------ ------------------
Cash flows from financing activities:
Proceeds from issuance of equity securities, less offering
expenses..................................................... 4,777,324 21,501,303
Payment of deferred equity issuance costs...................... (72,990) (72,990)
Payment of capital lease obligations........................... (156,046) (892,113)
Proceeds from notes payable.................................... -- 1,277,500
Repayments of notes payable.................................... -- (257,124)
Borrowings from stockholder.................................... -- 200,000
Repayment of borrowings from stockholder....................... -- (200,000)
Payments to acquire treasury shares............................ -- (251,403)
------------ ------------------
Net cash provided by (used in) financing activities.... 4,548,288 21,305,173
------------ ------------------
Net increase (decrease) in cash and cash equivalents... 1,186,482 1,745,776
Cash and cash equivalents at beginning of period................. 559,294 --
------------ ------------------
Cash and cash equivalents at end of period............. $ 1,745,776 $ 1,745,776
------------ ------------------
------------ ------------------
Supplemental disclosure of cash flow information:
Cash paid for interest....................................... $ 39,564 $ 440,717
------------ ------------------
------------ ------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1995 INTERIM DATA IS UNAUDITED)
1. ORGANIZATION AND BUSINESS
Progenics Pharmaceuticals, Inc. (the "Company") is a biopharmaceutical
company focusing on the development and commercialization of innovative products
for the treatment and prevention of cancer and viral diseases, including human
immunodeficiency virus ("HIV") infection. The Company was incorporated in
Delaware on December 1, 1986. The Company has no products approved by the U.S.
Food and Drug Administration and as a development stage enterprise, the
Company's primary efforts to date have been devoted to research and development,
raising capital, acquiring equipment, setting up laboratories, and clinical
testing of product candidates. In addition to the normal risks associated with a
new business venture, there can be no assurance that the Company's research and
development will be successfully completed, that any products developed will
obtain necessary government regulatory approval or that any approved products
will be commercially viable. In addition, the Company operates in an environment
of rapid change in technology and is dependent upon the continued services of
its current employees, consultants and subcontractors.
The Company has sustained net losses and negative cash flows from operations
since its inception and expects these conditions to continue for the foreseeable
future. The Company has received assurances from a stockholder that it will
provide the financing necessary to enable the Company to continue to operate
through February 28, 1998 if alternative financing, as defined, such as an
initial public offering, is not obtained. The Company will need to raise
additional financing through public or private equity financings, collaborative
or other arrangements with corporate sources, or other sources of financing to
fund operations after February 28, 1998. There can be no assurance that such
additional financing, if at all available, can be obtained on terms reasonable
to the Company. In the event the Company is unable to raise additional capital,
operations after February 28, 1998 will need to be scaled back or discontinued.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRODUCT SALES
The Company has derived all of its product revenue from the sale of research
reagents to primarily one customer. Product sales revenue is recognized at the
time reagents are shipped. The reagents are products of the Company's research
and development efforts. The Company maintains no inventory of reagent and cost
of product sales is not material.
RESEARCH GRANTS
The Company has been awarded government research grants from two grantors
("Grantors"). The respective grants are used to subsidize the Company's research
projects ("Projects") regarding HIV. Grant revenue is recognized on a pro rata
basis as the underlying costs of the Project are incurred. This method
approximates the straight-line basis over the lives of the Projects. Receivables
from the Grantors represent a concentration of credit risk to the Company. For
each of the three years in the period ended December 31, 1995 and the nine
months ended September 30, 1996, all of the Company's research grant revenue
came from the Grantors. In general, the grants provide the Company with
substantially all the rights regarding any technology (the "Technology")
developed as the result of the sponsored research except that the Grantor has
the right to use the Technology on a royalty-free basis and the Grantor may
require the Company to license the Technology to others, as defined. In
addition, the Company may be required to manufacture any product using the
Technology in the United States. Amounts paid to the Company are nonrefundable
and the Company is not contractually obligated to deliver any product or result
from its research.
F-8
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FIXED ASSETS
Leasehold improvements, furniture and fixtures, and equipment are stated at
cost. Furniture, fixtures, and equipment are depreciated on a straight-line
basis over their estimated useful lives. Leasehold improvements are amortized on
a straight-line basis over the life of the lease or of the improvement,
whichever is shorter. The estimated useful lives of fixed assets are as follows:
<TABLE>
<CAPTION>
<S> <C>
Computer equipment............................................ 5 years
Machinery and equipment....................................... 5-7 years
Furniture and fixtures........................................ 5 years
Life of
Leasehold improvements........................................ lease
</TABLE>
PATENTS
As a result of research and development efforts conducted by the Company, it
has applied, or is applying, for a number of patents to protect proprietary
inventions. All costs associated with patents are expensed as incurred.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments which have maturities of
three months or less, when acquired, to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates its
fair value. Cash, cash equivalents and certificates of deposit, subject the
Company to concentrations of credit risk. At September 30, 1996, the Company had
invested approximately $1,569,000 in funds with a major investment company and
held approximately $177,000 in a single commercial bank. At December 31, 1995,
the Company had invested approximately $33,000 in funds with a major investment
company and held approximately $526,000 in a single commercial bank. At December
31, 1994, the Company had invested approximately $2,100,000 in funds and three
month certificates of deposit with a major investment company and held
approximately $267,000, including certificates of deposit totaling approximately
$114,000, in a single commercial bank.
NET LOSS PER SHARE
PRO FORMA PER SHARE DATA (UNAUDITED)
The pro forma per share data included in the Statements of Operations has
been computed using the weighted average number of shares of common stock
outstanding. Common stock issuable upon the exercise of outstanding stock
options and warrants are excluded from the computation as their effect is
anti-dilutive, except that, pursuant to Securities and Exchange Commission Staff
Accounting Bulletin
No. 83 ("SAB No. 83"), equity securities, including options and warrants, issued
at prices below the assumed public offering price of $12.00 during the 12-month
period prior to the proposed offering have been included in the calculation as
if they were outstanding for all periods presented. In addition, the weighted
average number of shares of convertible preferred stock that will convert
automatically into shares of common stock upon the closing of the Company's
proposed initial public offering has been included in the calculation from their
original date of issuance.
F-9
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PER SHARE DATA IN ACCORDANCE WITH SAB NO. 83
The per share data found below has been computed in accordance with
Accounting Principles Board Opinion No. 15 ("APB No. 15") adjusted for SAB No.
83. Such computation is based on the net loss for the period divided by the
weighted average number of shares outstanding excluding the number of common
shares issuable upon the exercise of outstanding options and warrants and the
conversion of preferred stock since such inclusion would be anti-dilutive,
except that, pursuant to SAB
No. 83, equity securities including options and warrants, issued at prices below
the assumed public offering price of $12.00 during the 12 month period prior to
the proposed offering have been included in the calculation as if outstanding
for all periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net loss per share:
Per APB No. 15.......................... $ (1.06) $ (1.52) $ (1.99) $ (1.36) $ (1.52)
Effect of SAB No. 83.................... 0.24 0.35 0.45 0.31 0.33
------------ ------------- ------------ ------------ ------------
Per SAB No. 83........................ $ (0.82) $ (1.17) $ (1.54) $ (1.05) $ (1.19)
------------ ------------- ------------ ------------ ------------
------------ ------------- ------------ ------------ ------------
Shares used in calculating per share
amounts:
Per APB No. 15.......................... 2,249,675 2,249,675 2,264,839 2,254,784 2,294,675
Effect of SAB No. 83.................... 666,915 666,915 651,751 661,806 621,915
------------ ------------- ------------ ------------ ------------
Per SAB No. 83........................ 2,916,590 2,916,590 2,916,590 2,916,590 2,916,590
------------ ------------- ------------ ------------ ------------
------------ ------------- ------------ ------------ ------------
</TABLE>
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires that the Company recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined on the basis of the
difference between the tax basis of assets and liabilities and their respective
financial reporting amounts ("temporary differences") at enacted tax rates in
effect for the years in which the temporary differences are expected to reverse.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. See also
Note 7(c).
F-10
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121") in March 1995.
SFAS 121 requires companies to review their long-lived assets and certain
identifiable intangibles (collectively, "Long-Lived Assets") for impairment
whenever events or changes in circumstances indicate that the carrying value of
a Long-Lived Asset may not be recoverable. The Company adopted the provisions of
SFAS 121 as of January 1, 1996 which had no impact on the Company's financial
position or results of operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") in October 1995. SFAS 123 requires companies to estimate the fair value of
common stock, stock options, or other equity instruments ("Equity Instrument")
issued to employees using pricing models which take into account various
factors, such as the current price of the common stock, volatility, and the
expected life of the Equity Instrument. SFAS 123 permits companies to elect
either to provide pro forma note disclosure or adjust operating results for the
amortization of the estimated value of the Equity Instrument as compensation
expense over the vesting period of the Equity Instrument. The Company has
elected to provide pro forma note disclosure which will appear in its annual
financial statements for the year ending December 31, 1996 and, therefore, the
adoption of SFAS 123 will have no effect on the Company's financial position or
results of operations.
STATEMENT OF CASH FLOWS
Supplemental disclosure of noncash investing and financing activities:
For the years ended December 31, 1993, 1994 and 1995:
Capital lease obligations of approximately $71,000, $423,000 and
$139,000 were incurred during the years ended December 31, 1993, 1994 and
1995, respectively, when the Company leased new equipment.
In 1995, the Company issued 45,000 restricted shares of Common Stock
("Restricted Shares") in consideration for obtaining a license and supply
agreement. The estimated fair market value of such shares at the date of
issuance was $300,000.
In December 1995, a shareholder exchanged a note payable of $1,200,000
and accrued interest of approximately $24,000 for approximately 61,200
units. Each unit consists of four shares of Series C Preferred Stock and one
five-year warrant to purchase one share of Series C Preferred Stock. (See
Note 5.)
Included in accounts payable, at December 31, 1993, were obligations for
approximately $30,000 of fixed asset additions.
For the nine months ended September 30, 1996:
Capital lease obligations of approximately $81,000 were incurred during
the nine months ended September 30, 1996 when the Company leased new
equipment.
F-11
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Included in accounts payable, at September 30, 1996, were deferred
equity issuance costs of approximately $505,000.
For the period from December 1, 1986 (inception) to September 30, 1996:
Capital lease obligations of approximately $1,164,000 were incurred
during the period from December 1, 1986 (inception) to September 30, 1996
when the Company leased new equipment.
During 1991, the Company financed the acquisition of laboratory
equipment by issuing a note payable totaling approximately $64,000 to the
supplier.
In February 1990, the Company issued a note payable, which at the time
of issuance had a net present value of approximately $123,000, as partial
consideration for the acquisition of approximately 3,800,000 shares of
Common Stock and approximately $52,000 of operating expenses. The shares of
Common Stock were held as treasury stock and then subsequently retired.
In June 1988, the Company issued a note payable in the amount of $20,000
as partial consideration for the purchase of 75,000 shares of the Company's
Common Stock. Such shares, at the time they were acquired, were held as
treasury stock and then subsequently retired.
During 1988, a stockholder/creditor forgave repayment of a note payable
totaling approximately $28,000. This transaction was recorded as a
contribution to capital.
3. FIXED ASSETS
Fixed assets, including amounts under capitalized lease obligations, consist
of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1994 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Computer equipment.................................................... $ 279,445 $ 286,425 $ 167,654
Machinery and equipment............................................... 1,354,811 1,637,460 1,391,018
Furniture and fixtures................................................ 181,782 190,008 138,415
Leasehold improvements................................................ 29,702 29,702 29,702
------------ ------------- -------------
1,845,740 2,143,595 1,726,789
Less, accumulated depreciation and amortization....................... (886,604) (1,177,477) (836,398)
------------ ------------- -------------
$ 959,136 $ 966,118 $ 890,391
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
F-12
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
Accounts payable.......................................................... $ 69,515 $ 153,749 $ 112,104
Fees payable to Scientific Advisory Board members......................... 54,000 116,250 67,000
Accrued payroll and related costs......................................... 15,325 56,235 32,890
Legal and accounting fees payable......................................... 70,501 156,506 638,227
Deferred lease liability, current portion................................. -- 4,349 24,407
---------- ---------- -------------
$ 209,341 $ 487,089 $ 874,628
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
5. STOCKHOLDERS' EQUITY
On October 2, 1996, the Board of Directors (the "Board") of the Company
approved a three-for-four reverse stock split of common stock. All common stock
data, including loss per share and weighted average number of shares outstanding
has been retroactively amended to reflect the stock split. The Company's
Certificate of Incorporation, as amended, authorizes the Company to issue
60,000,000 shares, of which 40,000,000 shares are designated as common shares,
par value $.0013, and 20,000,000 shares are designated as preferred shares, par
value $.001. The Board has the authority to issue common and preferred shares,
in series, with rights and privileges determined by the Board. 4,000,000
preferred shares are designated as Series A Preferred Stock ("Series A"),
2,500,000 shares are designated as Series B Preferred Stock ("Series B") and
3,750,000 shares are designated as Series C Preferred Stock ("Series C")
(collectively the "Preferred Stock"). During June 1995, the Board rescinded the
designation of unissued Class A Common Stock and designated all common shares as
common stock ("Common Stock"). In the event that the Company declares and pays a
dividend, the Preferred Stock and Common Stock will receive such dividend on a
pro rata basis, as defined. Distributions in liquidation shall be pro rated to
the Preferred Stock and Common Stock up to specified amounts, as defined and,
thereafter, pro rata based upon the number of shares outstanding on a Common
Stock equivalent basis, as defined. Each share of Preferred Stock is
convertible, at the option of the holder, into .75 share of Common Stock,
adjusted in accordance with a formula should the Company sell Preferred or
Common Stock at a per share price below the original issuance price paid by
existing Preferred Stock shareholders ("Preferred Stockholder"), as defined.
Conversion is automatic at the earlier of (i) the closing of a public offering
of the Company's Common Stock in which certain defined aggregate proceeds are
raised and the per share selling price exceeds a defined level, or (ii) the date
the Preferred Stockholders have converted a defined number of shares of
Preferred Stock. The conversion rate is subject to anti-dilution provisions, as
defined. Preferred Stockholders are entitled to vote with Common Stockholders as
a single class. In addition, certain changes in the Company's capital structure,
as defined, which includes, under certain situations, the issuance of additional
series of Preferred or Common Stock (the "Proposal"), require a separate vote by
Preferred Stockholders. If less than a majority of Preferred Stockholders vote
in favor of the Proposal and if the Common Stockholders approve the Proposal,
the Company has the right to redeem all outstanding shares of Preferred Stock at
per share prices ranging from $3.46 to $8.84, as defined. The Preferred Stock
also is subject to transfer restrictions, as defined, and the Company has the
right of first refusal to acquire such
F-13
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
shares in the event the holder proposes to sell any or all shares to any person
other than a permitted transferee.
During 1988, the Company entered into subscription agreements ("Agreements")
in connection with the sale of approximately 1,000,000 shares of its Common
Stock at a per share price of $1.07. The Agreements contain a provision whereby
investors have the right to receive additional shares of Common Stock, as
defined, in the event the Company sells Common Stock at a per share price below
$1.07. This right terminates upon any registered public offering, any sale of
the Company or its assets, or upon the Company selling an aggregate of 7,500,000
shares of Common Stock.
During 1989 and 1990, the Company raised $2,913,000 from the sale of
1,165,000 Units (the "A Units") in a private placement. Each A Unit consisted of
one share of Series A Preferred Stock and one warrant (the "A Warrant") which
entitled the holder to purchase one share of Series A Preferred Stock at a price
of $2.75 per share. During 1991, 1,143,000 A Warrants were exercised yielding
$3,143,000 to the Company. The remaining unexercised A Warrants have expired.
During 1992 and 1993, the Company raised $5,049,000, after expenses, from
the sale of 1,263,520 Units (the "B Units") in a private placement. Each B Unit
consisted of one share of Series B Preferred Stock and one warrant (the "B
Warrant") which, as amended, entitled the holder to purchase one share of Series
B Preferred Stock at a price of $5.00 per share. During 1994, 719,310 B Warrants
were exercised yielding $3,597,000 to the Company. The remaining unexercised B
Warrants have expired.
During the fourth quarter of 1995 and the first quarter of 1996, the Company
raised $897,000 and $4,777,000, net of expenses, from the sale of approximately
44,900 Units and 241,203 Units, respectively, (the "C Units") in a private
placement. In addition, during December 1995, a stockholder converted a note
payable (see Note 6). Each C Unit consists of four shares of Series C Preferred
Stock and one five-year warrant (the "C Warrant") which entitles the holder to
purchase one share of Series C Preferred Stock at $5.00 per share or, if
exercised subsequent to an initial public offering, as defined, .75 share of
Common Stock at $6.67 per share. The number of C Warrants and their exercise
price are subject to adjustment in the event the Company issues additional
shares of Common Stock at below defined per share prices. As of September 30,
1996, 347,249 C Warrants were issued and outstanding and fully exercisable.
6. NOTE PAYABLE--STOCKHOLDER
During 1995, the Company borrowed $1,200,000 under a promissory note from a
stockholder. The promissory note, as amended and restated, provided for interest
to accrue at a rate of 10% per annum. Interest and principal were payable upon
demand, but not before December 8, 1995. During December 1995, the promissory
note plus accrued interest of $23,671 were exchanged for approximately 61,200 C
Units (see Note 5).
F-14
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES:
(A) OPERATING LEASES
The Company leases office and laboratory space under a noncancelable
sublease agreement expiring December 30, 1997 (the "sublease") and a lease
agreement expiring April 30, 1998 (the "lease"). The sublease, as amended, and
the lease provide for escalations of the minimum rent during the lease term as
well as additional charges based upon usage of certain utilities in excess of
defined amounts ("Additional Utility Charges"). The Company recognizes rental
expense from the sublease and lease on the straight-line basis. During 1994 and
1995, the Company recognized rental expense in excess of amounts paid of
approximately $18,000 and $24,000, respectively, while during the year ended
December 31, 1993 and the nine months ended September 30, 1996, approximately
$20,000 and $3,000 of previously recognized rent expense, which had been
included as a deferred lease liability at December 31, 1992 and 1995,
respectively, was paid.
The Company also leases office equipment and an automobile under
noncancelable operating leases. The leases expire at various times through July
1997.
Future minimum annual payments under all operating lease agreements,
including the sublease and lease, are as follows:
<TABLE>
<CAPTION>
MINIMUM
YEARS ENDING ANNUAL
SEPTEMBER 30, PAYMENTS
--------------- ------------
<S> <C>
1997............................................................................ $ 669,034
1998............................................................................ 403,685
------------
$ 1,072,719
------------
------------
</TABLE>
Rental expense totaled approximately $353,000, $506,000, $657,000, $481,000
and $2,854,000 for the years ended December 31, 1993, 1994 and 1995, for the
nine months ended September 30, 1996 and for the period from December 1, 1986
(inception) to September 30, 1996, respectively. Additional Utility Charges, as
defined above, were not material for these periods.
(B) CAPITAL LEASES
The Company leases certain equipment under various noncancelable capital
lease agreements. The leases are for periods ranging from two to five years,
after which the Company: (i) either has the option or is required to purchase
the equipment at defined amounts or (ii) may extend the lease for up to one
additional year at defined monthly payments or (iii) is required to return the
equipment, as per the respective lease agreements. Certain capital leases, as
amended, contain various covenants which include maintaining a minimum tangible
net worth, as defined, of at least $625,000 during the term of the leases. This
covenant indirectly restricts the Company's ability to pay dividends.
F-15
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
As of September 30, 1996, minimum annual payments under all capital leases,
including required payments to acquire leased equipment, are as follows:
<TABLE>
<CAPTION>
MINIMUM
YEARS ENDING ANNUAL
SEPTEMBER 30, PAYMENTS
--------------- ----------
<S> <C>
1997.............................................................................. $ 160,983
1998.............................................................................. 82,715
1999.............................................................................. 56,909
2000.............................................................................. 37,863
2001.............................................................................. 19,901
----------
358,371
Less, amounts representing interest............................................... 86,592
----------
Present value of net minimum capital lease payments............................... $ 271,779
----------
----------
</TABLE>
Leased equipment included as a component of fixed assets was approximately
$591,000, $731,000 and $799,000 at December 31, 1994 and 1995 and September 30,
1996, respectively; related accumulated depreciation was approximately $119,000,
$242,000 and $342,000 for the same respective periods.
(C) LICENSING AGREEMENTS:
(I) UNIVERSITIES
In March 1989, the Company (as licensee) entered into a worldwide licensing
agreement with Columbia University ("Columbia"). The license, as amended during
October 1996, provides the Company with the exclusive right to use certain
technology developed on behalf of Columbia. According to the terms of the
agreement, the Company is required to pay nonrefundable licensing fees
("Licensing Fees"), payable in installments by defined dates or, if earlier, as
certain milestones associated with product development ("Milestones") occur, as
defined, which include the manufacture and distribution of a product which uses
the licensed technology, at various times over the next eight years. The Company
expenses Licensing Fees when they become payable by the Company to Columbia. In
addition, the Company is required to remit royalties based upon the greater of
minimum royalties, as defined, or a percentage of net sales of products which
utilize the licensed technology and a portion of sublicensing income, as
defined. The licensing agreement may be terminated by Columbia under certain
circumstances which includes the Company's failure to achieve the Milestones;
however, Columbia shall not unreasonably withhold its consent to revisions to
the due dates for achieving the Milestones under certain circumstances. If not
terminated early, the agreement shall continue until expiration, lapse or
invalidation of Columbia's patents on the licensed technology. The Company has
the right to terminate the agreement at any time upon 90 days prior written
notice. The termination of the license could have a material adverse effect on
the business of the Company.
In January 1991, the Company (as licensee) also entered into a non-exclusive
licensing agreement with Stanford University whereby the Company has the
non-exclusive, non-transferable right to use certain technology owned by the
university. According to the terms of the agreement, the Company will be
F-16
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
required to remit royalties at various rates, as defined. Royalties shall
continue to be payable, irrespective of termination of this license agreement,
until such time as all sales of products which utilize the licensed technology
shall have ceased.
In September 1996, the Company (as licensee) entered into a licensing
agreement with The Regents of the University of California ("U of C"). According
to the terms of the agreement, the Company is required to remit royalties based
upon the greater of minimum royalties or a percentage of product sales and a
portion of sublicensing income, as defined. The agreement can be terminated by
the Company upon 90 days notice or by U of C in the event the Company fails to
perform, which includes the achievement of certain defined milestones; otherwise
the agreement terminates upon the lapse of U of C's patent regarding the
licensed technology. Early termination of the agreement could have a material
adverse effect on the business of the Company. Although the Company intends to
use its best efforts to comply with the terms of the agreement, there can be no
assurances that the agreement will not be terminated.
(II) SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH
In November 1994, the Company (as licensee) entered into a worldwide
exclusive licensing agreement with Sloan-Kettering Institute for Cancer Research
("Sloan-Kettering") whereby the Company has the exclusive right to use certain
technology owned by Sloan-Kettering. Certain employees of Sloan-Kettering are
consultants to the Company (see Note 7(d)). The agreement requires the Company
to pay nonrefundable, noncreditable licensing fees in installments. The Company
expenses such installments when they become payable by the Company to
Sloan-Kettering. Commencing in 1995, the Company is required to remit royalties
based upon the greater of minimum royalties, as defined, or as a percentage of
sales of any licensed product, as defined ("Product Royalties"), and sublicense
income, as defined, earned under sublicenses granted by the Company in
accordance with this licensing agreement ("Sublicense Royalties"). In the event
that no Product Royalties or Sublicense Royalties are due in a given calendar
year, then a defined percentage of that year's minimum royalty will be
creditable against future Product Royalties or Sublicense Royalties due
Sloan-Kettering. The licensing agreement may be terminated by Sloan-Kettering in
the event that the Company fails to achieve certain defined objectives, which
include the manufacture and distribution of a product which uses the licensed
technology, over the next six years, or if the Company fails to satisfy certain
other contractual obligations ("Early Termination"); otherwise the agreement
shall terminate either upon the expiration or abandonment of Sloan-Kettering's
patents on the technology licensed, or 15 years from the date of first
commercial sale, as defined, whichever is later. With regard to Early
Termination, Sloan-Kettering shall not unreasonably withhold its consent to
revisions to the due dates for achieving the defined objectives under certain
circumstances. The Company has the right to terminate the agreement at any time
upon 90 days prior written notice ("Company Termination"). In the event of Early
Termination or Company Termination, all licensing rights under the agreement
would revert to Sloan-Kettering. Early Termination of the license could have a
material adverse effect on the business of the Company. Although the Company
intends to use its best efforts to comply with the terms of the license, there
can be no assurance that the licensing agreement will not be terminated.
F-17
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
(III) AQUILA BIOPHARMACEUTICALS, INC.
In 1995, the Company (as licensee) entered into a license and supply
agreement (the "L&S Agreement") with Aquila Biopharmaceuticals, Inc. ("Aquila").
Under the terms of the L&S Agreement, the Company obtained a coexclusive license
to use certain technology and a right to purchase QS-21 adjuvant (the "Product")
from Aquila for use in the Company's research and development activities. In
consideration for the license, the Company paid a nonrefundable, noncreditable
license fee and issued 45,000 restricted shares of the Company's Common Stock
("Restricted Shares") to Aquila. The Restricted Shares are nontransferable with
this restriction lapsing upon the Company's achievement of certain milestones
("L&S Milestones"), as defined. In the event that any one or more L&S Milestones
do not occur, the underlying Restricted Shares would be returned to the Company.
The fair value of the Restricted Shares, combined with the noncreditable license
fee, were expensed during 1995 as research and development. In addition, the
Company will be required to remit royalties based upon the net sales of products
sold using the licensed technology ("Licensed Products") and a defined
percentage of any sublicense fees and royalties payable to the Company with
respect to Licensed Products. The L&S Agreement may be terminated by Aquila in
the event that the Company fails to achieve certain defined objectives, which
include the manufacture and distribution of a Licensed Product, over the next
seven years ("Early Termination"); otherwise the L&S Agreement shall terminate
upon the expiration of Aquila's patents on the technology licensed. With regard
to Early Termination, Aquila shall not unreasonably withhold its consent to
revisions to the due dates for achieving the L&S Milestones under certain
circumstances. The Company has the right to terminate the L&S Agreement at any
time upon 90 days prior written notice ("Company Termination"), as defined. In
the event of Early Termination or Company Termination, all licensing rights
under the agreement would revert to Aquila. Early termination of the L&S
Agreement would have a material adverse effect on the business of the Company.
Although the Company intends to use its best efforts to comply with the terms of
the L&S Agreement, there can be no assurance that the agreement will not be
terminated.
In connection with the above agreements, the Company has recognized expenses
totaling approximately $10,000, $22,500, $382,500, $22,500 and $807,500 for the
years ended December 31, 1993, 1994 and 1995, for the nine months ended
September 30, 1996 and for the period from December 1, 1986 (inception) to
September 30, 1996, respectively. Such expenses include the fair value of the
Restricted Shares. In addition, remaining payments associated with milestones or
defined objectives under the above agreements total $650,000. Future annual
minimum royalties under the licensing agreements above are not significant.
(D) CONSULTING AGREEMENTS
As part of the Company's research and development efforts it enters into
consulting agreements ("Agreements") with external scientific specialists
("scientists"). These Agreements contain varying terms and provisions which
include fees to be paid by the Company and services to be provided by the
scientists, some of whom are members of the Company's Scientific Advisory Board.
Certain scientists have purchased Common Stock or received stock options which
are subject to vesting provisions, as defined. The Company has recognized
expenses with regards to these Agreements totaling approximately $136,000,
$261,000, $245,000, $232,000 and $1,398,000 for the years ended December 31,
1993, 1994 and 1995, for the nine
F-18
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
months ended September 30, 1996, and for the period from December 1, 1986
(inception) to September 30, 1996, respectively. Such expenses include the fair
value of stock options.
8. STOCK OPTION PLANS:
(A) 1989 NON-QUALIFIED STOCK OPTION PLAN
On April 1, 1989, the Company adopted a Non-Qualified Stock Option Plan (the
"89 Plan"), under which a maximum of 375,000 shares of Common Stock, adjusted
for stock splits, stock dividends and other capital adjustments, as defined, are
available for stock option awards to employees, consultants, directors and other
individuals who render services to the Company. For a period of ten years
following the termination for any reason of an optionee's employment or active
involvement with the Company, as determined by the Board, the Company has the
right to repurchase any or all shares of Common Stock held by the optionee
and/or any or all of the vested but unexercised portion of any option granted
under the 89 Plan to such optionee at a purchase price defined by the 89 Plan.
The 89 Plan terminated on April 1, 1994, and any option granted before
termination of the 89 Plan shall continue under the terms of the 89 Plan.
Certain options issued from the 89 Plan entitle the holders to purchase
shares of Common Stock at a per share price of $1.33, which was less than the
estimated fair market value of the Common Stock, as determined by the Board of
Directors, on the date of grant. As a result, the Company is recognizing
compensation expense on a pro rata basis, over the respective options' vesting
periods of three to ten years, for the difference between the estimated fair
market value of the Common Stock on the date the option was granted and the
exercise price. The Company recognized compensation expense of approximately
$37,000, $33,000, $21,000, $17,000 and $299,000 for the years ended December 31,
1993, 1994 and 1995, for the nine months ended September 30, 1996, and for the
period from December 1, 1986 (inception) to September 30, 1996, respectively, in
connection with these options.
Transactions involving stock option awards under the 89 Plan during 1993,
1994, 1995 and the nine months ended September 30, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
NUMBER PRICE
OF SHARES PER SHARE
----------- ----------------
<S> <C> <C>
Balance outstanding, December 31, 1992............................................... 311,332 $1.33 to $3.67
1993: Granted........................................................................ 54,188 $5.33
-----------
Balance outstanding, December 31, 1993.......................................... 365,520 $1.33 to $5.33
1994: Canceled....................................................................... (259) $1.33
-----------
Balance outstanding, December 31, 1994.......................................... 365,261 $1.33 to $5.33
1995: Canceled....................................................................... (11,250) $3.67
-----------
Balance outstanding, December 31, 1995 and September 30, 1996................... 354,011 $1.33 to $5.33
-----------
-----------
</TABLE>
F-19
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
8. STOCK OPTION PLANS: (CONTINUED)
The total number of options exercisable under the 89 Plan at September 30,
1996 was 276,386 at exercise prices of $1.33 to $5.33 per share. As of September
30, 1996, no shares are available for future grants.
(B) 1993 STOCK OPTION PLAN
On December 2, 1993, the Company adopted a Stock Option Plan (the "93
Plan"). Under the 93 Plan, as amended, a maximum of 750,000 shares of Common
Stock, adjusted for stock splits, stock dividends, and other capital
adjustments, as defined, are available for stock option awards. Awards issued
under the 93 Plan may qualify as incentive stock options ("ISOs"), as defined by
the Internal Revenue Code, or may be granted as non-qualified stock options.
Under the 93 Plan, the Compensation Committee of the Board of Directors (the
"Committee") may award options to employees, directors who are not employees and
other individuals who render services to the Company. For a period of ten years
following the termination for any reason of an optionee's employment or active
involvement with the Company, as determined by the Board of Directors, the
Company shall have the right to repurchase any or all shares of Common Stock
acquired under the 93 Plan and held by the optionee and/or any or all of the
vested but unexercised portion of any option granted under the 93 Plan to such
optionee at a purchase price, as defined by the 93 Plan. This right will
terminate upon the Company's completion of a public offering of securities, as
defined. The 93 Plan will terminate on December 2, 2003; however, any option
outstanding as of the termination date shall remain outstanding until such
option expires in accordance with the terms of the respective grant.
During 1994, the Committee granted 582,000 stock options under the 93 Plan.
Included therein were 450,000 stock options ("94 Options") which entitle the
holders to purchase shares of Common Stock at a per share price of $5.33, which
was less than the estimated fair market value of the Common Stock, as determined
by the Board of Directors, on the date of issuance. As a result, the Company is
recognizing compensation expense on a pro rata basis, over the respective
options' vesting periods of seven years, for the difference between the
estimated fair market value of the Common Stock on the date the option was
issued and the exercise price. In addition, during 1996, the Committee granted
94,500 options under the 93 Plan. Included therein were 15,000 options issued to
consultants ("Consultants' Options") that are compensatory. Accordingly, the
Company is recognizing compensation expense on a pro rata basis over the
respective options' vesting periods of four to five years. The Company
recognized compensation expense of approximately $86,000 for each of the years
ended December 31, 1994 and 1995, approximately $82,000 for the nine months
ended September 30, 1996 and approximately $254,000 for the period from December
1, 1986 (inception) to September 30, 1996, in connection with the 94 Options and
the Consultants' Options.
F-20
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
8. STOCK OPTION PLANS: (CONTINUED)
The following table summarizes the activity in the 93 Plan:
<TABLE>
<CAPTION>
NUMBER PRICE
OF SHARES PER SHARE
----------- ----------------
<S> <C> <C>
1993: Granted........................................................................ 63,975 $5.33
-----------
Balance outstanding, December 31, 1993.......................................... 63,975 $5.33
1994: Granted........................................................................ 582,000 $5.33 to $6.67
-----------
Balance outstanding, December 31, 1994.......................................... 645,975 $5.33 to $6.67
1995: Granted........................................................................ 4,500 $6.67
Cancelled....................................................................... (33,750) $5.33 to $6.67
-----------
Balance outstanding, December 31, 1995.......................................... 616,725 $5.33 to $6.67
1996: Granted........................................................................ 94,500 $5.33 to $6.67
Cancelled....................................................................... (24,000) $5.33
-----------
Balance outstanding, September 30, 1996......................................... 687,225 $5.33 to $6.67
-----------
-----------
</TABLE>
The total number of options exercisable under the 93 Plan at September 30,
1996 was 185,166 at exercise prices of $5.33 to $6.67 per share. As of September
30, 1996, shares available for future grants under the 93 Plan amounted to
62,775.
(C) 1993 EXECUTIVE STOCK OPTION PLAN
On December 15, 1993, the Company adopted an Executive Stock Option Plan
(the "Executive Plan"), under which a maximum of 750,000 shares of Common Stock,
adjusted for stock splits, stock dividends, and other capital adjustments, as
defined, are available for stock option awards. Awards issued under the
Executive Plan may qualify as ISOs, as defined by the Internal Revenue Code, or
may be granted as non-qualified stock options. Under the Executive Plan, the
Board may award options to senior executive employees (including officers who
may be members of the Board) of the Company, as defined. The Executive Plan will
terminate on December 15, 2003; however, any option outstanding as of the
termination date shall remain outstanding until such option expires in
accordance with the terms of the respective grant.
During December 1993, the Board awarded a total of 750,000 stock options
under the Executive Plan to one officer, of which 664,774 were non-qualified
options ("NQOs") and 85,226 were ISOs. The NQOs and ISOs entitle the officer to
purchase an equal number of shares of Common Stock at prices of $5.33 and $5.87
per share, respectively, which represented the estimated fair market value and
110% of the estimated fair market value of the Company's Common Stock at the
date of grant, as determined by the Board of Directors. 375,000 of the options
vest over a period of five years, with the remaining 375,000 options vesting in
full on the tenth anniversary of the date of grant; however, vesting will be
accelerated in the event of the effective date of an initial public offering of
the Company's Common Stock or immediately before the closing of an acquisition
of the Company.
F-21
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
8. STOCK OPTION PLANS: (CONTINUED)
750,000 options were outstanding at September 30, 1996 under the Executive
Plan, of which 225,000 were exercisable. As of September 30, 1996, no shares
were available for future grants under the Executive Plan.
(D) 1996 STOCK INCENTIVE PLAN
During May 1996, the Company adopted the 1996 Stock Incentive Plan (the "96
Plan"). The 96 Plan, as amended, provides for the award of 750,000 shares of
Common Stock, adjusted for stock splits, stock dividends and other capital
adjustments as defined. Under the 96 Plan, the Committee may award stock to
eligible individuals which includes employees, advisors or consultants to the
Company. The form of the award will be determined by the Committee and includes
stock options, which may be ISOs, stock appreciation rights, restricted stock,
performance awards or phantom stock as defined (collectively "Awards"). The
Committee will also determine the term and vesting of the Award and the
Committee may in its discretion accelerate the vesting of an award at any time.
To date there have been no Awards issued from the 96 Plan.
9. EMPLOYEE SAVINGS PLAN
The Company, during 1993, adopted the provisions of the amended and restated
Progenics Pharmaceuticals 401(k) Plan (the "Amended Plan"). The terms of the
Amended Plan, among other things, allow eligible employees, as defined, to
participate in the Amended Plan by electing to contribute to the Amended Plan a
percentage of their compensation to be set aside to pay their future retirement
benefits, as defined. The Company has agreed to match 25% of up to the first 8%
of compensation that eligible employees contribute to the Amended Plan, as
defined. In addition, the Company may also make a discretionary contribution, as
defined, each year on behalf of all participants who are non-highly compensated
employees, as defined. The Company made matching contributions of approximately
$3,000, $10,000, $12,000, $8,000 and $33,000 to the Amended Plan for the years
ended December 31, 1993, 1994 and 1995, for the nine months ended September 30,
1996, and for the period from December 1, 1986 (inception) to September 30,
1996, respectively.
10. INCOME TAXES
There is no provision (benefit) for federal or state income taxes for all
periods presented, since the Company has incurred operating losses since
inception and has established a valuation allowance equal to the total deferred
tax asset.
F-22
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1995 INTERIM DATA IS UNAUDITED)
10. INCOME TAXES (CONTINUED)
The tax effect of temporary differences, net operating loss carry-forwards
and research and experimental tax credit carry-forwards as of December 31, 1994
and 1995 and September 30, 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
---------------------- 30,
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Deferred tax assets and valuation
allowance:
Net operating loss carry-forwards... $4,022,832 $4,350,960 $ 5,136,183
Fixed assets........................ 93,877 133,225 163,470
Deferred charges.................... 1,228,617 2,666,772 3,291,562
Research and experimental tax credit
carry-forwards.................... 426,234 491,681 524,323
Valuation allowance................. (5,771,560) (7,642,638) (9,115,538)
---------- ---------- -----------
-- -- --
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
As of September 30, 1996, the Company has available, for tax purposes,
unused net operating loss carry-forwards of approximately $12,400,000 which will
expire in various years from 2002 to 2011. The Company's research and
experimental tax credit carry-forwards expire in various years from 2003 to
2011. Future ownership changes may limit the future utilization of these net
operating loss and research and experimental tax credit carry-forwards as
defined by the federal tax code.
11. NOTE TO INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 (UNAUDITED)
BASIS OF PRESENTATION
The interim financial statements for the nine months ended September 30,
1995 are unaudited and reflect adjustments, consisting of only normal recurring
accruals, which are, in the opinion of the Company's management, necessary for a
fair presentation of the financial position and results of operations for the
periods presented. Operating results for any interim period are not necessarily
indicative of the results for the full year.
STATEMENT OF CASH FLOWS
Supplemental disclosure of noncash investing and financing activities:
Capital lease obligations of approximately $63,000 were incurred during the
nine months ended September 30, 1995 when the Company leased new equipment.
Included in accounts payable, at September 30, 1995, were obligations for
approximately $32,000 of fixed asset additions.
F-23
<PAGE>
PROGENICS PLANS TO INITIATE PHASE I/II CLINICAL TRIALS IN 1997 OF ITS TWO MOST
ADVANCED HIV PRODUCT CANDIDATES, PRO 542 AND PRO 367.
PRO 542 IS PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO NEUTRALIZE HIV.
[DIAGRAM DEPICTING PRO 542, PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO
NEUTRALIZE HIV]
PRO 367 IS PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO DESTROY HIV-
INFECTED CELLS.
[DIAGRAM DEPICTING PRO 367, PROGENICS' THERAPEUTIC PRODUCT CANDIDATE DESIGNED TO
DESTROY HIV-INFECTED CELLS]
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER TO SELL OR A SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................................ 3
Risk Factors.................................................. 6
Use of Proceeds............................................... 17
Dividend Policy............................................... 17
Capitalization................................................ 18
Dilution...................................................... 19
Selected Financial Data....................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 21
Business...................................................... 25
Management.................................................... 46
Certain Transactions.......................................... 55
Principal Stockholders........................................ 56
Description of Capital Stock.................................. 58
Shares Eligible for Future Sale............................... 60
Underwriting.................................................. 62
Legal Matters................................................. 64
Experts....................................................... 64
Additional Information........................................ 64
Index to Financial Statements................................. F-1
</TABLE>
-------------------
UNTIL , 1996 (25 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,000,000 SHARES
[COMPANY LOGO]
Pharmaceuticals, Inc.
COMMON STOCK
--------------
PROSPECTUS
--------------
OPPENHEIMER & CO., INC.
VECTOR SECURITIES INTERNATIONAL, INC.
, 1996
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock offered hereby, other than underwriting discounts and commissions:
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission.............. $ 9,061
NASD Filing Fee................................................... 3,490
Blue Sky fees and expenses........................................ 20,000
Accountants' fees and expenses.................................... 260,000
Legal fees and expenses........................................... 300,000
Printing and engraving expenses................................... 150,000
Transfer agent and registrar fees................................. 5,000
Miscellaneous..................................................... 2,449
---------
Total................................................. $ 750,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under such Section 145.
II-1
<PAGE>
Section 102(b)(7) of the DGCL provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its board
of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was illegal, or obtaining an improper
personal benefit. A provision of this type has no effect on the availability of
equitable remedies, such as injunction or rescission, for breach of fiduciary
duty. The Company's Restated Certificate of Incorporation contains such a
provision.
The Company's Certificate of Incorporation and By-Laws provide that the
Company shall indemnify officers and directors, and to the extent authorized by
the Board of Directors, employees and agents of the Company, to the full extent
permitted by and in the manner permissible under the laws of the State of
Delaware. In addition, the By-Laws permit the Board of Directors to authorize
the Company to purchase and maintain insurance against any liability asserted
against any director, officer, employee or agent of the Company arising out of
his capacity as such.
The Company has entered into Indemnification Agreements with each of its
officers and directors, pursuant to which the Company has agreed to indemnify
and advance expenses to such officers and directors to the fullest extent
permitted by applicable law.
The Company has obtained an insurance policy providing coverage for certain
liabilities of its officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has issued securities to a
limited number of persons, as described below. No underwriter or underwriting
discounts or commissions were involved. There was no public offering in any such
transaction and the Company believes that each transaction was exempt from the
registration requirements of the Securities Act of 1933 (the "Securities Act")
by reason of Section 4(2) thereof based on the private nature of the
transactions and the sophistication of the purchasers, all of whom had access to
information concerning the Registrant and acquired the securities for investment
and not with a view to the distribution thereof.
From January 1993 through August 1993, the registrant issued a total of
272,270 shares of Series B Preferred Stock, $.001 par value per share, and
warrants to purchase 272,270 shares of Series B Preferred Stock, to 33
individuals and entities of whom two entities are affiliates of the Company, one
individual is a director and the rest are accredited investors for an aggregate
purchase price of $1,089,080 in cash.
In September 1993 and October 1993, the registrant issued a total of 562,500
shares of Series B Preferred Stock, and warrants to purchase 562,500 shares of
Series B Preferred Stock, to three entities of whom two entities are affiliates
of the Company and the remaining entity is an accredited investor for an
aggregate purchase price of $2,250,000.
In February 1994, the registrant issued a total of 719,310 shares of Series
B Preferred Stock to 22 individuals and entities of whom one entity is an
affiliate of the Company, one individual is a director and the remaining
individuals and entities are accredited investors for an aggregate purchase
price of $3,596,550 in cash.
In November 1995 and December 1995, the registrant issued a total of 424,184
shares of Series C Preferred Stock, $.001 par value per share, and warrants to
purchase 106,046 shares of Series C Preferred Stock, to seven individuals and
entities of whom one individual is a director, two entities are affiliated with
a director of the Company and the remaining individuals and entities are
accredited investors for an aggregate purchase price of $897,249 in cash and
conversion of a note payable in the principal amount of $1,200,000 plus accrued
interest thereon of $23,671.
II-2
<PAGE>
In December 1995, the registrant issued 45,000 shares of Common Stock,
$.0013 par value per share, to one entity which is a licensor as partial
consideration for a license agreement.
In January 1996 and February 1996, the registrant issued a total of 964,812
shares of Series C Preferred Stock, and warrants to purchase 241,203 shares of
Series C Preferred Stock, to 52 individuals and entities of whom two entities
are affiliates of the Company, two individuals are directors and the remaining
individuals and entities are accredited investors for an aggregate purchase
price of $4,824,060 in cash.
From January 1, 1993 to September 30, 1996, the Company issued options to
purchase 1,549,163 shares of Common Stock (of which options to purchase 57,750
shares of Common Stock subsequently have been cancelled) to employees and
consultants of the Company pursuant to the 1989 Option Plan, the 1993 Option
Plan and the 1993 Executive Option Plan. None of such options has been
exercised.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
**1.1 --Form of Underwriting Agreement
3.1 --Certificate of Incorporation, as amended, of the Registrant
**3.2 --By-Laws of the Registrant
4.1 --Specimen Certificate for Common Stock, $0.0013 par value per share, of the
Registrant
**5.1 --Opinion of Dewey Ballantine
**10.1 --Form of Registration Rights Agreement
**10.2 --1989 Non-Qualified Stock Option Plan
**10.3 --1993 Stock Option Plan, as amended
**10.4 --1993 Executive Stock Option Plan
**10.5 --Amended 1996 Stock Incentive Plan
**10.6 --Form of Indemnification Agreement
**10.7 --Employment Agreement dated December 15, 1993 between the Registrant and Dr. Paul
J. Maddon
**10.8 --Letter dated August 25, 1994 between the Registrant and Dr. Robert J. Israel
**10.9 --Sublease dated July 13, 1988 between the Registrant and Union Carbide Corporation
**+10.10 --gp120 Supply Agreement dated July 19, 1995 between the Registrant and E. I.
DuPont De Nemours and Company, as amended October 27, 1995
**+10.11 --sCD4 Supply Agreement dated June 27, 1995 between the Registrant and E. I. DuPont
De Nemours and Company
+10.12 --Supply Agreement dated February 8, 1996 between the Registrant and Intracel
Corporation
**+10.13 --License Agreement dated November 17, 1994 between the Registrant and
Sloan-Kettering Institute for Cancer Research
**+10.14 --Clinical Trial Agreement dated December 12, 1994 between the Registrant and
Sloan-Kettering Institute for Cancer Research
+10.15 --QS-21 License and Supply Agreement dated August 31, 1995 between the Registrant
and Aquila Biopharmaceuticals Inc.
+10.16 --gp120 Sublicense Agreement dated March 17, 1995 between the Registrant and Aquila
Biopharmaceuticals Inc.
+10.17 --Cooperative Research and Development Agreement dated February 25, 1993 between
the Registrant and the Centers for Disease Control and Prevention
**+10.18 --License Agreement dated March 1, 1989, as amended by a Letter Agreement dated
March 1, 1989 and as amended by a Letter Agreement dated October 22, 1996 between
the Registrant and the Trustees of Columbia University
**+10.19 --License Agreement dated June 25, 1996 between the Registrant and The Regents of
the University of California
+10.20 --KLH Supply Agreement dated July 1, 1996 between the Registrant and PerImmune,
Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
+10.21 --sCD4 Supply Agreement dated November 3, 1993 between the Registrant and E.I.
DuPont De Nemours and Company
**10.22 --Lease dated June 30, 1994 between the Registrant and Keren Limited Partnership
**11.1 --Statement of computation of loss per share for the years ended December 31, 1993,
1994 and 1995
**11.2 --Statement of computation of loss per share for the nine months ended September
30, 1995 and 1996
**11.3 --Pro forma statement of computation of loss per share
23.1 --Consent of Coopers & Lybrand L.L.P.
**23.2 --Consent of Dewey Ballantine (contained in Exhibit 5.1)
**24.1 --Power of Attorney (included on page II-5)
**27.1 --Financial Data Schedule
</TABLE>
- ------------------------
** Previously filed.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
(b) Financial Statement Schedules
All schedules have been omitted because they are not required or because the
required information is given in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters,
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tarrytown,
State of New York, on November 25, 1996.
PROGENICS PHARMACEUTICALS, INC.
BY: /s/ PAUL J. MADDON, M.D., PH.D
-----------------------------------------
Paul J. Maddon, M.D., Ph.D.
Chairman of the Board,
Chief Executive Officer and President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to the Registration Statement has been signed by the following persons
on November 25, 1996 in the capacities indicated:
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
* Chief Executive Officer
- ------------------------------ and President (principal November 25, 1996
Paul J. Maddon, M.D., Ph.D. executive officer)
Vice President, Finance and
* Operations, Treasurer
- ------------------------------ (principal accounting and November 25, 1996
Robert A. McKinney financial officer)
* Director
- ------------------------------ November 25, 1996
Charles A. Baker
* Director
- ------------------------------ November 25, 1996
Mark F. Dalton
* Director
- ------------------------------ November 25, 1996
Stephen P. Goff, Ph.D.
* Director
- ------------------------------ November 25, 1996
Elizabeth M. Greetham
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* Director
- ------------------------------ November 25, 1996
Paul F. Jacobson
* Director
- ------------------------------
David A. Scheinberg, M.D., November 25, 1996
Ph.D.
*By: /s/ ROBERT A. MCKINNEY
------------------------------------------
Robert A. McKinney
(As Attorney-in-Fact)
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------------------------- ------------------------------------------------------------------------------- ---------
<C> <S> <C>
**1.1 --Form of Underwriting Agreement
3.1 --Certificate of Incorporation, as amended, of the Registrant
**3.2 --By-Laws of the Registrant
4.1 --Specimen Certificate for Common Stock, $.0013 par value per share, of the
Registrant
**5.1 --Opinion of Dewey Ballantine
**10.1 --Form of Registration Rights Agreement
**10.2 --1989 Non-Qualified Stock Option Plan
**10.3 --1993 Stock Option Plan as amended
**10.4 --1993 Executive Stock Option Plan
**10.5 --Amended 1996 Stock Incentive Plan
**10.6 --Form of Indemnification Agreement
**10.7 --Employment Agreement dated December 15, 1993 between the Registrant and Dr.
Paul J. Maddon
**10.8 --Letter dated August 25, 1994 between the Registrant and Dr. Robert J. Israel
**10.9 --Sublease dated July 13, 1988 between the Registrant and Union Carbide
Corporation
**+10.10 --gp120 Supply Agreement dated July 19, 1995 between the Registrant and E. I.
DuPont De Nemours and Company, as amended, October 27, 1995
**+10.11 --sCD4 Supply Agreement dated June 27, 1995 between the Registrant and E. I.
DuPont De Nemours and Company
+10.12 --Supply Agreement dated February 8, 1996 between the Registrant and Intracel
Corporation
**+10.13 --License Agreement dated November 17, 1994 between the Registrant and
Sloan-Kettering Institute for Cancer Research
**+10.14 --Clinical Trial Agreement dated December 12, 1994 between the Registrant and
Sloan-Kettering Institute for Cancer Research
+10.15 --QS-21 License and Supply Agreement dated August 31, 1995 between the
Registrant and Cambridge Biotech Corporation
+10.16 --gp120 Sublicense Agreement dated March 17, 1995 between the Registrant and
Cambridge Biotech Corporation
+10.17 --Cooperative Research and Development Agreement dated February 25, 1993
between the Registrant and the Centers for Disease Control and Prevention
**+10.18 --License Agreement dated March 1, 1989, as amended by a Letter Agreement dated
March 1, 1989 and as amended by a Letter Agreement dated October 22, 1996
between the Registrant and the Trustees of Columbia University
**+10.19 --License Agreement dated June 25, 1996 between the Registrant and The Regents
of the University of California
+10.20 --KLH Supply Agreement dated July 1, 1996 between the Registrant and PerImmune,
Inc.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
+10.21 --sCD4 Supply Agreement dated November 3, 1993 between the Registrant and E.I.
DuPont De Nemours and Company
**10.22 --Lease dated June 30, 1994 between the Registrant and Keren Limited
Partnership
**11.1 --Statement of computation of loss per share for the years ended December 31,
1993, 1994 and 1995
**11.2 --Statement of computation of loss per share for the nine months ended
September 30, 1995 and 1996
**11.3 --Pro forma statement of computation of loss per share
23.1 --Consent of Coopers & Lybrand L.L.P.
**23.2 --Consent of Dewey Ballantine (contained in Exhibit 5.1)
**24.1 --Power of Attorney (included on page II-5)
**27.1 --Financial Data Schedule
</TABLE>
- ------------------------
** Previously filed.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PROGENICS PHARMACEUTICALS, INC.
----------
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is
PROGENICS PHARMACEUTICALS, INC.
SECOND: Its registered office is to be located at 229 South State
Street, in the City of Dover, in the County of Kent, in the State of Delaware.
The name of its registered agent at that address is the United States
Corporation Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation is
authorized to issue is forty million (40,000,000) all with $.00l par value.
FIFTH: The name and address of the single incorporator are
Michael D. McManus One Gulf + Western Plaza
New York, NY 10023-7773
<PAGE>
SIXTH: The By-Laws of the corporation may be made, altered, amended,
changed, added to or repealed by the Board of Directors without the assent or
vote of the stockholders. Elections of directors need not be by ballot unless
the By-Laws so provide.
SEVENTH: The personal liability of the directors of the corporation
is hereby eliminated to the fullest extent permitted by paragraph (7) of
subsection (b) of ss. 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
EIGHTH: The corporation shall, to the full extent permitted by
Section 145 of the Delaware General Corporation Law, as amended from time to
time, indemnify all persons whom it may indemnify pursuant thereto.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand and 1st day of
December, 1986.
/s/ Michael D. McManus (L.S.)
-------------------------
Michael D. McManus
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
PROGENICS PHARMACEUTICALS, INC.
Progenics Pharmaceuticals, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (herein after
referred to as the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation at a meeting duly called
and held, adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of the Corporation:
RESOLVED: that the Certificate of Incorporation of the Corporation be
amended by changing the Fourth Article thereof so that, as
amended, said Article shall be and read as follows:
================================================================================
FOURTH:
(A) TOTAL NUMBER OF SHARES OF STOCK. The total number of shares of stock of
all classes that the Corporation shall have authority to issue is sixty
million (60,000,000) shares. The authorized capital stock is divided into
twenty million (20,000,000) Preferred Shares of the par value of $.00l
each and forty million (40,000,000) Common Shares of the par value of
$.00l each.
(B) COMMON SHARES.
(1) The forty million (40,000,000) Common Shares may be issued from time to
time in one or more series, the shares of each series to have such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as are stated and
expressed herein or in the resolution or resolutions providing for the
issue of such series, adopted by the Board of Directors as hereinafter
provided; provided, however, that no series of Common Shares other than
"Common Stock", as described in paragraph B(3) below, shall be
1
<PAGE>
designated or, if previously designated, no shares of such series shall be
issued if, at the time of such designation or issuance, the designation or
issuance of such shares would violate the rules or regulations of the
United States Securities and Exchange Commission or of the trading market
or markets on which the Corporation's shares are traded.
(2) Authority is hereby expressly granted to the Board of Directors of the
Corporation, subject to the provisions of this Article FOURTH and to the
limitations prescribed by the General Corporation Law of Delaware, to
authorize the issue of one or more series of Common Shares, and with
respect to each such series to fix by resolution or resolutions providing
for the issue of such series the voting powers, full or limited, if any,
of the shares of such series and the designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof. The authority of the
Board of Directors with respect to each series shall include, but not be
limited to, the determination or fixing of the following:
(i) The designation of such series;
(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relationship
which such dividends shall bear to the dividends payable on
any other class or classes of stock or any other series of any
class of stock of the Corporation, and whether such dividends
shall be cumulative or non-cumulative;
(iii) Whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to such
redemption, the times, prices and other terms and conditions
of such redemption;
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(v) Whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class or classes
of any stock or any other series of any class of stock of the
Corporation, and, if provision is made for conversion or
exchange, the times, prices, rates, adjustments, and
2
<PAGE>
other terms and conditions of such conversion or exchange;
(vi) The extent, if any, to which the holders of shares of such
series shall be entitled to vote with respect to the election
of directors or otherwise;
(vii) The restrictions, if any, on the issue or reissue of any
additional Common Shares;
(viii) The rights of the holders of the shares of such series upon
the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of, or upon the distribution of the
assets of, the Corporation; and
(ix) Any other rights, preferences or limitations of the shares of
such series consistent with the provisions hereof governing
the Common Shares.
(3) Twelve million (12,000,000) Common Shares are designated as a series to be
known "Common Stock". Subject to all of the rights of the Preferred Shares
and the remaining Common Shares provided for by resolution or resolutions
of the Board of Directors pursuant to this Article FOURTH or by the
General Corporation Law of Delaware, the holders of Common Stock shall
have full voting powers on all matters requiring stockholder action, each
share of such Common Stock being entitled to one vote, and have equal
rights of participation in the dividends an4 assets of the Corporation.
The Directors may be resolution or resolutions, adopted pursuant to
paragraph B(2) above, designate additional Common Shares as Common Stock.
The Directors may specify in any such resolution that such designation or
designations shall be irrevocable.
(C) PREFERRED STOCK.
(1) The twenty (20,000,000) Preferred Shares may be issued from time to time
in one or more series, the shares of each series to have such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as are stated and
expressed herein or in the resolution or resolutions providing for the
issue of such series, adopted by the Board of Directors as hereinafter
provided.
3
<PAGE>
(2) Authority is hereby expressly granted to the Board of Directors of the
Corporation, subject to the provisions of this Article FOURTH and to the
limitations prescribed by the General Corporation Law of Delaware, to
authorize the issue of one or more series of Preferred Shares, and with
respect to each such series to fix by resolution or resolutions providing
for the issue of such series the voting powers, full or limited, if any,
of the shares of such series and the designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof. The authority of the
Board of Directors with respect to each series shall include, but not be
limited to, the determination or fixing of the following:
(i) The designation of such series;
(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relationship
which such dividends shall bear to the dividends payable on
any other class or classes of stock or any other series of any
class of stock of the Corporation, and whether such dividends
shall be cumulative or non-cumulative;
(iii) Whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to such
redemption, the times, prices and other terms and conditions
of such redemption;
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(v) Whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class or classes
of any stock or any other series of any class of stock of the
Corporation, and, if provision is made for conversion or
exchange, the times, prices, rates, adjustments, and other
terms and conditions of such conversion or exchange;
(vi) The extent, if any, to which the holders of shares of such
series shall be entitled to vote with respect to the election
of directors or otherwise;
4
<PAGE>
(vii) The restrictions, if any, on the issue or reissue of any
additional Preferred Shares;
(viii) The rights of the holders of the shares of such series upon
the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of, or upon the distribution of the
assets of, the Corporation; and
(ix) Any other rights, preferences or limitations of the shares of
such series consistent with the provisions hereof governing
the Preferred Shares."
SECOND: That in lieu of a meeting and vote of stockholders, the holders of a
majority of the issued and outstanding common stock of the Corporation have
given written consent to said amendment in accordance with the provisions of
section 228 of the General Corporation Law of the State of Delaware and written
notice of the adoption of the amendment has been given as provided in said
section 228 to every stockholder entitled to said notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of sections 242 and 228 of the General Corporation Law of
the State of Delaware.
5
<PAGE>
IN WITNESS WHEREOF, Progenics Pharmaceuticals, Inc., has caused this
Certificate of Amendment to be duly executed in its corporate name on this 17th
day of July, 1989.
By: /s/ Gerard M. Housey, Ph. D.
----------------------------
Gerard M. Housey, Ph. D.
President
ATTEST: /s/ Terence C. Burnham
----------------------------
Terence C. Burnham
Secretary
STATE OF NEW YORK )
) SS
COUNTY OF WESTCHESTER )
On the 17th day of July, 1989 personally appeared before me Gerard M. Housey and
Terence C. Burnham, who, being by me duly sworn, declared that they are the
President and Secretary, respectively, of Progenics Pharmaceuticals, Inc., a
Delaware corporation, and that the within and foregoing Certificate of Amendment
to the Certificate of Incorporation of Progenics Pharmaceuticals, Inc. was
signed on behalf of said corporation by authority of a resolution of the Board
of Directors and a resolution of the shareholders of Progenics Pharmaceuticals,
Inc., and said persons duly acknowledged to me that said corporation executed
the Certificate of Amendment to the Certificate of Incorporation, and verified
that the matters set forth and the statements therein are true and correct.
/s/ DonnaMarie Neal
- -------------------
NOTARY PUBLIC
My Commission Expires: 3/30/90
DonnaMarie Neal
Notary Public, State of New York
No. 01-468288
Qualified in Putnam County
Commission Expires March 20, 1990
6
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
PROVIDING FOR AN ISSUE OF COMMON SHARES DESIGNATED
"CLASS A COMMON STOCK"
The undersigned, Gerard M. Housey, President of Progenics
Pharmaceuticals, Inc. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware in
accordance with section 151 thereof, does hereby certify:
That pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, as amended, the Board of
Directors, at a meeting duly called and held adopted a resolution providing for
the issuance of a Series of Common Shares, to be designated "Class A Common
Stock", which resolution is as follows:
RESOLVED: That there is hereby established a series of Common
Shares designated "Class A Common Stock" having the
following preferences, qualifications, privileges,
limitations, restrictions, and other special or
relative rights:
CLASS A COMMON STOCK
1. Designation; Number of Shares.
There is hereby established a series of Common Shares consisting of
Five Million (5,000,000) shares of Common Shares and the designation of such
series shall be "Class A Common Stock" (hereinafter "Class A Common Stock").
2. Rights, Privileges and Preferences of the Class A Common Stock.
For all purposes other than voting the holders of the Class A Common Stock as a
class shall have the same rights, privileges and preferences as the holders of
the Common Stock have as a class. Without limiting the foregoing:
(A) Dividends. The holders of Class A Common Stock shall be
entitled to receive the same per share dividend at the same time and
on the same terms as the holders of Common Stock.
(B) Distributions Upon Liquidation, Dissolution or Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, from the assets of
the Corporation available for distribution to the holders of Common
Shares the holders of Class A Common Stock shall be entitled to
receive the same
<PAGE>
-2-
per share amount at the same time and on the same terms as the
holders of Common Stock.
3. Adjustment to Class A Common Stock Upon the Occurrence of Certain
Events.
(A) Stock Dividends. If the number of shares of Common Stock
outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common
Stock, then contemporaneous with the record date fixed for the
determination of holders of Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or
split-up, as the case may be, a similar Class A Common Stock per
share stock dividend, subdivision or split-up shall be effected with
respect to the Class A Common Stock.
(B) Combination of Stock. If the number of shares of Common
Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then contemporaneously with the effective
date of such combination, a similar combination shall be effected
with respect to the Class A Common Stock.
(C) Other Changes in Common Stock. Appropriate adjustments and
distributions shall be made with respect to the Class A Common Stock
as may be required so that at all times the Class A Common Stock and
the Common Stock will have the same rights, privileges and
preferences except for the voting right differences set forth below.
4. Voting Rights.
(A) General. Except as may be otherwise required by law or the
provisions of this Paragraph 4, the holders of Class A Common Stock
shall have no voting rights.
(B) Actions Affecting the Class A Common Stock. Without the
affirmative vote of at least a majority of the shares of Class A
Common Stock at the time outstanding, the Corporation may not effect
any change in the powers, preferences, privileges, rights,
qualifications, limitations or restrictions of the Class A Common
stock; provided, however, and without expanding the foregoing
limited class voting rights, no such separate class vote shall be
required of the Class A Common Stock in order to amend the
certificate of Incorporation of the Corporation to authorize any new
class of stock, whether such class is senior, on a parity with or
junior to the Class A Common Stock in dividends, liquidation, voting
rights or otherwise. Such consents shall either be given in writing
or by vote at a meeting called for that purpose at which the holders
of the Class A Common Stock shall vote as a class.
<PAGE>
-3-
(C) Conversion of the Class A Common Stock. Any provision
hereof the contrary notwithstanding, the Board of Directors of the
Company without obtaining the consent or approval of the holders of
Class A Common Stock may by Board action convert the Class A Common
Stock into shares of Common Stock.
5. Right of Conversion upon Merger or Consolidation. In case of any
consolidation or merger of the Corporation with any other corporation (other
than a consolidation or merger in which the Corporation is the continuing or
surviving corporation and which does not result in any change in the outstanding
Common Stock), or in case of any sale or transfer of all or substantially all
the assets of the Corporation, or in case of a binding share exchange in which
all the outstanding shares of the Common Stock are changed into cash, stock or
other securities or property, then except for maintaining the voting rights
differences between the Common Stock and the Class A Common Stock adequate
provision shall be made by the Company so that the holders of the Class A Common
Stock shall obtain the kind and amount of shares of stock or other securities or
property or cash, as the case may be, which such holder would have been entitled
to receive upon such consolidation, merger, sale or transfer or binding share
exchange if he had held an equivalent number of shares of Common Stock.
IN WITNESS WHEREOF, Progenics Pharmaceuticals, Inc., has caused this
Certificate of Designation, Preferences and Rights to be duly executed in its
corporate name on this 5 day of October, 1989.
By: /s/ Gerard M. Housey
------------------------
Gerard M. Housey, Ph.D.
President
ATTEST: /s/ Terence C. Burnham
------------------------
Terence C. Burnham
Secretary
STATE OF NEW YORK )
) SS.
COUNTY OF WESTCHESTER )
On the 5 day of October, 1989 personally appeared before me Gerard M. Housey and
Terence C. Burnham, who, being by me duly sworn, declared that they are the
President and Secretary, respectively, of Progenics Pharmaceuticals, Inc., a
Delaware corporation, and that the within and foregoing Certificate of
<PAGE>
-4-
Designation, Preferences and Rights was signed on behalf of said corporation by
authority of a resolution of the Board of Directors, and said persons duly
acknowledged to me that said corporation executed the Certificate of
Designation, Preferences and Rights and verified that the matters set forth and
the statements therein are true and correct.
/s/ Mary C. Lanni
- -----------------------
NOTARY PUBLIC
My Commission Expires:
[Notary Stamp]
11/30/89
<PAGE>
PROGENICS PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF PREFERRED STOCK
PROVIDING FOR AN ISSUE OF PREFERRED STOCK DESIGNATED
"PREFERRED STOCK, SERIES A"
The undersigned, Gerard M. Housey, President of Progenics
Pharmaceuticals, Inc. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware in
accordance with section 151 thereof, does hereby certify:
That pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, as amended, the Board of
Directors, at a meeting duly called and held adopted a resolution providing for
the issuance of a Series of Preferred Stock, to be designated "Preferred Stock,
Series A", which resolution is as follows:
RESOLVED, that there is hereby established a series of Preferred
Stock designated "Preferred Stock, Series A" having the
following preferences, qualifications, privileges,
limitations, restrictions, and other special or
relative rights:
PREFERRED STOCK, SERIES A
1. Designation; Number of Shares.
There is hereby established a series of Preferred Stock consisting of Four
Million (4,000,000) shares of Preferred Stock and the designation of such series
shall be "Preferred Stock, Series A" (hereinafter "Series A Preferred Stock").
2. Certain Definitions. Unless the context otherwise requires, the terms
defined in this paragraph 2 shall have, for all purposes of the provisions of
the Series A Preferred Stock, the meanings herein specified:
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Common Stock Equivalent" shall mean the number of shares of Common
Stock which a holder of a share of Series A Preferred Stock would be entitled to
receive at any given time upon conversion of such share of Series A Preferred
Stock.
1
<PAGE>
"Issue Date" shall mean the date on which shares of Series A
Preferred Stock are first issued.
"Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"Preferred Stock" shall mean the Series A Preferred Stock and any
other class or series of preferred stock hereafter authorized by the
Corporation.
3. Dividends. As between the series consisting of the Series A Preferred
Stock and the class consisting of Common Shares, the Series A Preferred Stock
shall be entitled to receive from the amounts available for distribution as
dividends to the group consisting of holders of Series A Preferred Stock and
holders of Common Shares, when and as declared by the Board of Directors,
dividends pro rata based on the sum of (a) the number of shares of Common Shares
which are issued and outstanding on the dividend record date and (b) the number
of Common Stock Equivalents on the dividend record date. Each holder of record
of Series A Preferred Stock on a dividend record date shall be entitled to
receive from the amount so available to the series consisting of the Series A
Preferred Stock, dividends pro rata based on the number of Common Stock
Equivalents on such dividend record date. Each series of Common Shares shall be
entitled to receive from the amount so available to the class consisting of
Common Shares, dividends in accordance with the relative preferences which may
from time to time be established among series of the Common Shares; provided
that within any series the holders of record of such series shall receive from
the amount available to such series dividends pro rata to the number of Common
Shares of such series held of record by such holder on the dividend record date.
4. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, from the assets of the
Corporation available for distribution to the holders of Series A Preferred
Stock and Common Stock (the "Distributable Amount"), the holders of Common Stock
shall receive the Common Stock Capital Percentage and the holders of Series A
Preferred Stock shall receive the Series A Capital Percentage of any
distributions of the Distributable Amount. The Distributable Amount shall be so
allocated until the aggregate amount per share of such distributions (together
with all other distributions and dividends and subject to adjustment for stock
dividends, splits,
2
<PAGE>
combinations, etc.) received by the holders of (a) the Common Stock shall equal
the Common Stock Invested Capital and (b) the Series A Preferred stock shall
equal the Series A Invested Capital. Thereafter the holders of Common Stock and
the holders of Series A Preferred Stock shall receive distributions of the
Distributable Amount pro rata to the number of shares of Common Stock and the
number of Common Stock Equivalents held by such holders on the record date for
such distributions. Distributions made to the class consisting of holders of
Common Stock or to the class consisting of Series A Preferred Stock shall be
made pro rata to members of each class based on the number of shares of Common
Stock or Series A Preferred Stock held of record by each such holder as of the
record date for such distribution.
(b) The term "Common Stock Invested Capital" shall equal
$1,095,000.00.
The term "Series A Invested Capital" shall mean at any time the sum
of the aggregate amount of cash received by the Corporation (x) upon the
original issuance of all then outstanding shares of Series A Preferred Stock
other than shares sold or transferred from treasury stock and (y) in the case of
outstanding shares which were sold or transferred from treasury stock the
aggregate amount received by the Corporation in respect of such transfer.
The term "Common Stock Capital Percentage" shall mean at any time the
fraction (expressed as a percentage) obtained by dividing (a) the Common Stock
Invested Capital by (b) the sum of (x) the Common Stock Invested Capital and (y)
the Series A Invested Capital.
The term "Series A Capital Percentage" shall mean at any time the
fraction (expressed as a percentage) obtained by dividing (a) the Series A
Invested Capital by (b) the sum of (x) the Common Stock Invested Capital and (y)
the Series A Invested Capital.
5. Conversion Right. The Series A Preferred Stock shall be convertible
into Common Stock as follows:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this paragraph 5, the holder of any shares of Series A Preferred
Stock shall have the right at such holder's option, at any time or from time to
time, to convert any of such shares of Series A Preferred Stock into fully paid
and nonassessable shares of Common Stock at the Conversion Price (as hereinafter
defined) upon the terms hereinafter set forth.
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(b) Automatic Conversion. Each outstanding share of Series A
Preferred Stock shall automatically be converted, without any further act of the
Corporation or its shareholders, into fully paid and nonassessable shares of
Common Stock at the Conversion Price then in effect on the earlier to occur of
(a) the closing of a public offering by the Corporation pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of any shares of any series of Common Shares by the
Corporation for the account of the Corporation in which the aggregate gross
proceeds (before deduction of any underwriting discount, commission or expense)
received by the Corporation equal or exceed $5,000,000, and (b) the date as of
which there shall have been converted under subparagraph 5(a) a cumulative
aggregate number of shares of Series A Preferred Stock as follows: (x) prior to
August 31, 1989, 600,001 shares of Series A Preferred Stock, (y) from and after
August 31, 1989 and prior to October 1, 1990, a number of shares equal to a
majority of the issued and outstanding shares of Series A Preferred Stock as of
August 31, 1989, and (z) from and after October 1, 1990, a number of shares
equal to a majority of the issued and outstanding shares of Series A Preferred
Stock as of October 1, 1990.
(c) Conversion Price. Each share of Series A Preferred Stock shall be
converted into the number of shares of Common Stock as is determined by dividing
(i) the Original Issue Price of such share of Series A Preferred Stock by (ii)
the Conversion Price in effect on the Conversion Date. The Conversion Price at
which shares of Common Stock shall initially be issuable upon conversion of
shares of Series A Preferred Stock shall be $2.50. The Conversion Price shall be
subject to adjustment as set forth in subparagraph 5(f). No payment or
adjustment shall be made for any dividends on the Common Stock issuable upon
such conversion.
(d) Mechanics of Conversion. Upon the occurrence of the event
specified in subparagraph 5(b), the outstanding shares of Series A Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue to any such holder certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of Series A Preferred Stock are delivered to
the Corporation or any transfer agent of the Corporation. The holder of any
shares of Series A Preferred Stock may exercise the conversion right specified
in subparagraph 5(a) as to all or a minimum of 1,000
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shares of Series A Preferred Stock held by him by surrendering to the
Corporation or any transfer agent of the Corporation the certificate or
certificates for the shares of Series A Preferred Stock to be converted,
accompanied by written notice stating that the holder elects to convert all or a
specified portion of the shares of Series A Preferred Stock represented thereby.
Conversion shall be deemed to have been effected (i) in the case of an automatic
conversion pursuant to subparagraph 5(b), on the date of the occurrence of the
event specified in subparagraph 5(b) or (ii) in any other case, on the date when
delivery of notice of any election to convert and the certificates for shares is
made (each such date described in clause (i) or clause (ii) above being referred
to herein as the "Conversion Date"). Subject to the provisions of clause (vii)
of subparagraph 5(f), as promptly as practicable thereafter (and after surrender
of the certificate or certificates representing shares of Series A Preferred
Stock to the Corporation or any transfer agent of the Corporation in the case of
conversions pursuant to subparagraph 5(b)) the Corporation shall issue and
deliver to, or upon the written order of, such holder a certificate or
certificates for the number of full shares of Common Stock to which such holder
is entitled and a check or cash with respect to any fractional interest in a
share of Common Stock as provided in subparagraph 5(e). Subject to the
provisions of clause (vii) of subparagraph 5(f), the Person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a holder of record of such Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares of Series A
Preferred Stock covered by a certificate representing shares of Series A
Preferred Stock surrendered for conversion (in the case of conversion pursuant
to subparagraph 5(a)), the Corporation shall issue and deliver to, or upon the
written order of, the holder of the certificate so surrendered for conversion,
at the expense of the Corporation, a new certificate covering the number of
shares of Series A Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series A Preferred Stock. If more
than one share of Series A Preferred Stock shall be surrendered for conversion
at any one time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock so surrendered. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series A Preferred Stock, the Corporation shall pay
a cash
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adjustment in respect of such fractional interest in an amount equal to that
fractional interest of the then Current Market Price (as hereinafter defined).
(f) Conversion Price Adjustments. The Conversion Price and number of
shares of Common Stock deliverable upon conversion of the shares of Series A
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) Issuances of Capital Stock. If, at any time after the Issue
Date, the Corporation shall issue (or be deemed to have issued pursuant to
subclause (C) below) any capital stock (whether Common Stock, any series
of Common Shares or any other series of Preferred Stock) other than
Excluded Stock (as hereinafter defined) (such stock other than Excluded
Stock being hereinafter referred to as "Capital Stock") for a
consideration per share less than the Conversion Price applicable
immediately prior to such issuance, the Conversion Price in effect
immediately prior to such issuance shall immediately (except as provided
below) be reduced to a price determined by dividing (a) the sum of (i) the
number of shares of Capital Stock outstanding immediately prior to such
issue, multiplied by the Conversion Price in effect immediately prior to
such issue, plus (ii) the consideration, if any, received by the
Corporation upon such issue, by (b) the number of shares of Capital Stock
outstanding immediately after such issue.
For the purpose of any adjustment of the Conversion Price pursuant
to this clause (i) of this subparagraph 5(f), the following provisions
shall be applicable:
(A) Cash. In the case of the issuance of Capital Stock for cash, the
amount of the consideration received by the Corporation shall be deemed to
be the aggregate cash proceeds received by the Corporation for such
Capital Stock before deducting therefrom any reasonable discounts,
commissions, taxes or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection with the
issuance and sale thereof.
(B) Consideration Other than Cash. In the case of the issuance of
Capital Stock (otherwise than upon the conversion of shares of capital
stock or other securities of the Corporation) for a consideration in whole
or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the
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consideration other than cash shall be deemed to be the fair market value
thereof as determined by the Board of Directors in good faith,
irrespective of any accounting treatment; provided, however, that such
fair market value as determined by the Board of Directors shall not exceed
the aggregate Current Market Price of the shares of Capital Stock being
issued in exchange therefor as of the date the Board of Directors
authorizes the issuance of such shares.
(C) Options and Convertible Securities. In the case of the issuance
at any time after the Issue Date of (i) options, warrants or other rights
to purchase or acquire Capital Stock (,whether or not at the time
exercisable), (ii) securities by their terms convertible into or
exchangeable for Capital Stock (whether or not at the time so convertible
or exercisable) or (iii) options, warrants or rights to purchase such
convertible or exchangeable securities (whether or not at the time
exercisable):
(I) the aggregate maximum number of shares of Capital Stock
deliverable upon exercise of such options, warrants or other rights to
purchase or acquire Capital Stock shall be deemed to have been issued at
the time such options, warrants or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, received by the
Corporation upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options1 warrants or rights for
the Capital Stock covered thereby (the amount of the purchase price in
each case to be determined in the manner provided in subclauses (A) and
(B) above);
(II) the aggregate maximum number of shares of Capital Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options, warrants or
other rights to purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such securities were issued or such
options, warrants or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any such
securities and related options, warrants or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such securities and the
exercise of any related options, warrants or rights
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(the consideration in each case to be determined in the manner provided in
subclauses (A) and (B) above);
(III) on any change in the number of shares of Capital Stock
deliverable upon exercise of any such options, warrants or rights or
conversion of or exchange for such convertible or exchangeable securities
or any change in the consideration to be received by the Corporation upon
such exercise, conversion or exchange, (other than under or by reason of
provisions designed to protect against dilution), the Conversion Price as
then in effect shall forthwith be readjusted to such Conversion Price as
would have been obtained had an adjustment been made upon the issuance of
such options, warrants or rights, or securities on the basis of such
change; provided, however, there shall be no adjustment pursuant to this
clause (III) to the extent that any of such options, warrants, rights or
securities shall have been exercised, converted or exchanged, as the case
may be, prior to such change;
(IV) on the expiration or cancellation of one or more of such
options, warrants or rights, or the termination of the right to convert or
exchange one or more of such convertible or exchangeable securities, if
the Conversion Price shall have been adjusted upon the issuance thereof
and any of such options, warrants, rights or securities shall not have
been exercised, converted or exchanged, as the case may be, prior to such
expiration or cancellation, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have been obtained had an
adjustment been made upon only the issuance of such options, warrants,
rights or securities on the basis of the issuance of only the number of
shares of Capital Stock that would actually have been issued upon the
exercise of such options, warrants or rights, or upon the conversion or
exchange of such securities; and
(V) if the Conversion Price has been adjusted upon the issuance of
any such options, warrants, rights or convertible or exchangeable
securities, no further adjustment of the Conversion Price shall be made
for the actual issuance of Capital Stock upon the exercise, conversion or
exchange thereof; provided, however, that, except as provided in clause IV
of subparagraph 5(f)(i)(C), no increase in the Conversion Price shall be
made pursuant to this clause (C).
(ii) Excluded Stock. "Excluded Stock" shall mean: (1) shares of
Common Stock, any other series of Common Shares or
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any series of Preferred Stock to be issued pursuant to the 1989 Stock
Option Plan of the Corporation or any other stock options or warrants
granted or sold to employees, consultants, advisors or directors of the
Corporation relating to the provision of services to the Corporation; (2)
the options and warrants described in (1); (3) shares of Common Stock, any
other series of Common Shares or any series of Preferred Stock issued
under provisions of the Certificate of Incorporation as from time to time
in effect or by virtue of agreements designed to protect against dilution;
and (4) shares of Common Stock issued or reserved for issuance by the
Corporation upon conversion of any series of Preferred Shares.
(iii) Stock Dividends. If the number of shares of Common Stock
outstanding at any time after the Issue Date is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then immediately after the record date fixed
for the determination of holders of Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or split-up, as
the case may be, the Conversion Price shall be appropriately reduced so
that the holder of any shares of Series A Preferred Stock thereafter
converted shall be entitled to receive the number of shares of Common
Stock which such holder would have owned immediately following such action
had such shares of Series A Preferred Stock been converted immediately
prior thereto.
(iv) Combination of Stock. If the number of shares of Common Stock
outstanding at any time after the Issue Date is decreased by a combination
of the outstanding shares of Common Stock, then immediately after the
effective date of such combination, the Conversion Price shall be
appropriately increased so that the holder of any shares of Series A
Preferred Stock thereafter converted shall be entitled to receive the
number of shares of Common Stock which such holder would have owned
immediately following such action had such shares of Series A Preferred
Stock been converted immediately prior thereto.
(v) Reclassification. In the event of a reclassification of the
Common Stock, each share of Series A Preferred Stock shall, after such
reclassification, be convertible into the number and type of shares of
capital stock or other securities to which the Common Stock issuable (at
the time of such reclassification) upon conversion of such shares of
Series A Preferred Stock would have been entitled upon such
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reclassification; and, in such event, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of the
holders of Series A Preferred Stock shall be appropriately adjusted so as
to be applicable, as nearly as may reasonably be, to any shares of stock
or other securities thereafter deliverable upon the conversion of Series A
Preferred Stock. The subdivision or combination of Common Stock issuable
upon conversion of Series A Preferred Stock at any time outstanding into a
greater or lesser number of shares of Common Stock (whether with or
without par value) shall not be deemed to be a reclassification of the
Common Stock of the Corporation for the purposes of this clause (v).
(vi) Rounding of Calculations; Minimum Adjustment. All calculations
under this subparagraph (f) shall be made to the nearest cent or to the
nearest one one-hundredth (1/100th) of a share, as the case may be. Any
provision of this paragraph 5 to the contrary notwithstanding, no
adjustment to the Conversion Price shall be made if the amount of such
adjustment would be less than $.01, but any such amount shall be carried
forward and an adjustment with respect thereto shall be made at the time
of and together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall aggregate
$.01 or more.
(vii) Timing of Issuance of Additional Common Stock upon Certain
Adjustments. In any case in which the provisions of this subparagraph (f)
shall require that an adjustment shall become effective immediately after
a record date for an event, the Corporation may defer until the occurrence
of such event (1) issuing to the holder of any share of Series A Preferred
Stock converted after such record date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the
shares of Common Stock issuable upon such conversion before giving effect
to such adjustment and (2) paying to such holder any amount of cash in
lieu of a fractional share of Common Stock pursuant to subparagraph (e) of
this paragraph 5; provided, however, that the Corporation upon request
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares, and such
cash, upon the occurrence of the event requiring such adjustment.
(viii) Prohibition of Action Resulting in Minimum
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Conversion Price. The Corporation shall not take any action of the kind
covered by this subparagraph 5(f) which would cause the Conversion Price
to fall below the greater of $.01 and the par value of the Common Stock.
(g) Current Market Price. The Current Market Price at any date shall
mean the price per share of Capital Stock on such date determined by the Board
of Directors as provided below. The Current Market Price shall be the average of
the daily closing price per share of such Capital Stock for thirty (30)
consecutive business days ending no more than fifteen (15) business days before
the day in question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 30-day period). The closing price
for each day shall be the last reported sales price regular way or, in the case
no such reported sales take place on such day, the average of the last reported
bid and asked prices regular way, in either case, on the principal national
securities exchange on which such Capital Stock is listed or admitted to
trading, unless such principal national securities exchange is a regional
securities exchange and such Capital Stock is also quoted on the National
Association of Securities Dealers Automated Quotation System (the "NASDAQ
System"), or if not listed or admitted to trading on a national securities
exchange or if such principal securities exchange is a regional securities
exchange and such Capital Stock is also quoted on the NASDAQ System, the average
of the highest bid and the lowest asked prices quoted on the NASDAQ system or,
if not so quoted, as reported by the National Quotation Bureau, Inc.; provided,
however, that if such Capital Stock is not traded in such manner that any of the
quotations referred to above is available for the period required hereunder, the
Current Market Price per share of such Capital Stock shall be deemed to be the
fair market value as determined by the Board of Directors in good faith,
irrespective of any accounting treatment.
(h) Statement Regarding Adjustments. Whenever the Conversion Price
shall be adjusted as provided in subparagraph 5(f), the Corporation shall
forthwith file, at the office of any transfer agent for the Series A Preferred
Stock and at the principal office of the Corporation, a statement showing in
detail the facts requiring such adjustment and the Conversion Price that shall
be in effect after such adjustment, and the Corporation shall also cause a copy
of such statement to be sent by mail, first-class postage prepaid, to each
holder of Series A Preferred Stock at its address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
subparagraph 5(i).
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(i) Notice to Holders. In the event the Corporation shall propose to
take any action of the type described in clause (i) (but only if the action of
the type described in clause (i) would result in an adjustment in the Conversion
Price), (iii), (iv) or (v) of subparagraph 5(f), the Corporation shall give
notice to each holder of shares of Series A Preferred Stock, in the manner set
forth in subparagraph 5(h), which notice shall specify the record date, if any,
with respect to any such action and the approximate date on which such action is
to take place. Such action shall also set forth such facts with respect thereto
as shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Price and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Series A Preferred Stock. In the case
of any such action which would require the fixing of a record date, such notice
shall be given at least twenty (20) calendar days prior to the date so fixed,
and in the case of all other action, such notice shall be given at least thirty
(30) calendar days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
any such action.
(j) Treasury Stock. For the purposes of this paragraph 5, the sale or
other disposition (other than sales or dispositions to employees, consultants,
advisors or directors of the Corporation in connection with the provision of
services to the Corporation) of any capital stock of the Corporation theretofore
held in its treasury shall be deemed to be an issuance thereof.
(k) Costs. The Corporation shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock of the Corporation upon conversion of any shares of Series A
Preferred Stock; provided, however, that the Corporation shall not be required
to pay any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series A Preferred, Stock in respect of
which such shares are being issued.
(l) Reservation of Shares. The Corporation shall reserve at all times
so long as any shares of Series A Preferred Stock remain outstanding out of its
treasury stock or its authorized but unissued shares of Common Stock, or both,
solely for the purpose
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of effecting the conversion of the shares of Series A Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of all
outstanding shares of Series A Preferred Stock.
(m) Approvals. If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Series A Preferred Stock require registration
with or approval of any governmental authority under any Federal or state law
before such shares may be validly issued or delivered upon conversion, then the
Corporation will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. If, and so long as,
any Common Stock into which the shares of Series1 A Preferred Stock are then
convertible is listed in any national securities exchange, the Corporation will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon conversion.
(n) Valid Issuance. All shares of Common Stock which may be issued
upon conversion of the shares of Series A Preferred Stock will upon issuance by
the Corporation be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof and
the Corporation shall take no action which will cause a contrary result
(including, without limitation, any action which would cause the Conversion
Price to be less than the par value, if any, of the Common Stock).
6. Voting Rights.
(a) General. Except as may be otherwise required by law or by the
provisions of this paragraph 6, the holders of Series A Preferred Stock shall
vote together with the holders of Common Stock as a single class on every matter
coming before any meeting of the shareholders or otherwise to be acted upon by
the shareholders. At every meeting of the shareholders of the Corporation, every
holder of Series A Preferred Stock shall be entitled, for each such share
standing in its name on the transfer books of the Corporation, to a number of
votes equal to the number of votes which could be cast by such holder if it held
the Common Stock Equivalent of such share of Series A Preferred Stock on the
record date for such vote.
(b) Changes to Series A Preferred Stock. Without the affirmative vote
of at least a majority of the shares of Series A Preferred Stock at the time
outstanding, the Corporation may not effect any change in the powers,
preferences, privileges, rights, qualifications, limitations or restrictions of
the Series A Preferred Stock; provided, however, and without expanding the
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foregoing limited class voting rights, except as provided in subparagraph (c)
below, no such separate class vote shall be required of the Series A Preferred
Stock in order to amend the Certificate of Incorporation of the Corporation to
authorize any new class of stock, whether such class is senior, on a parity with
or junior to the Series A Preferred Stock in dividends, liquidation, voting
rights or otherwise. Such consents shall either be given in writing or by vote
at a meeting called for that purpose at which the holders of the Series A
Preferred Stock shall vote as a class.
(c) Special Series A Voting Rights. A separate affirmative vote of at
least a majority of the shares of Series A Preferred stock outstanding shall be
required for any additional series of Common Shares or Preferred Stock to be
issued if:
(i) Such series has senior rights to the Series A Preferred Stock
upon any liquidation, dissolution or winding up of the Corporation, or
(ii) (A) Such series has equivalent rights to the Series A Preferred
Stock upon any liquidation, dissolution or winding up of the Corporation,
and
(B) The aggregate amount received by the Corporation in respect
of the issuance or sale of shares of Capital Stock having equivalent
rights to the Series A Preferred Stock upon any liquidation, dissolution
or winding up of the Corporation from and after the Issue Date (exclusive
of capital invested upon issuance of not in excess of 2,400,000 shares the
Series A Preferred Stock) through and inclusive of the additional series
of Common Shares or Preferred Stock proposed to be issued exceeds
$10,000,000.
(d) Special Redemption Rights. If in any case of a separate class
vote of the Series A Preferred Stock is required under clause (i) or (ii) of
subparagraph (c) above a majority of the outstanding shares of the Series A
Preferred Stock are not voted in favor of such issuance of stock, but the
holders of majority of the then issued and outstanding Common Stock voting as a
separate class vote in favor of such issuance then the Corporation shall have
the right to redeem all but not less than all of the outstanding shares of
Series A Preferred Stock at the following per share price (subject to adjustment
for stock dividends, splits, combinations, etc.) (the "Redemption Price"):
If Redemption Date occurs:
on or after and prior to Redemption Price
-------------------------- ------------ ----------------
July 1, 1989 June 30, 1990 $2.75
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July 1, 1990 June 30, 1991 $2.97
July 1, 1991 June 30, 1992 $3.21
July 1, 1992 June 30, 1993 $3.46
after July 1, 1993 ---- $3.74
The Corporation's redemption right may be exercised at any time
within 12 months after the record date for the special class vote provided in
clause (i) or (ii) of subparagraph (c) by giving written notice to the holder of
record of each share of Series A Preferred Stock at least 30 days prior to the
date on which the redemption is to occur ("Redemption Date"). On the Redemption
Date the Corporation shall tender the Redemption Price to each record holder of
Series A Preferred Stock against delivery of stock certificates for the Series A
Preferred Stock being redeemed; provided that until the close of business on the
day immediately preceding the Redemption Date each holder of Series A Preferred
Stock shall be entitled to convert such stock to Common Stock pursuant to the
terms hereof.
Notwithstanding the provision of subparagraph (c) in order to permit
the Corporation to issue securities to provide in whole or in part funds to
redeem the Series A Preferred Stock as contemplated hereby, the Certificate of
Incorporation may be amended and/or additional series of Common Shares or
Preferred Stock may be issued solely upon the requisite of other series and
classes of Common Shares and Preferred Stock (other than the Series A Preferred
Stock) provided the Corporation uses all or a portion of the proceeds to redeem
all outstanding Series A Preferred Stock.
7. Right of Conversion upon Merger or Consolidation. In case of any
consolidation or merger of the Corporation with any other corporation (other
than a consolidation or merger in which the Corporation is the continuing or
surviving corporation and which does not result in any change in the outstanding
Common Stock), or in case of any sale or transfer of all or substantially all
the assets of the Corporation, or in case of a binding share exchange in which
all the outstanding shares of the Common Stock are changed into cash, stock or
other securities or property, the holder of each share of the Series A Preferred
Stock shall at any time after such consolidation, merger, sale or transfer or
binding share exchange have the right to convert such share of Series A
Preferred Stock into the kind and amount of shares of stock or other securities
or property or cash, as the case may be, which such holder would have been
entitled to receive upon such consolidation, merger, sale or transfer or binding
share exchange if he had held the Common Stock issuable upon the conversion of
such share of Series A Preferred Stock immediately prior to such
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consolidation, merger, sale or transfer or binding share exchange.
8. Retirement of Shares. Shares of Series A Preferred Stock which have
been issued and have been redeemed, converted, repurchased or reacquired in any
manner by the Corporation shall be canceled and shall not be reissued.
9. Certain Rights of Participation in Stock Issuances. In the event that
the Corporation shall issue any equity securities or securities exercisable for
or convertible into equity securities of the Corporation (hereinafter "Equity
Securities"), each holder of shares of Series A Preferred Stock shall have the
right to purchase such amount of such Equity Securities which will enable such
holder to retain the percentage ownership interest (in terms of Common Stock or
Common Stock Equivalents) in the Corporation which such holder had immediately
prior to such issuance of Equity Securities. No later than twenty (20) days
after the issuance of any Equity Securities the Corporation shall give each
record holder of Series A Preferred Stock written notice (the "Notice") of the
issuance or proposed issuance of such Equity Securities and shall offer to sell
to each such holder the amount of Equity Securities described in the preceding
sentence on the same terms and conditions which such Equity Securities were or
are proposed to be issued. Each such holder shall have a period of twenty (20)
days after the date of the Notice to purchase such amount of Equity Securities
on such terms and conditions. The rights of participation provided in this
paragraph shall not apply to Equity Securities issued under the provisions of
this paragraph, upon conversion or exercise of any Equity Securities, as a stock
dividend or upon any subdivision of any Equity Securities, in consideration in
whole or in part for the acquisition (whether by merger or otherwise) by the
Corporation or any of its subsidiaries of all or substantially all of the stock
or assets of any other entity, in connection with any transaction (e.g. a joint
venture, technology licensing, distribution or other arrangement) With respect
to which the Board of Directors has made a good faith determination that the
primary purpose of such transaction is the advancement of the business interests
of the Corporation as opposed to the raising of funds, pursuant to a firm
commitment underwritten public offering, pursuant to the grant of options or
warrants to and the exercise of the same to purchase Equity Securities by
employees, consultants, advisors or directors of the Corporation relating to the
providing of services to the Corporation or the issuance of treasury shares
acquired from employees, consultants, advisors or directors, upon the exercise
of any right which was not itself in violation of the terms of this paragraph,
or the issuance of securities pursuant to anti-
16
<PAGE>
dilution, pre-emptive, participation or similar rights granted herein or by
contract. The rights of the holders of Series A Preferred Stock under this
paragraph may be waived by a vote or consent of persons holding a majority of
the Common Stock Equivalents at the time represented by the issued and
outstanding shares of Series A Preferred Stock.
17
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * *
Progenics Pharmaceuticals, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY
FIRST: That at a meeting of the Board of Directors of the Corporation, a
resolution was duly adopted proposing and declaring advisable the following
amendment to the Certificate of Incorporation of the Corporation:
RESOLVED: That, in the judgment of the Board of Directors of this
Corporation, it is deemed advisable to amend the Certificate of
Incorporation of the Corporation, as amended, by changing the
Article thereof numbered "Fourth" so that, as amended, said
Article shall be and read as follows:
"FOURTH:
(A) TOTAL NUMBER OF SHARES OF STOCK. The total number of shares of stock of
all classes that the Corporation shall have authority to issue is sixty
million (60,000,000) shares. The authorized capital stock is divided into
twenty million (20,000,000) Preferred Shares of the par value of $.00l each
and forty million (40,000,000) Common Shares of the par value of $.00l
each.
(B) COMMON SHARES.
(1) The forty million (40,000,000) Common Shares may be issued from time to
time in one or more series, the shares of each series to have such voting
powers, full
<PAGE>
-2-
or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as are stated and
expressed herein or in the resolution or resolutions providing for the
issue of such series, adopted by the Board of Directors as hereinafter
provided; provided, however, that no series of Common Shares other than
"Common Stock", as described in paragraph B(3) below, shall be designated
or, if previously designated, no shares of such series shall be issued if,
at the time of such designation or issuance, the designation or issuance of
such shares would violate the rules or regulations of the United States
Securities and Exchange Commission or of the trading market or markets on
which the Corporation's shares are traded.
(2) Authority is hereby expressly granted to the Board of Directors of the
Corporation, subject to the provisions of this Article FOURTH and to the
limitations prescribed by the General Corporation Law of Delaware, to
authorize the issue of one or more series of Common Shares, and with
respect to each such series to fix by resolution or resolutions providing
for the issue of such series the voting powers, full or limited, if any, of
the shares of such series and the designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof. The authority of the Board of
Directors with respect to each series shall include, but not be limited to,
the determination or fixing of the following:
(a) The designation of such series;
(b) The dividend rate of such series, the conditions and dates upon which
such dividends shall be payable, the relationship which such dividends
shall bear to the dividends payable on any other class or classes of
stock or any other series of any class of stock of the Corporation,
and whether such dividends shall be cumulative or non-cumulative;
(c) Whether the shares of such series shall be subject to redemption by
the Corporation and, if made subject to such redemption, the times,
prices and other terms and conditions of such redemption;
(d) The terms and amount of any sinking fund provided for the purchase or
redemption of the shares of such series;
(e) Whether or not the shares of such series shall be convertible into or
exchangeable for shares of any
<PAGE>
-3-
other class or classes of any stock or any other series of any class
of stock of the Corporation, and, if provision is made for conversion
or exchange, the times, prices, rates, adjustments, and other terms
and conditions of such conversion or exchange;
(f) The extent, if any, to which the holders of shares of such series
shall be entitled to vote with respect to the election of directors or
otherwise;
(g) The restrictions, if any, on the issue or reissue of any additional
Common Shares;
(h) The rights of the holders of the shares of such series upon the
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of, or upon the distribution of the assets of, the
Corporation; and
(i) Any other rights, preferences or limitations of the shares of such
series consistent with the provisions hereof governing the Common
Shares.
(3) Twelve million (12,000,000) Common Shares are designated as a series to be
known "Common Stock". Subject to all of the rights of the Preferred Shares
and the remaining Common Shares provided for by resolution or resolutions
of the Board of Directors pursuant to this Article FOURTH or by the General
Corporation Law of Delaware, the holders of Common Stock shall have full
voting powers on all matters requiring stockholder action, each share of
such Common Stock being entitled to one vote, and have equal rights of
participation in the dividends and assets of the Corporation. The
Directors may be resolution or resolutions, adopted pursuant to paragraph
B(2) above, designate additional Common Shares as Common Stock. The
Directors may specify in any such resolution that such designation or
designations shall be irrevocable.
(C) PREFERRED SHARES
(1) Authorized Preferred Shares.
The Twenty Million (20,000,000) Preferred Shares shall consist of Four
Million (4,000,000) shares of Series A Preferred Stock, Two Million Five
Hundred Thousand (2,500,000) shares of Series B Preferred Stock and
Thirteen Million Five Hundred Thousand (13,500,000) shares which may be
issued in one or more series as described in subparagraph 10 hereof.
<PAGE>
-4-
(2) Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph shall have, for all purposes hereof, the following meanings:
"Applicable Series Issue Date" shall mean for any series of Preferred
Shares the date on which shares of such series are first issued.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Common Stock Equivalent" shall mean at any time the number of shares
of Common Stock (including fractions of a share) into which a share of
Preferred Stock could be converted at such time.
"Junior Stock" shall mean any series of Common Shares, and any other
class or series of capital stock of the Corporation ranking junior to the
Preferred Stock either as to rights on Liquidation or as to dividends or
distributions.
"Liquidation" shall mean any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary.
"Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series
B Preferred Stock and any other series of Preferred Shares which are
specifically designated as Preferred Stock with the Series A Preferred
Stock and the Series B Preferred Stock.
"Series A Preferred Stock" shall mean the Series A Preferred Stock,
par value $.00l per share, of the Corporation.
"Series B Preferred Stock" shall mean the Series B Preferred Stock,
par value $.00l per share, of the Corporation.
(3) Dividends.
No dividends may be declared on or paid to any series of Common Shares,
Junior Stock or Preferred Stock except as part of a declaration or payment
of dividends to a group consisting of the Preferred Stock and one or more
series Common Shares or Junior Stock. As between the class
<PAGE>
-5-
consisting of the Preferred Stock and the class consisting of one or more
series of Common Shares or Junior Stock, dividends shall be allocated
between such classes pro rata based on the sum of (a) the number of shares
of such series of Common Shares or Junior Stock which are issued and
outstanding on the dividend record date and (b) the number of Common Stock
Equivalents with respect to the Preferred Stock on the dividend record
date. No dividends shall be paid to the Preferred Stock except as part of
a dividend paid to the group consisting of Series A Preferred Stock and
Series B Preferred Stock and holders of record of the Series A Preferred
Stock and the Series B Preferred Stock shall receive from the amount
available to such group dividends pro rata to the number of Common Stock
Equivalents with respect to the Series A Preferred Stock and the Series B
Preferred Stock held of record by such holder on the dividend record date.
Each series of Common Shares or Junior Stock as to which a dividend has
been declared shall be entitled to receive from the amount so available to
the class consisting of such series of Common Shares and Junior Stock,
dividends in accordance with the relative preferences which may from time
to time be established among series of the Common Shares and Junior Stock;
provided that within any series of Common Shares holders of record of such
series shall receive from the amount available to such series dividends pro
rata to the number of Common Shares of such series held of record by such
holder on the dividend record date.
(4) Distributions Upon Liquidation, Dissolution or Winding Up.
In the event of any Liquidation, no distributions may be made with respect
to any series of Common Shares, Junior Stock or Preferred Stock except as a
part of a distribution to a group consisting of the Preferred Stock and one
or more series of Common Shares or Junior Stock. From the assets of the
Corporation available for distribution to the holders of Preferred Stock
and one or more series of Common Shares or Junior Stock (the "Distributable
Amount"), the holders of Common Shares or Junior Stock shall receive the
Junior Stock Capital Percentage, the holder of Series A Preferred Stock
shall receive the Series A Capital Percentage and the holders of Series B
Preferred Stock shall receive the Series B Capital Percentage of any
distributions of the Distributable Amount. The Distributable Amount shall
be so allocated until the aggregate amount per share of such distributions
(together with all other distributions and dividends and subject to
adjustment for stock dividends, splits, combinations, etc.) received by the
holders of (i) the Common Stock and Junior Stock shall equal the Junior
Stock Invested Capital, (ii) the Series A Preferred Stock shall equal the
Series A Invested Capital and (iii) the Series B Preferred Stock shall
equal the Series B Invested Capital. Thereafter the holders of such series
of Common Shares and Junior Stock and the holders of Preferred Stock shall
receive
<PAGE>
-6-
distributions of the Distributable Amount pro rata to the number of shares
of Common Stock, Junior Stock and the number of Common Stock Equivalents
with respect to the Preferred Stock held by such holders on the record date
for such distributions. Distributions made to the class consisting of
holders of such series of Common Shares shall be made pro rata to the
number of shares of such series of Common Shares held of record by each
such holder as of the record date for such distribution. Distributions
made to the class consisting of holders of such Junior Stock shall be made
pro rata to the number of shares of such Junior Stock held of record by
each such holder as of the record date for such distribution.
Distributions made to the class consisting of holders of Preferred Stock
shall be made pro rata to the Common Stock Equivalents with respect to the
shares of Preferred Stock held of record by each such holder as of the
record date for such distribution.
The term "Junior Stock Invested Capital" shall equal $1,095,000.00.
The term "Series A Invested Capital" shall mean at any time the sum of
the aggregate amount of cash received by the Corporation (x) upon the
original issuance of all then outstanding shares of Series A Preferred
Stock other than shares sold or transferred from treasury stock and (y) in
the case of outstanding shares which were sold or transferred from treasury
stock the aggregate amount received by the Corporation in respect of such
transfer.
The term "Series B Invested Capital" shall mean at any time the sum of
the aggregate amount of cash received by the Corporation (x) upon the
original issuance of all then outstanding shares of Series B Preferred
Stock other than shares sold or transferred from treasury stock and (y) in
the case of outstanding shares which were sold or transferred from treasury
stock the aggregate amount received by the Corporation in respect of such
transfer.
The term "Total Invested Capital" shall mean at any time the sum of
(a) the Junior Stock Invested Capital, (b) the Series A Invested Capital
and (c) the Series B Invested Capital.
The term "Junior Stock Capital Percentage" shall mean at any time the
fraction (expressed as a percentage) obtained by dividing (a) the Junior
Stock Invested Capital by (b) the Total Invested Capital.
The term "Series A Capital Percentage" shall mean at any time the
fraction (expressed as a percentage) obtained by dividing (a) the Series A
Invested Capital by (b) the Total Invested Capital.
<PAGE>
-7-
The term "Series B Capital Percentage" shall mean at any time the
fraction (expressed as a percentage) obtained by dividing (a) the Series B
Invested Capital by (b) the Total Invested Capital.
(5) Conversion Rights.
The holders of Preferred Stock shall have the following conversion rights:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this paragraph 5, the holder of any share or shares of
Preferred Stock shall have the right at such holder's option, at any time
or from time to time, to convert any of such shares of preferred Stock
(except that upon any Liquidation of the Corporation the right of
conversion shall terminate at the close of business on the business day
fixed for payment of the amount distributable on the preferred Stock) into
such number of fully paid and nonassessable shares of Common Stock as is
obtained by (a) multiplying the number of shares of Preferred Stock to be
so converted by the Original Series Issue Price for such series of
Preferred Stock being converted and (b) dividing the result by the
Applicable Series Conversion Price for such series of Preferred Stock as
defined in Section 5(c). The term "Original Series Issue Price" shall mean
(a) in the case of the Series A Preferred Stock, $2.50 per share and (b) in
the case of the Series B Preferred Stock, $4.00 per share.
(b) Automatic Conversion. Each outstanding share of a series of
Preferred Stock shall automatically be converted, without any further act
of the Corporation or its shareholders, into fully paid and nonassessable
shares of Common Stock at the Applicable Series Conversion Price then in
effect on the earlier to occur of (a) the closing of a public offering by
the Corporation pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offering and sale of any
shares of any series of Common Shares by the Corporation for the account of
the Corporation in which (i) the aggregate gross proceeds (before deduction
of any underwriting discount, commission or expense) received by the
Corporation equal or exceed $5,000,000 and (ii) the price per share of such
Common Shares equals or exceeds 200% of the Applicable Series Conversion
Price in effect immediately prior to the closing of the sale of such shares
by the Corporation, and (b)(i) in the case of the Series A Preferred Stock
the date as of which there shall have been converted under subparagraph
5(a) a cumulative of 1,145,001 shares of Series A Preferred Stock and (ii)
in the case of the Series B Preferred Stock the date as of which there
shall have been converted under subparagraph 5(a) a cumulative aggregate
number of shares of Series B Preferred
<PAGE>
-8-
Stock as follows: (x) prior to January 31, 1994, a number of shares equal
to a majority of the issued and outstanding shares of Series B Preferred
Stock as of February 28, 1993, and (y) from and after February 1, 1994 , a
number of shares equal to a majority of the issued and outstanding shares
of Series B Preferred Stock as of February 1, 1994.
(c) Applicable Series Conversion Price. The term "Applicable Series
Conversion Price" shall mean (a) in the case of the Series A Preferred
Stock, $2.50 per share and (b) in the case of the Series B Preferred Stock,
$4.00 per share, in each case as such price may from time to time be
adjusted pursuant to the provisions subparagraph 5(f) and as such price as
adjusted is in effect at the date any shares or shares of Preferred Stock
are surrendered for conversion. No payment or adjustment shall be made for
any dividends on the Common Stock issuable upon such conversion.
(d) Mechanics of Conversion. Upon the occurrence of the event
specified in subparagraph 5(b), the outstanding shares of the series of
Preferred Stock involved shall be converted automatically without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or
its transfer agent; provided, however, that the Corporation shall not be
obligated to issue to any such holder certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing
such shares of Preferred Stock are delivered to the Corporation or any
transfer agent of the Corporation. The holder of any shares of Preferred
Stock may exercise the conversion right specified in subparagraph 5(a) as
to all or a minimum of 1,000 shares of a series of Preferred Stock held by
such holder by surrendering to the Corporation or any transfer agent of the
Corporation the certificate or certificates for the shares of Preferred
Stock to be converted, accompanied by written notice stating that the
holder elects to convert all or a specified portion of the shares of series
of Preferred Stock represented thereby. Conversion shall be deemed to have
been effected (i) in the case of an automatic conversion pursuant to
subparagraph 5(b), on the date of the occurrence of the event specified in
subparagraph 5(b) or (ii) in any other case, on the date when delivery of
notice of any election to convert and the certificates for shares is made
(each such date described in clause (i) or clause (ii) above being referred
to herein as the "Conversion Date"). Subject to the provisions of clause
(vii) of subparagraph 5(f), as promptly as practicable thereafter (and
after surrender of the certificate or certificates representing shares of
Preferred Stock to the Corporation or any transfer agent of the Corporation
in the case of conversions pursuant to subparagraph 5(b)) the Corporation
shall issue and deliver to, or upon the written order of, such holder a
certificate or certificates for the
<PAGE>
-9-
number of full shares of Common Stock to which such holder is entitled and
a check or cash with respect to any fractional interest in a share of
Common Stock as provided in subparagraph 5(e). Subject to the provisions
of clause (vii) of subparagraph 5(f), the Person in whose name the
certificate or certificates for Common Stock are to be issued shall be
deemed to have become a holder of record of such Common Stock on the
applicable Conversion Date. Upon conversion of only a portion of the
number of shares of Preferred Stock covered by a certificate representing
shares of Preferred Stock surrendered for conversion (in the case of
conversion pursuant to subparagraph 5(a)), the Corporation shall issue and
deliver to, or upon the written order of, the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Preferred Stock representing
the unconverted portion of the certificate so surrendered.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Preferred Stock. If more than
one share of Preferred Stock shall be surrendered for conversion at any one
time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Preferred Stock so surrendered. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Preferred Stock, the Corporation shall pay a
cash adjustment in respect of such fractional interest in an amount equal
to that fractional interest of the then Current Market Price (as
hereinafter defined).
(f) Conversion Price Adjustments. The Applicable Series Conversion
Price and number of shares of Common Stock deliverable upon conversion of
the shares of a series of Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) Issuances of Capital Stock. If, at any time after the
Applicable Series Issue Date, the Corporation shall issue (or be
deemed to have issued pursuant to subclause (C) below) any capital
stock (whether Common Stock, any series of Common Shares or any other
series of Preferred Stock) other than Excluded Stock (as hereinafter
defined) (such stock other than Excluded Stock being hereinafter
referred to as "Capital Stock") for a consideration per share less
than the Applicable Series Conversion Price applicable immediately
prior to such issuance, the Applicable Series Conversion Price with
respect to such series of Preferred Stock in effect immediately prior
to such issuance shall immediately (except as provided below) be
reduced to a price determined by dividing (a) the sum of (i) the
number of shares of Capital Stock outstanding immediately prior to
<PAGE>
-10-
such issue, multiplied by the Applicable Series Conversion Price in
effect immediately prior to such issue, plus (ii) the consideration,
if any, received by the Corporation upon such issue, by (b) the number
of shares of Capital Stock outstanding immediately after such issue.
For the purpose of any adjustment of the Applicable Series
Conversion Price pursuant to this clause (i) of this subparagraph
5(f), the following provisions shall be applicable:
(ii) Cash. In the case of the issuance of Capital Stock for
cash, the amount of the consideration received by the Corporation
shall be deemed to be the aggregate cash proceeds received by the
Corporation for such Capital Stock before deducting therefrom any
discounts, commissions, taxes or other expenses allowed, paid or
incurred by the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(iii) Consideration Other than Cash. In the case of the
issuance of Capital Stock (otherwise than upon the conversion of
shares of capital stock or other securities of the Corporation) for a
consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than securities by
their terms so exchangeable), the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the
Board of Directors in good faith, irrespective of any accounting
treatment; provided, however, that such fair market value as
determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Capital Stock being issued in
exchange therefor as of the date the Board of Directors authorizes the
issuance of such shares.
(iv) Options and Convertible Securities. In the case of the
issuance at any time after the Applicable Series Issue Date of (i)
options, warrants or other rights to purchase or acquire Capital Stock
(whether or not at the time exercisable), (ii) securities by their
terms convertible into or exchangeable for Capital Stock (whether or
not at the time so convertible or exercisable) or (iii) options,
warrants or rights to purchase such convertible or exchangeable
securities (whether or not at the time exercisable):
(I) the aggregate maximum number of shares of Capital Stock
deliverable upon exercise of such options, warrants or other
rights to purchase or acquire Capital Stock shall be deemed to
have been
<PAGE>
-11-
issued at the time such options, warrants or rights were issued
and for a consideration equal to the consideration (determined in
the manner provided in subclauses (A) and (B) above), if any,
received by the Corporation upon the issuance of such options,
warrants or rights plus the minimum purchase price provided in
such options, warrants or rights for the Capital Stock covered
thereby (the amount of the purchase price in each case to be
determined in the manner provided in subclauses (A) and (B)
above);
(II) the aggregate maximum number of shares of Capital
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or acquire such
convertible or exchangeable securities and the subsequent
conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options,
warrants or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any
such securities and related options, warrants or rights
(excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation upon the conversion or
exchange of such securities and the exercise of any related
options, warrants or rights (the consideration in each case to be
determined in the manner provided in subclauses (A) and (B)
above);
(III) on any change in the number of shares of Capital Stock
deliverable upon exercise of any such options, warrants or rights
or conversion of or exchange for such convertible or exchangeable
securities or any change in the consideration to be received by
the Corporation upon such exercise, conversion or exchange,
(other than under or by reason of provisions designed to protect
against dilution), the Applicable Series Conversion Price as then
in effect shall forthwith be readjusted to such Applicable Series
Conversion Price as would have been obtained had an adjustment
been made upon the issuance of such options, warrants or rights,
or securities on the basis of such change; provided, however,
there shall be no adjustment pursuant to this clause (III) to the
extent that any of such options, warrants, rights or securities
shall have been exercised, converted or exchanged, as the case
may be, prior to such change;
<PAGE>
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(IV) on the expiration or cancellation of one or more of
such options, warrants or rights, or the termination of the right
to convert or exchange one or more of such convertible or
exchangeable securities, if the Applicable Series Conversion
Price shall have been adjusted upon the issuance thereof and any
of such options, warrants, rights or securities shall not have
been exercised, converted or exchanged, as the case may be, prior
to such expiration or cancellation, the Applicable Series
Conversion Price shall forthwith be readjusted to such Applicable
Series Conversion Price as would have been obtained had an
adjustment been made upon only the issuance of such options,
warrants, rights or securities on the basis of the issuance of
only the number of shares of Capital Stock that would actually
have been issued upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such securities;
and
(V) if the Applicable Series Conversion Price has been
adjusted upon the issuance of any such options, warrants, rights
or convertible or exchangeable securities, no further adjustment
of the Applicable Series Conversion Price shall be made for the
actual issuance of Capital Stock upon the exercise, conversion or
exchange thereof; provided, however, that, except as provided in
clause IV of subparagraph 5(f)(i)(C), no increase in the
Applicable Series Conversion Price shall be made pursuant to this
clause (C).
(v) Excluded Stock. "Excluded Stock" shall mean: (1) shares of
Common Stock, any other series of Common Shares or any series of
Preferred Stock to be issued pursuant to the 1989 Stock Option Plan of
the Corporation or any other stock options or warrants granted or sold
to employees, consultants, advisors or directors of the Corporation
relating to the provision of services to the Corporation; (2) the
options and warrants described in (1); (3) shares of Common Stock, any
other series of Common Shares or any series of Preferred Shares issued
by under provisions of the Certificate of Incorporation as from time
to time in effect or by virtue of agreements designed to protect
against dilution; and (4) shares of Common Stock, any other series of
Common Shares or any series of Preferred Shares issued or reserved for
issuance by the Corporation upon conversion of any series of Preferred
Shares.
(vi) Stock Dividends. If the number of shares of Common Stock
outstanding at any time after the Applicable Series Issue Date is
increased by a stock dividend payable in shares of Common Stock or by
a subdivision or split-up of
<PAGE>
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shares of Common Stock, then immediately after the record date fixed
for the determination of holders of Common Stock entitled to receive
such stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Applicable Series Conversion Price
shall be appropriately reduced so that the holder of any shares of
Preferred Stock thereafter converted shall be entitled to receive the
number of shares of Common Stock which such holder would have owned
immediately following such action had such shares of Preferred Stock
been converted immediately prior thereto.
(vii) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the Applicable Series Issue Date
is decreased by a combination of the outstanding shares of Common
Stock, then immediately after the effective date of such combination,
the Applicable Series Conversion Price shall be appropriately
increased so that the holder of any shares of any series of Preferred
Stock thereafter converted shall be entitled to receive the number of
shares of Common Stock which such holder would have owned immediately
following such action had such shares of such series of Preferred
Stock been converted immediately prior thereto.
(viii) Reclassification. In the event of a reclassification of
the Common Stock, each share of Preferred Stock shall, after such
reclassification, be convertible into the number and type of shares of
capital stock or other securities to which the Common Stock issuable
(at the time of such reclassification) upon conversion of such shares
of Preferred Stock would have been entitled upon such
reclassification; and, in such event, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of
the holders of Preferred Stock shall be appropriately adjusted so as
to be applicable, as nearly as may reasonably be, to any shares of
stock or other securities thereafter deliverable upon the conversion
of such Preferred Stock. The subdivision or combination of Common
Stock issuable upon conversion of Preferred Stock at any time
outstanding into a greater or lesser number of shares of Common Stock
(whether with or without par value) shall not be deemed to be a
reclassification of the Common Stock of the Corporation for the
purposes of this clause (v).
(ix) Rounding of Calculations; Minimum Adjustment. All
calculations under this subparagraph (f) shall be made to the nearest
cent or to the nearest one one-hundredth (1/100th) of a share, as the
case may be. Any provision of this paragraph 5 to the contrary
notwithstanding, no adjustment to any Applicable Series Conversion
Price shall be made if the amount of such adjustment would be less
than $.01, but any such amount shall be carried forward and an
adjustment with respect thereto shall be made at the time of and
together with any subsequent adjustment which, together with such
<PAGE>
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amount and any other amount or amounts so carried forward, shall
aggregate $.0l or more.
(x) Timing of Issuance of Additional Common Stock upon Certain
Adjustments. In any case in which the provisions of this subparagraph
(f) shall require that an adjustment shall become effective
immediately after a record date for an event, the Corporation may
defer until the occurrence of such event (1) issuing to the holder of
any share of Preferred Stock converted after such record date and
before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock
issuable upon such conversion before giving effect to such adjustment
and (2) paying to such holder any amount of cash in lieu of a
fractional share of Common Stock pursuant to subparagraph (e) of this
paragraph 5; provided, however, that the Corporation upon request
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event requiring such
adjustment.
(xi) Prohibition of Action Resulting in Minimum Conversion
Price. The Corporation shall not take any action of the kind covered
by this subparagraph 5(f) which would cause the Applicable Series
Conversion Price to fall below the greater of $.0l and the par value
of the Common Stock.
(g) Current Market Price. The Current Market Price at any date shall
mean the price per share of Capital Stock on such date determined by the
Board of Directors as provided below. The Current Market Price shall be
the average of the daily closing price per share of such Capital Stock for
thirty (30) consecutive business days ending no more than fifteen (15)
business days before the day in question (as adjusted for any stock
dividend, split, combination or reclassification that took effect during
such 30-day period). The closing price for each day shall be the last
reported sales price regular way or, in the case no such reported sales
take place on such day, the average of the last reported bid and asked
prices regular way, in either case, on the principal national securities
exchange on which such Capital Stock is listed or admitted to trading,
unless such principal national securities exchange is a regional securities
exchange and such Capital Stock is also quoted on the National Association
of Securities Dealers Automated Quotation System (the "NASDAQ System"), or
if not listed or admitted to trading on a national securities exchange or
if such principal securities exchange is a regional securities exchange and
such Capital Stock is also quoted on the NASDAQ System, the average of the
highest bid and the lowest asked prices quoted on the NASDAQ System or, if
not so quoted, as reported by the National Quotation Bureau, Inc.;
provided,
<PAGE>
-15-
however, that if such Capital Stock is not traded in such manner that any
of the quotations referred to above is available for the period required
hereunder, the Current Market Price per share of such Capital Stock shall
be deemed to be the fair market value as determined by the Board of
Directors in good faith, irrespective of any accounting treatment.
(h) Statement Regarding Adjustments. Whenever any Applicable Series
Conversion Price shall be adjusted as provided in subparagraph 5(f), the
Corporation shall forthwith file, at the office of any transfer agent for
the series of Preferred Stock affected and at the principal office of the
Corporation, a statement showing in detail the facts requiring such
adjustment and the Applicable Series Conversion Price that shall be in
effect after such adjustment, and the Corporation shall also cause a copy
of such statement to be sent by mail, first-class postage prepaid, to each
holder of such series of Preferred Stock at its address appearing on the
Corporation 5 records. Where appropriate, such copy may be given in
advance and may be included as part of a notice required to be mailed under
the provisions of subparagraph 5(i).
(i) Notice to Holders. In the event the Corporation shall propose to
take any action of the type described in clause (i) of subparagraph 5(f)
(but only if the action of the type described in clause (i) would result in
an adjustment in an Applicable Series Conversion Price), (iii), (iv) or (v)
of subparagraph 5(f), the Corporation shall give notice to each holder of
shares of the series of Preferred Stock affected, in the manner set forth
in subparagraph 5(h), which notice shall specify the record date, if any,
with respect to any such action and the approximate date on which such
action is to take place. Such action shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such
notice) on the Applicable Series Conversion Price and the number, kind or
class of shares or other securities or property which shall be deliverable
or purchasable upon the occurrence of such action or deliverable upon
conversion of shares of such Preferred Stock. In the case of any such
action which would require the fixing of a record date, such notice shall
be given at least twenty (20) calendar days prior to the date so fixed, and
in the case of all other action, such notice shall be given at least thirty
(30) calendar days prior to the taking of such proposed action. Failure to
give such notice, or any defect therein, shall not affect the legality or
validity of any such action.
(j) Treasury Stock. For the purposes of this paragraph 5, the sale
or other disposition (other than sales or dispositions to employees,
consultants, advisors or
<PAGE>
-16-
directors of the Corporation in connection with the provision of services
to the Corporation) of any capital stock of the Corporation theretofore
held in its treasury shall be deemed to be an issuance thereof.
(k) Costs. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock of the Corporation upon conversion of
any shares of Preferred Stock; provided, however, that the Corporation
shall not be required to pay any taxes which may be payable in respect of
any transfer involved in the issuance or delivery of any certificate for
such shares in a name other than that of the holder of the shares of
Preferred Stock in respect of which such shares are being issued.
(1) Reservation of Shares. The Corporation shall reserve at all
times so long as any shares of Preferred Stock remain outstanding out of
its treasury stock or its authorized but unissued shares of Common Stock,
or both, solely for the purpose of effecting the conversion of the shares
of Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Preferred Stock.
(m) Approvals. If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Preferred Stock require registration
with or approval of any governmental authority under any Federal or state
law before such shares may be validly issued or delivered upon conversion,
then the Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case may be. If,
and so long as, any Common Stock into which the shares of Preferred Stock
are then convertible is listed in any national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of
such Common Stock issuable upon conversion.
(n) Valid Issuance. All shares of Common Stock which may be issued
upon conversion of the shares of Preferred Stock will upon issuance by the
Corporation be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof
and the Corporation shall take no action which will cause a contrary result
(including, without limitation, any action which would cause the Applicable
Series Conversion Price to be less than the par value, if any, of the
Common Stock).
<PAGE>
-17-
(6) Voting Rights.
(a) General. Except as may be otherwise required by law or by the
provisions of this paragraph 6, the holders of Preferred Stock shall vote
together with the holders of Common Stock as a single class on every matter
coming before any meeting of the shareholders or otherwise to be acted upon
by the shareholders. At every meeting of the shareholders of the
Corporation, every holder of Preferred Stock shall be entitled, for each
such share standing in its name on the transfer books of the Corporation,
to a number of votes equal to the number of votes which could be cast by
such holder if it held the Common Stock Equivalent of such share of
Preferred Stock on the record date for such vote.
(b) Changes to Series of Preferred Stock. Without the affirmative
vote of the holders of at least a majority of the shares of a series of
Preferred Stock at the time outstanding, the Corporation may not effect any
change in the powers, preferences, privileges, rights, qualifications,
limitations or restrictions of such series of Preferred Stock; provided,
however, and without expanding the foregoing limited class voting rights,
no such separate class vote shall be required of any series of Preferred
Stock in order to amend the Certificate of Incorporation of the Corporation
to authorize any new class of stock, whether such class is senior, on a
parity with or junior to the such series of Preferred Stock in dividends,
liquidation, voting rights or otherwise. Such consents shall either be
given in writing or by vote at a meeting called for that purpose at which
the holders of such series of Preferred Stock shall vote as a class.
(c) Other Special Series Voting Rights of the Preferred Stock. A
separate affirmative vote of the holders of at least a majority of the
shares of Preferred Stock outstanding and voting as a single class shall be
required for any additional series of Common Shares or Preferred Stock to
be issued if:
(i) Such series has senior rights to the Preferred Stock upon
any Liquidation of the corporation, or
(ii) (I) Such series has equivalent rights to the Preferred
Stock upon any Liquidation of the Corporation, and
(II) The aggregate amount received by the Corporation in
respect of the issuance or sale of shares of Capital Stock having
equivalent rights
<PAGE>
-18-
to the Preferred Stock upon any Liquidation of the Corporation from an
after the Applicable Series Issue Date (including capital invested
upon issuance of not in excess of 2,400,000 shares of Series A
Preferred Stock and 4,000,000 shares of Series B Preferred Stock)
through and inclusive of the additional series of Common Shares or
Preferred Shares proposed to be issued exceeds $20,000,000.
(d) Special Redemption Rights. If in any case of a separate class
vote of the Preferred Stock is a required under clause (i) or (ii) of
subparagraph (c) above a majority of the outstanding shares of the
Preferred Stock are not voted in favor of such issuance of stock, but the
holders of majority of the then issued and outstanding Common Stock voting
as a separate class vote in favor of such issuance then the Corporation
shall have the right to redeem all but not less than all of the outstanding
shares of the Preferred Stock at the following per share price (subject to
adjustment for stock dividends, splits, combinations, etc.) (the
"Redemption Price"):
If Redemption Date occurs:
Redemption Price
------------------
on or after and prior to Series A Series B
----------- ------------ -------- --------
July 1, 1992 June 30, 1993 $3.46
July 1, 1993 June 30, 1994 $3.74 $4.32
July 1, 1994 June 30, 1995 $3.74 $4.67
July 1, 1995 June 30, 1996 $3.74 $5.04
July 1, 1996 June 30, 1997 $3.74 $5.44
July 1, 1997 June 30, 1998 $3.74 $5.88
After July 1, 1998 $3.74 $6.35
The Corporation's redemption right may be exercised at any time within
12 months after the record date for the special class vote provided in
clause (i) or (ii) of subparagraph (c) by giving written notice to the
holder of record of each share of Series A Preferred Stock and Series B
Preferred Stock at least 30 days prior to the date on which the redemption
is to occur ("Redemption Date"). On the Redemption Date the Corporation
shall tender the Redemption Price to each record holder of Preferred Stock
against delivery of stock certificates for the Preferred Stock being
redeemed; provided that until the close of business on the date immediately
preceding the Redemption Date each holder of Preferred Stock shall be
entitled to convert such stock to Common Stock pursuant to the terms
hereof.
Notwithstanding the provision of subparagraph (c) in order to permit
the Corporation to issue securities to provide in whole or in part funds to
redeem the Preferred Stock as contemplated hereby, the Certificate of
Incorporation may be amended and/or additional series of
<PAGE>
-19-
Common Shares or Preferred Shares may be issued solely upon the requisite
vote of other series and classes of Common Shares and Preferred Shares
(other than Series A Preferred Stock and Series B Preferred Stock) provided
the Corporation uses all or a portion of the proceeds to redeem all
outstanding Series A Preferred Stock and Series B Preferred Stock.
(7) Right of Conversion upon Merger or Consolidation.
In case of any consolidation or merger of the Corporation with any other
corporation (other than a consolidation or merger in which the Corporation
is the continuing or surviving corporation and which does not result in any
change in the outstanding Common Stock), or in case of any sale or transfer
of all or substantially all the assets of the Corporation, or in case of a
binding share exchange in which all the outstanding shares of the Common
Stock are changed into cash, stock or other securities or property, the
holder of each share of Preferred Stock shall at any time after such
consolidation, merger, sale or transfer or binding share exchange have the
right to convert such share of Preferred Stock into the kind and amount of
shares of stock or other securities or property or cash, as the case may
be, which such holder would have been entitled to receive upon such
consolidation, merger, sale or transfer or binding share exchange if he had
held the Common Stock issuable upon the conversion of such share of
Preferred Stock immediately prior to such consolidation, merger, sale or
transfer or binding share exchange.
(8) Retirement of Shares.
Shares of Preferred Stock which have been issued and have been redeemed,
converted, repurchased or reacquired in any manner by the Corporation shall
be canceled and shall not be reissued.
(9) Certain Rights of Participation in Stock Issuances.
In the event that the Corporation shall issue any equity securities or
securities exercisable for or convertible into equity securities of the
Corporation (hereinafter "Equity Securities"), each holder of shares of
Preferred Stock shall have the right to purchase such amount of such Equity
Securities which will enable such holder to retain the percentage ownership
interest (in terms of Common Stock or Common Stock Equivalents) in the
Corporation which such holder had immediately prior to such issuance of
Equity Securities. No later than twenty (20) days after the issuance of
any Equity Securities the Corporation shall give each record holder of
Preferred Stock written notice (the
<PAGE>
-20-
"Notice") of the issuance or proposed issuance of such Equity Securities
and shall offer to sell to each such holder the amount of Equity Securities
described in the preceding sentence on the same terms and conditions which
such Equity Securities were or are proposed to be issued. Each such holder
shall have a period of twenty (20) days after the date of the Notice to
purchase such amount of Equity Securities on such terms and conditions.
The rights of participation provided in this paragraph shall not apply to
Equity Securities issued under the provisions of this paragraph, upon
conversion or exercise of any Equity Securities, as a stock dividend or
upon any subdivision of any Equity Securities, in consideration in whole or
in part for the acquisition (whether by merger or otherwise) by the
Corporation or any of its subsidiaries of all or substantially all of the
stock or assets of any other entity, in connection with any transaction
(e.g. a joint venture, technology licensing, distribution or other
arrangement) with respect to which the Board of Directors has made a good
faith determination that the primary purpose of such transaction is the
advancement of the business interests of the Corporation as opposed to the
raising of funds, pursuant to a firm commitment underwritten public
offering, pursuant to the grant of options or warrants to and the exercise
of the same to purchase Equity Securities by employees, consultants,
advisors or directors of the Corporation relating to the providing of
services to the Corporation or the issuance of treasury shares acquired
from employees, consultants, advisors or directors, upon the exercise of
any right which was not itself in violation of the terms of this paragraph,
the issuance of securities pursuant to anti-dilution, preemptive,
participation or similar rights granted herein or by contract or the
issuance of Equity Securities all or a portion of the proceeds of which
will be used in redeem Preferred Stock as provided in Subparagraph 6(d)
hereof. The rights of the holders of Preferred Stock under this paragraph
may be waived by a vote or consent of persons holding a majority of the
Common Stock Equivalents at the time represented by the issued and
outstanding shares of Preferred Stock.
(10) Other Series of Preferred Shares.
The Thirteen Million Five Hundred Thousand (13,500,000) Preferred Shares
may be issued from time to time in one or more series, the shares of each
series to have such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions
thereof, as are stated and expressed herein or in the resolution or
resolutions providing for the issue of such series,
<PAGE>
-21-
adopted by the Board of Directors as hereinafter provided.
(a) Authority is hereby expressly granted to the Board of Directors of the
Corporation, subject to the provisions of this Article FOURTH and to
the limitations prescribed by the General Corporation Law of Delaware,
to authorize the issue of one or more series of Preferred Shares, and
with respect to each such series to fix by resolution or resolutions
providing for the issue of such series the voting powers, full or
limited, if any, of the shares of such series and the designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof. The
authority of the Board of Directors with respect to each series shall
include, but not be limited to, the determination or fixing of the
following:
(i) The designation of such series;
(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relationship
which such dividends shall bear to the dividends payable on
any other class or classes of stock or any other series of
any class of stock of the Corporation, and whether such
dividends shall be cumulative or non-cumulative;
(iii) Whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to such
redemption, the times, prices and other terms and conditions
of such redemption;
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
(v) Whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other
class or classes of any stock or any other series of any
class of stock of the Corporation, and, if provision is made
for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such
conversion or exchange;
(vi) The extent, if any, to which the holders of shares of such
series shall be entitled to vote with respect to the
election of directors or otherwise;
<PAGE>
-22-
(vii) The restrictions, if any, on the issue or reissue of any
additional Preferred Shares;
(viii) The rights of the holders of the shares of such series upon
the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of, or upon the distribution of
the assets of, the Corporation; and
(ix) Any other rights, preferences or limitations of the shares
of such series consistent with the provisions hereof
governing the Preferred Shares.
SECOND: That in lieu of a meeting and vote of stockholders, the holders
of a majority of the issued and outstanding shares of each class of the capital
stock of the Corporation required to approve such amendment have given their
written consent to said amendment in accordance with the provisions of Section
228 of the General Corporation Law of the State of Delaware and written notice
of the adoption of the amendment has been given as provided in said Section 228
to every stockholder entitled to said notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
<PAGE>
-23-
IN WITNESS WHEREOF, said Progenics Pharmaceuticals, Inc. has caused this
certificate to be signed by Paul J. Maddon, its President, and attested by
Robert McKinney, its Assistant Secretary, this 24 day of November, 1992.
PROGENICS PHARMACEUTICALS, INC.
By: /s/Paul J. Maddon
----------------------
President
ATTEST:
By: /s/Robert McKinney
---------------------
Assistant Secretary
STATE OF NEW YORK )
) SS
COUNTY OF WESTCHESTER )
On the 24 day of November, 1992 personally appeared before me Paul J.
Maddon and Robert McKinney, who, being by me duly sworn, declared that they are
the President and an Assistant Secretary, respectively, of Progenics
Pharmaceuticals, Inc., a Delaware corporation, and that the within and foregoing
Certificate of Amendment to the Certificate of Incorporation of Progenics
Pharmaceuticals, Inc. was signed on behalf of said corporation by authority of a
resolution of the Board of Directors and a resolution of the shareholders of
Progenics Pharmaceuticals, Inc., and said persons duly acknowledged to me that
said corporation executed the Certificate of Amendment to the Certificate of
Incorporation, and verified that the matters set forth and the statements
therein are true and correct.
Gladys Leiva GLADYS LEIVA
- ---------------------- Notary Public, State of New York
NOTARY PUBLIC No 4895173
Qualified in Westchester County
My Commission Expires: 5/18/93 Commission Expires May 18, 1993
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISIONS OF CORPORATIONS
FILED 9:00 AM 12/08/1996
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
($.001 Par Value)
OF
PROGENICS PHARMACEUTICALS, INC.
-------------------------
Pursuant to Section 151 (g) of the General Corporation Law
of the State of Delaware
------------------------
THE UNDERSIGNED, being, respectively, the President and the Assistant
Secretary of Progenics Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), DO HEREBY CERTIFY that, pursuant to the provisions of Section 151(g)
of the General Corporation Law of the State of Delaware the following
resolutions were duly adopted by the Board of Directors of the Company and
pursuant to authority conferred upon the Board of Directors by the provisions of
the Certificate of Incorporation (as amended) of the Company (the "Certificate
of Incorporation"), the Board of Directors of the Company, at a meeting duly
held on June 8, 1995, adopted resolutions providing for the issuance of a series
of its Preferred Stock and fixing the relative powers, preferences, rights,
qualifications, limitations and restrictions of such stock. These resolutions
are as follows:
RESOLVED, that pursuant to the authority granted expressly to and vested
in the Board of Directors of the Company by the provisions of the Certificate of
Incorporation of the
<PAGE>
Company, as amended, (the "Certificate of Incorporation"), the issuance of a
series of preferred stock, par value $.001 per share (the "Preferred Stock"),
which shall consist of up to 3,750,000 shares of Preferred Stock that the
Company has authority to issue, be, and the same hereby is, authorized, and the
Board of Directors hereby fixes the powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, of the shares of such
series (in addition to the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof set forth in the Certificate of
Incorporation that may be applicable to the Preferred Stock) as follows:
Section 1. Number of Shares and Designation. 3,750,000 shares of the
preferred stock, $.001 par value per share, of the Company are hereby
constituted as a series of the preferred stock designated as Series C Preferred
Stock (the "Series C Preferred Stock").
Section 2. Definitions. Unless the context requires otherwise, the terms
defined in this Section shall have, for all purposes hereof, the following
meanings:
"Board of Directors" shall mean the Board of Directors of the Company.
"Capital Stock" shall have the meaning assigned thereto in Section 5(f).
"Common Shares" shall mean the Common Shares, par value $0.01 per share of
the Company.
"Common Stock" shall mean the Common Stock, par value $0.01 per share, of
the Company.
"Common Stock Equivalent" shall mean at any time the number of shares of
Common Stock (including fractions of a share) into which a share of Preferred
Stock could be converted at such time.
"Conversion Date" shall have the meaning assigned thereto in Section 5(d).
"Current Market Price" shall have the meaning assigned thereto in Section
5(g).
"Distributable Amount" shall have the meaning assigned thereto in Section
4.
"Equity Securities" shall have the meaning assigned thereto in Section 9.
"Excluded Stock" shall have the meaning assigned thereto in Section 5(f).
"Junior Stock" shall mean any series of Common Shares, and any other class
or series of capital stock of the Company ranking junior to the Preferred Stock
either as to rights on Liquidation or as to dividends or distributions.
"Junior Stock Capital Percentage" shall mean at any time the fraction
(expressed as a percentage) obtained by dividing (a) the Junior Stock Invested
Capital by (b) the Total Invested Capital.
2
<PAGE>
"Junior Stock Invested Capital" shall mean $1,095,000.00.
"Liquidation" shall mean any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
"Original Series Issue Price" shall have the meaning assigned thereto in
Section 5(a).
"Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and any other series of Preferred
Shares that are specifically designated as Preferred Stock.
"Redemption Date" shall have the meaning assigned thereto in Section 6(d).
"Redemption Price" shall have the meaning assigned thereto in Section
6(e).
"Series A Capital Percentage" shall mean at any time the fraction
(expressed as a percentage) obtained by dividing (a) the Series A Invested
Capital by (b) the Total Invested Capital.
"Series A Invested Capital" shall mean at any time the sum of the
aggregate amount of cash received by the Company (x) upon the original issuance
of all then outstanding shares of Series A Preferred Stock other than shares
sold or transferred from treasury stock and (y) in the case of outstanding
shares sold or transferred from treasury stock, the aggregate amount received by
the Company in respect of such transfer.
"Series A Preferred Stock" shall mean the Series A Preferred Stock, par
value $0.01 per share, of the Company.
"Series B Capital Percentage" shall mean at any time the fraction
(expressed as a percentage) obtained by dividing (a) the Series B Invested
Capital by (b) the Total Invested Capital.
"Series B Invested Capital" shall mean at any time the sum of the
aggregate amount of cash received by the Company (x) upon the original issuance
of all then outstanding shares of Series B Preferred Stock other than shares
sold or transferred from treasury stock and (y) in the case of outstanding
shares sold or transferred from treasury stock, the aggregate amount received by
the Company in respect of such transfer.
"Series B Preferred Stock" shall mean the Series B Preferred Stock, par
value $0.01 per share, of the Company.
"Series C Preferred Stock" shall mean the Series C Preferred Stock, par
value $0.01 per share, of the Company.
3
<PAGE>
"Series Conversion Price" shall have the meaning assigned thereto in
Section 5(c).
"Series Issue Date" shall mean the date on which shares of the Series C
Preferred Stock are first issued.
"Total Invested Capital" shall mean at any time the sum of (a) the Junior
Stock Invested Capital, (b) the Series A Invested Capital and (c) the Series B
Invested Capital.
Section 3. Dividends. No dividends may be declared on or paid to any
series of Common Shares, Junior Stock or Preferred Stock except as a part of a
declaration or payment of dividends to a group consisting of the Preferred Stock
and one or more series of Common Shares or Junior Stock. As between the class
consisting of the Preferred Stock and the class consisting of one or more series
of Common Shares or Junior Stock, dividends shall be allocated between such
classes pro rata based on the sum of (a) the number of shares of such series of
Common Shares or Junior Stock are issued and outstanding on the dividend record
date and (b) the number of Common Stock Equivalents with respect to the
Preferred Stock on the dividend record date. No dividends shall be paid to the
Series C Preferred Stock except as part of a dividend paid to the group
consisting of Series A Preferred Stock, Series B Preferred Stock and the Series
C Preferred Stock and holders of record of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock shall receive from the
amount available to such group individuals pro rata to the number of Common
Stock Equivalents with respect to the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock held of record by such holder
on the dividend record date.
Section 4. Distributions Upon Liquidation, Dissolution or Winding Up. In
the event of any Liquidation, no distributions may be made with respect to any
series of Common Shares, Junior Stock or Preferred Stock except as part of a
distribution to a group consisting of the Preferred Stock and one or more series
of Common Shares or Junior Stock. From the assets of the Company available for
distribution to the holders of Preferred Stock and one or more series of Common
Shares or Junior Stock (the "Distributable Amount"), the holders of Common
Shares or Junior Stock shall receive the Junior Stock Capital Percentage, the
holders of Series A Preferred Stock shall receive the Series A Capital
Percentage, the holders of Series B Preferred Stock shall receive the Series B
Capital Percentage and the holders of Series C Preferred Stock shall receive the
Series C Capital Percentage of any distributions of the Distributable Amount.
The Distributable Amount shall be so allocated until the aggregate amount per
share of such distributions (together with all other distributions and dividends
and subject to adjustment for stock dividends, splits, combinations, etc.)
received by the holders of (i) the Common Stock and Junior Stock shall equal the
Junior Stock Invested Capital, (ii) the Series A Preferred Stock shall equal the
Series A Invested Capital, (iii) the Series B Preferred Stock shall equal the
Series B Invested Capital and (iv) the Series C Preferred Stock shall equal the
Series C Invested Capital. Thereafter the holders of such series of Common
Shares and Junior Stock and the holders of Preferred Stock shall receive
distributions of the Distributable Amount pro rata to the number of shares of
Common Stock, Junior Stock and the number of Common Stock Equivalents with
respect to the Preferred Stock held by such holders on the record date for such
distributions. Distributions made to the class consisting of holders of such
series of Common Shares shall be made pro rata to the number of shares of such
series of Common Shares held of record by each such holder as of the record date
for such distribution. Distributions made to the class consisting of holders of
such Junior Stock shall be made pro rata to the number of shares
4
<PAGE>
of such Junior Stock held of record by each such holder as of the record date
for such distribution. Distributions made to the class consisting of holders of
Preferred Stock shall be made pro rata to the Common Stock Equivalents with
respect to the shares of Preferred Stock held of record by each such holder as
of the record date for such distribution.
Section 5. Conversion Rights. The holders of Series C Preferred Stock
shall have the following conversion rights:
(a) Optional Conversion. Subject to and upon the compliance with the
provisions of this Section 5, the holder of any share or shares of Series
C Preferred Stock shall have the right at such holder's option, at any
time or from time to time, to convert any of such shares of Series C
Preferred Stock (except that upon any Liquidation of the Company the right
of conversion shall terminate at the close of business on the business day
fixed for payment of the amount distributable on the Series C Preferred
Stock) into such number of fully-paid and nonassessable shares of Common
Stock as is obtained by (a) multiplying the number of Shares of Series C
Preferred Stock to be so converted by the Original Series Issue Price and
(b) dividing the result by the Series Conversion Price as defined in
Section 5(c). The term "Original Series Issue Price" shall mean $5.00 per
share.
(b) Automatic Conversion. Each outstanding share of Series C
Preferred Stock shall be converted automatically, without any further act
of the Company or its shareholders, into fully-paid and nonassessable
shares of Common Stock at the Series Conversion Price then in effect on
the earlier to occur of (a) the closing of a public offering by the
Company pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offering and sale of any
shares of any series of Common Shares by the Company for the account of
the Company in which (i) the aggregate gross proceeds (before deduction of
any underwriting discount, commission or expense) received by the Company
equal or exceed $5,000,000 and (ii) the price per share of such Common
Shares equals or exceeds 200% of the Series Conversion Price in effect
immediately prior to the closing of the sale of such shares by the
Company, and (b) the date as of which there shall have been converted
under Section 5(a) a cumulative aggregate number of shares of Series C
Preferred Stock equal to a majority of the issued and outstanding shares
of Series C Preferred Stock as of December 31, 1995.
(c) Series Conversion Price. The term "Series Conversion Price"
shall mean $5.00 per share, as such price may from time to time be
adjusted pursuant to the provisions of Section 5(f) and as such price as
adjusted is in effect at the date any shares or shares of Series C
Preferred Stock are surrendered for conversion. No payment or adjustment
shall be made for any dividends on the Common Stock issuable upon such
conversion.
(d) Mechanics of Conversion. Upon the occurrence of the event
specified in Section 5(b), the outstanding shares of Series C Preferred
Stock shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates representing
such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue to any
such holder certificates evidencing the shares of Common Stock issuable
upon such conversion unless certificates evidencing such shares of
Preferred Stock are
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<PAGE>
delivered to the Company or any transfer agent of the Company. The holder
of any shares of Series C Preferred Stock may exercise the conversion
right specified in Section 5(a) as to all or a minimum of 1,000 shares of
Series C Preferred Stock held by such holder or surrendering to the
Company or any transfer agent of the Company the certificate or
certificates for the shares of Series C Preferred Stock to be converted,
accompanied by written notice stating that the holder elects to convert
all or a specified portion of the shares of Series C Preferred Stock
represented thereby. Conversion shall be deemed to have been effected (i)
in the case of an automatic conversion pursuant to Section 5(b), on the
date of the occurrence of the event specified Section 5(b) or (ii) in any
other case, on the date when delivery of notice of any election to convert
and the certificates for shares is made (each such date described in
clause (i) or clause (ii) above being referred to herein as the
"Conversion Date"). Subject to the provisions of clause (viii) of Section
5(f), as promptly as practicable thereafter (and after surrender of the
certificate or certificates representing shares of Series C Preferred
Stock to the Company or any transfer agent of the Company in the case of
conversions pursuant to Section 5(b)) the Company shall issue and deliver
to, or upon the written order of, such holder a certificate of
certificates for the number of full shares of Common Stock to which such
holder is entitled and a check or cash with respect to any fractional
interest in a share of Common Stock as provided in Section 5(e). Subject
to the provisions of clause (viii) of Section 5(f), the Person in whose
name the certificate or certificates for Common Stock are to be issued
shall be deemed to have become a holder of record of such Common Stock on
the applicable Conversion Date. Upon conversion of only a portion of the
number of shares of Series C Preferred Stock covered by a certificate
representing shares of Series C Preferred Stock surrendered for conversion
(in the case of conversion pursuant to Section 5(a)), the Company shall
issue and deliver to, or upon the written order of, the holder of the
certificate so surrendered for conversion, at the expense of the Company,
a new certificate covering the number of shares of Series C Preferred
Stock representing the unconverted portion of the certificate so
surrendered.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series C Preferred Stock. If
more than one share of Series C Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full shares
of Common Stock issuable upon conversion thereof shall be completed on the
basis of the aggregate number of shares of Series C Preferred Stock so
surrendered. Instead of any fractional shares of Common Stock that would
otherwise be issuable upon conversion of any shares of Series C Preferred
Stock, the Company shall pay a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest of the
then Current Market Price.
(f) Conversion Price Adjustments. The Series Conversion Price and
number of shares of Common Stock deliverable upon conversion of the shares
of Series C Preferred Stock shall be subject to adjustment from time to
time as follows:
(i) Issuances of Capital Stock Prior to or on December 31,
1996. If, at any time after the Series Issue Date but prior to (and
including) December 31, 1996, the Company shall issue (or deemed to
have issued pursuant to clause (v) below) any capital stock (whether
Common Stock, any series of Common Shares or an otherwise series of
Preferred Stock) other than Excluded Stock (as hereinafter defined)
(capital stock, other than Excluded Stock, issued after the
6
<PAGE>
Series Issue Date being hereinafter referred to as "Capital Stock")
for a consideration per share (or, in the case of Capital Stock
convertible into Common Shares, for consideration per share based on
the Common Stock Equivalent number of shares) less than the Series
Conversion Price applicable immediately prior to such issuance, the
Series Conversion Price in effect immediately prior to such issuance
shall immediately (except as provided below) be reduced to a price
determined by dividing (a) the total consideration, if any, received
by the Company on such issue by (b) the Common Stock Equivalent of
the number of shares of Capital Stock issued by the Company in such
issue.
(ii) Issuances of Capital Stock. If, at any time after
December 31, 1996, the Company shall issue (or deemed to have issued
pursuant to clause (v) below) any Capital Stock other than Excluded
Stock for a consideration per share (or, in the case of Capital
Stock convertible into Common Shares, for consideration per share
based on the Common Stock Equivalent of the number of shares), less
than the Series Conversion Price applicable immediately prior to
such issuance, the Series Conversion Price in effect immediately
prior to such issuance shall immediately (except as provided below)
be reduced to a price determined by dividing (a) the sum of (i) the
Common Stock Equivalent of the number of shares of capital stock
outstanding immediately prior to such issue, multiplied by the
Series Conversion Price in effect immediately prior to such issue,
plus (ii) the consideration, if any, received by the Company upon
such issue, by (b) the Common Stock Equivalent of the number of
shares of capital stock outstanding immediately after such issue.
For the purpose of any adjustment of the Series Conversion Price pursuant
to clause (i) or clause (ii) of this Section 5(f), the following provisions
shall be applicable:
(iii) Cash. In the case of the issuance of Capital Stock for
cash, the amount of the consideration received by the Company shall
be deemed to be the aggregate cash proceeds received by the Company
for such Capital Stock before deducting therefrom any discounts,
commissions, taxes or other expenses allowed, paid or incurred by
the Company for any underwriting or otherwise in connection with the
issuance and sale thereof.
(iv) Consideration Other than Cash. In the case of the
issuance of Capital Stock (otherwise than upon the conversion of
shares of capital stock or other securities of the Company) for a
consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than securities by
their terms so exchangeable), the consideration other than cash
shall be deemed to be the fair market value thereof as determined by
the Board of Directors in good faith, irrespective of any accounting
treatment; provided, however, that such fair market value as
determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Capital Stock being issued in
exchange therefor as of the date the Board of Directors authorizes
the issuance of such shares.
7
<PAGE>
(v) Options and Convertible Securities. In the case of the
issuance at any time after the Series Issue Date of (x) options,
warrants or other rights to purchase or acquire Capital Stock
(whether or not at the time exercisable), (y) securities by their
terms so convertible into or exchageable for Capital Stock (whether
or not at the time so convertible or exercisable) or (z) options,
warrants or rights to purchase such convertible or exchangeable
securities (whether or not at the time exercisable):
a. the aggregate maximum number of shares of Capital
Stock deliverable upon exercise of such options, warrants or
other rights to purchase or acquire Capital Stock shall be
deemed to have been issued at the time such options, warrants
or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in clauses
(iii) and (iv) above), if any, received by the Company upon
the issuance of such options, warrants or rights for the
Capital Stock covered thereby (the amount of the purchase
price in each case to be determined in the manner provided in
clauses (iii) and (iv) above);
b. the aggregate maximum number of shares of Capital
Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities, or upon the
exercise of options, warrants or other rights to purchase or
acquire such convertible or exchangeable securities and the
subsequent conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were issued or
such options, warrants or rights were issued and for a
consideration equal to the consideration, if any, received by
the Company for any such securities and related options,
warrants or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the
Company upon the conversion or exchange of such securities and
the exercise of any related options, warrants or rights (the
consideration in each case to be determined in the manner
provided in clauses (iii) and (iv) above);
c. on any change in the number of shares of Capital
Stock deliverable upon exercise of any such options, warrants
or rights or conversion of or exchange for such convertible or
exchageable securities or any change in the consideration to
be received by the Company upon such exercise, conversion or
exchange (other than under or by reason of provisions designed
to protect agaisnt dilution), the Series Conversion Price as
then in effect shall forthwith be readjusted to such Series
Conversion Price as would have been obtained had an adjustment
been made upon the issuance of such options, warrants or
rights or securities on the basis of such change; provided,
however, there shall be no adjustment pursuant to this clause
(c) to the extent that any of such options, warrants, rights
or securities shall have been exercised, converted or
exchanges, as the case may be, prior to such change.
8
<PAGE>
d. on the expiration or cancellation of one or more of
such options, warrants or rights, or the termination of the
right to convert or exchange one or more of such convertible
or exchageable securities, if the Series Conversion Price
shall have been adjusted upon the issuance thereof and any of
such options, warrants, rights or securities shall not have
been exercised, converted or exchanged, as the case may be,
prior to such expiration or cancellation, the Series
Conversion Price shall forthwith be readjusted to such Series
Conversion Price as would have been obtained had an adjustment
been made upon only the issuance of such options, warrants,
rights or securities on the basis of the issuance of only the
number of shares of Capital Stock that would actually have
been issued upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such securities;
and
e. if the Series Conversion Price has been adjusted upon
the issuance of any such options, warrants, rights or
securities, no further adjustment of the Series Conversion
Price shall be made for the actual issuance of Capital Stock
upon the exercise, conversion or exchange thereof; provided,
however, that, except as provided in clause (d) of Section
5(f)(v), no increase in the Series Conversion Price shall be
made pursuant to this clause (e).
(vi) Excluded Stock. "Excluded Stock" shall mean: (1) shares
of Common Stock, any other series of Common Shares or any series of
Preferred Stock to be issued pursuant to the Company's 1989 Stock
Option Plan, 1993 Stock Option Plan, 1993 Executive Stock Option
Plan or any other stock options or warrants granted or sold to
employees, consultants, advisors or directors of the Company
relating to the provision of services to the Company; (2) shares of
Common Stock, any other series of Common Shares or any series of
Preferred Shares issued by the Company under provisions of the
Certificate of Incorporation as from time to time in effect or by
virtue of agreements designed to protect against dilution; and (3)
shares of Common Stock, any other series of Common Shares or any
series of Preferred Shares issued or reserved for issuance by the
Company upon conversion of any series of Preferred Shares.
(vii) Stock Dividends. If the number of shares of Common Stock
outstanding at any time after the Series Issue Date is increased by
a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then immediately
after the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend or the
effective date of such subdivision or split-up, as the case may be,
the Series Conversion Prices shall be appropriately reduced so that
the holder of any shares of Series C Preferred Stock thereafter
converted shall be entitled to receive the number of shares of
Common Stock that such holder would have owned immediately following
such action had such shares of Series C Preferred Stock have been
converted immediately prior thereto.
(viii) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the Series Issue Date is
decreased by a combination
9
<PAGE>
of the outstanding shares of Common Stock, then immediately after
the effective date of such combination, the Series Conversion Price
shall be appropriately increased so that the holder of any shares of
Series C Preferred Stock thereafter converted shall be entitled to
receive the number of shares of Common Stock that such holder would
have owned immediately following such action had such shares of
Series C Preferred Stock been converted immediately prior thereto.
(ix) Reclassification. In the event of a reclassification of
the Common Stock, each share of Series C Preferred Stock shall,
after such reclassification, be convertible into the number and type
of shares of capital stock or other securities to which the Common
Stock issuable (at the time of such reclassification) upon
conversion of such shares of Series C Preferred Stock would have
been entitled upon such reclassification; and, in such event, if
necessary, the provisions set forth herein with respect to the
rights and interests thereafter of the holders of Series C Preferred
Stock shall be appropriately adjusted so as to be applicable, as
nearly as may reasonably be, to any shares of stock or other
securities thereafter deliverable upon the conversion of such Series
C Preferred Stock. The subdivision or combination of Common Stock
issuable upon conversion of Series C Preferred Stock at any time
outstanding into a greater or lesser number of shares of Common
Stock (whether with or without par value) shall not be deemed to be
a reclassification of the Common Stock of the Company for the
purposes of this clause (ix).
(x) Rounding of Calculations; Minimum Adjustment. All
calculations under this Section 5(f) shall be made to the nearest
cent or to the nearest one one-hundredth (1/100th) of a share, as
the case may be. Any provision of this Section 5 to the contrary
notwithstanding, no adjustment to any Series Conversion Price shall
be made if the amount shall be carried forward and an adjustment
with respect thereto shall be made at the time of and together with
any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $.01 or
more.
(xi) Timing of Issuance of Additional Common Stock Upon
Certain Adjustments. In any case in which the provisions of this
Section 5(f) shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may defer
until the occurrence of such event (1) issuing to the holder of any
share of Series C Preferred Stock converted after such record date
and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of
Common Stock issuable upon such conversion before giving effect to
such adjustment and (2) paying to such holder any amount of cash in
lieu of a fractional share of Common Stock pursuant to Section 5(e);
provided, however, that the Company upon request shall deliver to
such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares, and such
cash, upon the occurrence of the event requiring such adjustment.
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<PAGE>
(xii) Prohibition of Action Resulting in Minimum Conversion
Price. The Company shall not take any action or the kind covered by
this Section 5(f) that would cause the Series Conversion Price to
fall below the greater of $.01 and the par value of the Common
Stock.
(g) Current Market Price. The "Current Market Price" at any date
shall mean the price per share of the Capital Stock on such date
determined by the Board of Directors as provided below. The Current Market
Price shall be the average of the daily closing price per share of such
Capital Stock for thirty (30) consecutive business days ending no more
than fifteen (15) business days before the day in question (as adjusted
for any stock dividend, split, combination or reclassification that took
effect during such 30-day period). The closing price for each day shall be
the last reported sales price regular way or, in the case no such reported
sales take place on such day, the average of the last reported bid and
asked price regular way, in either case, on the principal national
securities exchange on which such Capital Stock is listed or admitted to
trading, unless such principal national securities exchange is a regional
securities exchange and such Capital Stock is also quoted on the Nasdaq
Stock Market, or if not listed or admitted to trading on a national
securities exchange or if such principal securities exchange is a regional
securities exchange and such Capital Stock is also quoted on the Nasdaq
Stock Market, or, if not so quoted, as reported by the National Quotation
Bureau, Inc.; provided, however, that if such Capital Stock is not traded
in such manner that any of the quotations referred to above is available
for the period required hereunder, the Current Market Price per share of
such Capital Stock shall be deemed to be the fair market value as
determined by the Board of Directors in good faith, irrespective of any
accounting treatment.
(h) Statement Regarding Adjustments. Whenever any Series Conversion
Price shall be adjusted as provided in Section 5(f), the Company shall
within a reasonable time file, at the office of any transfer agent for
Series C Preferred Stock affected and at the principal office of the
Company, a statement showing in detail the facts requiring such adjustment
and the Series Conversion Price that shall be in effect after such
adjustment, and the Company shall also cause a copy of such statement to
be sent by mail, first-class postage prepaid, to each holder of Series C
Preferred Stock at its address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of Section 5(i).
(i) Notice to Holders. In the event the Company shall, propose to
take any action of the type described in clause (i) or (ii) of Section
5(f) (but only if the action of the type described in clause (i) would
result in an adjustment in a Series Conversion Price) or clause (v),
(vii), (viii) or (ix) of Section 5(f), the Company shall give notice to
each holder of shares of the Series C Preferred Stock affected, in the
manner set forth in Section 5(h), which notice shall specify the record
date, of any, with respect to any such action and the approximate date on
which such action is to take place. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate
the effect of such action (to the extent such effect may be known at the
date of such notice) on the Series Conversion Price and the number, kind
or class of shares or other securities or property which shall be
deliverable or puchaseable upon the occurrence
11
<PAGE>
of such action or deliverable upon conversion of shares of Series C
Preferred Stock. In the case of any such action which would require the
fixing of a record date, such notice shall be given at least twenty (20)
calendar days prior to the date so fixed, and in the case of all other
action, such notice shall be given at least thirty (30) calendar days
prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any
such action.
(j) Treasury Stock. For the purposes of this Section 5, the sale or
other disposition (other than sales or dispositions to employees,
consultants, advisors or directors of the Company in connection with the
provision of services to the Company) of any capital stock of the Company
theretofore held in its treasury shall be deemed to be an issuance
thereof.
(k) Costs. The Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of
shares of Common Stock of the Company upon conversion of any shares of
Series C Preferred Stock; provided, however, that the Company shall not be
required to pay any taxes that may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in
a name other than that of the holder of the Series C Preferred Stock in
respect of which such shares are being issued.
(l) Reservation of Shares. The Company shall reserve at all times so
long as any shares of Series C Preferred Stock remain outstanding out of
its treasury stock or its authorized but unissued shares of Common Stock,
or both, solely for the purpose of effecting the conversion of the shares
of Series C Preferred Stock, sufficient shares of Common Stock to provide
for the conversion of all outstanding shares of Series C Preferred Stock.
(m) Approvals. If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Series C Preferred Stock require
registration with or approval of any governmental authority under any
Federal of state law before such shares may be validly issued or delivered
upon conversion, then the Company will in good faith and as expeditiously
as possible endeavor to secure such registration or approval, as the case
may be. If, and so long as, any Common Stock into which the shares of
Series C Preferred Stock are then convertible is listed in any national
securities exchange, the Company will, if permitted by the rules of such
exhcange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon conversion.
(n) Valid Issuance. All shares of Common Stock that may be issued
upon conversion of the shares of Series C Preferred Stock will upon
issuance by the Company be duly and validly issued, fully-paid and
nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof and the Company shall take no action that will cause
a contrary result (including, without limitation, any action which would
cause the Series Conversion Price to be less than th par value, if any, of
the Common Stock).
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<PAGE>
Section 6. Voting Rights.
(a) General. Except as may be otherwise required by law or by the
provisions of this Section 6, the holders of Series C Preferred Stock
shall vote together with the holders of Preferred Stock and Common Stock
as a single class on every matter coming before any meeting of the
shareholders or otherwise to be acted upon by the shareholders. At every
meeting of the shareholders of the Company, every holder of Series C
Preferred Stock shall be entitled, for each such share standing in its
name on the transfer books of the Company, to a number of votes equal to
the number of votes equal to the number of votes that could be cast by
such holder if it held the Common Stock Equivalent of such share of Series
C Preferred Stock on the record date for such vote.
(b) Changes to Series C Preferred Stock. Without the affirmative
vote of the holders of at least a majority of the shares of Series C
Preferred Stock at the time outstanding, the Company may not effect any
change in the powers, preferences, privileges, rights, qualifications,
limitations or restrictions of the Series C Preferred Stock; provided,
however, and without expanding the foregoing limited class voting rights,
no such separate class vote shall be required of the Series C Preferred
Stock in order to amend the Certificate of Incorporation of the Company to
authorize any new class of stock, whether such class is senior, on a
parity with, or junior to the Series C Preferred Stock in dividends,
liquidation, voting rights or otherwise. Such consents shall either be
given in writing or by vote at a meeting called for that purpose at which
the holders of the Series C Preferred Stock shall vote as a class.
(c) Other Special Voting Rights of the Series C Preferred Stock. A
separate affirmative vote of the holders of at least a majority of the
shares of the Series C Preferred Stock outstanding and voting as a single
class shall be required for any additional series of Common Shares or
Preferred Stock to be issued if:
(i) Such series has senior rights to the Series C Preferred
Stock upon any Liquidation of the Company, or
(ii) (x) Such series has equivalent rights to the Series C
Preferred Stock upon any Liquidation of the Company; and (y) the
aggregate amount received by the Company in respect of the issuance
or sale of shares of Capital Stock having equivalent rights to the
Series C Preferred Stock upon any Liquidation of the Company from
and after the Series Issue Date through and inclusive of the
additional series of Common Shares or Preferred Shares proposed to
be issued exceeds $20,000,000.
(d) Special Redemption Rights. If in any case of a separate class
vote of the Series C Preferred Stock is required under clause (i) or (ii)
of Section 6(c) above a majority of the outstanding shares of the Series C
Preferred Stock are not voted in favor of such issuance of stock; but the
holders of majority of the then issued and outstanding Common Stock voting
as a separate class vote in favor of such issuance then the Company shall
have the right to redeem all but not less than all of the outstanding
shares of the Series C Preferred Stock at the following per share price
(subject to adjustment for stock dividends, splits, combinations, etc.)
(the "Redemption Price"):
If Redemption Date occurs:
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<PAGE>
on or after and prior to Redemption Price
----------- ------------ ----------------
July 1, 1995 June 30, 1996 $7.02
July 1, 1996 June 30, 1997 $7.58
July 1, 1997 June 30, 1998 $8.19
After July 1, 1998 $8.84
The Company's redemption right may be exercised at any time within
12 months after the record date for the special class vote provided in
clause (i) or (ii) of Section 6(c) by giving written notice to the holder
of record of each share of Series C Preferred Stock at least 30 days prior
to the date on which the redemption is to occur ("Redemption Date"). On
the Redemption Date the Company shall tender the Redemption Price to each
record holder of Preferred Stock against delivery of stock certificates
for the Series C Preferred Stock being redeemed; provided that until the
close of business on the date immediately preceding the Redemption Date
each holder of Series C Preferred Stock shall be entitled to convert such
stock to Common Stock pursuant to the terms hereof.
Notwithstanding the provision of Section 6(c), in order to permit
the Company to issue securities to provide in whole or in part funds to
redeem the Series C Preferred Stock as contemplated hereby, the
Certificate of Incorporation may be amended and/or additional series of
Common Shares or Preferred Shares may be issued solely upon the requisite
vote of other series and classes of Common Shares and Preferred Shares
(other than Series C Preferred Stock) provided the Company uses all or a
portion of the proceeds to redeem all outstanding Series C Preferred
Stock.
Section 7. Right of Conversion upon Merger or Consolidation. In case of
any consolidation or merger of the Company with any other corporation (other
than a consolidation or merger in which the Company is the continuing or
surviving corporation and which does not result in any change in the outstanding
Common Stock), or in case of any sale or transfer of all or substantially all
the assets of the Company, or in case of a binding share exchange in which all
the outstanding shares of the Common Stock are changed into cash, stock or other
securities or property, the holder of each share of Series C Preferred Stock
shall at any time after such consolidation, merger, sale or transfer or binding
share exchange have the right to convert such share of Preferred Stock into the
kind and amount of shares of stock or other securities or property or cash, as
the case may be, which such holder would have been entitled to receive upon such
consolidation, merger, sale, or transfer or binding share exchange if he had
held the Common Stock issuable upon the conversion of such share of Series C
Preferred Stock immediately prior to such consolidation, merger, sale, or
transfer or binding share exchange.
Section 8. Retirement of Shares. Shares of Series C Preferred Stock that
have been issued and have been redeemed, converted, repurchased or reacquired in
any manner by the Company shall be canceled and shall not be reissued.
Section 9. Certain Rights of Participation in Stock Issuances. In the
event that the Company shall issue any equity securities or securities
exercisable for or convertible into equity securities of the Company
(hereinafter "Equity Securities"), each holder of shares of Series
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<PAGE>
C Preferred Stock shall have the right to purchase such amount of such Equity
Securities that will enable such holder to retain the percentage ownership
interest (in terms of Common Stock or Common Stock Equivalents) in the Company
that such holder had immediately prior to such issuance of Equity Securities. No
later than twenty (20) days after the issuance of any Equity Securities the
Company shall give each record holder of Series C Preferred Stock written notice
(the "Notice") of the issuance or proposed issuance of such Equity Securities
and shall offer to sell to each such holder the amount of Equity Securities
described in the preceding sentence on the same terms and conditions that such
Equity Securities were or are proposed to be issued. Each such holder shall have
a period of twenty (20) days after the date of the Notice to purchase such
amount of Equity Securities on such terms and conditions. The rights of
participation provided in this Section 9 shall not apply to Equity Securities
issued under the provisions of this Section, upon conversion or exercise of any
Equity Securities issued under the provisions of this subdivision of any Equity
Securities, in consideration in whole or in part for the acquisition (whether by
merger or otherwise) by the Company or any of its subsidiaries of all or
substantially all of the stock or assets of any other entity, in connection with
any transaction (e.g. a joint venture, technology licensing, distribution or
other arrangement) with respect to which the Board of Directors has made a food
faith determination that the primary purpose of such transaction is the
advancement of the business interests of the Company as opposed to the raising
of funds, pursuant to a firm commitment underwritten public offering, pursuant
to the grant of options or warrants to and the exercise of the same to purchase
Equity Securities by employees, consultants, advisors or directors of the
Company relating to the providing of services to the Company or the issuance of
treasury shares acquired from employees, consultants, advisors or directors,
upon the exercise of any right which was not itself in violation of the terms if
this Section 9, the issuance of securities pursuant to anti-dilution,
preemptive, participation or similar rights granted herein or by contract or the
issuance of Equity Securities all or a portion of the proceeds of which will be
used in redeeming Series C Preferred Stock as provided in Section 6(d) hereof.
The rights of the holders of Series C Preferred Stock under this Section may be
waived by a vote or consent of persons holding a majority of the Common Stock
Equivalents at the time represented by the issued and outstanding shares of
Series C Preferred Stock.
15
<PAGE>
IN WITNESS WHEREOF, this Certificate has been signed by Paul J. Maddon and
attested to by Robert A. McKinney of the Company, all as of the 8th day of
December, 1995.
PROGENICS PHARMACEUTICALS, INC.
By: /s/ Paul J. Maddon
--------------------------
Name: Paul J. Maddon
Title: President
Attest:
By: /s/ Robert A. McKinney
--------------------------
Name: Robert A. McKinney
Title: Assistant Secretary
16
<PAGE>
CERTIFICATE OF ELIMINATION
OF
CLASS A COMMON STOCK
OF
PROGENICS PHARMACEUTICALS, INC.
---------------
Pursuant to Section 151 of Title 8 of the Delaware Code of 1953
---------------
THE UNDERSIGNED, being the Vice President and Treasurer of Progenics
Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY
CERTIFY that, pursuant to the provisions of Section 151 of Title 8 of the
Delaware Code of 1953 and the authority conferred upon the Board of Directors by
the provisions of the Certificate of Incorporation, as amended, of the
Corporation (the "Certificate of Incorporation"), the Board of Directors of the
Corporation duly adopted resolutions regarding the series of its Common Shares
previously designated as Class A Common Stock in a Certificate of Designation
dated October 5, 1989. These resolutions are as follows:
RESOLVED, that 5,000,000 shares of Common Shares were previously
designated as Class A Common Stock, par value $.001 per share (the "Class A
Common Stock") in a Certificate of Designation dated October 5, 1989, that none
of the authorized shares of Class A Common Stock are outstanding and that none
of the shares designated as Class A Common Stock will be issued; and
<PAGE>
RESOLVED, that pursuant to the authority granted expressly to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation, as amended, of the Corporation (the "Certificate
of Incorporation"), the number of shares designated as Class A Common Stock
shall be decreased by 5,000,000 shares to zero and such shares shall resume the
status of undesignated Common Shares.
2
<PAGE>
IN WITNESS WHEREOF, the Certificate of Elimination has been signed by
Robert A. McKinney of the Corporation, as of the 25th day of October, 1996.
PROGENICS PHARMACEUTICALS, INC.
By: /s/ Robert A. McKinney
----------------------
Name: Robert A. McKinney
Title: Vice President and Treasurer
3
<PAGE>
CERTIFICATE OF INCREASE
OF
COMMON STOCK
OF
PROGENICS PHARMACEUTICALS, INC.
---------------
Pursuant to Section 151 of Title 8 of the Delaware Code of 1953
---------------
THE UNDERSIGNED, being the Vice President and Treasurer of Progenics
Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY
CERTIFY that, pursuant to the provisions of Section 151 of Title 8 of the
Delaware Code of 1953 and the authority conferred upon the Board of Directors by
the provisions of the Certificate of Incorporation, as amended, of the
Corporation (the "Certificate of Incorporation"), the Board of Directors of the
Corporation duly adopted resolutions providing for an increase in the number
of shares of authorized Common Shares which are designated as Common Stock
from 12,000,000 to 40,000,000. These resolutions are as follows:
RESOLVED, that the Board of Directors previously designated 12,000,000
Common Shares as Common Stock, par value $.001 per share (the "Common Stock")
pursuant to a Certificate of Amendment of the Corporation's Certificate of
Incorporation dated July 17, 1989; and
<PAGE>
RESOLVED, that pursuant to the authority granted expressly to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation, the number of Common Shares designated as Common
Stock shall be increased by 28,000,000 shares to a total of 40,000,000 shares.
2
<PAGE>
IN WITNESS WHEREOF, the Certificate of Increase has been signed by
Robert A. McKinney of the Corporation, as of the 25th day of October, 1996.
PROGENICS PHARMACEUTICALS,
INC.
By: /s/ Robert A. McKinney
----------------------
Name: Robert A. McKinney
Title: Vice President and Treasurer
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * *
Progenics Pharmaceuticals, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted proposing and declaring advisable the following
amendments to the Certificate of Incorporation of the Corporation:
Automatic Conversion of Series B Preferred Stock
RESOLVED: That, Article Fourth, Paragraph C, Section 5(b) of the
Certificate of Incorporation shall be amended to read as
follows:
"(b) Automatic Conversion. Each outstanding share of a series
of Preferred Stock shall automatically be converted,
without any further act of the Corporation or its
shareholders, into fully paid and nonassessable shares
of Common Stock at the Applicable Series Conversion
Price then in effect on the earlier to occur of (a) the
closing of a public offering by the Corporation pursuant
to an effective registration statement under the
Securities Act of 1933, as amended, covering the
offering and sale of any shares of any series of Common
Shares by the Corporation for the
<PAGE>
account of the Corporation in which (i) the aggregate
gross proceeds (before deduction of any underwriting
discount, commission or expense) received by the
Corporation equal or exceed $5,000,000 and (ii) the
price per share of such Common Shares equals or exceeds
200% of the Applicable Series Conversion Price in effect
immediately prior to the closing of the sale by the
Corporation of such shares in the case of Series A
Preferred Stock and 160% of the Applicable Series
Conversion Price in effect immediately prior to the
closing of the sale by the Corporation of such shares in
the case of Series B Preferred Stock, and (b)(i) in the
case of the Series A Preferred Stock the date as of
which there shall have been converted under subparagraph
5(a) a cumulative of 1,145,001 shares of Series A
Preferred Stock and (ii) in the case of the Series B
Preferred Stock the date as of which there shall have
been converted under subparagraph 5(a) a cumulative
aggregate number of shares of Series B Preferred Stock
as follows: (x) prior to January 31, 1994, a number of
shares equal to a majority of the issued and outstanding
shares of Series B Preferred Stock as of February 28,
1993, and (y) from and after February 1, 1994, a number
of shares equal to a majority of the issued and
outstanding shares of Series B Preferred Stock as of
February 1, 1994.
Automatic Conversion of Series C Preferred Stock
RESOLVED: That, Section 5(b) of the Certificate of Designation of
Series C Preferred Stock shall be amended to read as
follows:
"(b) Automatic Conversion. Each outstanding share of Series C
Preferred Stock shall be converted automatically,
without any further act of the Company or its
shareholders, into fully-paid and nonassessable shares
of Common Stock at the Series Conversion Price then in
effect on the earlier to occur of (a) the closing of a
public offering by the Company pursuant to an effective
registration statement under the
2
<PAGE>
Securities Act of 1933, as amended, covering the
offering and sale of any shares of any series of Common
Shares by the Company for the account of the Company in
which (i) the aggregate gross proceeds (before deduction
of any underwriting discount, commission or expense)
received by the Company equal or exceed $5,000,000 and
(ii) the price per share of such Common Shares equals or
exceeds 128% of the Series Conversion Price in effect
immediately prior to the closing of the sale of such
shares by the Company, and (b) the date as of which
there shall have been converted under Section 5(a) a
cumulative aggregate number of shares of Series C
Preferred Stock equal to a majority of the issued and
outstanding shares of Series C Preferred Stock as of
December 31, 1995."
Fractional Shares - Series A and Series B Preferred Stock
RESOLVED: That, Article Fourth, Paragraph C, Section 5(e) of the
Corporation's Certificate of Incorporation shall be
amended to read as follows:
"(e) Fractional Shares. No fractional shares of Common Stock
or scrip shall be issued upon conversion of shares of
Preferred Stock. If more than one share of Preferred
Stock shall be surrendered for conversion at any one
time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares
of Preferred Stock so surrendered. Instead of any
fractional shares of Common Stock which would otherwise
be issuable upon conversion of any shares of Preferred
Stock, the Corporation shall round up the number of
shares of Common Stock to be issued upon conversion."
Fractional Shares - Series C Preferred Stock
RESOLVED: That, Section 5(e) of the Corporation's Certificate of
Designation shall be amended to read as follows:
3
<PAGE>
"(e) Fractional Shares. No fractional shares of Common Stock
or scrip shall be issued upon conversion of shares of
Series C Preferred Stock. If more than one share of
Series C Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the
number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the
aggregate number of shares of Series C Preferred Stock
so surrendered. Instead of any fractional shares of
Common Stock that would otherwise be issuable upon
conversion of any shares of Series C Preferred Stock,
the Company shall round up the number of shares of
Common Stock to be issued upon conversion."
Par Value
RESOLVED: That, in the judgement of the Board of Directors of this
Corporation, it is deemed advisable to amend the
Certificate of Incorporation of the Corporation by
changing paragraph A of the Article thereof numbered
"Fourth" so that, as amended, paragraph A of Article
Fourth reads as follows:
"FOURTH:
(A) TOTAL NUMBER OF SHARES OF STOCK. The total number of shares of
stock of all classes that the Corporation shall have authority
to issue is sixty million (60,000,000) shares. The authorized
capital stock is divided into twenty million (20,000,000)
Preferred Shares of the par value $.001 each and forty million
(40,000,000) Common Shares of the par value of $.0013 each."
Stock Split
RESOLVED: That, at the time of this amendment to the Certificate
of Incorporation, each four issued and outstanding
shares of Common Stock of the Corporation shall be
reclassified as and combined into three shares of
validly issued, fully paid and nonassessable Common
Stock of the Corporation. No scrip or fractional
4
<PAGE>
shares shall be issued by reason of this amendment. In
lieu of fractional shares, the Corporation shall round
up the number of shares of Common Stock to be issued to
the next whole number of shares of Common Stock as a
result of the stock split.
SECOND: That in lieu of a meeting and vote of stockholders, the holders of
a majority of the issued and outstanding shares of each class of the capital
stock of the Corporation required to approve such amendments have given their
written consent to such amendments in accordance with the provisions of Section
228 of the General Corporation Law of the State of Delaware and written notice
of the adoption of the amendments has been given as provided in Section 228 to
every stockholder entitled to receive notice.
THIRD: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
5
<PAGE>
IN WITNESS WHEREOF, the Certificate of Amendment of Certificate of
Incorporation has been signed by Paul J. Maddon and attested to by Robert A.
McKinney of the Corporation, as of the 28th day of October, 1996.
PROGENICS PHARMACEUTICALS, INC.
By:
/s/ Paul J. Maddon
---------------------------------
Name: Paul J. Maddon, M.D., Ph.D
Title: President
Attest:
By:
/s/ Robert A. McKinney
- --------------------------
Name: Robert A. McKinney
Title: Assistant Secretary
6
<PAGE>
Exhibit 4.1
<TABLE>
<C> <S> <C>
COMMON STOCK COMMON STOCK
Graphic Graphic
[PROGENICS
PHARMACEUTICALS, INC.
LOGO]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 743187 10 6
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.0013 PAR VALUE, OF
PROGENICS PHARMACEUTICALS, INC.
transferable on the books of the Corporation by the holder hereof in parson or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
/s/Robert A. McKinney [PROGENICS PHARMACEUTICALS, INC. /s/Paul A. Maddon
CORPORATE
TREASURER SEAL CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1986
DELAWARE]
</TABLE>
<PAGE>
<TABLE>
<S> <C>
The Corporation is authorized to issue more than one class of stock. The
Corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional
or other special rights of each class of stock or series thereof and the
qualifictions, limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______________Custodian____________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act________________________________________
in common (State)
UNIF TRF MIN ACT -- _______________Custodian (Until age________)
(Cust)
_______________under Uniform Transfers
(minor)
to Minors Act_________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received,________________________________________________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
__________________________________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
_________________________________________________________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated________________________________________
________________________________________________________________
Notice: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
______________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIBIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION
SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15
</TABLE>
<PAGE>
Exhibit 10.12
This document, when properly executed, shall constitute a Supply Agreement
between Progenics Pharmaceuticals, Inc. with offices at 777 Old Saw Mill River
Road, Tarrytown, NY, 10591 ("Progenics") and Intracel Corporation, with offices
at 359 Allston Street, Cambridge, MA 02139 ("Intracel").
1. PERIOD OF AGREEMENT: February 1, 1996 through January 31, 1999. After the
original term, this Agreement will renew automatically for successive 12
month periods unless either party gives notice to the other of its
intention not to renew at least 120 days prior to the expiration of the
then current term.
2. MATERIAL: Recombinant HIV-1LAI gp120 (full-length) and recombinant
soluble human CD4 produced in a Chinese Hamster Ovary ("CHO") expression
system referred to hereafter as "gp120" and "CD4" or together as
"Product" (see attached Product Specification Sheets).
3. MATERIAL SPECIFICATIONS: Material shall be supplied in the form and
manner, and must conform in all material respects to the specifications
set out in the attached Product Specification Sheets. Alterations to
these specifications require the express written consent of each party.
4. PRICE:
sCD4
----
February 1, 1996 through January 31, 1994: [***]
February 1, 1997 through January 31, 1998: [***]
February 1, 1998 through January 31, 1999: [***]
gp120
-----
February 1, 1996 through January 31, 1997: [***]
February 1, 1997 through January 31, 1998: [***]
February 1, 1998 through January 31, 1999: [***]
5. MINIMUM PURCHASE: 10 milligrams of gp120 or CD4.
6. PAYMENT TERMS: Net 30 days, following the receipt of a properly prepared
and correct invoice.
7. DELIVERY TERMS: F.O.B. Tarrytown, NY.
8. RELEASES: Intracel will advise Progenics of its purchase requirements at
least quarterly, or as may otherwise suit the parties by agreement.
Progenics shall ship Product as required by Intracel according to a
mutually agreed upon schedule. Progenics shall advise Intracel at its
earliest opportunity if it is unable to ship Product at an agreed upon
time. Progenics will, on a best effort basis, attempt to fulfill any
unscheduled, or spot requirements of Intracel.
[***] Confidential Treatment Requested
<PAGE>
9. LABELING AND PACKAGING: Both Intracel's and Progenics' names shall appear
on the main product label, along with the following statement:
"Manufactured by Progenics Pharmaceuticals, Inc." Both Intracel's and
Progenics' names and logos shall appear on promotional literature, along
with the following statement: "Manufactured by Progenics Pharmaceuticals,
Inc."
All labels to be approved by both parties. All product labeling and
literature shall contain the phrase "For Laboratory Use." Progenics will
package product as 100 micrograms per vial, or in other package sizes as
mutually agreed upon by both parties. Product will be shipped on dry ice.
Shelf life of the Product will be no less than six (6) months upon
receipt by Intracel.
10. CONFIDENTIALITY: The parties hereto shall keep confidential all
confidential technical information, shall not disclose or make known to
any individual, firm, or corporation, except when authorized in writing
to do so by the other party, and shall not use such information for any
purpose other than the performance of the obligations provided in this
Agreement. The provisions of this clause shall remain binding for five
(5) years after the termination of this agreement. Each party shall use
the same degree of care to avoid disclosure of confidential technical
information as the party employs with similar information of its own
which it does not desire to publish or disclose. Any confidential
information shared between the parties must be identified and labeled in
writing as confidential. The confidentiality of and information disclosed
verbally must be identified in writing as confidential no more than 14
days after disclosure.
This obligation shall not apply to information and/or documents which:
A) Are or come within the public domain otherwise than as a consequence
of a breach of the obligations hereunder;
B) Are known to the receiving party prior to disclosure by the other
party as shown by the receiving party's records;
C) Are lawfully disclosed to the receiving party by third parties; or
D) Are subsequently independently developed by the receiving party
through no reference whatsoever to disclosure hereunder.
11. WARRANTY: Progenics warrants the packaged product hereunder shall meet
the specifications set forth in the attached Product Specification Sheets
and shall be free from defects except those caused by misuse or
mishandling occurring after such delivery. Progenics agrees to notify
Intracel prior to making any formulation changes in the Product.
Progenics further warrants that packaged product will meet the warranty
of merchantability and fitness for intended use. In the event of a recall
of Product, Progenics agrees to reimburse Intracel for all reasonable
costs incurred in the recall.
<PAGE>
12. USE OF MATERIAL: Progenics shall supply Intracel sCD4 and gp120 to be
sold by Intracel to third parties. The material will be used only for
research purposes and not for other uses such as clinical diagnostics or
therapeutic development. This Agreement is limited to resale of sCD4 and
gp120 as packaged at Progenics and does not allow Intracel to modify the
Product or combine the Product with other components, with the exception
of labeling Product with biotin, HRP, or FITC, which is permitted.
13. RELATIONSHIP OF THE PARTIES: Nothing contained herein shall be construed
to empower either party to act as agent for the other. The parties agree
that each of them shall, in relation to its obligations hereunder, be
acting as an independent contractor.
14. CANCELLATION: This Agreement may be canceled by either party upon 120
days written notice to the other party.
15. ENTIRETY: This Agreement, together with the Attachments specifically
referenced and attached hereto, embodies the entire understanding between
Intracel and Progenics, and there are no contracts, warranties, or
representations, oral or written, express or implied, with reference to
the subject matter hereof which are not merged herein. Except as
otherwise specifically stated, no modification hereto shall be of any
force or effect unless reduced to writing and signed by both parties and
expressly referred to as being modifications of this Agreement.
AGREED & APPROVED:
For Progenics: For Intracel:
------------- -------------
Name: Paul J. Maddon, M.D., Ph.D. Name: Cheryl G. Cataldo
Title: Chairman & CEO Title: Controller
Signature: /s/ Paul J. Maddon Signature: /s/ Cheryl G. Cataldo
Date: February 7, 1996 Date: February 8, 1996
<PAGE>
Exhibit 10.15
LICENSE AND SUPPLY AGREEMENT
This license and supply agreement is entered into as of August 31 ,
1995 (the "Effective Date") between Cambridge Biotech Corporation, debtor and
debtor in possession, Case No. 94-43054-IFQ, United States Bankruptcy Court
for the District of Massachusetts, Western Division, a Delaware corporation,
having offices at 365 Plantation Street, Worcester, Massachusetts 01605, and
Progenics Pharmaceuticals, Inc., a Delaware corporation having offices at 777
Old Saw Mill River Road, Tarrytown, New York 10591 (each singularly a "Party"
and collectively the "Parties") with reference to the following:
RECITALS
WHEREAS, CBC is performing research and development in the field of
purified saponin extracts from the tree Quillaja saponaria, production
processes therefor and uses thereof as an immune adjuvant; and
WHEREAS, Progenics is performing research and development in the field
of vaccines for human cancers and is interested in licensing CBC's rights to
such purified saponin extracts for use as an immune adjuvant with such
vaccines;
THEREFORE, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement:
1.1 "ACTIVE DEVELOPMENT EFFORT" is defined in Section 5.1.
[***]
-1-
*** Confidential Treatment Requested
<PAGE>
1.3 "ADJUVANT REQUIREMENTS" means the amount of Adjuvant in bulk
which Progenics and its sublicensees may require pursuant to the
provisions hereof for all research and development, pre-clinical
and human clinical testing of Licensed Products and, after
Commercial Introduction, production of Licensed Products for
comme'rcial sales.
1.4 "AFFILIATE" means any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly
owns, is owned by, or is under common ownership with a party to
this Agreement to the extent of at least fifty percent (50%) of
the equity (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular
jurisdiction) having the power to vote on or direct the affairs
of the entity and any person, firm, partnership, corporation or
other entity actually controlled by, controlling, or under common
control with a party to this Agreement.
1.5 "AGREEMENT" means this License and Supply Agreement, including
any exhibits, schedules or other attachments thereto, as any of the
foregoing may be validly amended from time to time.
1.6 "CBC" means Cambridge Biotech Corporation, a Delaware corporation,
its Affiliates, and its successors and permitted assigns.
1.7 "cGLPs" means the current Good Laboratory Practices for Finished
Pharmaceuticals pursuant to 21 C.F.R. 58 et seq., as amended from
time to time.
1.8 "cGMPs" means the current Good Manufacturing Practices for
Finished Pharmaceuticals pursuant to 21 C.F.R. 210 et seq., as
amended from time to time.
1.9 "COMMERCIAL INTRODUCTION" means on a country-by-country basis the
date of first commercial sale (other than for purposes of
obtaining regulatory approval) of a Licensed Product by Progenics
or its sublicensees in such country.
1.10 "EFFECTIVE DATE" is defined in the introductory paragraph.
1.11 "FIELD OF USE" means vaccines containing purified GM2 and GD2
ganglioside preparations (whether alone or in combination with each
other) for the prevention or treatment of human cancers.
1.12 "FULLY BURDENED MANUFACTURING COST" means the actual cost of
Manufacture by CBC of the Adjuvant under a Manufacturing Process in
compliance with cGMPs, if applicable, which actual cost shall be
comprised of the cost of goods produced as determined in
accordance with United States generally accepted accounting
-2-
<PAGE>
principles, and shall include direct labor, direct material and
allocable manufacturing overhead but shall exclude selling,
general and administrative, research and development and interest
expenses; Fully-Burdened Manufacturing Cost shall include, to the
extent applicable, the cost to CBC of having some portion or all
of the Manufacturing Process performed by a third party.
[***]
1.15 "KNOWHOW" means materials, data, results, formulae, designs,
specifications, methods, processes, improvements, techniques,
ideas, discoveries, technical information, process information,
clinical information and any other information, whether or not
any of the foregoing is patentable, known to and which is
confidential (in accordance with Section 9.1 hereof) and
proprietary to CBC now or hereafter during the Term, to the extent
that any of the foregoing relates to any Licensed Patent Rights or
the development, manufacture, use or sale of Adjuvant in connection
with the development, manufacture, use or sale of any Licensed
Product; provided however, that the term "Knowhow" shall not include
any of the foregoing that is subject to proprietary rights of third
parties.
1.16 "LICENSED PATENT RIGHTS" means any and all patent applications
and patents (including inventor's certificates and utility models)
throughout the world, including any substitutions, extensions,
reissues, reexaminations, renewals, divisions, continuations and
continuation-in-parts of the foregoing, which CBC now or hereafter
during the Term owns or controls (solely or jointly) or under which
CBC has the fight to grant sublicenses (regardless of any royalty or
other payments to a third party required of CBC), to the extent that
any of the foregoing covers, in whole or in part, the development,
manufacture, use or sale of Adjuvant in connection with the
development, manufacture, use or sale of any Licensed Product.
"Licensed Patent Rights" shall include, without limitation,
the patent listed on Exhibit "A" attached and incorporated into
this Agreement.
1.17 "LICENSED PRODUCT" means any vaccine or vaccines formulated using
Licensed Patent Rights or Knowhow in the Field of Use.
-3-
*** Confidential Treatment Requested
<PAGE>
1.18 "LICENSED TERRITORY" means the world.
1.19 "MANUFACTURE" OR "MANUFACTURING PROCESS" means the aseptic
storage, handling, production, processing and packaging of
Adjuvant in accordance with this Agreement.
[***]
1.21 "OPTION" is defined in Section 3.2.
1.22 "PARTY" AND "PARTIES" are defined in the introductory paragraph.
1.23 "PLA-ENABLING HUMAN CLINICAL TRIAL" means as to a specific
Licensed Product, a controlled and lawful study of the efficacy
of such Licensed Product by administration of such Licensed
Product to human beings where the principal purpose of such trial
is to provide statistically significant efficacy data to serve as
pivotal support for an application to the United States Food
and Drug Administration for approval of a Licensed Product for the
indication being investigated by the trial.
1.24 "PROGENICS" means Progenics Pharmaceuticals, Inc., a Delaware
corporation, its Affiliates and its permitted successors and
assigns.
1.25 "PROGENICS SHARES" is defined in Section 3.2.
1.26 "SPECIFICATIONS" is defined in Section 8.3(a).
1.27 "TERM" is defined in Section 10.1.
1.28 "VALID CLAIM" means a claim in an issued, unexpired patent in the
Licensed Patent Rights, which has not been held invalid,
unpatentable or unenforceable in an unappealed or unappealable
decision of a court or other governmental body of
-4-
*** Confidential Treatment Requested
<PAGE>
competent jurisdiction, which has not been rendered unenforceable
through disclaimer or otherwise, and which has not been lost
through an interference proceeding.
2. LICENSE.
2.1 GRANT OF LICENSE RIGHTS. CBC hereby grants to Progenics a
worldwide license that is exclusive as to all parties [***],
to use the Knowhow and practice the Licensed Patent Rights
to develop, manufacture, have manufactured, use, sell, and
have sold Licensed Products.
2.2 SUBLICENSES. Progenies shall have the right to grant sublicenses
of its rights under this Agreement with respect to Licensed
Products (but not the Adjuvant alone) (a "Sublicense") only as
follows:
(a) Progenics may grant a Sublicense to a third party for
purposes of manufacturing and/or marketing the Licensed
Products developed by or under continuing development by
Progenics; and
(b) Progenics may grant a Sublicense to a third party that
enters into a joint development or joint venture agreement
with Progenics in connection with Licensed Products to be
developed by Progenics and the third party.
(c) Progenies shall promptly notify CBC of the execution of
each sublicensee and shall provide CBC with a copy of same.
2.3 ON-GOING TRANSFER OF KNOWHOW AND LICENSED PATENT RIGHTS.
CBC shall promptly transfer to Progenics existing Knowhow
and Licensed Patent Rights for purposes of Progenics'
research and development (including but not limited to
pre-clinical trials and human clinical trials but excluding
Knowhow relating to the Manufacture of the Adjuvant) with
respect to Licensed Products. On an on-going basis during
the Term, CBC shall identify and disclose to Progenics in
writing any and all Knowhow (exclusive of Knowhow relating
to the Manufacturing the Adjuvant) then existent, whether or
not potentially patentable, and any and all Licensed Patent Rights
then existent.
3. SCHEDULE OF PAYMENTS TO CBC.
3.1 Initial Payments
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[***]
3.2 RESTRICTED SHARES. As additional consideration for the rights
granted hereunder, Progenies shall issue to CBC simultaneously
with the execution of this agreement sixty thousand (60,000)
shares of Progenies' common stock (the "Progenies Shares). Each
of the Progenies Shares shall be subject to the restriction (the
"Transfer Restriction") that no holder of such share shall sell,
assign or transfer (collectively a "Transfer") a Progenies Share
during the period of time that the Transfer Restriction is in force
and effect as to such share. Upon the occurrence of certain
milestone events, as set forth below, the Transfer Restriction
shall lapse as to the number of Progenies Shares which remain
restricted set forth opposite the respective milestone.
MILESTONE NUMBER OF PROGENICS SHARES AS
TO WHICH RESTRICTION LAPSES
[***] 15,000
[***] 15,000
[***] 30,000
Total 60,000
Progenies shall promptly give CBC notice of the occurrence of
each milestone. Notwithstanding the foregoing, a holder of
Progenies Shares may Transfer all (but not less than all) of the
Progenies Shares which are subject to the Transfer Restriction to
a transferee of all or substantially all of the business division to
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which this license pertains or to such holder's legal successor
upon a merger, reorganization, consolidation, dissolution or
liquidation of such holder. In the event that the license
hereunder shall terminate pursuant to the provisions of either
Section 5.1 or Section 10, then CBC (or its permitted transferee or
successor pursuant to the next preceeding sentence) shall reconvey
to Progenics all of the Progenics Shares which on the effective date
of such termination remain subject to the Transfer Restriction.
3.3 ROYALTIES. Subject to the other terms of this agreement,
Progenics shall pay to CBC royalties as follows:
(a) [***] by Progenics of any Licensed Product
covered by a Valid Claim of Licensed Patent Rights,
payable on a country-by-country basis until the expiration
of the last-to-expire of the Valid Claims covering a
Licensed Product in the country of manufacture or sale.
[***]
(b) In the event that Progenics should enter into a
Sublicense, CBC will receive [***]
(c) If Licensed Patent Rights existing in a given country are
not sufficient to afford a given Licensed Product
sufficient protection from competition by a vaccine in the
Field of Use manufactured by a third party using an adjuvant
based on Quillaja Saponaria and such third party holds
at least one-third of the market for such vaccine in the
Field of Use in such country, then the royalty rate payable
by Progenies to CBC will be [***]
(d) In any country in which there are no Licensed Patent
Rights, Progenics shall pay to CBC a royalty equal to [***]
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4. ROYALTY PAYMENTS, REPORTS AND RECORDS.
4.1 COMMERCIAL INTRODUCTION. Progenies shall promptly give CBC notice
of the occurrence of Commercial Introduction of each Licensed
Product.
4.2 ROYALTY PAYMENTS.
(a) PAYMENTS; DEDUCTION OF TAXES. After the date of Commercial
Introduction of the first Licensed Product, royalties
under this Agreement on Net Sales of any Licensed Product
for a given calendar quarter will be due and payable from
Progenies to CBC within thirty (30) days after the end of
such calendar quarter. Royalties due under Section 3.3(b)
attributable to sublicense fees shall be payable at the end
of the quarter when such license fees are payable. Progenies
will remit any such royalty payment due to CBC under this
Agreement by check payable to CBC. Any tax paid or required
to be withheld by Progenies on account of royalties
payable to CBC under this Agreement shall be deducted from
the amount of royalties otherwise due. Progenies shall make
any applicable withholding payments due on behalf of CBC
and shall promptly provide CBC with written documentation
of any such taxes withheld and paid by Progenies or its
sublicensees for the benefit of CBC.
(b) FOREIGN CURRENCY CONVERSION. For sales of any Licensed
Product that occur in a currency other than United States
dollars ("foreign currency sales"), the quarterly royalty
payment will be calculated as follows:
(A/B) X C = United States dollars royalty payment on
foreign currency sales, where
A = foreign currency "Net Sales" per quarter
B = foreign exchange conversion rate, expressed in local
currency per United States dollar (using as the applicable
foreign exchange conversion rate the average of the rate
published in the Wall Street Journal or any other mutually
agreed-upon source for the last business day of each of the
three (3) months of the quarter); and
C = the royalty rate applicable to such Net Sales under
Section 3.2.
4.3 ROYALTY REPORTS. After the date of Commercial Introduction of the
first Licensed Product Progenies shall render to CBC, together
with the royalty payment due under Section 4.2 for a given
calendar quarter, a written account for such calendar
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quarter showing (a) total gross sales and Net Sales of Licensed
Products sold by Progenics and its sublicensees, and the total
gross royalty and license fee revenues paid to Progenies by any
sublicensee(s) during such calendar quarter, and (b) a calculation
of the royalty rate and royalties payable under Section 3.3
(including, in the case of foreign currency sales, the total
foreign currency Net Sales during such calendar quarter, the
applicable foreign exchange conversion rate(s) and the total
United States dollar royalty payment amount).
4.4 PROGENICS' RECORDKEEPING AND INSPECTION. After the date of
Commercial Introduction of the first Licensed Product, Progenics
shall keep for at least three (3) years records of all sales of
Licensed Products in sufficient detail to permit CBC to confirm
the accuracy of Progenics' royalty calculations. At the request of
CBC no more frequently than once per year, upon at least five (5)
business days' prior written notice to Progenics from CBC, and at
the expense of CBC (except as otherwise provided below), Progenics
shall permit a nationally recognized, independent, certified
public accountant selected by CBC and acceptable to Progenics to
inspect, during regular business hours, any such Progenics records
for the then-preceding three (3) years solely to the extent
necessary to verify such calculations, provided that such accountant
in advance has entered into a confidentiality agreement with
Progenics (substantially similar to the confidentiality provisions
of this Agreement) limiting the disclosure of such information to
authorized representatives of the Parties. Results of any such
inspection shall be made available to both Parties. If such
inspection reveals a deficiency in the calculation of royalties
resulting in an underpaymeat to CBC by five percent (5%) or more,
Progenics shall pay all costs and expenses of such inspection.
5. DUE DILIGENCE.
5.1 Maintenance of License. In order to maintain the license granted
pursuant to Section 2.1 with respect to a designated Licensed
Product, Progenics agrees to use its best efforts to:
[***]
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[***]
If Progenics shall fail to achieve any of the above objectives
and such failure shall remain unremedied for a period of sixty
(60) days after notice of such failure to Progenics by CBC (the
"Grace Period"), this license shall automatically terminate at
the end of the Grace Period (except with respect to the first
Licensed Product if Progenics has fulfilled the obligations set
forth in subparagraphs (a)-(d) of this section 5.1).
Notwithstanding the foregoing, if such failure is a result of
Progenics not having obtained a third party license necessary
to make, use or sell Licensed Products and reasonable evidence is
submitted by Progenics to CBC that such license can be obtained in a
reasonable period of time, Progenics may request that the Grace
Period be extended for a period of time set forth in the request.
CBC shall not unreasonably withhold its consent to such extension
but in no event shall the Grace Period exceed one year.
CBC shall not unreasonably withhold its consent to any reasonable
revision in the preceding schedule requested in writing by Progenics
and supported by reasonable evidence of technical difficulties or
delays in the clinical studies or regulatory process that could have
not have been reasonably anticipated or avoided, (as for example,
should the clinical studies for the first Licensed Product be
unsuccessful, the parties shall establish a reasonable schedule
for the second Licensed Product). Notwithstanding the foregoing,
CBC shall not have the right to terminate the license for failure
of Progenics to meet a goal if such failure is a result of.'
(i) CBC's failure to meet its obligations hereunder, or (ii) an
action brought by a third party claiming that the use of the
Adjuvant in Licensed Products infringed a patent of such
third party.
5.2 PRE-CLINICAL AND CLINICAL PROGRAMS. Subject to the other terms of
this Agreement (including but not limited to Section 8.7), with
respect to all Licensed Products, Progenics or its sublicensees
shall be solely responsible for the conduct of pre-clinical and
human clinical testing, regulatory filings, applications
and approvals, and expenses in connection with all of the foregoing.
In connection with all of the foregoing:
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(a) CBC COOPERATION. CBC shall cooperate with and assist
Progenies in the preparation and filing of information
with respect to the Adjuvant for use in any Investigational
New Drug application, Product License Application or any
other regulatory filings throughout the Licensed Territory
with respect to any Licensed Product. Without limiting the
generality of the foregoing, for purposes of supporting
all pre-clinical and human clinical trials and all
regulatory filings, applications and approvals on the part
of Progenics with respect to any Licensed Product,
CBC hereby agrees that on an on-going basis during the Term:
(i) CBC shall permit Progenics and its sublicensees to
reference CBCs drug master file for the Adjuvant with
the United States Food and Drug Administration; (ii) to the
extent not subject to the proprietary rights of third
parties, CBC shall provide Progenics with all pre-clinical
and clinical data, results and other relevant information
with respect to the Adjuvant (including but not limited to
information regarding the toxicity, safety and stability of
the Adjuvant) that is (A) submitted by CBC in connection with
any Investigational New Drug application or other regulatory
filing with respect to the Adjuvant from time to time during
the Term or (B) otherwise in CBC's possession from time to
time during the Term; and (iii) a CBC representative,
at Progenics' request, shall attend periodic meetings to
discuss the progress of clinical trials of any Licensed
Products. Progenies will reimburse CBC for the foregoing
assistance only (i) for its reasonable out-of-pocket
expenses, including but not limited to travel, and (ii)
CBC's fully burdened costs of performing technical studies
or engaging outside services subject to the prior approval
of Progenies.
(b) ADVERSE EVENTS REPORTING. On an on-going basis during the
Term and for at least ten (10) years after the expiration
or termination of this Agreement, each Party agrees to
provide the other Party with any written information in
its possession which indicates adverse effects in humans
associated with the Adjuvant or any products using the
Adjuvant (including but not limited to Licensed Products).
(c) PROGENICS' ERGULATORY REPORTS. Within thirty (30) days of
the Effective Date and on an annual basis thereafter
(commencing with the first anniversary of the Effective
Date), Progenics will provide CBC with (i) a written report
summarizing the regulatory filings, applications and
approvals with respect to any Licensed Product that Progenics
or its sublicensees (a) have made, sought or obtained in the
prior twelve (12)-month period, and (b) reasonably expect
to make, seek or attempt to obtain in the ensuing twelve
(12)- month period following the date of the report,and
(ii) results of clinical trials conducted by Progenics
using QS-21. Any
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and all such reports shall be considered confidential and
proprietary information of Progenics in accordance with
Section 9, provided, however, that CBC may share relevant
safety data with its other QS-21 licensees in a manner
intended not to disclose any other proprietary information of
Progenics.
6. REPRESENTATIONS AND WARRANTIES OF PROGENICS; REGISTRATION RIGHTS.
6.1 Progenics represent and warrants to CBC as follows:
(a) ORGANIZATION, STANDING AND AUTHORITY. Progenics is a
corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware.
Progenics has all requisite corporate power to own and
operate its properties and assets and to carry on its
business as presently being conducted and as proposed to be
conducted. Progenics has, and will have on all relevant
dates, all requisite legal and corporate power to execute
and deliver this Agreement, to issue the Progenics Shares,
and to carry out and perform its obligations under the terms
of this Agreement.
The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby have
been duly authorized by all appropriate Progenics
corporate action. The performance by Progenics of any of
the terms and conditions of this Agreement on its part to be
performed does not and will not constitute a breach or
violation of any other agreement or understanding, written
or oral, to which it is a party.
(b) CAPITALIZATION. The authorized capital stock of Progenics
at December 31, 1994 consisted of: (i) 40,000,000 common
shares, par value of $.001 per share, of which 12,000,000
shares have been designated Common Stock, of which
2,999,550 shares are issued and outstanding and 5,000,000
shares have been designated Class A Common Stock, of which
no shares are issued and outstanding; and (ii) 20,000,000
preferred shares, par value $.001 per share, of which
4,000,000 shares have been designated Series A Preferred
Stock, of which 2,308,000 shares are issued and outstanding
and 2,500,000 shares have been designated Series B
Preferred Stock, of which 1,982,830 shares are issued and
outstanding. Progenics has reserved 2,348,313 shares of
Progenies Common stock for stock options outstanding at
December 31, 1994. Progenics has reserved 150,000 shares
of Progenics Common Stock for a warrant outstanding
at December 31, 1994.
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<PAGE>
Except as set forth above, there are (i) no share
of capital stock or other voting securities of Progenics
authorized or outstanding, (ii) no subscriptions, options,
conversation or exchange rights, warrants, repurchase or
redemption agreements or other agreements, claims or
commitments of any nature whatsoever obligating Progenies to
issue, transfer, deliver or sell, repurchase or redeem or
cause to be issued, transferred, delivered, sold,
repurchased or redeemed, additional shares of its capital
stock or other securities or obligating Progenics to grant,
extend or enter into any such agreement or commitment: (iii)
no voting trusts or other agreements or understandings with
respect to the voting of the capital stock of Progenics or
agreements or understandings, restrictions on disposition of
the capital stock of Progenics to which Progenics is a party
or is bound or, to the actual knowledge of Progenics, to
which any other party is bound; and (iv) except as set forth
herein, no agreements granting any registration fights
including "piggy-back" fights to any person or entity. All
issued and outstanding shares of common stock have been duly
authorized and validly issued and are fully paid and
nonassessable.
(c) FINANCIAL STATEMENTS. Progenics has delivered to CBC copies
of the following financial statements:
(i) Progenics' audited balance sheet at December 31, 1994,
and its audited statements of operations,
stockholders' equity and cash flows for the year then
ended certified by Coopers & Lybrand LLP. 6.2
Registration Rights.
(a) INCIDENTAL REGISTRATION. IfProgenics at any time proposes to
file a registration statement under the Securities Act with
respect to an offering for its own account or on behalf of
holders of its securities of any class of equity security
(excluding an initial public offering which does not include
securities registered for the account of so-called "selling
shareholders" or a registration relating solely either to the
sale of securities to employees of Progenics pursuant to a
stock purchase, stock option or similar plan or a merger,
recapitalization or reorganization), Progenics shall promptly
give CBC or any holder of Progenies Shares pursuant to a
transfer permitted under Section 3.2 (collectively a
"Holder") written notice of such registration at least 10
days prior to the anticipated filing date and such notice
shall offer the Holder the opportunity to register such
number of Progenics Shares as the Holder may request. Upon
the written request of Holder given within 10 days after
receipt of such notice delivered by Progenies, Progenics
shall use its best efforts to cause to be registered
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<PAGE>
under the Securities Act all of the Progenics Shares that
Holder has requested to be registered.
(b) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares herein issued by
Progenics, Progenics shall not be required under
paragraph 6.2(a) to include any of the Progenics Shares in
such underwriting unless Holder accepts the terms of the
underwriting as agreed upon between Progenics and the
underwriters selected by it, and then only in such quantity
as will not, in the written opinion of the underwriters,
jeopardize the success of the offering by Progenics. In
connection with any offering pursuant to paragraph 6.2(a).
if the total amount of shares requested by Holder to be
included in such offering exceeds the amount of securities
sold other than by Progenics that the underwriters reasonably
believe is compatible with the success of the offering, then
Progenics shall be required to include in the offering only
that number of shares that the underwriters believe will not
jeopardize the success of the offering, (the shares so
included to be apportioned pro rata among all stockholders
of Progenics selling in the offering according to the total
amount of shares owned by each such stockholder or in such
other proportions as shall be agreed upon by such
stockholders).
(c) EXPENSES OF REGISTRATION. Progenics shall bear and pay all
expenses incurred in connection with any registration, filing
or qualification of shares with respect to registrations
pursuant to this paragraph 6.2 for Holder, including, without
limitation, all registration, filing, qualification, printing
and accounting fees relating or apportionable thereto, but
excluding underwriting discounts and commissions relating to
shares being registered, applicable transfer taxes and
expenses of counsel to any of the Holders, which shall be
borne by the stockholders selling shares being registered.
(d) PROGENICS WITHDRAWAL OF REGISTRATION. Progenics shall have
no liability to Holder for Progenics' withdrawal of any
registration as to which Holder has registration rights
under the paragraph 6.2 provided such withdrawal is made
in good faith by Progenies and not for the purpose of
impairing any of Holder's rights under this paragraph 6.2.
(e) OBLIGATIONS OF PROGENICS. Whenever required under this
paragraph 6.2 to effect the registration of any shares,
Progenies shall, as expeditiously as reasonably possible:
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(i) prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts
to cause such registration statement to become
effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be
necessary to comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by such registration statement;
(iii) furnish to Holder such number of copies of a
prospectus, including a preliminary prospectus,
in conformity with the requirement of the Securities
Act and such other documents as they may reasonably
request in order to facilitate the disposition of the
shares owned by them and covered by a registration
statement flied under this paragraph 6.2;
(iv) use its best efforts to register and qualify the
securities covered by such registration statement
under such other securities or Blue Sky laws of such
jurisdiction as shall be reasonably requested by
Holder, provided that Progenics shall not be required
in connection therewith or as a condition thereto to
qualify to do business or to file a general consent
to service of process in any such states or
jurisdictions;
(v) in the event of any underwritten public offering,
enter into and perform its Obligations under an
underwriting agreement, in usual and customary form,
with the underwriter(s) of such offering who shall be
chosen by Progenics (and Holder shall also enter into
and perform its obligations under such an underwriting
agreement); and
(vi) notify Holder as promptly as possible at any time when
a prospectus relating thereto is required to be
delivered under the Securities Act of the happening
of any event as a result of which the prospectus
included in such registration statement, as then in
effect, includes an untrue statement of a material
fact or omits to state a material fact required to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which
they were made, not misleading.
(f) OBLIGATIONS OF HOLDER. In connection with any registration
required to be effected pursuant to this paragraph 6.2,
Holder shall furnish to Progenies
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such information regarding itself, the shares held by it and
the intended method of disposition of such securities as
shall be required to effect the registration of their shares.
(g) LOCK-UP AGREEMENT. CBC hereby agrees that in connection with
any registration of equity securities relating to an
underwritten offering thereof to the general public, CBC
shall not, whether or not CBC is participating in such
registration, to the extent requested by Progenies or the
underwriter of such offering, sell or otherwise transfer or
dispose of (other than to donors who agree to be similarly
bound) any Progenies Shares (other than those shares which
are in fact included, in such registration) without the prior
written consent of Progenics or such underwriters. as the
case may be, for such period of time (not to exceed 120 days)
from the effective date of the registration statement for
such registration as Progenies or such underwriters may
specify in writing.
(h) INDEMNIFICATION. Progenies may require, as a condition to
including any Progenies Shares in any registration statement
filed pursuant to this paragraph 6.2, that Progenics shall
have received an undertaking satisfactory to it from (i) the
prospective seller of such securities, to indemnify and hold
harmless Progenics, each officer and director of each such
underwriter and each other person, if any, who controls
Progenies or the underwriter, and (ii) each such underwriter
of such securities, to indemnify and hold harmless Progenics,
each officer and director of Progenics, each prospective
seller, each officer and director or each prospective seller
and each other person, if any, who controls Progenies or
any such prospective seller within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act,
with respect to any statement in or omission from such
registration statement, any preliminary prospectus, final
prospectus or summary prospectus included therein, or any
amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with
written information furnished by such prospective seller
or underwriter, as the ease may be, to Progenics for use in
the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment
or supplement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf
of Progenics or any such director, officer or controlling
person and shall survive the transfer of such securities by
such seller.
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7. CBC REPRESENTATIONS AND WARRANTIES.
7.1 CBC represents and warrants to Progenies as follows:
(a) ORGANIZATION, STANDING AND AUTHORITY. CBC is a corporation
duly organized, validly existing and in good standing under
the laws of the state of Delaware. CBC has all requisite
corporate power to own and operate its properties and assets
and to carry on its business as presently being conducted
and as proposed to be conducted. CBC has, and will have on
all relevant dates, all requisite legal and corporate power
to execute and deliver this Agreement.
The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby have
been duly authorized by all appropriate CBC corporate action.
The performance by CBC of any of the terms and conditions of
this Agreement on its part to be performed does not and will
not constitute a breach or violation of any other agreement
or understanding, written or oral, to which it is a party.
CBC has the full right and legal capacity to provide in the
Licensed Territory all rights to the Knowhow and Licensed
Patent Rights granted to Progenics hereunder.
(b) PROCEEDINGS OR CLAIMS. There are no adverse proceedings,
claims or actions pending, or to the best of CBC's knowledge,
threatened, relating to the Knowhow and/or Licensed Patent
Rights and at the time of disclosure and delivery thereof to
Progenies, CBC shall have the full right and legal capacity
to disclose and deliver the Knowhow and Licensed Patent
Rights to Progenics without violating the fights of third
parties.
(c) INVESTMENT. CBC is acquiring the Progenics Shares for
investment and not with a view to the distribution thereof
nor with any present intention of distributing or selling any
Progenics Shares except in compliance with the Securities
Act.
8. MANUFACTURE AND SUPPLY.
8.1 GENERAL. The terms of the exclusive license granted to Progenics
under Section 2 notwithstanding, Progenics agrees that CBC
retains the right to Manufacture the Adjuvant for use in Licensed
Products. CBC agrees to supply Progenies with one hundred percent
(100%) of its Adjuvant Requirements for purposes of research and
development, pre-clinical and human clinical trials and
commercial sales of all Licensed Products. CBC also agrees to
supply each of Progenics sublicensees with all of its Adjuvant
Requirements provided such sublicensee enters a supply
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agreement with CBC containing substantially the same terms
pertaining to supplyas set forth herein. CBC hereby agrees, at
its sole expense, to commit allreasonably necessary facilities,
appropriately trained personnel, machinery, equipment, utilities
and other CBC resources required to satisfy its obligations under
this Agreement. CBC may contract with a third party to fulfill
its obligations hereunder and/or may assign or sublicense all or
any portion of its rights and obligations under this Section 8
with respect to Manufacture and supply of Adjuvant Requirements.
For all purposes under this Section 8, the term CBC,.shall be
deemed to include any such third party, assignee or sublicensee
of CBC.
8.2 CBC TRANSFER PRICE OF ADJUVANT.
(a) THROUGH FILING OF PRODUCT LICENSE APPLICATION. With respect
to each and every Licensed Product, CBC shall supply one
hundred percent (100%) of Adjuvant Requirements prior to
Commercial Introduction of such Licensed Product, including
for purposes of all research and development, pre-clinical
trials and human clinical trials (including PLA-Enabling
Human Clinical Trials) of such Licensed Product. CBC agrees
to supply Adjuvant under this Section 8.2(a) at a transfer
price to Progenics [***]. In order to verify the production
cost of the Adjuvant, Progenics will have the right to pay
for an independent certified public accountant to inspect the
records of CBC once per year during regular business hours,
provided that such accountant has entered into a
confidentiality agreement with CBC limiting the disclosure
of such information to authorized representatives of the
Parties.
(b) COMMERCIAL INTRODUCTION AND SALES. With respect to each and
every Licensed Product, CBC shall supply [***] of Adjuvant
Requirements for commercial sales of suchLicensed Product
upon and after its Commercial Introduction. CBC agrees to
supply Adjuvant under this Section 8.2(b) at a transfer
price [***].
8.3 CBC'S REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING
MANUFACTURING. CBC hereby represents and warrants to Progenics
and its sublicensees as follows:
(a) PRE-CLINICAL TRIAL USE. CBC shall Manufacture or cause to be
Manufactured all Adjuvant Requirements for use in any vaccine
used in
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connection with any pre-clinical trial of any Licensed
Product (i) strictly in compliance with (A) this Agreement,
(B) the specifications for the Manufacture of Adjuvant, as
may from time to time be required by the Food and Drug
Administration (the "Specifications") the current version of
which is set forth in Exhibit B, and (C) all applicable laws
and regulations.
(b) HUMAN CLINICAL TRIAL USE. CBC shall Manufacture or cause to
be Manufactured all Adjuvant Requirements for use in any
vaccine used in connection with any human clinical trial of
any Licensed Product (i) strictly in compliance with (A) this
Agreement, (B) all Specifications, and (C) all applicable
laws and regulations, including but not. limited to cGMPs,
to the extent applicable. Notwithstanding the foregoing, the
parties acknowledge and agree that the Adjuvant which is
being delivered to Progenics in the first lot (approximately
one gram) has been manufactured by CBC for use in Phase 1
and Phase 2 clinical trials in a manner which CBC believes
to be appropriate for such level of clinical trial. It shall
be the responsibility of Progenics to obtain such assurances
from regulatory authorities as it may deem necessary or
appropriate for the use of such Adjuvant in the trials it is
planning to conduct.
(c) COMMERCIAL USE. CBC shall Manufacture or cause to be
Manufactured all Adjuvant Requirements for use in the
commercialization of any Licensed Product (i) strictly in
compliance with (A) this Agreement, (B) all Specifications,
and (C) all applicable laws and regulations, including but
not limited to cGMPs, to the extent applicable.
(d) CERTIFICATE OF ANALYSIS; NON-COMPLYING ADJUVANT. Before,
during and after Manufacture of Adjuvant Requirements, CBC
shall obtain samples, monitor the Manufacturing Process and
the environment of such Manufacture, and keep such technical
books and records of all of the foregoing as are required
under the Specifications and all applicable laws and
regulations, including but not limited to cGLPs or cGMPs (as
appropriate and applicable). CBC shall test each lot of
Adjuvant Requirements Manufactured for Progenics as required
under the Specifications. Together with each such lot of
Adjuvant Requirements, CBC shall provide a written
certificate of analysis which shall set forth the results of
such testing by CBC and CBC's quality control approval of
such lot of Adjuvant Requirements. CBC's obligations under
this Section 8.3(d) shall be at CBC's sole expense. Progenies
shall be entitled to test any such Adjuvant Requirements in
accordance with the Specifications, at Progenics' sole
expense. Without limiting any of Progenics' other rights
or remedies under this Agreement, with respect to any
Adjuvant Requirements supplied
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hereunder that do not comply with applicable
representations and warranties under this Section 8.3, the
Parties agree that: (i) neither Progenies nor its
sublicensees shall be obligated to pay CBC the transfer
price applicable to such non-complying Adjuvant
Requirements; (ii) if Progenies or its sublicensee has
already paid for such non-complying Adjuvant Requirements,
Progenies or its sublicensee shall be entitled to a credit
against future purchases for the amount paid to CBC
therefor; (iii) CBC on a priority basis shall Manufacture
and supply to Progenics or its sublicensee, as applicable,
replacement Adjuvant Requirements in full compliance with
this Section 8.3; and (iv) CBC shall bear the full cost of
returning or destroying the non-complying Adjuvant
Requirements. Progenies shall be deemed to have accepted
any Adjuvant provided hereunder and such Adjuvant shall be
deemed to comply with the provisions hereof unless
Progenies shall notify CBC of the rejection of such
Adjuvant and the reasons for such rejection within the
forty-five days (45) of delivery of such Adjuvant.
8.4 PROCEDURES FOR ESTIMATING, ORDERING AND SUPPLYING ADJUVANT REQUIREMENTS.
Subject to the other terms of this Agreement:
(a) ANNUAL DEMAND FORECAST FOR EACH MANUFACTURING YEAR. During
the Term, commencing on October 1, 1995 and on an on-going
quarterly basis as described below, Progenics will provide
CBC with a written rolling annual demand forecast of Adjuvant
Requirements for each calendar year which shall be binding as
to the first quarter and non-binding as to the remaining
three (3) quarters. Thereafter, Progenics shall provide an
updated annual demand forecast on a quarterly basis no later
than ninety (90) days in advance of the commencement of the
first (and binding) quarter covered by such annual demand
forecast. The Parties also agree that the variance, if any,
between the binding forecast of a given quarter and the last
non-binding forecast for such quarter shall be between
[***] and [***], meaning that Progenies' binding forecast for
such quarter must be at least [***] but not more than [***]
of such last non-binding forecasted amount for such quarter.
(b) PURCHASE ORDERS. Except as set forth in Section 8.4(a),
Progenics shall place a firm purchase order or purchase
orders with CBC setting forth (i) the quantities of Adjuvant
Requirement to be Manufactured and supplied hereunder, (ii)
the schedule for receipt from CBC of such batch(es) of
Adjuvant Requirements, and (iii) instructions for shipping
and packaging. Each such firm purchase order shall be
submitted no later than thirty (30)
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days in advance of the first scheduled date of receipt
thereof. Subject to the other terms of this Agreement,
Progenics shall be obligated to place firm purchase orders
with CBC for, and CBC hereby commits to Manufacture and
supply hereunder pursuant to such firm purchase orders, no
less than one hundred percent (100%) of the amount of
Adjuvant Requirements in the then-binding quarter of each
annual demand forecast under Section 8.4(b); provided,
however, that: (A) the Parties may mutually agree in writing
to amend any such firm purchase order; (B) CBC, in its
discretion, may agree to supply additional amounts of
Adjuvant Requirements in excess of the then-binding amount,
provided that Progenies place firm purchase order(s) for such
excess Adjuvant Requirements on a timely basis; and (C) CBC
agrees to provide Progenics with as much advance written
notice as possible (and in any case at least thirty (30)
days' written advance notice) if CBC determines that any
scheduled delivery of Adjuvant Requirements pursuant to any
purchase order will be delayed for any reason of which CBC
becomes aware.
(c) SAFETY STOCK [***]
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8.5 ALLOCATION.
(a) ALLOCATION AMONG CUSTOMERS. CBC and Progenics hereby
agree and acknowledge that, in the event that CBC is
unable to satisfy in full its obligations under this
Agreement to supply one hundred percent (100%) of Adjuvant
Requirements as well as CBC's obligations to third parties
with respect to supply of Adjuvant, CBC shall allocate
proportionately all available Adjuvant among Progenies and
its sublicensees and such third parties with highest
priority for the supply of Adjuvant given to outstanding
firm purchase orders for comparable delivery time frames.
(b) INABILITY TO SUPPLY. In the event CBC shall fail to fill
one hundred percent (100%) of Progenics' allowable finn
purchase orders for two successive calendar quarters (an
"Inability to Supply") then, notwithstanding Section 8.1,
Progenics may either purchase its Adjuvant Requirements
from a third party or manufacture for its own use its
Adjuvant Requirements, in either case only until such time
as CBC shall demonstrate (if such demonstration shall be
made within one (I) year after the end of the second
consecutive quarter of such shortfall) that it is willing
and able to supply Progenics' Adjuvant Requirements
(provided that Progenics shall not be require. d to
purchase additional Adjuvant from CBC until such time as
it has satisfied commitments of reasonable scope and
duration made for purchase or manufacture of Adjuvant
during such period). In the event Progenics elects to
manufacture the Adjuvant, CBC shall transfer to Progenics
all information and Knowhow reasonably necessary to
manufacture the Adjuvant and CBC shall fully cooperate
with regulatory authorities to qualify Progenics as a
manufacturer of the Adjuvant. Progenics' fight to
manufacture under this section shall be its exclusive
remedy for any damages or losses it incurs as a result of
any interruption in the supply of Adjuvant under this
Agreement. Without limiting the generality of the
foregoing, CBC shall not be liable to Progenics for
consequential damages or lost profits.
8.6 REGULATORY APPROVAL OF MANUFACTURING. CBC shall be responsible,
at sole cost and expense, for obtaining all necessary regulatory
approvals particular to the Adjuvant for Manufacture and supply
of Adjuvant Requirements. Progenics shall advise CBC of any new
requirements specified by the United States Food and Drug
Administration or the Federal Food, Drug and Cosmetic Act (or the
equivalent regulatory authority or law in other countries) with
respect to any Licensed Product. At any time when any portion of
the Adjuvant Requirements is being Manufactured by CBC for
Progenics, Progenics shall have the right to have its personnel
observe all phases and areas of such Manufacture and the CBC
facility,
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and CBC shall not modify in any manner any Specifications without
Progenics' prior written consent (which consent shall not be
unreasonably withheld).
8.7 CBC RECORDKEEPING AND INSPECTION.
(a) TECHNICAL RECORDS. With respect to any Manufacture and supply of
Adjuvant Requirements, CBC shall, at its expense, keep properly
completed technical books and records, test data and reports as
required under the Specifications and all applicable laws and
regulations, including but not limited to cGLPs or cGMPs (as
appropriate), and in any case shall maintain such technical
information for at least two (2) years from the expiration date
of the relevant Licensed Product or longer if required under
applicable laws and regulations (including but not limited to
cGLPs and cGMPs, as applicable). During regular business hours
and upon reasonable advance written request, CBC shall make any
such technical information available to Progenics for inspection
and copying.
(b) FINANCIAL RECORDS. During the Term, CBC shall keep for at
least three (3) years records of its Fully Burdened
Manufacturing Costs, and the calculations thereof in
sufficient detail to permit Progenics to confirm the accuracy
thereof. At the request of Progenics, and not more frequently
than once per year, upon at least five (5) business days'
prior written notice, and at the expense of Progenics (except
as otherwise provided below), CBC shall permit a nationally
recognized, independent, certiffied public accountant selected
by Progenics and acceptable to CBC to inspect (during regular
business hours) any such CBC records for the then-preceding
three (3) years solely to the extent necessary to verify such
costs, margins and calculations, provided that such accountant
in advance has entered into a confidentiality agreement with
CBC and Progenics substantially similar to the confidentiality
provisions of this Agreement, limiting the use and disclosure
of such information to authorized representatives of the
Parties. Results of any such inspection shall be made
available to both Parties. If such inspection reveals a
deficiency in the calculation of CBC's Fully Burdened
Manufacturing Cost resulting in an overpayment to CBC of the
transfer price by five percent (5%) or more, CBC shall pay all
costs and expenses of such inspection.
(c) QUALITY AUDIT. To the extent required by law, CBC shall permit
Progenics to audit, in cooperation with CBC's personnel,
production, packaging, and quality control facilities of CBC
and any of its significant suppliers as they relate to
production of the Adjuvant to allow Progenics to verify CBC's
compliance with its responsibilities under this Agreement.
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8.8 LIABILITY.
(a) INDEMNIFICATION BY PROGENIES. Except as otherwise provided in
Sections 8.8(b) or (c), Progenics will defend, indemnify and
hold harmless CBC against any and all claims, actions,
liabilities, damages, loses, costs or expenses, including
reasonable attorneys' fees, based upon or arising out of the
sales or use of any Licensed Product by Progenics or a
sublicensee, unless CBC should fail to give Progenics prompt
notice thereof in writing and such failure materially
prejudices CBC's abilities to defend against such claim. CBC
shall permit Progenics to control the investigation,
preparation and defense thereof(including any compromise or
settlement thereof and any appeal) and provide reasonable
assistance to Progenics, at Progenics' expense, in that regard.
(b) LIABILITY. Each Party assumes full responsibility and
liability for any injury, damage or expense which it or its
employees, agents and invitees incur and which arise from its
manufacture, handling and use of the Adjuvant or Licensed
Products, except to the extent such injury, damage or expense
arises from the negligence or willful misconduct of the other
Party.
(c) INDEMNIFICATION BY CBC. CBC will defend, indemnify and hold
harmless Progenics against any and all claims, actions,
liabilities, damages, losses, costs or expense (including
reasonable attorneys' fees) based upon the failure of the
Adjuvant to conform to the Specifications; of CBC, unless
Progenics shall fail to give CBC prompt notice thereof in
writing and such failure materially prejudices Progenics'
ability to defend against said claim. Progenics shall permit
CBC to control the investigation, preparation and defense
thereof (including any compromise or settlement thereof and
any appeal) and provide reasonable assistance to CBC, at CBC's
expense, in that regard.
9. CONFIDENTIALITY.
9.1 CONFIDENTIALITY. The Parties acknowledge that during the Term,
either Party may receive from the other Party information which is
proprietary, confidential and of significant commercial value to
the disclosing Party. Except to the extent expressly authorized by
this Agreement, the Parties agree that, for the Term and for five
(5) years thereafter, the receiving Party shall keep completely
confidential and shall not publish or otherwise disclose and shall
not use for any purpose (except those related to this agreement)
any information furnished to it by the other Party pursuant to this
Agreement, except to the extent that it can be
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established by the receiving Party by competent proof (including
written records) that such information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by
the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving
Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through
any act or omission of the receiving Party in breach of this
Agreement;
(d) was subsequently lawfully disclosed to the receiving Party by
a third party; or
(e) was subsequently independently developed by receiving Party.
9.2 PERMITTED DISCLOSURES. Each Party may disclose the other Party's
information to the extent such disclosure is reasonably necessary
in prosecuting or defending litigation, filing, prosecuting or
maintaining patent applications or patents, complying with
applicable laws or regulations, or, in the case of Progenics and
its sublicensees, conducting preclinical or clinical trials or
preparing or filing regulatory filings with respect to Licensed
Products; provided, however, that if a Party is required to make
any disclosure of the other Party's information furnished pursuant
to this Agreement, it will give reasonable advance notice of such
disclosure requirements to the other Party and, except to the
extent inappropriate as in the case of patent applications, will
use its best efforts to secure confidential treatment of such
information required to be disclosed.
10. TERM; TERMINATION.
10.1 TERM. This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided in this Section 10, shall
expire on the date royalties are not longer payable by Progenics to
CBC under Section 3.3 (the "Term"), upon which expiration Progenics
shall thereafter have in perpetuity a royalty-free license in the
Licensed Territory to use the Knowhow and practice the Licensed
Patent Rights to develop, make, have made, use and sell Licensed
Products without any accounting to CBC.
10.2 MATERIAL BREACH. Subject to Section 13.6, failure by either Party
to comply with any of the material obligations contained in this
Agreement shall entitle the other
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Party to give to the Party in default notice specifying the nature
of the default and requiring it to cure such default. If such
default is not cured within sixty (60) days after the receipt of
such notice, the notifying Party shall be entitled, without
prejudice to any of its other rights conferred on it by this
Agreement and in addition to any other remedies available to it by
law or in equity, to terminate this Agreement effective upon
written notice to the other Party. The right of a Party to
terminate this Agreement, as hereinabove provided, shall not be
affected in any way by its waiver or failure to take action with
respect to any previous default.
10.3 ACCRUED RIGHTS, SURVIVING OBLIGATIONS; SUBLICENSEES. Expiration or
any termination of this Agreement for any reason shall be without
prejudice to any rights which shall have accrued to the benefit of
either Party prior to such expiration or termination. Such
expiration or termination shall not relieve either Party from
obligations which are expressly indicated to survive expiration or
termination of this Agreement, which obligations include, without
limitation, those under Sections 4.4, 5,2(b), 7, 8.7, 8.8, 9, 11
and 12. [***]
10.4 TERMINATION BY PROGENICS. Progenics may terminate this Agreement by
giving 90 days written notice to CBC: provided Progenics shall be
obligated to fulfill its obligations under any binding purchase
order outstanding; and further provided that upon such termination
all rights to Know-how and Licensed Patent Rights shall revert to
CBC.
11. PATENTS.
11.1 INVENTIONS. Title to any Licensed Patent Rights will follow
inventorship, which will in turn be determined in accordance with
United States laws of inventorship and written evidence of the
Parties. Designation of inventors on any patent application is a
matter of law and will be solely within the discretion of qualified
patent counsel of CBC and Progenics.
11.2 PATENT PROSECUTION STRATEGY. Subject to the other terms of this
Agreement:
(a) CBC SOLELY OWNED LICENSED PATENT RIGHTS. During the Term, the
filing, prosecution and maintenance of Licensed Patent Rights
solely owned by CBC will be under the control of CBC, at its
sole cost and expense.
(b) JOINTLY OWNED LICENSED PATENT RIGHTS. During the Term, the
filing, prosecution and maintenance of any Licensed Patent
Rights jointly owned
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by the Parties will be under the control of the Party from
whom the majority of the data underlying such Licensed Patent
Rights arose (the "controlling Party"), and the controlling
Party is authorized to undertake such filings, prosecutions
and maintenance at its sole cost and expense, using patent
counsel reasonably satisfactory to the non-controlling Party
and with the reasonable cooperation of the non-controlling
Party and its employees, provided that: (i) the controlling
Party notifies the non-controlling Party reasonably prior to
the filing of any such Licensed Patent Rights by the
controlling Party and permits review of such proposed Licensed
Patent Rights by the non-controlling Party; (ii) the
controlling Party provides the non-controlling Party promptly
with copies of all communications received by the controlling
Party; (iii) the controlling Party keeps the non-controlling
Party reasonably informed of the status of such Licensed
Patent Rights, and (iv) the controlling Party provides the
non-controlling Party notice at least thirty (30) days in
advance of taking or failing to take any action that would
affect the scope or validity of any such Licensed Patent
Rights (including but not limited to substantially narrowing
or canceling any claim, abandoning any such Licensed Patent
Rights or not filing or perfecting the filing of any such
Licensed Patent Rights in any country), with prior written
notice of such proposed action or inaction so that the
non-controlling Party has a reasonable opportunity to review
and make comments. Either Party may assign its rights to any
jointly owned Licensed Patent Rights to the other Party, who
will have the right, in its discretion, to assume the
prosecution and maintenance thereof at its sole expense and as
the sole owner thereof.
(c) [***]
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[***]
11.3 THIRD PARTY INFRINGEMENT. Either Party promptly shall notify the
other Party in writing of any alleged infringement of the Licensed
Patent Rights and of any available evidence thereof. The Parties
shall consult as to a potential litigation strategy or strategies
against any alleged infringer. If the Parties commence and
prosecute a suit jointly, they shall share all associated
attorneys' fees and out-of-pocket litigation expenses equally. If
the Parties do not decide to jointly commence an action within
thirty (30) days of the notice specified above, or otherwise
terminate the alleged infringement, CBC shall have the right, at
its expense, to bring suit against the allegedly infringing party.
[***]
11.4 TRADEMARKS. Progenics, at its expense, shall be responsible for the
selection, registration and maintenance of all trademarks and
tradenames which it employs in connection with Licensed Products.
The terms "trademark" or "tradename" shall include, without
limitation, the name or names of any Licensed Products, the design
of the packaging of any Licensed Products, and the appearance of
dosage forms of any Licensed Product. Progenics shall own such
tradenames and trademarks and shall retain such ownership upon
termination of this Agreement.
12. ARBITRATION.
Any dispute, controversy or claim between the Parties, arising out of or
relating to this Agreement or the Parties' respective rights and
obligations hereunder either during or after the Term (including the
question as to whether any such matter is arbitrable) shall be subject
to binding arbitration in accordance with then-existing commercial
arbitration rules of the American Arbitration Association. The Parties
agree that, in the course of any such
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arbitration, service of any notice at their respective addresses in
accordance with Section 13.11 of this Agreement shall be valid and
sufficient, and any arbitration hereunder shall be in the jurisdiction
of the defendant Party, which in the case of Progenics shall be New York
and in the case of CBC shall be Massachusetts. In any such arbitration,
an award shall be rendered by a majority of the members of a board of
arbitration consisting of three (3) members, one (1) of whom shall be
chosen by each of Progenics and CBC and the third of whom shall be
appointed by mutual agreement of such two (2) arbitrators. In the event
of failure of such two (2) arbitrators to agree within sixty (60) days
after the commencement of arbitration (as defined below) upon
appointment of the third arbitrator, or in the event that either Party
shall fail to appoint an arbitrator within thirty (30) days after the
commencement of the arbitration proceedings, the third arbitrator or
(upon request of the other Party) the second arbitrator and the third
arbitrator, as the case may be, shall be appointed by the American
Arbitration Association in accordance with its then existing commercial
arbitration rules. For purposes of this Section, the "commencement of
the arbitration proceeding" shall mean the date upon which the
defendant Party receives from the American Arbitration Association a
copy of the request for arbitration filed by the party desiring to have
recourse to arbitration. The decision of the arbitrators shall be in
writing and shall set forth the basis therefor. The Parties shall abide
by all awards rendered in arbitration proceedings, and such awards may
be enforced and executed upon in any court having jurisdiction over the
Party against whom enforcement of such award is to be sought. The
Parties shall divide equally the administrative charges, arbitrators'
fees, and related expenses of arbitration, but each Party shall pay its
own legal fees incurred in connection with any such arbitration;
provided, however, if the arbitrators determine that one Party prevailed
clearly and substantially over the other Party, then the non-prevailing
Party shall also pay the reasonable attorneys' fees and expert witness
costs and other arbitration costs of the prevailing Party.
13. MISCELLANEOUS PROVISIONS.
13.1 NO PARTNERSHIP. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, distributorship, agency,
employer-employee or joint venture relationship between the
Parties. No Party shall incur any debts or make any commitments for
the other, except to the extent, if at all, specifically provided
herein.
13.2 ASSIGNMENTS. Except as set forth in Section 8 hereof, neither Party
shall assign any of its right or obligations hereunder or this
Agreement, except that either Party may do so: (a) as incident to
the merger, consolidation, reorganization or acquisition of stock
or assets affecting substantially all of the assets or voting
control of such Party; (b) to any wholly-owned subsidiary if such
Party remains liable and responsible for the performance and
observance of all of the subsidiary's duties and obligations
hereunder; (c) with the prior written consent of the other
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Party; (d) as incident to a joint venture between Progenics and a
major corporate partner; or (e) as incident to any reorganization
of CBC; including any reorganization under the provisions of
Chapter 11 of the United States Bankruptcy Code and any merger,
spin-off, sale of assets or other transaction. This Agreement shall
be binding upon the successors and permitted assigns of the Parties
and the name of a Party appearing herein shall be deemed to include
the names of such Party's successors and permitted assigns to the
extent necessary to carry out the intent of this Agreement. Any
assignment not in accordance with this Section 13.2 shall be void.
13.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as
may be necessary or appropriate in order to carry out the purposes
and intent of this Agreement. Without limiting the generality of
the foregoing, CBC agrees to provide a letter to FDA authorizing
Progenics to cross reference CBC's drug master flies for QS-21.
13.4 NO NAME OR TRADEMARK RIGHTS. Except as otherwise provided herein,
no right, express or implied, is granted by this Agreement to use
in any manner the names "Cambridge Biotech Corporation" or
"Progenics Pharmaceuticals, Inc." or any contraction thereof or any
other trade name or trademark of CBC or Progenics in connection
with the performance of this Agreement.
13.5 PUBLIC ANNOUNCEMENTS. Except as may otherwise be required by
applicable law or regulation, neither Party shall make any public
announcement concerning this Agreement or the subject matter hereof
without the prior written consent of the other Party (not to be
unreasonably withheld).
13.6 FORCE MAJEURE. If any default or delay occurs which prevents or
materially impairs a Party's performance and is due to a cause
beyond the Party's reasonable control, including but not limited to
any act of any god, flood, fire, explosion, earthquake, casualty,
accident, war, revolution, civil commotion, blockade or embargo,
injunction, law, proclamation, order, regulation or governmental
demand, the affected Party promptly shall notify the other Party in
writing of such cause and shall exercise diligent efforts to resume
performance under this Agreement as soon as possible. Neither Party
shall be liable to the other Party for any loss or damage due to
such cause. Neither Party may terminate this Agreement because of
such default or delay.
13.7 ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS. This Agreement,
including the exhibits attached hereto which are incorporated
herein, constitutes and contains the entire understanding and
agreement of the Parties and cancels and supersedes any and all
prior negotiations, correspondence, understandings and agreements,
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whether verbal or written, between the Parties respecting the
subject matter hereof. No waiver, modification or amendment of any
provision of this Agreement shall be valid or effective unless made
in writing and signed by a duly authorized officer of each of the
Parties.
13.8 SEVERABILITY. In the event that any of the provisions of this
Agreement shall for any reason be held by any court or authority of
competent jurisdiction to be invalid, illegal or unenforceable,
such provision or provisions shall be validly reformed to as nearly
as possible approximate the intent of the Parties and, if
unreformable, shall be divisible and deleted in such jurisdiction;
elsewhere, this Agreement shall not be affected so long as the
Parties are still able to realize the principal benefits bargained
for in this Agreement.
13.9 CAPTIONS. The captions to this Agreement are for convenience only,
and are to be of no force or effect in construing or interpreting
any of the provisions of this Agreement.
13.10 APPLICABLE LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of The Commonwealth of
Massachusetts applicable to agreements made and performed wholly
within such state without regard to its principles of conflicts of
laws.
13.11 NOTICES AND DELIVERIES. Any notice, requests, delivery, approval
or consent required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, transmitted by telecopy (with written
confirmation to follow via United States first class mail) or five
(5) days after being sent by United States certified mail to the
Party to whom it is directed at its address shown below or such
other address as such Party shall have last given by written notice
to the other Party in accordance with this Section.
If to CBC, addressed to:
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Attention: President
Telecopy: 508-797-4014
with a copy to:
Attention: General Counsel
Telecopy: 508-797-4014
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If to Progenics, addressed to:
Progenics Pharmaceuticals, Inc.
777 Old Saw Mill River Road
Tarrytown, NY 10591
Attention: Paul J. Maddon, M.D., Ph.D., CEO
Telecopy: 914-789-2817
13.12 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
13.13 COMPLIANCE WITH LAWS. Progenics and CBC each shall comply with all
applicable laws in connection with its own performance under this
Agreement. Without limiting the generality of the foregoing,
Progenics shall be responsible for compliance with all applicable
product safety, product testing, product labeling, package marking,
and product advertising laws and regulations, except with respect
to efforts performed by CBC in which case CBC shall be responsible
for its activities as governed by such laws and regulations.
13.14 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by a
Party and shall be able to be relied fully on by the Parties.
13.15 BANKRUPTCY COURT APPROVAL: ESCROW. The performance of either party
of its obligations hereunder is subject to approval of this
Agreement by the United States Bankruptcy Court for the District of
Massachusetts, Western Division. Within thirty days following
execution of this Agreement, CBC will deliver to a mutually
agreeable escrow agent all documentation set forth on EXHIBIT C,
attached hereto and made a part hereof, (the "Escrow
Documentation") necessary for Progenics to manufacture the Adjuvant
pursuant to the provisions of Section 8.5(b) of this Agreement. [***]
At Progenics' expense, Progenics shall obtain a verification from
Coopers & Lybrand, L.L.P. that the documentation delivered to the
Escrow Agent conforms with the definition of Escrow Documentation
as set forth in Exhibit C. The Escrow Documentation shall be held
by the escrow agent pursuant to the terms of a mutually agreeable
escrow agreement which shall
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provide INTER ALIA for the updating of the Escrow Documentation as
necessary by CBC to insure that the Escrow Documentation is current
and for the delivery of the Escrow Documentation to CBC upon the
effective date of CBC's reorganization plan and prior to such date
for delivery of the Escrow Documentation to Progenics in the event
of the occurrence of an Inability to Supply or in the event that
CBC's Chapter 11 bankruptcy proceeding is converted to a Chapter 7
bankruptcy proceeding. The procedures set forth in this Section
13.15 respecting escrow shall apply each and every time, if any,
that CBC enters into reorganization or bankruptcy in the future.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective corporate officers, duly authorized as of the day
and year first above written.
CAMBRIDGE BIOTECH CORPORATION PROGENICS PHARMACEUTICALS, INC.
By: /s/ Alison Taunton-Rigby By: /s/ Paul J. Maddon
-------------------------- ---------------------------------
Name: Alison Taunton-Rigby Name: Paul J. Maddon, M.D., Ph.D.
----------------------- -------------------------------
Title: President and CEO Title: CEO and Scientific Director
---------------------- ------------------------------
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EXHIBIT A
LICENSED PATENT RIGHTS
U.S. Patent No. 5,057,540, entitled "Saponin Adjuvant" inventors Charlotte A.
Kensil and Dante J. Marciani, issued October 15, 1991 (filed August 27, 1990).
COUNTRY SERIAL NUMBER
Australia 19340/88
Canada 568,119
Denmark 6029/89
Europe 88905332.8
Japan 504974/1988
PCT PCT/US88/01842
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EXHIBIT B
CAMBRIDGE BIOTECH CORPORATION 365 PLANTATION ST. WORCESTER, MA 01605
CERTIFICATE OF ANALYSIS
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EXHIBIT C
[***]
*** Confidential Treatment Requested
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[LOGO] PROGENICS Progenics Pharmaceuticals, Inc.
Old Saw Mill River Road
Tarrytown, New York 10591
(914) 789-2800
Telefax:(914) 789-2817
September 6, 1995
Alison Taunton-Rigby, Ph.D.
Chief Executive Officer
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Re: Cambridge Biotech Corporation/Progenics License and Supply Agreement
(August 1995)
Dear Dr. Rigby,
This letter confirms our understanding that if pursuant to Paragraph 8.5(b)
of the above-referenced agreement Progenics finds it necessary to manufacture
the Adjuvant, CBC agrees that it will immediately execute and deliver a
letter as set forth in Appendix A (attached).
Sincerely,
/s/ Paul J. Maddon
Paul J. Maddon, M.D., Ph.D.
Chairman and CEO
Scientific Director
Accepted:
/s/ Alison Tauton-Rigby
Alison Taunton-Rigby, Ph.D.
Chief Executive Officer
Cambridge Biotech Corporation
PJM/em
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Exhibit 10.16
FINAL
CAMBRIDGE BIOTECH CORPORATION
and
PROGENICS PHARMACEUTICALS, INC.
SUBLICENSE
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TABLE OF CONTENTS
BACKGROUND .........................................................1
1. DEFINITIONS ........................................................2
2. GRANT ..............................................................3
3. ROYALTIES ..........................................................3
4. PAYMENTS AND REPORTS ...............................................4
5. BOOKS AND RECORDS ..................................................5
6. NOTICES ............................................................5
7. TERM AND TERMINATION ...............................................5
8. NEGATION OF WARRANTIES AND INDEMNITY ...............................6
9. LAWS AND REGULATIONS ...............................................7
10. USE OF NAMES .......................................................7
11. PATENT NOTICE ......................................................8
12. MISCELLANEOUS PROVISIONS ...........................................8
APPENDIX A ........................................................10
APPENDIX B ........................................................11
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SUBLICENSE AGREEMENT
This is a SUBLICENSE AGREEMENT to be effective on the last date of the
signature dates provided hereinbelow, by and between CAMBRIDGE BIOTECH
CORPORATION (CBC), debtor and debtor in possession, Case No. 94-43054-JFQ,
United States Bankruptcy Court for the District of Massachusetts, Western
Division, a Delaware corporation, having offices at 365 Plantation Street,
Worcester, Massachusetts 01605, and PROGENICS PHARMACEUTICALS, INC., a
Delaware corporation having offices at 777 Old Saw Mill River Road,
Tarrytown, New York 10591 (SUBLICENSEE).
BACKGROUND
In the course of research conducted at Harvard University, Department of
Cancer Biology, Harvard School of Public Health, certain inventions were made
relating to the HIV-1 envelope glycoprotein, designated gp120. Additional
inventions relating to the HIV-1 envelope glycoprotein include gp160 and
methods for assay.
The President and Fellows of Harvard College ("Harvard") is the owner of
these inventions, subject to rights reserved by the United States Government,
pursuant to various assignments by Myron E. Essex and Tun-Hou Lee to Harvard
of all their right, title and interest in and to the inventions and any
patents resulting therefrom.
Harvard has been granted U.S. Patent No. 4,725,669 entitled "Assay for
Detecting Infection by Human T-Cell Lymphotrophic Virus-III" issued on
February 16, 1988 directed to gp120 and cross-reactive peptides. Currently
pending is a divisional application, U.S. Serial No. 056,134, filed May 29,
1987, directed to gp160 and cross-reactive peptides and to methods for
assaying for the glycoproteins.
CBC is the exclusive, worldwide licensee of these inventions and the
issued patent and pending patent applications by way of an exclusive license
agreement from Harvard, and has the right to grant sublicenses thereunder for
making, using or selling of the inventions which are disclosed and claimed in
the issued patent and pending patent applications.
SUBLICENSEE desires to use LICENSED PATENT RIGHTS in a commercial
diagnostic, therapeutic, or vaccine application for public use and benefit or
for selling products for research applications only.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
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1. DEFINITIONS
1.1. LICENSED PATENT RIGHTS shall mean U.S. Patent No. 4,725,669, issued
February 16, 1988, and pending U.S. Patent Application Serial No. 056,134,
filed May 29, 1987, and any divisionals, continuations, continuations-in-part
based thereon, and any patents which may issue therefrom and any reissues,
re-examinations, or extensions thereof; and any and all foreign patents and
patent applications corresponding to any of the foregoing patents and patent
applications, as well as such other patents or patent applications as are
listed in Appendix A, effective as of the date said patents or patent
applications are added to Appendix A, and the inventions described or claimed
therein.
1.2. FIELD OF USE shall mean products for research applications only.
[***]
1.3. LICENSED PRODUCT(S) shall mean goods covered by or made in
accordance with LICENSED PATENT RIGHTS. For purposes of example only,
LICENSED PRODUCT(S) may include bulk glycoprotein for use in research
applications only.
1.4. NET SALES shall mean [***]
1.5. FIRST USE shall mean the date of the initial transfer by
SUBLICENSEE of LICENSED PRODUCTS to any third party in exchange for cash or
some equivalent to which value can be assigned for the purpose of determining
the NET SALES.
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1.6. EARNED ROYALTIES shall mean royalties paid or payable by
SUBLICENSEE to CBC determined with respect to NET SALES.
1.7. EFFECTIVE DATE shall mean the date of the last signature date(s)
provided hereinbelow.
1.8. PRIME LICENSE shall mean the exclusive license agreement between
Harvard and CBC.
1.9. SUBLICENSEE is understood to include all of its AFFILIATES. AN
AFFILIATE of SUBLICENSEE shall mean any corporation or other business entity
controlled by, controlling, or under common control with SUBLICENSEE. For
this purpose, "control" means direct or indirect beneficial ownership of at
least fifty percent (50%) of the voting stock or equity, or at least fifty
percent (50%) interest in the income of such corporation or other business.
2. GRANT
2.1. CBC grants to SUBLICENSEE, subject to all the terms and conditions
of this Agreement, a non-exclusive, worldwide right and license to make, have
made, use, and sell LICENSED PRODUCTS under LICENSED PATENT RIGHTS in the
Field of Use.
2.2. CBC hereby grants to SUBLICENSEE the right to extend the license
granted herein to an Affiliate, subject to the terms and conditions of this
Agreement. CBC shall receive prompt written notice of each such extension and
of any termination of such AFFILIATE license. SUBLICENSEE is expressly not
granted a right to sublicense anyone other than an Affiliate under this
Agreement.
3. ROYALTIES
As consideration for the rights granted hereunder, SUBLICENSEE shall make
the following payments to CBC:
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3.3. Only one royalty shall be payable with respect to any LICENSED
PRODUCT regardless of whether it or its use is covered by one or more
LICENSED PATENT RIGHTS. On sales between SUBLICENSEE and its AFFILIATES for
resale, the royalty shall be paid on the resale to any third-party purchaser.
4. PAYMENTS AND REPORTS
4.1. SUBLICENSEE agrees to notify CBC promptly, in writing, of the date
of the FIRST USE of LICENSED PRODUCT(S).
4.2. Beginning with date of FIRST USE, SUBLICENSEE shall pay to CBC
EARNED ROYALTIES within sixty (60) days from the end of each calendar
quarter, which is the end of March, June, September, and December. Any
royalties not paid within this time period shall be deemed past due
royalties. Any past due royalties shall bear interest at the rate of
[***] PER ANNUM from their due date, which interest shall
be paid by SUBLICENSEE to CBC.
4.3. SUBLICENSEE shall also prepare for each calendar quarter a written
report in the form substantially as set forth in Appendix B setting forth the
NET SALES and the EARNED ROYALTIES payable thereon, including a detailed
listing of all LICENSED PRODUCTS sold and all deductions from NET SALES. The
reports required by this Agreement shall be certified by an officer of
SUBLICENSEE to be correct to the best of SUBLICENSEE's knowledge and
information.
4.4. All amounts payable to CBC shall be paid in United States Dollars.
In the event any LICENSED PRODUCT shall be sold for funds other than United
States funds, the NET SALES of such product shall first be determined in the
foreign funds and then converted into the equivalent United States funds at:
(i) the rate applicable to the transfer of funds arising from
royalty payments as established by the exchange control authorities
of the country of which such funds are the national currency, for the
last business day of the accounting period for which payment is thus
made; or
(ii) if there is no rate so applicable, then the buying rate for such
foreign funds as published by the Wall Street Journal on the last
business day of such calendar accounting period.
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5. BOOKS AND RECORDS
5.1. SUBLICENSEE shall keep, and shall require its AFFILIATES to keep,
accurate and correct records of calculations for determining EARNED ROYALTIES
on sales of LICENSED PRODUCTS made, used and sold under this Agreement,
appropriate to determine the amount of EARNED ROYALTIES based on NET SALES at
least three (3) years following a given reporting period. The records shall
be available during normal business hours for inspection at the expense of
CBC by a certified public accountant, selected by CBC and acceptable to
SUBLICENSEE, for the sole purpose of verifying reports and payments
hereunder. The accountant shall not disclose to CBC any financial information
other than that information relating to the accuracy of reports and payments
made under this Agreement.
6. NOTICES
6.1. Any notice required by this Agreement shall be sent by registered
or certified mail properly addressed or by telex or facsimile, with a mailed
confirmation copy, properly addressed to the other party at the address
designated below, or to another address as may be designated in writing by
the party. The notice shall be effective as of the date of the postmark of
such mailed notice.
For CBC:
CAMBRIDGE BIOTECH CORPORATION
365 Plantation Street
Worcester, Massachusetts 01605
Attn: President
with a copy Attn: General Counsel
FOR SUBLICENSEE:
PROGENICS PHARMACEUTICALS, INC.
777 Old Saw Mill River Road
Tarrytown, NY 10591
Attn: Chief Executive Officer
7. TERM AND TERMINATION
7.1. The term of this Agreement, unless sooner terminated as provided
herein, shall extend from the EFFECTIVE DATE until expiration of the last to
expire patents included in LICENSED PATENT RIGHTS.
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7.2. Upon any breach of, or default under, this Sublicense Agreement by
SUBLICENSEE, CBC may terminate this Agreement by giving ninety (90) days
written notice to SUBLICENSEE. The termination shall take effect at the end
of the ninety-day period, unless during the period SUBLICENSEE cures such
breach or default to CBC's satisfaction.
7.3. SUBLICENSEE has the right to terminate this Agreement at any time
upon giving ninety (90) days written notice to that effect to CBC.
7.4. Termination of this Agreement shall not affect any rights or
obligations accrued prior to the date of the termination, including
SUBLICENSEE's obligation to pay all EARNED ROYALTIES and SUBLICENSEE's
obligation to indemnify CBC. Upon termination of this Agreement all unpaid
EARNED ROYALTIES due to CBC shall become immediately due and payable.
7.5. Waiver by CBC of a single default or breach or of succession of
defaults or breaches shall not deprive CBC of any right to terminate this
Agreement pursuant to the terms hereof upon the occasion of any subsequent
default or breach.
[***]
7.6. If the PRIME LICENSE between Harvard and CBC is terminated, this
Agreement between CBC and SUBLICENSEE shall, assigned to Harvard, and Harvard
shall accept such assignment. CBC shall notify SUBLICENSEE if the PRIME
LICENSE is terminated.
8. NEGATION OF WARRANTIES AND INDEMNITY
8.1. CBC has the right to enter into this Agreement notwithstanding its
bankruptcy filings. CBC makes no representations or warranties as to the
validity or scope of any LICENSED PATENT RIGHTS.
8.2. CBC makes no representations or warranties that the manufacture,
use, sale or other disposal of the LICENSED PRODUCTS is or will be free from
infringement of patents of third parties.
8.3. CBC makes no representations or warranties whatsoever, either
express or implied, as to the merchantability or fitness of the LICENSED
PRODUCTS for a particular purpose, and SUBLICENSEE shall make no statements,
representations or warranties whatsoever to any third parties which are
inconsistent with such disclaimer by CBC.
8.4. SUBLICENSEE shall defend, indemnify and hold harmless CBC and
Harvard, their directors, officers, employees, and agents, from and against
any and all claims, demands, damages, losses, and expenses of any nature,
including attorney's fees, for but not limited to death, personal injury,
illness, property damage or products liability arising from or in
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connection with any of the following:
(1) the use by SUBLICENSEE of any method or process related to
the LICENSED PATENT RIGHTS; or
(2) any use, sale or other disposition of any of the LICENSED
PRODUCTS by SUBLICENSEE or any statement, representation or
warranty of SUBLICENSEE with respect thereto; or
(3) the use by any person of the LICENSED PRODUCTS made by
SUBLICENSEE.
CBC shall reasonably cooperate with SUBLICENSEE in defending any such
claim. CBC shall be entitled to receive information regarding the status of
any such matter and shall be entitled to retain counsel on its own behalf and
at its sole expense if CBC is named as a party or if CBC is not satisfied
with the defense provided by SUBLICENSEE for any reason, the rights and
obligations of this paragraph shall survive termination or expiration of the
Agreement. CBC and/or Harvard may, at its option, require SUBLICENSEE to name
CBC and/or Harvard as a co-insured on a product liability insurance policy
deemed sufficient by CBC.
9. LAWS AND REGULATIONS
9.1. SUBLICENSEE shall comply with all foreign and United States
federal, state, and local laws, regulations, rules and orders applicable to
the testing, production, transportation, packaging, labeling, sale and use of
the LICENSED PRODUCTS.
10. USE OF NAMES
10.1. SUBLICENSEE shall not use the names "Harvard College" or
"Harvard," the names of the inventors, "Myron E. Essex," or "Tun-Hou Lee," or
the name "Cambridge Biotech Corporation" or any other name or mark by which
Harvard or CBC may be identified for any purpose without prior written
consent obtained from the respective parties in each instance.
10.2. CBC shall not use the names "Progenics" or "Progenics
Pharmaceuticals, Inc." or any other name or mark by which SUBLICENSEE may be
identified for any purpose without prior written consent obtained from
SUBLICENSEE in each instance.
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11. PATENT NOTICE
11.1. SUBLICENSEE shall apply the patent marking notices required by the
laws of the United States and relevant countries.
12. MISCELLANEOUS PROVISIONS
12.1. This Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereof and supersedes and replaces
all prior agreements, understandings, writings, and discussions between the
parties relating to said subject matter.
12.2. This Agreement may be amended only by a written instrument
executed by the parties.
12.3. Without prior written approval of CBC and Harvard, the license
granted pursuant to this Agreement shall not be assigned or transferred by
SUBLICENSEE to any other party other than to a successor to the entire
business interest of SUBLICENSEE.
12.4. This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns.
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12.5. This Agreement shall be governed and construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereinbelow:
CAMBRIDGE BIOTECH CORPORATION
By: /s/ Jeffrey Beaver March 13, 1995
----------------------- -----------------------
Jeffrey T. Beaver Date
Chief Executive Officer
PROGENICS PHARMACEUTICALS, INC.
By: /s/ Paul J. Maddon March 7, 1995
------------------------ -----------------------
Paul J. Maddon, M.D. Ph.D. Date
Chairman and CEO
AGREED AS TO SECTION 7.6:
PRESIDENT AND FELLOWS HARVARD COLLEGE
By: /s/ Joyce Brinton 3/17/95
------------------------- ------------------------
Joyce Brinton, Director Date
Office for Technology and Trademark Licensing
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APPENDIX A
1. U.S. PATENT NO. 4,725,669
Title: ASSAY FOR DETECTING INFECTION BY HUMAN T-CELL
LYMPHOTROPHIC VIRUS-III
Inventors: Myron E. Essex and Tun-Hou Lee
Filed: November 9, 1984
Issued: February 16, 1988
The claims of this patent are directed to gp120 and cross-reactive
peptides.
2. U.S. PATENT APPLICATION SERIAL NO. 056,134
Title: ASSAY FOR DETECTING INFECTION BY HUMAN T-CELL
LYMPHOTROPHIC VIRUS-III
Inventors: Myron E. Essex and Tun-Hou Lee
Filed: May 29, 1987
Cross-Reference: division of U.S. 4,725,669
Issued: currently pending
This is a divisional application of U.S. 4,725,669, directed to methods
of assay using the proteins covered by the patent and to gp160 and
cross-reactive peptides.
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APPENDIX B
FORM OF ROYALTY REPORT
For each Licensed Product, SUBLICENSEE shall report the following information:
Gross amount billed or invoiced
Deductions allowable under Section 1.4
Resulting Net Sales
Amount received
Effective royalty rate
Amount of Earned Royalties payable with report
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Exhibit 10.17
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
ARTICLE 1. INTRODUCTION
This Cooperative Research and Development Agreement (CRADA) between the
Centers for Disease Control and Prevention (CDC) and the Collaborator will be
effective when signed by all parties. By signing this CRADA, the Collaborator
acknowledges that it has received and read a copy of the Policy Statement on
Cooperative Research and Development Agreements and Intellectual Property
Licensing which is attached as Appendix A. The Research and Development
project(s) which will be undertaken by each of the Parties in the course of
this CRADA is detailed in the Research Plan (RP) which is attached as
Appendix B. The funding and staffing commitments of the Parties are set forth
in Appendix C. Any exceptions or changes to the CRADA are set forth in
Appendix D.
ARTICLE 2. DEFINITIONS
As used in this CRADA, the following terms shall have the indicated meanings:
2.1 "COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT" or "CRADA" means this
Agreement, entered into by CDC pursuant to the Federal Technology Transfer
Act of 1986 and Executive Order 12591 of October 10, 1987.
2.2 "PROPRIETARY INFORMATION" means confidential scientific, business or
financial information provided that such information:
2.2.1 Is not publicly known or available from other sources who are
not under a confidentiality obligation to the source of the
information;
2.2.2 Has not been made available by its owners to others without a
confidentiality obligation;
2.2.3 Is not already available to the receiving Party without a
confidentiality obligation; and
2.2.4 Does not relate to potential hazards or cautionary warnings
associated with the production, handling or use of the subject
matter of the Research Plan of this CRADA.
2.3 "SUBJECT DATA" means all recorded information first produced in the
performance of this CRADA.
2.4 "RESEARCH RESULTS" means all tangible materials other than Subject Data
first produced in the performance of this CRADA.
2.5 "SUBJECT INVENTION" means any invention conceived and reduced to
practice in the performance of research under this CRADA that may be
patentable under 35 U.S.C. Section 101 or Section 161, protectable under
7 U.S.C. Section 2321, or otherwise protectable by other types of U. S.
or foreign Intellectual Property (IP) fight.
2.6 "GOVERNMENT" means the U. S. Government and any of its agencies.
2.7 "RESEARCH PLAN" or "RP" means the statement in Appendix B of the
respective research and development commitments of the Parties to this
CRADA.
2.8 "PRINCIPAL INVESTIGATOR" or "PI" means each of the persons designated
respectively by the Parties to this CRADA who will be responsible for
the scientific and technical conduct of the RP.
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ARTICLE 3. COOPERATIVE RESEARCH
3.1 RESEARCH TEAM. The Parties agree to establish a joint research and
development team (hereinafter referred to as the "Team") comprising at
least the Principal Investigators designated pursuant to Article 3.3 to
conduct and monitor the research in accordance with the RP. Although
members of the Team shall be considered as having been delegated to the
Team, they shall continue to remain employed by their respective
employers under their respective terms of employment.
3.2 REVIEW OF WORK. Periodic conferences shall be held by the Team to
review work progress; it is understood that the nature of this
cooperative research precludes guarantee of its completion within
the specified period of performance or limits of allocated financial or
staffing support. Accordingly, research under this CRADA is to be
performed on a best efforts basis.
3.3 PRINCIPAL INVESTIGATORS. CDC research work under this CRADA will be
performed by the Laboratory identified in the RP, and the CDC Principal
Investigator (PI) designated in the RP will be responsible for the
scientific and technical conduct of this project on behalf of CDC. Also
designated in the RP is the Collaborator PI who will be responsible for
the scientific and technical conduct of this project on behalf of the
Collaborator.
3.4 RESEARCH PLAN CHANGE. The RP may be modified by mutual written consent of
the Principal Investigators. Substantial changes in the scope of the RP
will be treated as amendments under Article 14.6
ARTICLE 4. REPORTS
4.1 INTERIM REPORTS. The Parties shall exchange formal written interim
progress reports on a schedule agreed to by the PIs, but at least within
six (6) months after this CRADA becomes effective and at least within
every six (6) months thereafter. Such reports shall set forth the
technical progress made, identifying such problems as may have been
encountered and establishing goals and objectives requiring further
effort.
4.2 FINAL REPORTS. The Parties shall exchange final reports of their results
within four (4) months after completing the projects described in the RP
or after the termination of this CRADA.
ARTICLE 5. FINANCIAL AND STAFFING OBLIGATIONS
5.1 CDC AND COLLABORATOR CONTRIBUTIONS. The CDC contribution to the RP in
the form of personnel, services and property is designated in Appendix C.
The Collaborator contribution to the RP in the form of personnel,
services, property, support for staffing and/or funding is designated in
Appendix C. Payment schedules, if applicable, are also indicated in
Appendix C.
5.2 INSUFFICIENT AND EXCESS FUNDS. CDC shall not be obligated to perform any
of the research specified herein or to take any other action required by
this CRADA if the funding is not provided as set forth in Appendix C.
CDC shall return excess funds to the Collaborator when it sends its
final fiscal report pursuant to Article 5.3, except for staffing support
pursuant to Article 11.3.
5.3 ACCOUNTING RECORDS. CDC shall maintain separate and distinct current
accounts, records, and other evidence supporting all its obligations
under this CRADA, and shall provide the Collaborator with an annual
report reflecting the use of the Collaborator's funds and a final fiscal
report at the time that final reports are exchanged pursuant to
Article 4.2.
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ARTICLE 6. TITLE TO PROPERTY
6.1 CAPITAL EQUIPMENT. The purchase or use of capital equipment to carry
out this CRADA does not affect the ownership rights that would otherwise
apply. Equipment purchased by CDC with funds provided by the
collaborator shall be the property of CDC. All capital equipment
provided under this CRADA by one party for the use of another Party
remains the property of the providing Party unless other disposition is
mutually agreed upon in writing by the collaborating parties. If title
to this equipment remains with the providing Party, that Party is
responsible for maintenance of the equipment and the costs of its
transportation to and from the site where it will be used.
ARTICLE 7. INTELLECTUAL PROPERTY RIGHTS AND APPLICATIONS
7.1 REPORTING. The Parties shall promptly report to each other in writing
each Subject Invention resulting from the research conducted under this
CRADA that is reported to them by their respective employees. Such
reports shall be treated in confidence by the receiving Party until
such time as a patent or other Intellectual Property (IP) application,
as appropriate, claiming that Subject Invention has been filed.
Because of the royalty sharing provisions for Government inventors in
the Federal Technology Transfer Act of 1986, and in view of Article 8.4
of this CRADA which grants the Government a research license on
inventions made solely by the Collaborator, the Collaborator
acknowledges a special duty to report all Subject Inventions to CDC so
that CDC may determine whether or not inventors properly includes CDC
investigators.
7.2 COLLABORATOR EMPLOYEE INVENTIONS. The Collaborator may elect to retain
IP rights to any Subject Invention made solely by a Collaborator
employee. The Collaborator shall notify CDC promptly upon making this
election. If the Collaborator does not elect to retain its IP rights,
the Collaborator shall offer to assign these IP rights to the Subject
Invention to CDC pursuant to Article 7.5. If CDC declines such
assignment, the Collaborator may release its IP rights to its employee
inventors pursuant to Article 7.6.
7.3 CDC EMPLOYEE INVENTION. CDC, on behalf of the U.S. Government, may elect
to retain IP fights to each Subject Invention made solely by CDC
employees. If CDC does not elect to retain IP rights, CDC shall offer to
assign these IP rights to such Subject Invention to the Collaborator
pursuant to Article 7.5. If the Collaborator declines such assignment,
CDC may release IP rights in such Subject Invention to its employee
inventors pursuant to Article 7.6.
7.4 JOINT INVENTIONS. Each Subject Invention made jointly by CDC and
Collaborator employees shall be jointly owned by CDC and the
Collaborator. The Collaborator may elect to file the joint patent or
other IP application(s) thereon and shall notify CDC promptly upon making
this election. If the Collaborator decides to file such applications, it
shall do so in a timely manner and at its own expense. If the
Collaborator does not elect to file such application(s), CDC on behalf of
the U.S. Government, shall have the right to file the joint applications
in a timely manner and at its own expense. If either Party decides not
to retain its IP rights to a jointly owned Subject Invention, it shall
offer to assign such rights to the other Party pursuant to Article 7.5.
If the other Party declines such assignment, the offering Party may
release its IP rights to employee inventors pursuant to Article 7.6.
7.5 FILING OF PATENT APPLICATIONS. With respect to Subject Inventions made
by the Collaborator as described in Article 7.2 or by CDC as described
in Article 7.3, a Party exercising its right to elect to retain IP rights
to a Subject Invention agrees to file patent or other IP applications in
a timely manner and at its own expense. The Party may elect not to file
a patent or other IP application thereon in any particular country or
countries provided it so advises the other Party ninety (90) days prior
to the expiration of any applicable filing deadline, priority period or
statutory bar date, and hereby agrees to assign its IP rights, title
and interest in such country or countries to the Subject Invention to
the other Party and to cooperate
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in the preparation and filing of a patent or other IP applications.
In any countries in which title to patent or other IP fights is
transferred from CDC to the Collaborator, the Collaborator agrees that
CDC inventors will share in any royalty distribution that the
Collaborator pays to its own inventors.
7.6 RELEASE TO INVENTORS. In the event neither of the Parties to this CRADA
elects to file a patent or other IP application on a Subject Invention,
either or both (if a joint invention) may release their IP rights to
their respective employee inventor(s) with a nonexclusive,
non-transferrable, royalty-free license being retained by each Party.
7.7 PATENT EXPENSES. The expenses attendant to the filing of patent or
other IP applications generally shall be paid by the Party filing such
application. If an exclusive license to any Subject Invention is granted
to the Collaborator by CDC, the Collaborator shall reimburse CDC for the
reasonable past and ongoing funds expended worldwide for filing
prosecuting and maintaining any applications. The Collaborator may waive
its exclusive license fights on any application, patent or other IP
grant at any time, and incur no subsequent compensation obligation for
that application, patent or IP grant.
7.8 PROSECUTION OF INTELLECTUAL PROPERTY APPLICATIONS. Each Party shall
provide the other Party with copies of the applications it files on any
Subject Invention along with the power to inspect and make copies of all
documents retained in the patent or other IP application files by the
applicable patent or other IP office. The Parties agree to consult with
each other with respect to the prosecution of Subject Inventions
described in Article 7.3 and joint Subject Inventions described in
Article 7.4. If the Collaborator elects to file and prosecute IP
applications on joint Subject Inventions pursuant to Article 7.4, CDC
will be granted an associate power of attorney (or its equivalent) on
such IP applications.
ARTICLE 8. LICENSING
8.1 OPTION FOR EXCLUSIVE COMMERCIALIZATION LICENSE. With respect to
Government IP rights to any Subject Invention not made solely by the
Collaborator's employees for which a patent or other IP application is
filed, CDC grants to the Collaborator an option to negotiate, in good
faith, the terms of an exclusive or nonexclusive commercialization
license that fairly reflects the relative contributions of the Parties
to the invention and the CRADA, the risks incurred by the Collaborator,
and the costs of subsequent research and development needed to bring
the invention to the marketplace. The license will specify the licensed
fields of use, breadth of exclusivity and royalties. Royalty rates will
be based on product sales and the rates conventionally granted in the
field identified in the RP for inventions with reasonably similar
commercial potential Royalty rates generally will not exceed a rate
within the range of [***] for extensive commercialization licenses.
Contingent royalty schemes based on, e.g., patent issuance or
nonissuance, and provisions treating the stacking of royalties or
packaging of other licensed inventions developed under this CRADA may be
provided. Extensive licensees will be expected to reimburse CDC for IP
expenses related to each licensed intellectual property, and may be
permitted to offset such reimbursement against future product royalties.
8.2 EXERCISE OF LICENSE OPTION. The option of Article 8.1 must be exercised
by written notice mailed within three (3) months after the patent or
other IP application is filed to:
CDC Technology Transfer Coordinator
Centers for Disease Control
1600 Clifton Road, N.E.
Building 1, B72, Mailstop A20
Atlanta, Georgia 30333
5
[***] Confidential Treatment Requested
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Exercise of this option by the Collaborator initiates a negotiation
period that expires nine (9) months after the patent or other IP
application filing date. If the last proposal by the Collaborator has
not been responded to in writing by CDC within this nine (9) month
period, the negotiation period shall be extended to expire one (1) month
after CDC so responds, during which month the Collaborator may accept in
writing the final license proposal of CDC. After that time, CDC will be
free to license such IP rights to others.
8.3 PRICING. CDC has a concern that there be a reasonable relationship
between the pricing of a licensed product, the public investment in that
product, and the health and safety needs of the public. Accordingly,
extensive commercialization licenses granted for CDC intellectual
property rights may require that this relationship be supported by
reasonable evidence.
8.4 GOVERNMENT INTELLECTUAL PROPERTY RIGHTS. For inventions developed wholly
by CDC investigators or jointly with a Collaborator under this CRADA,
CDC is required by the Federal Technology Transfer Act of 1986, 15 U.S.C.
at Section 3710a(b)(2), to retain at least a nonexclusive, irrevocable,
paid-up license to practice the invention or to have the invention
practiced throughout the world by or on behalf of the U.S. Government.
For inventions developed wholly by the Collaborator under this CRADA,
the Collaborator agrees to grant a research license as described in
Article 8.5 to the Government.
8.5 RESEARCH LICENSES. CDC reserves the right under any IP license granted
by CDC to the Collaborator under this CRADA to grant nonexclusive
licenses to third parties to make and to use the licensed invention for
purposes of research involving the invention ifself, and not for
purposes of commercial manufacture or in lieu of purchase as a commercial
product for use in other research. CDC intends to consult with their
exclusive commercialization licensee(s) before granting research licenses
to commercial entities.
8.6 JOINT INVENTIONS NOT EXCLUSIVELY LICENSED. In the event that the
Collaborator does not choose to acquire an exclusive commercialization
license to IP rights in joint Subject Inventions described in Article
7.4, then each Party shall have the right to use the joint Subject
Invention and to license its use to others. The Parties may agree to a
joint licensing approach for such IP rights.
ARTICLE 9. PROPRIETARY RIGHTS AND PUBLICATION
9.1 RIGHT OF ACCESS. CDC and the Collaborator agree to exchange all Subject
Data and Research Results produced in the course of research under this
CRADA, whether developed solely by CDC, jointly with the Collaborator, or
solely by the Collaborator. Tangible research products developed under a
CRADA will be shared equally by the Parties to the CRADA unless other
disposition is agreed to by the Principal Investigators. All Parties to
this CRADA will be free to utilize Subject data and Research Results for
their own purposes, consistent with their obligations under this CRADA.
9.2 OWNERSHIP OF SUBJECT DATA IN RESEARCH RESULTS. Subject to the sharing
requirements of Article 9.1, the producing Party will retain ownership
of and title to all Subject Inventions, all Subject Data and all
Research Results produced solely by their investigators. Jointly
developed Subject Inventions, Subject Data and Research Results will be
jointly owned. However, except as may be afforded through IP rights that
require public disclosure of the protected subject matter (e.g.,
patents), CDC does not have statutory authority to limit (or agree with
the Collaborator to limit) dissemination of Subject Data or Research
Results developed solely by CDC investigators or jointly with the
Collaborator. Accordingly, CDC may not agree to exclude others from
utilizing or commercializing such Subject Data or Research Results.
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9.3 PROPRIETARY AND CONFIDENTIAL INFORMATION. Each Party agrees to limit its
disclosure of Proprietary Information to the amount necessary to carry
out the Research Plan of this CRADA, and shall place a confidentiality
notice on all such information. Research materials required for the RP
may also be designated as Proprietary Information.
Each Party receiving Proprietary Information agrees that any information
so designated shall be used by it only for the purposes described in the
attached Research Plan. Any Party may object to the designation of
information as Proprietary Information by another Party and may decline
to accept such information. Data and research products developed solely
by the Collaborator may be designated as Proprietary Information when
they are wholly separable from the data and research product categories
as set forth in the RP. The exchange of confidential information should
be similarly limited and treated. Unless disclosure is otherwise
mutually agreed upon, all Parties to this CRADA agree to keep CRADA
Subject Data and Research Results confidential, to the extent permitted
by law, until they arc published or corresponding patent or other IP
application(s) have been filed.
9.4 PROTECTION OF PROPRIETARY INFORMATION. Proprietary Information shall not
be disclosed, copied, reproduced or otherwise made available to any
other person or entity without the consent of the owning Party except as
may be required under court order or the Freedom of Information Act (5
U.S.C. Section 552). Each Party agrees to use its best efforts to main-
tain the confidentiality of Proprietary Information. Each Party agrees
that another Party is not liable for the disclosure of Proprietary
Information which, after notice to and consultation with the concerned
Party, another Party in possession of the Proprietary Information
determines the information may not lawfully bc withheld, provided the
concerned Party has been given an opportunity to obtain a court order to
enjoin disclosure.
9.5 DURATION OF CONFIDENTIALITY OBLIGATION. The obligation to maintain the
confidentiality of Proprietary Information shall expire at the earlier of
the date when the information is no longer Proprietary Information as
defined in Article 2.2 or three (3) years after the expiration or
termination date of this CRADA. The Collaborator may request an extension
to this term when necessary to protect Proprietary Information relating
to products not yet commercialized.
9.6 PUBLICATION. The Parties are encouraged to make publicly available the
results of their research. Before either Party submits a paper or
abstract for publication or otherwise intends to publicly disclose
information about a Subject Invention, Subject Data or Research Results,
the other Party shall be provided thirty (30) days to review the
proposed publication or disclosure to assure that Proprietary
Information is protected. The publication or other disclosure shall be
delayed for up to (thirty) 30 additional days upon written request by
any Party as necessary to preserve U.S. or foreign patent or other IP
rights.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
10.1 REPRESENTATIONS AND WARRANTIES OF CDC. CDC hereby represents and warrants
to the Collaborator that the Official signing this CRADA has authority to
do so.
10.2 REPRESENTATIONS AND WARRANTIES OF THE COLLABORATOR. The Collaborator
hereby represents and warrants to CDC that the Collaborator has the
requisite power and authority to enter into this CRADA and to perform
according to its terms, and that the Collaborator's Official signing
this CRADA has authority to do so. The Collaborator further represents
that it is financially able to satisfy any funding commitments made in
Appendix C.
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ARTICLE 11. TERMINATION
11.1 TERMINATION BY MUTUAL CONSENT. The CDC and the Collaborator may terminate
this CRADA, or portions thereof, at any time by mutual written consent.
In such event the Parties shall specify the disposition of all property,
inventions, patents and other IP applications and other results of work
accomplished or in progress, arising from or performed under this CRADA.
11.2 UNILATERAL TERMINATION. Either CDC or the Collaborator may unilaterally
terminate this entire CRADA at any time by giving the written notice at
least thirty (30) days prior to the desired termination date, and any
rights accrued in property, patents or other IP shall be disposed of as
in 11.1.
11.3 STAFFING. If this CRADA is mutually or unilaterally terminated prior to
its expiration, funds will nevertheless remain available to CDC for
continuing any staffing commitment made by the Collaborator pursuant
to Article 5.1 above and Appendix C, ff applicable, for a period of six
(6) months after such termination. If there are insufficient funds to
cover this expense, the Collaborator agrees to pay the difference.
11.4 NEW COMMITMENTS. No party shall make new commitments related to this
CRADA after a mutual or unilateral termination and shall, to the extent
feasible, cancel all outstanding commitments and contracts by the
termination date.
11.5 TERMINATION COSTS. Concurrently with the exchange of final reports
pursuant to Articles 4.2 and 5.3, CDC shall submit to the Collaborator
for payment a statement of all costs incurred prior to the date of
termination and for all reasonable termination costs including the cost
of returning Collaborator property or removal of abandoned property.
ARTICLE 12. DISPUTES
12.1 SETTLEMENT. Any dispute arising under the CRADA which is not disposed of
by agreement of the Principal Investigators shall bc submitted jointly
to the signatories of this CRADA. If the signatories are unable to
jointly resolve the dispute within thirty (30) days after notification
thereof, the Assistant Secretary of Health (or his/her designee) shall
propose a resolution. Nothing in this section shall prevent any Party
from pursuing any and all administrative and/or judicial remedies which
may be available.
12.2 CONTINUATION OF WORK. Pending the resolution of any dispute or claim
pursuant to this Article, the Parties agree that performance of all
obligations shall be pursued diligently in accordance with the direction
of the CDC signatory.
ARTICLE 13. LIABILITY
13.1 PROPERTY. The U.S. Government shall not be responsible for damages to any
property of the Collaborator provided to CDC or acquired by CDC pursuant
to this CRADA.
13.2 NO WARRANTY. Except as specifically stated in Article 10, the Parties
make no express or implied warranty as to any matter whatsoever,
including the conditions of the research or any invention or product,
whether tangible or intangible, made, or developed under this CRADA, or
the ownership, merchantability, or fitness for a particular purpose of
the research or any invention or product.
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13.3 INDEMNIFICATION. The Collaborator agrees to hold the U.S. Government
harmless and to indemnify the Government for all liabilities, demands,
damages, expenses and losses arising out of the use by the Collaborator
for any purpose of the Subject Data, Research results and/or Subject
Inventions produced in whole or part by CDC employees under this CRADA,
unless due to the negligence of CDC, its employees or agents. The
Collaborator shall be liable for any claims or damages it incurs in
connection with this CRADA. CDC has no authority to indemnify the
Collaborator.
13.4 FORCE MAJEURE. Neither party shall be liable for any unforeseeable event
beyond its reasonable control not caused by the fault or negligence of
such Party, which causes such Party to be unable to perform its
obligations under this CRADA, and which it has been unable to overcome by
the exercise of due diligence. In the event of the occurrence of such a
force majeure event, the Party unable to perform shall promptly notify
the other Party. It shall further use its best efforts to resume
performance as quickly as possible and shall suspend performance only
for such period of time as necessary as a result of the force majeure
event.
ARTICLE 14. MISCELLANEOUS
14.1 GOVERNING LAW. The construction, validity, performance and effect of
this CRADA shall be governed by Federal Law, as applied by the Federal
Courts. Federal law and regulations will preempt any conflicting or
inconsistent provisions in this CRADA.
14.2 ENTIRE AGREEMENT. This CRADA constitutes the entire agreement between
the Parties concerning the subject matter of this CRADA and supersedes
any prior understanding of written or oral agreement.
14.3 HEADINGS. Titles and headings of the sections and subsections of this
CRADA are for the convenience of references only and do not form a
part of this CRADA and shall in no way affect its interpretation.
14.4 WAIVERS. None of the provisions of this CRADA shall be considered waived
by any Party unless such waiver is given in writing to the other Party.
The failure of a Party to insist upon strict performance of any of the
terms and conditions hereof, or failure or delay to exercise any rights
provided herein or by law, shall not be deemed a waiver of any rights of
any Party.
14.5 SEVERABILITY. The illegality or invalidity of any provisions of this
CRADA shall not impair, affect or invalidate the other provisions of
this CRADA.
14.6 AMENDMENTS. If either party desires a modification to this CRADA, the
Parties shall, upon reasonable notice of the proposed modification or
extension by the Party desiring the change, confer in good faith to
determine the desirability of such modification or extension. Such
modification shall not be effective until a written amendment is signed
by the signatories to this CRADA or by their representatives duly
authorized to execute such amendment.
14.7 ASSIGNMENT. Neither this CRADA nor any rights or obligations of any
Party hereunder shall be assigned or otherwise transferred by either
Party without the prior written consent of the other Party.
14.8 NOTICES. All notices pertaining to or required by this CRADA shall be
in writing and shall be signed by an authorized representative and shall
be delivered by hand or sent by certified mail, return receipt requested,
with postage prepaid, to addresses indicated on the signature page for
each Party. Notices regarding the exercise of license options shall be
made pursuant to Article 8.2. Any Party may change such address by notice
given to the other Party in the manner set forth above.
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14.9 INDEPENDENT CONTRACTORS. The relationship of the Parties to this CRADA is
that of independent contractors and not as agents of each other or as
joint venturers or partners. Each Party shall maintain sole and exclusive
control over its personnel and operations. Collaborator employees who
will be working at CDC facilities may be asked to sign a Guest Researcher
or Special Volunteer Agreement appropriately modified in view of the
terms of this CRADA.
14.10 USE OF NAME OR ENDORSEMENTS. By entering into this Agreement, CDC does
not directly or indirectly endorse any product or service provided, or
to be provided, whether directly or indirectly related to either this
CRADA or to any patent license or other IP license or agreement which
implements this CRADA by its successors, assignees, or licensees. The
Collaborator shall not in any way state or imply that this CRADA is an
endorsement of any such product or service by the U.S. Government or any
of its organizational units or employees.
14.11 EXCEPTIONS TO THIS CRADA. Any exceptions or modifications to this CRADA
that are agreed to by the Parties prior to their execution of this CRADA
are set forth in Appendix D.
14.12 REASONABLE CONSENT. Whenever a Party's consent or permission is required
under this CRADA, such consent or permission shall not be unreasonably
withheld.
ARTICLE 15. DURATION OF AGREEMENT
15.1 DURATION. It is mutually recommended that this project cannot be rigidly
defined in advance and that the contemplated time periods for various
phases of the RP are only good faith guidelines subject to adjustment
by mutual agreement to fit circumstances as the RP proceeds. In no case
will the term of this CRADA extend beyond the term indicated in the RP
unless it is revised in accordance with Article 14.6.
15.2 SURVIVABILITY. The provisions of Articles 4.2, 5.2, 5.3, 6.1, Articles
7-9, 11.3, 11.5, 12.1, 13.3 and 14.10 shall survive the termination of
this CRADA.
CRADA #: CID-93-045-00
FOR THE CDC: FOR THE COLLABORATOR:
/s/Joseph McDade 2/25/93 /s/Paul J. Maddon 2/19/93
- --------------------------------- --------------------------------
SIGNATURE DATE SIGNATURE DATE
Joseph McDade Paul J. Maddon, M.D., Ph.D.
- --------------------------------- --------------------------------
TYPED NAME TYPED NAME
Associate Director for Laboratory Chairman and CEO
- --------------------------------- --------------------------------
TITLE TITLE
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<PAGE>
APPENDIX A
CENTERS FOR DISEASE CONTROL AND PREVENTION (CDC)
AND THE
AGENCY FOR TOXIC SUBSTANCES AND DISEASE REGISTRY
POLICY STATEMENT ON
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS
AND INTELLECTUAL PROPERTY LICENSING
This Statement sets forth the policies of the Centers for Disease Control and
Prevention (CDC) and the Agency for Toxic Substances and Disease Registry
(ATSDR) on various aspects of cooperative research and intellectual property
licensing. These policies apply to the negotiation of CDC and ATSDR
Cooperative Research and Development Agreements (CRADAs). License agreements
for intellectual property rights to inventions developed under a CRADA or
through the CDC and ATSDR intramural research programs, whether negotiated by
CDC and ATSDR or by the National Technical Information Service on its
behalf, will also incorporate these policies. This statement may be revised
as appropriate.
The Federal Technology Transfer Act of 1986 (FTTA, 15 U.S.C. at Section
3710), Executive Order 12591 of April 10, 1987, orders Federal laboratories
to assist universities and the private sector in broadening our national
technology base by moving new knowledge from the research laboratory into the
development of new products and processes. While Federal patent law (35
U.S.C. at Sections 200-212) authorizes the licensing of Government-owned
patent rights, the FTTA seeks to facilitate technological collaboration at an
earlier stage. Thus the FTTA authorizes Federal laboratories to enter into
CRADAs and to agree to grant intellectual property rights in advance to
collaborators for inventions made in whole or part by Federal employees under
the CRADA. Besides assisting in the transfer of commercially useful
technologies from Federal laboratories to the marketplace, CRADAs make
outside resources more accessible to Federal investigators.
The CDC and ATSDR, agencies of the U.S. Public Health Service (PHS) within
the Department of Health and Human Services (HHS), are lead Federal agencies
for prevention and control of disease and disability in the U.S. and
throughout the world. The CDC and ATSDR primary goals are to prevent
disease, illness, injuries, and disability before they occur, and to promote
health. Under the FTTA, 15 U.S.C. at Section 3710(a)2, technology transfer,
consistent with mission responsibilities, is also a responsibility of each
laboratory science and engineering professional. To achieve its goals, CDC
and ATSDR have developed an interdisciplinary research environment and
service program that promotes and encourages the free exchange of ideas and
information.
In order to safeguard the collegiality and integrity of, as well as public
confidence in, the CDC/ATSDR research programs, the following research and
technology transfer policies have been adopted.
1. RESEARCH FREEDOM
The CDC and ATSDR investigators generally are free to choose the subject
matter of their research, consistent with the mission of their
Center/Institute/Office (CIO) and the research programs of their
laboratories. No CRADA or license agreement may contravene this freedom.
<PAGE>
2. RESEARCH POLICY
The CDC and ATSDR research results generally are disseminated freely through
publication in the scientific literature and presentations at public fora.
Brief delays in the dissemination of research results may be permitted under
a CRADA as necessary in order to file corresponding patent or other
intellectual property applications. The CDC and ATSDR consider the filing of
such applications to be an important component of its research efforts.
3. COOPERATIVE RESEARCH AND DEVELOPMENT UNDER A CRADA
As defined by the FTTA, 15 U.S.C. at Section 3710(d)(1), a CRADA means any
agreement between one or more Federal laboratories and one or more
non-Federal parties, under which the Government provides personnel, services,
facilities, equipment or other resources (but not funds), and the non-Federal
parties provide funds, personnel, services, facilities, equipment or other
resources toward the conduct of specified research or development efforts.
Cooperative research and development activities are intended to facilitate
the transfer of federally funded research and development for use by State
and local governments, universities, and the private sector, particularly
small business.
4. CDC AND ATSDR CRADAS FOR COOPERATIVE RESEARCH
As adopted by CDC and ATSDR, a CRADA is a standardized agreement intended to
provide an appropriate legal framework for, and to expedite the approval of,
cooperative research and development projects. The use of CRADAs is
encouraged for cooperative efforts because they permit CDC and ATSDR to
accept, retain, and use funds, personnel, services, and property from
collaborating parties and to provide personnel, services, and property to
collaborating parties. The CDC and ATSDR may permit its investigator to
enter into CRADAs with collaborators who will make significant intellectual
contributions to the research project undertaken or who will contribute
essential research materials not otherwise reasonably available. While CDC
and ATSDR welcome contributions to its gift funds for research purposes, it
does not view CRADAs as a general funding source or a mechanism for sponsored
research. This approach to implementing the FTTA has been chosen in order to
maintain the public's confidence in CDC and ATSDR through maintaining an
independence from reliance on industry funding.
5. SELECTION OF COLLABORATORS UNDER A CRADA
Collaborators under a CRADA may be suggested by potential collaborators or by
CDC and ATSDR investigators. Generally, the decision to initiate the
approval process for a CRADA is made by the involved CDC or ATSDR
investigator and laboratory chief with the approval of Division and CIO
directors. Approval is based on scientific considerations and the desire for
the public to benefit from the application by the private sector of
particular CDC and ATSDR research. For some cooperative projects, where the
development and commercialization potential is more immediate relative to the
basic research aspects, CDC and ATSDR may seek a collaborator(s) which has
both scientific expertise and commercialization capabilities. In certain
areas of research, e.g. where the Government has the intellectual lead or
where both scientific and commercialization capabilities are deemed essential
at the outset, CDC and ATSDR may competitively seek a collaborator(s) through
Federal Register notification. The PHS has also developed policy guidelines
for ensuring fairness of access to PHS laboratories such as CDC in the
process of initiating and developing CRADAs. Additionally, from time to
time, CDC and ATSDR may sponsor industry collaboration fora to publicize
opportunities for collaboration to a wide audience.
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6. PROPRIETARY OR CONFIDENTIAL INFORMATION AND MATERIALS
The CDC and ATSDR recognize that an effective collaborative research program
may require the disclosure of proprietary information to CDC and ATSDR
investigators. Although agreements to maintain confidentiality are permitted
under a CRADA, collaborators should limit their disclosure of proprietary
information to the amount necessary to carry out the research plan of the
CRADA. The mutual exchange of confidential information, e.g. patient
identification data, should be similarly limited. The CDC and ATSDR also
recognize that cooperative research may require the exchange of proprietary
research materials. Such materials may be used only for the purposes
specified in the research plan set forth in the CRADA. All parties to the
CRADA will agree to keep CRADA research results confidential until they are
published or presented at a scientific meeting.
7. TREATMENT OF DATA AND RESEARCH PRODUCTS PRODUCED UNDER A CRADA
The CDC and ATSDR investigator and the collaborator will agree to exchange
all data and research products developed in the course of research under a
CRADA whether developed solely by CDC and ATSDR, jointly with the
collaborator, or solely by the collaborator. In general, tangible research
products developed under a CRADA will be shared equally by the parties to the
CRADA. All parties to a CRADA will be free to utilize such data and research
products for their own purposes. Data and research products developed solely
by the collaborator may be designated as proprietary by the collaborator
when they are wholly separable from the data and research products developed
jointly with CDC and ATSDR investigators. However, except as may be afforded
through intellectual property rights that require public disclosure of the
protected subject matter (e.g. patents), the CDC and ATSDR will not agree to
exclude others from utilizing or commercializing the data or research
products developed solely by CDC and ATSDR investigators or jointly with the
collaborator under a CRADA. Thus, intellectual property which is not
patented is not to be afforded trade secret status.
8. OWNERSHIP OF AND LICENSING OF CDC INTELLECTUAL PROPERTY RIGHTS
Pursuant to the FTTA, 15 U.S.C. at Section 3710(b)(2), a Federal laboratory
is authorized to own and license patent rights to inventions made in whole or
part by its employees under a CRADA. The term "invention" is defined at
Section 3703(9) to mean any invention or discovery which is or may be
patentable or otherwise protected under Title 35 or any novel variety of
plant which is or may be protectable under the Plant Variety Protection Act
(PVPA), 7 U.S.C. Section 2321 et seq. The patent law, 35 U.S.C. Section 207,
authorizes the ownership and licensing of intramural inventions. Executive
Order 12591 at Section 1(b)(1)(B) further authorizes the transfer of
Government intellectual property rights. Although the FTTA speaks broadly of
the transfer of "technology", CDC and ATSDR do not have statutory authority
to license (or to agree to limit dissemination) of technology developed in
whole or part by their investigators under a CRADA unless a patent, PVPA
certificate or other intellectual property application has been filed for
that technology. The CDC and ATSDR will retain the Government ownership
interest in, but license rights to, all intellectual property rights to
inventions developed solely by their investigators through intramural
research or developed in whole or in part under a CRADA.
9. GENERAL LICENSING POLICY
The CDC and ATSDR recognize that under the FTTA and the patent licensing law
to which it refers, Congress and the President have chosen to utilize the
patent system as the primary mechanism for transferring Government inventions
to the private sector. The importance of patents to commercialization in the
biomedical field is further reflected by the Drug Price Competition and
Patent Term Restoration Act of 1984 (Pub. L. 98-417). A fundamental
principle of the patent system is that the owner of a patent has a
time-limited "right to exclude others from making, using, or selling the
[patented] invention." The reason for such a period of exclusivity is to
encourage industry to invest the resources necessary to bring an invention
from the discovery stage through subsequent development, clinical trials,
regulatory approvals, and ultimately into commercial production. The CDC and
ATSDR accordingly are willing to grant exclusive commercialization licenses
under their patent or other intellectual property rights in cases where
substantial additional risks, time, and costs must be
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undertaken by a licensee prior to commercialization. Under a CRADA, CDC and
ATSDR are also willing to agree to grant exclusive commercialization licenses
in advance to collaborators. The CDC and ATSDR will attempt, however, to
license their intramural inventions nonexclusively in cases where an
invention reflects a relatively more advance stage in its commercial
development, e.g. when a CDC and ATSDR investigator invents a patentable new
therapeutic use for a known and FDA approved compound.
Federal laboratories are authorized to negotiate license agreements for
Government-owned patent rights in intramural inventions pursuant to 35 U.S.C.
Section 207. Although Section 207 does not apply to intellectual property
license agreements authorized by the FTTA for inventions made under a CRADA,
CDC and ATSDR have adopted the following approach of Section 207 for all
license agreements:
Each Federal Agency [may] ... grant nonexclusive, exclusive or
partially exclusive licenses under federally owned patent applications,
patents, or other forms of protection ... on such terms and conditions
... as determined appropriate in the public interest.
The CDC and ATSDR have determined it to be appropriate and in the public
interest to grant nonexclusive research licenses and either exclusive or
nonexclusive commercialization licenses to HHS owned intellectual property
rights according to the plan discussed below.
10. GOVERNMENT INVENTION RIGHTS
For inventions developed wholly by CDC and ATSDR investigators or jointly
with a collaborator under a CRADA, CDC and ATSDR are required by the FTTA at
15 U.S.C. Section 3710(a)(b)(2) to retain at least a nonexclusive,
irrevocable, paid-up license to practice the invention or to have the
invention practiced throughout the world by or on behalf of the U.S.
Government. When granting exclusive or partially exclusive licenses to CDC
and ATSDR intramural inventions, 35 U.S.C. Section 208, as implemented by 37
C.F.R. Section 404.7(2)(i), required the reservation of similar Government
rights. The CDC and ATSDR will not assert an ownership right in inventions
made solely by a collaborator under a CRADA, but will require the grant of a
research license, as described below, to the Government for inventions made
wholly by collaborator under a CRADA.
11. RESEARCH LICENSES
The CDC and ATSDR will reserve the right under any CRADA and intellectual
property license to grant nonexclusive licenses to make and to use such
property, for purposes of research involving the invention itself and not for
purposes of commercial manufacture or in lieu of purchase as a commercial
product for use in other research. The purpose of the research license is to
facilitate basic academic research. The CDC and ATSDR intends to consult
with any involved commercialization licensee(s) before granting research
licenses to commercial entities. The grant of any research license hereunder
does not permit CDC and ATSDR to grant any license to third parties to use
the invention for any commercial purpose.
12. COMMERCIALIZATION LICENSES
The CDC and ATSDR are willing to consider requests for nonexclusive or
exclusive commercialization licenses to intellectual property rights to
inventions developed under a CRADA or in the course of intramural research
pursuant to applicable statutes and regulations. Under a CRADA, CDC and ATSDR
generally will grant a time-limited option to negotiate, in good faith, the
terms of a license that fairly reflects the relative contributions of the
parties, the risks incurred by the collaborator and the costs of subsequent
research and development needed to bring the results of CRADA research to the
marketplace. The CDC and ATSDR consider the drafting of a model invention
license to serve as the starting point for license negotiations. It is
contemplated further that such a model will reduce negotiations essentially
to matters of execution fees, royalty rates, and minimum annual royalties.
Royalty rates will be based on product sales and the rates conventionally
granted in the field identified in the CRADA's research plan for inventions
with reasonably similar commercial
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potential. Royalty rates generally will not exceed a rate [***]
for exclusive commercialization licenses. Contingent royalty
schemes based on, e.g. patent issuance or nonissuance, and clauses treating
the stacking of royalties or packaging of other inventions developed under
the CRADA may be provided. Exclusive licensees will be expected to reimburse
CDC and ATSDR for intellectual property related expenses and may be permitted
to offset such reimbursement against future product royalties.
13. NONEXCLUSIVE COMMERCIALIZATION LICENSES
Unless a request for exclusive commercialization license is made under a
CRADA or submitted for an intramural invention, CDC and ATSDR will attempt to
license their inventions nonexclusively. Such nonexclusive licenses
generally will follow the guidelines of 37 C.F.R. Part 404.
14. EXCLUSIVE COMMERCIALIZATION LICENSES
The CDC and ATSDR exclusive commercialization requires the submission by a
prospective licensee of an acceptable development and commercialization plan
as described by 35 U.S.C. Section 209(a) and subsequent, periodic reports on
utilization of the invention as described by Section 209(f)(1). All such
plans and reports will be treated in confidence and as privileged from
disclosure under the Freedom of Information Act. Modification provisions as
described by Section 209(f)(2-4) may apply. In appropriate cases, CDC and
ATSDR may also reserve the right to grant separate exclusive
commercialization licenses in various fields of use. The remaining
provisions of 35 U.S.C. Section 200-212 will also apply to licenses to CDC
and ATSDR intramural inventions.
The CDC and ATSDR also consider the following provisions for exclusive
commercialization licenses to be necessary and appropriate in the public
interest:
(i) the exclusive licensee must pledge its reasonable best efforts to
commercialize a licensed invention and the development and
commercialization plan mentioned above may serve as the measure of such
efforts;
(ii) the CDC and ATSDR shall have the right, after notice and
opportunity to cure, to terminate or render nonexclusive any license
granted: (1) if the licensee is not reasonably engaged in research,
development, clinical trials, manufacturing, marketing, sublicensing,
or other activities reasonably necessary to the expeditious commercial
dissemination of the licensed invention; or (2) when the licensee
cannot reasonably satisfy unmet health and safety needs;
(iii) in order to maximize the commercialization of the licensed
invention in other fields of use not utilized by the exclusive licensee
through ongoing development, manufacturing, or sublicensing, CDC and
ATSDR reserve the right to require the licensee to grant sublicenses to
responsible applicants, on reasonable terms, in such other fields of
use unless the licensee can reasonably demonstrate that such a
sublicense would be contrary to sound and reasonable business practice
and the granting of the sublicense would not materially increase the
availability to the public of the licensed invention; and
(iv) exclusive licensees to HHS inventions, whether developed under a
CRADA or through intramural research, must agree to not unreasonably
deny requests for sublicense or cross license rights from future CRADA
collaborators when the possibility of acquiring such derivative rights
is necessary in order to permit a proposed cooperative research project
with CDC and ATSDR to go forward, and the exclusive licensee has been
given a reasonable opportunity to join as a party to the proposed
CRADA. The grant of any sublicense or cross license rights hereunder
does not grant future CRADA collaborators a license to use or CDC and
ATSDR the right to grant to future CRADA collaborators a license to use
any inventions of the instant CRADA for any commercial purpose.
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15. COMPLIANCE UNDER CRADAS WITH OTHER POLICIES
For research conducted pursuant to a CRADA, collaborators must agree to
comply with PHS, CDC, and ATSDR policies and guidelines concerning, e.g.
human subjects research, the use of research animals, recombinant DNA and
other policy statements as may be promulgated from time to time.
16. PRICING
HHS has the responsibility for funding basic biomedical research, for funding
medical treatment through programs such as medicare and medicaid, for
providing direct medical care, and more generally, for protecting the health
and safety of the public. Because of these responsibilities, and the public
investment in the research that contributes to a product licensed under a
CRADA, HHS has a concern that there be a reasonable relationship between the
pricing of a licensed product, the public investment in the product, and the
health and safety needs of the public.
17. WAIVERS
The CDC and ATSDR will consider requests to modify any of the foregoing
policies in special cases where public health exigencies or commercial
situations warrant such a modification. Modifications dealing with business
terms such as royalties are not decided by the CDC and ATSDR investigators
and should be discussed with the appropriate CDC and ATSDR technology
management personnel.
18. SPECIAL CONSIDERATION AND PREFERENCE UNDER A CRADA
The CDC and ATSDR will give special consideration to entering into CRADAs with
small business firms and consortia involving small business firms; and will
give preference to business units located in the United States which agree to
manufacture substantially in the United States products which embody
inventions developed in the course of research under CRADAs.
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CRADA #: CID-93-045-00
Appendix B
Research Plan
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Exhibit 10.20
SUPPLY AGREEMENT
This supply agreement is entered into as of July 1, 1996 (the "Effective
Date") between PerImmune, Inc. ("PerImmune") and Progenics Pharmaceuticals,
Inc. (each singularly a "Party" and collectively the "Parties") with
reference to the following:
RECITALS
WHEREAS, PerImmune, Inc. manufactures purified keyhole limpet hemocyanin
("KLH"); and
WHEREAS, Progenics Pharmaceuticals, Inc. is performing research and
development in the field of vaccines for human cancers and is interested in
purchasing KLH from PerImmune, Inc. for use as a carrier protein for such
vaccines;
THEREFORE, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement:
1.1 "AFFILIATE" means any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly owns, is
owned by, or is under common ownership with a party to this Agreement to the
extent of at least fifty percent (50%) of the equity (or such lesser
percentage which is the maximum allowed to be owned by a foreign corporation
in a particular jurisdiction) having the power to vote on or direct the
affairs of the entity and any person, firm, partnership, corporation or other
entity actually controlled by, controlling, or under common control with a
party to this Agreement. For example, Akzo, N.Y. is an Affiliate of PerImmune
pursuant to this definition.
1.2 "AGREEMENT" means this Supply Agreement, including any exhibits,
schedules or other attachments thereto, as any of the foregoing may be
validly amended and agreed to in writing by the Parties from time to time.
1.3 "COMMERCIAL INTRODUCTION" means the date of first commercial sale
(other than for purposes of obtaining regulatory approval) of a Ganglioside
Vaccine by Progenies Pharmaceuticals, Inc.
1.4 "EFFECTIVE DATE" is defined in the introductory paragraph.
1.5 "FULLY BURDENED MANUFACTURING COST" means the actual cost of
Manufacture by PerImmune of KLH under a Manufacturing Process in compliance
with
<PAGE> Page 2
cGMPs, which actual cost shall be comprised of the cost of goods produced as
determined in accordance with United States generally accepted accounting
principles, [***]
1.6 "cGLPs" means the current Good Laboratory Practices for Finished
Pharmaceuticals pursuant to 21 C.F.R. 58 et sea., as amended from time to
time.
1.7 "cGMPs" means the current Good Manufacturing Practices for Finished
Pharmaceuticals pursuant to 21 C.F.R. 210 et seci., as amended from time to
time.
1.8 "KLH" means keyhole limpet hemocyanin.
1.9 "KLH REQUIREMENTS" means the amount of KLH in bulk which Progenics
Pharmaceuticals, Inc. may require for all research and development,
pre-clinical and human clinical testing of Ganglioside Vaccines and, after
Commercial Introduction, production of Ganglioside Vaccines for commercial
sales.
1.10 "KNOW-HOW" means materials, data, results, formulae, designs,
specifications, methods, processes, improvements, techniques, ideas,
discoveries, technical information, process information, clinical information
and any other information, whether or not any of the foregoing is patentable,
which is confidential (in accordance with Section 5 hereof and proprietary to
PerImmune now or hereafter during the Term of this Agreement, to the extent
that any of the foregoing relates to the development, manufacture, use or
sale of KLH in connection with the development, manufacture, use or sale of
any Gangiloside Vaccine, provided however, that the term "Know-how" shall not
include any of the foregoing that is subject to proprietary rights of third
parties.
1.11 "GANGLIOSIDE VACCINE" means any vaccine or vaccines comprising
purified gangliosides (whether alone or in combination) conjugated to KLH for
the prevention or treatment of human cancers. A ganglioside is a neuraminic
acid containing glycolipids.
1.12 "MANUFACTURE" OR "MANUFACTURING PROCESS" means the aseptic-storage,
handling, production, processing and packaging of KLH in accordance with this
Agreement.
1.13 ."MANUFACTURING YEAR" means each calendar year commencing on or after
January 1, 1995.
1.14 "PARTY" and "PARTIES" are defined in the introductory paragraph.
1.15 "PERIMMUNE" means PERIMMUNE, INC., (formerly Organon Teknika
Corporation Biotechnology Research Institute) , a Delaware corporation, its
Affiliates and its successors and permitted assigns.
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1.16 "SPECIFICATIONS" is defined in Exhibit A
1.17 "TERM" is defined in Section 4.1.
1.18 "PROGENICS" means Progenics Pharmaceuticals, Inc., a Delaware
corporation, its Affiliates and its permitted successors and assigns.
2. MANUFACTURE AND SUPPLY.
2.1 GENERAL. [***] PerImmune hereby agrees, at its sole expense, to
commit all reasonably necessary facilities, appropriately trained personnel,
machinery, equipment, utilities and other PerImmune resources required to
satisfy its obligations under this Agreement.
2.2 PERIMMUNE TRANSFER PRICE OF KLH.
With respect to each and every Ganglioside Vaccine, PerImmune shall
Manufacture and supply one hundred percent (100%) of KLH Requirements of such
Ganglioside Vaccine, including for purposes of all research and development,
preclinical studies and human clinical trials, and the Commercial sales of
such Ganglioside Vaccine. [***]
In addition, in order to verify the production cost of KLH, Progenics will
have the right to pay for an independent certified public accountant, ("CPA")
to inspect the records of PerImmune once per year during regular business
hours, provided that such accountant has entered into a confidentiality
agreement with PerImmune which is satisfactory to PerImmune. The CPA shall
then compile a report which states only PerImmune's Fully Burdened
manufacturing Cost for KLH which may be used by the Parties for negotiating
the transfer price.
2.3 PERlMMUNE'S REPRESENTATIONS, WARRANTIES AND COVENANTS. PerImmune
hereby represents and warrants to Progenics as follows:
(a) PRE-CLINICAL STUDY AND HUMAN CLINICAL TRIAL USE, PerImmune shall
Manufacture all KLH Requirements for use in any vaccine used in connection
with any pre-clinical study or human clinical trial of any Ganglioside
Vaccine (i) strictly in compliance with (A) this Agreement, (B) all
Specifications, and (C) all applicable laws
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and regulations, including but not limited to cGMPs to the extent applicable,
and (ii) in a PerImmune facility holding all applicable licenses in the
jurisdiction of Manufacture.
(b) COMMERCIAL USE. PerImmune shall Manufacture all KLH Requirements for
use in the commercialization of any Ganglioside Vaccine (i) strictly in
compliance with (A) this Agreement, (B) all Specifications, and (C) all
applicable laws and regulations, including but not limited to cGMPs to the
extent applicable, and (ii) in a PerImmune facility holding all applicable
licenses in the jurisdiction of Manufacture.
(c) CERTIFICATE OF ANALYSIS: NON-COMPLYING KLH. Before, during and after
Manufacture of KLH Requirements, PerImmune shall obtain samples, monitor the
Manufacturing Process and the environment of such Manufacture, and keep such
technical books and records of all of the foregoing as are required under the
Specifications and Procedures and all applicable laws and regulations,
including but not limited to cGLPs or cGMPs (as appropriate and applicable).
PerImmune shall test each lot of KLH requirements Manufactured for Progenics
or as required under the Specifications. Together with each such lot of KLH
Requirements, PerImmune shall provide a written certificate of analysis which
shall set forth the results of such testing by PerImmune and PerImmune's
quality control approval of such lot of KLH Requirements. PerImmune's
obligations under this section 2.3(c) shall be performed at PerImmune's sole
expense. Progenics shall be entitled to test any such KLH Requirements in
accordance with the Specifications, at Progenics' sole expense. Without
limiting any of Progenics' other rights or remedies under this Agreement with
respect to any KLH Requirements supplied hereunder that do not comply with
applicable representations and warranties under this Section 2.3, and
provided PerImmune reasonably confirms Progenics' test results, the Parties
agree that; (i) Progenics shall not be obligated to pay PerImmune the
transfer price applicable to such non-complying KLH Requirements; (ii) if
Progenics has already paid for such non-complying KLH Requirements, Progenics
shall be entitled to a credit against future purchases for the amount paid to
PerImmune therefor; (iii) PerImmune shall, on a priority basis, Manufacture
and supply to Progenics, as applicable, replacement KLH Requirements in full
compliance with this Section 2.3; and (iv) PerImmune shall bear the full cost
of returning or destroying the non-complying KLH Requirements.
2.4 Procedures for Estimating, Ordering and Supplying - KLH REQUIREMENTS.
Subject to the other terms of this Agreement:
(a) ANNUAL DEMAND FORECAST FOR EACH MANUFACTURING YEAR. During the Term,
commencing on July 1 , 1996 and on an on-going quarterly basis as described
below, Progenics will provide PerImmune with a written rolling annual demand
forecast of KLH Requirements for each manufacturing Year which shall be
binding as to the first quarter and non-binding as to the remaining three (3)
quarters. Thereafter, Progenics shall provide an updated annual demand
forecast on a quarterly
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basis no later than ninety (90) days in advance of the commencement of the
first (and binding) quarter covered by such annual demand forecast. The
Parties also agree that the variance, if any, between the binding forecast of
a given quarter and the last nonbinding forecast for such quarter shall be
between [***] and [***]
meaning that Progenics' binding forecast for such quarter must be at least
[***] but not more than [***]
of such last non-binding forecasted amount for such quarter.
(b) PURCHASE ORDERS. Progenics shall place a firm purchase order or
purchase orders with PerImmune setting forth (i) the quantities of KLH
Requirements to be Manufactured and supplied hereunder, (ii) the schedule for
receipt from PerImmune of such batch(es) of KLH Requirements, and (iii)
instructions for shipping and packaging. Each such firm purchase order shall
be submitted no later than thirty (30) days in advance of the first scheduled
date of receipt thereof. Subject to the other terms of this Agreement,
Progenics shall be obligated to place firm purchase orders with PerImmune
for, and PerImmune hereby commits to Manufacture and supply hereunder
pursuant to such firm purchase orders, [***] of the
amount of KLH Requirements in the then-binding quarter of each annual demand
forecast under Section 2.4(b); provided, however, that: (A) the Parties may
mutually agree in writing to amend any such firm purchase order; (B)
PerImmune in its discretion may agree to Manufacture and supply hereunder
additional amounts of KLH Requirements in excess of the then-binding amount,
provided that Progenics places firm purchase order(s) for such excess KLH
Requirements on a timely basis; and (C) PerImmune agrees to provide Progenics
with as much advance written notice as possible (and in any case at least
thirty (30) days' written advance notice) if PerImmune determines that any
scheduled delivery of KLH Requirements pursuant to any purchase order will be
delayed by more than fifteen (15) days for any reason of which PerImmune
becomes aware.
2.5 PRIORITY.
a) PRIORITY AMONG CUSTOMERS. PerImmune hereby agrees and acknowledges
that, in the event that PerImmune is unable to satisfy in full its
obligations under this Agreement to Manufacture and supply
[***] of KLH Requirements as well as PerImmune's obligations to
third parties with respect to Manufacture and supply of KLH, PerImmune shall
use reasonable efforts to satisfy its obligations under this Agreement and,
in the event of any shortage of KLH available to meet all such obligations,
PerImmune shall allocate proportionately all available KLH among Progenics
and such third parties with highest priority for the Manufacture and supply
of KLH for purposes of outstanding firm purchase orders for comparable
delivery time frames. In such event PerImmune, shall be permitted to invoice,
and Progenics agrees to pay, the additional expenses of PerImmune for such
efforts.
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(b) INABILITY TO SUPPLY. In the event that PerImmune is unable to supply
[***] of Progenics' purchase orders for two consecutive quarters, then
PerImmune agrees to provide Progenics the right and license to use the
relevant Know-how to manufacture or have manufactured KLH for use in
producing Ganglioside Vaccine, and to fully cooperate with regulatory
authorities to qualify Progenics and/or its designee as a manufacturer of
KLH. In such event, at Progenics' request, PerImmune shall promptly disclose
to Progenics all Know-how and information reasonably necessary to manufacture
KLH and the parties shall mutually agree upon a reasonable schedule for
gradually reducing the amount of KLH purchased by Progenics from PerImmune,
until such time PerImmune is able to reasonably demonstrate the ability to
supply Progenics with its requirements.
(c) ASSURANCE OF SUPPLY. Progenics and PerImmune will cooperate to
anticipate Progenics' long-term requirements for KLH Requirements supply, and
PerImmune will take reasonable measures to assure that Progenics' and its
Partners' KLH Requirements can be met, which measures may include the
maintenance of adequate safety stocks of KLH.
2.6. REGULATORY APPROVAL OF MANUFACTURING. PerImmune shall be solely
responsible, at its sole cost and expense, for obtaining all necessary
regulatory approvals particular to KLH for Manufacture and supply of KLH
Requirements. Progenics shall advise PerImmune of any new Specifications
required by the United States Food and Drug Administration or the Federal
Food, Drug and Cosmetic Act (or the equivalent regulatory authority or law In
other countries) with respect to any Ganglioside Vaccine. PerImmune shall not
modify in any manner any Specifications without Progenics prior written
consent (which consent shall not be unreasonably withheld).
2.7 REGULATORY FILINGS. Without limiting the generality of the
foregoing, for purposes of supporting all preclinical studies and human
clinical trials and all regulatory filings, applications and approvals on the
part of Progenics with respect to any Ganglioside Vaccine, PerImmune hereby
agrees that on an on-going basis during the Term: (1) PerImmune shall permit
Progenics to reference PerImmune's drug master file and/or Investigational
New Drug Applications (IND's) for KLH with the United States Food and Drug
Administration; (ii) to the extent not subject to the proprietary rights of
third parties, PerImmune shall provide Progenics with all pre-clinical and
clinical data, results and other relevant information with respect to KLH
(including but not limited to information regarding the toxicity, safety and
stability of KLH) that is (A) submitted by PerImmune in connection with any
Investigational New Drug application or other regulatory filing with respect
to KLH from time to time during the Term or (B) otherwise in PerImmune's
possession from time to time during the Term; and (iii) a PerImmune
representative, at Progenics' request, shall attend periodic meetings to
discuss the progress of clinical trials of any Ganglioside Vaccines.
Progenics will reimburse
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PerImmune for the foregoing assistance only (i) for its reasonable out-of
pocket expenses, including but not limited to travel, and (ii) PerImmune's
fully burdened costs of performing technical studies or engaging outside
services subject to the prior approval of Progenics.
a) ADVERSE EVENTS REPORTING. On an on-going basis during the Term and
for at least ten (10) years after the expiration or termination of this
Agreement, each Party agrees to provide the other Party with any written
information in its possession which indicates adverse effects in humans
associated with KLH or any products using KLH.
2.8 PERIMMUNE RECORDKEEPING AND INSPECTION.
(a) TECHNICAL RECORDS. With respect to any Manufacture and supply of KLH
Requirements, PerImmune shall, at its expense, keep properly completed
technical books and records, test data and reports as required under the
Specifications and all applicable laws and regulations, including but not
limited to cGLPs or cGMPs (as appropriate), and in any case shall maintain
such technical Information for at least two (2) years from the expiration
date of the relevant Ganglioside Vaccine or longer if required under
applicable laws and regulations (including but not limited to cGLPs and
cGMPs, as applicable). During regular business hours and upon reasonable
advance written request, PerImmune shall make any such technical information
available to Progenics for inspection.
(b) FINANCIAL RECORDS. During the Term, PerImmune shall keep for at
least three (3) years records of its Fully Burdened Manufacturing Costs, and
the calculations thereof in sufficient detail to permit Progenics designee,
reasonably acceptable to PerImmune, to confirm the accuracy thereof. At the
request of Progenics, and not more frequently than once per year, upon at
least five (5) business days' prior written notice, and at the expense of
Progenics (except as otherwise provided below), PerImmune shall permit a
nationally recognized, independent, certified public accountant selected by
Progenics and acceptable to PerImmune to inspect (during regular business
hours) any such PerImmune records for the then-preceding three (3) years
solely to the extent necessary to verify such costs, margins and
calculations, provided that such accountant in advance has entered into a
confidentiality agreement with PerImmune and Progenics substantially similar
to the confidentiality provisions of this Agreement, limiting the use and
disclosure of such information to authorized representatives of the Parties.
Results of any such inspection shall be made available to both Parties. If
such inspection reveals a deficiency in the calculation of PerImmune's Fully
Burdened Manufacturing Cost to PerImmune resulting in an overpayment to
PerImmune of the transfer price by [***] , PerImmune shall
pay all costs and expenses of such inspection.
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(c) QUALITY AUDIT. Upon submission of a proposal by Progenics which is
approved by PerImmune, PerImmune shall permit Progenics to audit, in
cooperation with PerImmune's personnel, production, packaging, and quality
control facilities of PerImmune and any of its significant suppliers as they
relate to production of KLH to allow Progenics to verify PerImmune's
compliance with its responsibilities under this Agreement.
2.9 LIABILITY.
(a) INDEMNIFICATION BY PROGENICS. Except as otherwise provided in
Sections 2.9(b) or (c), Progenics will defend, indemnify and hold harmless
PerImmune against any and all claims, actions, liabilities, damages, losses,
costs or expenses, including reasonable attorney's fees, based upon or
arising out of the sales or use of any Ganglioside Vaccine by Progenics,
provided that PerImmune gives Progenics prompt notice thereof in writing,
permits Progenics to control the investigation, preparation and defense
thereof (including any compromise or settlement thereof and any appeal) and
provides reasonable assistance to Progenics, at Progenics expense, in that
regard.
(b) LIABILITY. Each Party assumes full responsibility and liability for
any injury, damage or expense which it or its employees, agents and invitees
incur and which arise from its manufacture, handling and use of KLH or
Ganglioside Vaccines, except to the extent such injury, damage or expense
arises from the negligence or willful misconduct of the other Party.
(c) INDEMNIFICATION BY PERIMMUNE. PerImmune will defend, indemnify and
hold harmless Progenics against any and all claims, actions, liabilities,
damages, losses, costs or expense (including reasonable attorneys' fees)
including without limitation expenses of total or partial product recalls in
connection with the manufacture, use or sale of Ganglioside Vaccines (i)
based upon the gross negligence or willful misconduct of PerImmune or its
employees arising out of the Manufacture or shipment of KLH Requirements by
PerImmune or based upon a manufacturing defect in KLH Requirements
manufactured by PerImmune; or (ii) the failure of PerImmune to comply with
governmental regulations with respect to KLH, provided that Progenics or its
Partners give PerImmune prompt notice thereof in writing, permits PerImmune
to control the investigation, preparation and defense thereof (including any
compromise or settlement thereof and any appeal) and provides reasonable
assistance to PerImmune, at PerImmune's expense, in that regard.
3. CONFIDENTIALITY.
3.1. Each party agrees to take such steps and, when necessary to protect
the rights of the other, shall cause its employees and agents and its
Affiliates employees and agents, to take such steps as are reasonably
required to protect and keep
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confidential, and shall not use, publicize or otherwise disclose to third
parties other than Affiliates, Confidential Information (as defined below) of
the other party, which was acquired from the other party pursuant to this
Agreement, including, without limitation, following procedures designed to
limit access of such information to those persons having a need to know it.
The parties agree not to disclose or use such Confidential Information except
as they may be entitled to do so or if necessary pursuant to or in the
performance of this Agreement.
3.2 The obligation of confidentiality and restriction on use imposed by
the foregoing Subsection 3.1 shall not apply to any particular item of
Confidential Information that:
3. 2.1 is known or generally available, or subsequently becomes known or
generally available, to the public, or is otherwise at the time of disclosure
or subsequently becomes part of the public domain, whether by printed
publication or otherwise through no fault of the receiving parties;
3.2.2 the receiving party can demonstrate by competent evidence, based
in substance upon writings and/or physical evidence, (i) was known to the
receiving party at the time of receipt or (ii) is furnished to the receiving
party without obligation of confidentiality or non-use by a third party,
either before or after the time of its disclosure by the disclosing party,
which third party is not restricted by a confidential undertaking to the
disclosing party at the time of the disclosure;
3.2.3 the receiving party can demonstrate by competent evidence, based
in substance upon writings and/or physical evidence, has been developed
independently for the receiving party by persons not having access to the
Confidential information; or
3.2.4 is the Confidential Information of the disclosing party and that
the disclosing party discloses to a non-Affiliate party without restriction.
3.3 The obligations of confidentiality and restriction on use under this
Section 3 shall continue to be binding upon the parties for a period of five
years following termination of this Agreement.
3.4 Either party may also disclose Confidential Information disclosed to
it by the other party to the extent, and only to the extent, such disclosure
is necessary for such party to comply with applicable governmental laws or
regulations. The party that desires to so disclose Information shall give the
other party reasonable advance notice of any such proposed disclosure
pursuant to such compliance with law or regulation, shall use its best
efforts to secure confidential treatment of the Information thus disclosed,
and shall advise the other party in writing of the manner in which that was
done.
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3.5 For purposes of this Agreement, Confidential Information shall
mean: (a) data, inventions, Information, processes, know-how, patent
applications, trade secrets and similar intellectual property rights of a
party, including, without limitation, the original and copies of all
documents, inventions, laboratory notebooks, drawings, specifications,
devices, equipment, prototype models and tangible manifestations embodying
any technology disclosed hereunder, (b) a party's customer lists and
marketing, sales, costs, royalty and similar information related to the
manufacture or sale of KLH or other part of the Parties' business, and (c)
any other information disclosed in writing and marked as "Confidential
Information" or, if disclosed orally, reduced to writing and marked as
"Confidential Information" and submitted within thirty (30) days of the
original oral disclosure.
3.6 PERMITTED DISCLOSURES. Each Party may disclose the other Party's
information to the extent such disclosure is reasonably necessary in
prosecuting or defending litigation, filing, prosecuting or maintaining
patent applications or patents, complying with applicable laws or
regulations, or, in the case of Progenics, conducting preclinical or clinical
trials or preparing or filing regulatory filings with respect to Ganglioside
Vaccines; provided, however, that if a Party is required to make any
disclosure of the other Party's information furnished pursuant to this
Agreement, it will give reasonable advance notice of such disclosure
requirements to the other Party and, except to the extent inappropriate in
the case of patent applications, will use its best efforts to secure
confidential treatment of such information required to be disclosed.
4. TERM: TERMINATION.
4.1 TERM. The term of this Agreement shall be for three years from the
Effective Date and will renew automatically for successive 12 month periods
unless sooner terminated as provided in this Section 4.
4.2 MATERIAL BREACH. Subject to Section 8.6, failure by either Party to
comply with any of the material obligations contained in this Agreement shall
entitle the other Party to give to the Party in default notice specifying the
nature of the default and requiring it to make good such default. If such
default is not cured within sixty (60) days after the receipt of such notice,
the notifying Party shall be entitled, without prejudice to any of its other
rights conferred on it by this Agreement and in addition to any other
remedies available to it by law or in equity, to terminate this Agreement
effective upon written notice to the other Party. The right of a Party to
terminate this Agreement, as herein above provided, shall not be affected in
any way by its waiver or failure to take action with respect to any previous
default.
4.3 INSOLVENCY OR BANKRuPTCY. Either Party may, in addition to any other
remedies available to it by law or in equity, terminate this Agreement, in
whole or in part as the terminating Party may determine, effective upon
written notice to the other Party, in the event the other party shall have
become insolvent or bankrupt, or shall have
<PAGE>
Page 11
made an assignment for the benefit of its creditors, or there shall have been
appointed a trustee or receiver of the other Party for all or a substantial
part of its property, or any case or proceeding shall have been commenced
seeking reorganization, liquidation, dissolution, winding-up, arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or there shall have been issued a
warrant of attachment, execution, disdain or similar process against, any
substantial part of the property of the other Party, and any such event shall
have continued for sixty (60) days undismissed, unbounded and undischarged.
4.4 ACCRUED RIGHTS, SURVIVING OBLIGATIONS: PARTNERS. Expiration or any
termination of this Agreement for any reason shall be without prejudice to
any rights which shall have accrued to the benefit of either Party prior to
such expiration or termination. Such expiration or termination shall not
relieve either Party from obligations which are expressly indicated to
survive expiration or termination of this Agreement, which obligations
include, without limitation, those under Sections 2.8, 2.9, 3, 5, 6 and 7.
5. PERIMMUNE PATENT RIGHTS.
PerImmune shall not assert against Progenics or its customers any
patents now or hereinafter owned or controlled by PerImmune which concern KLH
or any Ganglioside Vaccine of Progenics which incorporates KLH. This Section
shall continue to apply to any Affiliate of PerImmune which ceases to be an
Affiliate of PerImmune as defined by this Agreement.
6. PERiMMUNE REPRESENTATIONS AND WARRANTIES.
PerImmune represents and warrants that:
(a) the execution and delivery of this Agreement and the performance of
the transactions contemplated hereby have been duly authorized by PerImmune;
(b) the performance by PerImmune of any of the terms and conditions of
this Agreement on its part to be performed does not and will not constitute a
breach or violation of any other agreement or understanding, written or oral,
to which it is a party;
(c) To the best of PerImmune's knowledge, there are no adverse
proceedings, claims or actions pending, or threatened, relating to KLH and at
the time of disclosure and delivery thereof to Progenics and PerImmune shall
have the full right
<PAGE>
Page 12
and legal capacity to disclose and deliver KLH without violating the rights
of third parties.
7. ARBITRATION.
Any dispute, controversy or claim between the Parties, arising out of or
relating to this Agreement or the Parties' respective rights and obligations
hereunder either during or after the Term (including the question as to
whether any such matter is arbitrable) shall be subject to binding
arbitration in accordance with then-existing commercial arbitration rules of
the American Arbitration Association. The Parties agree that, in the course
of any such arbitration, service of any notice at their respective addresses
in accordance with Section 8.11 of this Agreement shall be valid and
sufficient, and any arbitration hereunder shall be in the jurisdiction of the
defendant Party, which in the case of Progenics shall be New York and in the
case of PerImmune shall be Maryland. In any such arbitration, an award shall
be rendered by a majority of the members of a board of arbitration consisting
of three (3) members, one (1) of whom shall be chosen by each of Progenics
and PerImmune and the third of whom shall be appointed by mutual agreement of
such two (2) arbitrators. In the event of failure of such two (2) arbitrators
to agree within sixty (60) days after the commencement of arbitration (as
defined below) upon appointment of the third arbitrator, or, in the event
that either Party shall fail to appoint an arbitrator within thirty (30) days
after the commencement of the arbitration proceedings, the third arbitrator
or (upon request of the other Party) the second arbitrator and the third
arbitrator, as the case may be, shall be appointed by the American
Arbitration Association in accordance with its then existing commercial
arbitration rules. For purposes of this Section, the "commencement of the
arbitration proceeding" shall mean the date upon which the defendant Party
receives from the American Arbitration Association a copy of the request for
arbitration filed by the party desiring to have recourse to arbitration. The
decision of the arbitrators shall be in writing and shall set forth the basis
therefor. The Parties shall abide by all awards rendered in arbitration
proceedings, and such awards may be enforced and executed upon in any court
having jurisdiction over the Party against whom enforcement of such award is
to be sought. The Parties shall divide equally the administrative charges,
arbitrators' fees, and related expenses of arbitration, but each Party shall
pay its own legal fees incurred in connection with any such arbitration;
provided, however, if the arbitrators determine that one Party prevailed
clearly and substantially over the other Party, then the non-prevailing Party
shall also pay the reasonable attorneys' fees and expert witness costs and
other arbitration costs of the prevailing Party.
<PAGE>
Page 13
8. MISCELLANEOUS PROVISIONS.
8.1 NO PARTNERSHIP. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, distributorship, agency employer-employee
or joint venture relationship between the Parties. No Party shall incur any
debts or make any commitments for the other, except to the extent, if at all,
specifically provided herein.
8.2 ASSIGNMENTS. Neither Party shall assign any of its rights or
obligations hereunder or this Agreement, except that either Party may do so:
(a) as incident to the merger, consolidation, reorganization or acquisition
of stock or assets affecting substantially all of the assets or voting
control of such Party; (b) to any wholly owned subsidiary if such Party
remains liable and responsible for the performance and observance of all of
the subsidiary's duties and obligations hereunder; (c) with the prior written
consent of the other Party; or (d) as incident to an agreement between
Progenics and a major corporate partner. This Agreement shall be binding upon
the successors and permitted assigns of the Parties and the name of a Party
appearing herein shall be deemed to include the names of such Party's
successors and permitted assigns to the extent necessary to carry out the
intent of this Agreement. Any assignment not in accordance with this Section
8.2 shall be void.
8.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of
this Agreement.
8.4 NO NAME OR TRADEMARK RIGHTS. Except as otherwise provided herein,
no right, express or implied, is granted by this Agreement to use in any
manner the names "PerImmune, Inc." or "Progenics Pharmaceuticals, Inc." or
any contraction thereof or any other trade name or trademark of PerImmune or
Progenics in connection with the performance of this Agreement.
8.5 PUBLIC ANNOUNCEMENT. Except as may otherwise be required by
applicable law or regulation, neither Party shall make any public
announcement concerning this Agreement or the subject matter hereof without
the prior written consent of the other Party (not to be unreasonably
withheld).
8.6 FORCE MAJEURE. If any default or delay occurs which prevents or
materially impairs a Party's performance and is due to a cause beyond the
Party's reasonable control, including but not limited to any act of any god
or demon, flood, fire, explosion, earthquake, casualty, accident, war,
revolution, civil commotion, blockade or embargo, injunction, law,
proclamation, order, regulation or governmental demand, the affected Party
promptly shall notify the other Party in writing of such cause and shall
exercise diligent efforts to resume performance under this Agreement as soon
as possible. Neither Party shall be liable to the other Party for any loss or
damage due to such cause. Neither Party may terminate this Agreement because
of such default or delay.
<PAGE>
Page 14
8.7 ENTIRE AGREEMENT OF THE PARTIES: AMENDMENTS. This Agreement,
including the exhibits attached hereto which are incorporated herein,
constitutes and contains the entire understanding and agreement of the
Parties and cancels and supersedes any and all prior negotiations,
correspondence, understandings and agreements, whether verbal or written,
between the Parties respecting the subject matter hereof. No waiver,
modification or amendment of any provision of this Agreement shall be valid
or effective unless made in writing and signed by a duly authorized officer
of each of the Parties.
8.8 SEVERABILITY. In the event that any of the provisions of this
Agreement shall for any reason be held by any court or authority of competent
jurisdiction to be invalid, illegal or unenforceable, such provision or
provisions shall be validly reformed to as nearly as possible approximate the
intent of the Parties and, if unreformable, shall be divisible and deleted in
such jurisdiction; elsewhere, this Agreement shall not be affected so long as
the Parties are still able to realize the principal benefits bargained for in
this Agreement.
8.9 CAPTIONS. The captions to this Agreement are for convenience only,
and are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement.
8.10 APPLICABLE LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of Maryland.
8.11 NOTICE. All notices and other communications shall be deemed to
have been duly given when delivered in person or by registered or certified
mail (postage prepaid, returned receipt requested) to the respective parties
as follows:
If To Progenics:
Paul J. Maddon, M.D., Ph.D.
Chairman and CEO
- ---------------------------
777 Old Saw Mill River Road
- ---------------------------
Tarrytown, NY 10591
- ----------------------------
<PAGE>
Page 15
If To PerImmune:
Michael G. Hanna, Jr.
- ------------------------
President & CEO
1330 Piccard Drive
- ------------------------
Rockville, MD 20850
- ------------------------
8.12 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by a Party and
shall be able to be relied fully on by the Parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective corporate officers, duly authorized as of the day
and year first above written. PerImmune, Inc., represents and warrants that
it has the right and authority to provide to Progenics the material and
rights set forth in this agreement pursuant to the transfer of relevant right
and authority from Akzo Nobel to PerImmune.
PERIMMUNE, INC. PROGENICS PHARMACEUTICALS, INC.
By: /s/ Michael G. Hanna, Jr. By: Paul J. Maddon
- ---------------------------- ----------------------
Name: Michael G. Hanna, Jr. Name: Paul J. Maddon
- --------------------------- -----------------------
Title: President & CEO Title: Chairman and CEO
- --------------------------- -----------------------
<PAGE>
As set forth in this Exhibit A, the following are the specifications for the
Manufacture of KLH, as may from time to time be required by the Food and Drug
Administration (the "Specifications").
<PAGE>
EXHIBIT A
ORGANON TEKNIKA
[GRAPHIC] AKZO
CERTIFICATE OF ANALYSIS
KEYHOLE LIMPET HEMOCYANIN
[***]
[***] Confidential Treatment Requested
<PAGE>
Exhibit 10.21
This document, when properly executed, shall constitute a Supply Agreement
between Progenics Pharmaceuticals, Inc. with offices at Old Saw Mill River Road,
Tarrytown, NY, (Progenics) and E.I. Du Pont de Nemours and Company (Du Pont),
with offices at 549 Albany Street, Boston, MA.
1. PERIOD OF AGREEMENT: July 1, 1993 through June 30, 1996. After the
original term, this Agreement will renew automatically for successive 12 month
periods unless either party gives notice to the other of its intention not to
renew at least 120 days prior to the expiration of the then current term.
2. MATERIAL: Recombinant Soluble sCD4, referred to hereafter as sCD4 or
Product.
3. MATERIAL SPECIFICATIONS: Material shall be supplied in the form and
manner, and must conform in all material respects to the specifications set out
in Attachment A. Alterations to these specifications require the express
written consent of each party.
4. PRICE: July 1, 1993 through June 30, 1994: [***]
July 1, 1994 through June 30, 1995: [***]
July 1, 1995 through June 30, 1996: [***]
5. PAYMENT TERMS: Net 30 Days, following the receipt of a properly prepared
and correct invoice.
6. QUANTITY: Du Pont commits to purchase 100% of its purchase requirements
for sCD4 during the term of this order from Progenics, and Progenics agrees to
supply 100% of Du Pont's purchase requirements.
7. DELIVERY TERMS: F.O.B. Destination, freight collect.
8. RELEASES: Du Pont will advise Progenics of its purchase requirements at
least quarterly, or as may otherwise suit the parties by agreement. Progenics
shall ship product as required by Du Pont according to a mutually agreed upon
schedule. Progenics shall advise Du Pont at its earliest opportunity if it is
unable to ship Product at an agreed upon time. Progenics will, on a best effort
basis, attempt to fulfill any unscheduled, or spot requirements of Du Pont.
9. LABELLING AND PACKAGING: Both Du Pont's and Progenics' names and logos
shall appear on the main product label and on promotional literature, along with
the following statement: "Manufactured by Progenics Pharmaceuticals, Inc."
[***] Confidential Treatment Requested
<PAGE>
-2-
All labels to be approved by both parties. All product labelling and literature
shall contain the phrase "For Laboratory Use." Progenics will package product
as 100 micrograms per vial, or in other package sizes as mutually agreed upon by
both parties. Product will be shipped on dry ice. In parallel, Progenics will
perform stability studies on lyophilized product. Shelf life of the sCD4 will
be no less than 6 months upon receipt by Du Pont.
10. CONFIDENTIALITY: The parties hereto shall keep confidential all
confidential technical information, shall not disclose or make known to any
individual, firm, or corporation, except when authorized in writing to do so by
the other party, and shall not use such information for any purpose other than
the performance of the obligations provided in this Agreement. The provisions
of this clause shall remain binding for five (5) years after the termination of
this agreement. Each party shall use the same degree of care to avoid
disclosure of confidential technical information as the party employs with
similar information of its own which it does not desire to publish or disclose.
Any confidential information shared between the parties must be identified and
labeled in writing as confidential. The confidentiality of and information
disclosed verbally must be identified in writing as confidential no more than 14
days after disclosure.
This obligation shall not apply to information and/or documents which:
A) Are or come within the public domain otherwise than as a consequence of a
breach of the obligations hereunder;
B) Are known to the receiving party prior to disclosure by the other party as
shown by the receiving party's records;
C) Are lawfully disclosed to the receiving party by third parties; or
D) Are subsequently independently developed by the receiving party through no
reference whatsoever to disclosure hereunder.
11. WARRANTY: Progenics warrants the packaged product hereunder shall meet the
specifications set forth in Attachment A and shall be free from defects except
those caused by misuse or mishandling occurring after such delivery. Progenics
agrees to notify Du Pont prior to
<PAGE>
-3-
making any formulation changes in the Product. Progenics further warrants that
packaged product will meet the warranty of merchantability and fitness for
intended use. In the event of a recall of Product, Progenics agrees to
reimburse Du Pont for all reasonable costs incurred in the recall.
12. USE OF MATERIAL: Progenics shall supply Du Pont sCD4 to be sold by Du Pont
to third parties. The material will be used only for research purposes and not
for other uses such as clinical diagnostics or therapeutic development. This
Agreement is limited to resale of sCD4 as packaged at Progenics and does not
allow Du Pont to modify sCD4 or combine sCD4 with other components.
13. PATENTS: [***] to make, have made, use and sell sCD4 gene and protein
under U.S. Patent No. [***]
and all divisional, continuation, continuation-in-part applications thereof,
any patent granted on any aforesaid patent application, and any extension,
reissue, or reexamination of any patents that may issue thereon as well as
any foreign counterparts thereof [***] Progenics shall defend any suit or
proceeding brought against Du Pont based on a claim that materials or
services purchased hereunder, or any part therof, furnished by Progenics
under this Agreement constitutes an infringement of any patent, copyright, or
other proprietary right of any third party provided Progenics is notified
promptly in writing and given authority, information, and assistance by Du
Pont to defend such suits or proceeding. Progenics shall assume the
responsibility to pay all costs, to include such reasonable attorney fees of
defending such suits or proceeding and any damages that may be awarded
therein against Du Pont, to settle any such claim on such terms and
conditions it deems advisable. In case the materials purchased hereunder, or
any part thereof, is in such suit or proceeding held to constitute
infringement of any patent, copyright, or other proprietary right of any
third party, and the use thereof is enjoined, or the settlement made requires
the use of services or materials purchased hereunder to be discontinued,
Progenics shall, at its own expense, and its option, either procure for Du
Pont the right to continue using such materials or services, replace the same
with non-infringing materials which conform to the available specifications,
modify such materials or services in a manner acceptable to Du Pont so it
becomes noninfringing, or terminate this Agreement.
[***] Confidential Treatment Requested
<PAGE>
-4-
13. RELATIONSHIP OF THE PARTIES: Nothing contained herein shall be construed
to empower either party to act as agent for the other. The parties agree that
each of them shall, in relation to its obligations hereunder, be acting as an
independent contractor. Not withstanding, neither party shall, during the
period of this Agreement, enter into discussions nor create an alternative
arrangement with any third party concerning the subject matter herein, without
first advising the other party of its intent.
14. AUDITS: Progenics shall permit no less frequently than once per year, and
upon reasonable notice by Du Pont, inspections and audits by Du Pont during
regular business hours of all records and aspects of sCD4 manufacture, testing,
packaging, labeling and shipping.
15. CANCELLATIONS: This Agreement may be cancelled by either party upon 120
days written notice to the other party.
16. ENTIRETY: This Agreement, together with the Attachments specifically
referenced and attached hereto, embodies the entire understanding between Du
Pont and Progenics, and there are no contracts, warranties, or
representations, oral or written, express or implied, with reference to the
subject matter hereof which are not merged herein. Except as otherwise
specifically stated, no modification hereto shall be of any force or effect
unless reduced to writing and signed by both parties and expressly referred
to as being modifications of this Agreement.
AGREED & APPROVED:
FOR PROGENICS: FOR DU PONT:
Name Paul J. Maddon, M.D., Ph.D. Name: Robert M. Hand
------------------------------- ------------------------------
Title Chairman and CEO Title: Senior Purchasing Agent
------------------------------ -----------------------------
Signature: /s/ Paul J. Maddon Signature: /s/ Robert M. Hand
------------------------- -------------------------
Date: November 3, 1993 Date: October 27, 1993
------------------------------ ------------------------------
<PAGE>
ATTACHMENT "A"
PRODUCT SPECIFICATION SHEET
PRODUCT: Recombinant Soluble CD4
PRODUCT Full-length extracellular domain of human CD4
DESCRIPTION: produced in a CHO expression system.
CONCENTRATION: GREATER THAN = 1.0 mg/ml
AMOUNT GREATER THAN = 100 micrograms/vial
STORAGE BUFFER: 50 mM MES, pH 6.0, 0.35M NaCl
SHIP: DRY ICE
STORE: -80 DEG. C
STABILITY: 6 months at -80 DEG. C
QUALITY CONTROL
CONCENTRATION Determined by Optical Density and
AND PURITY: SDS-PAGE/Silver stain (Purity GREATER THAN 95%)
AUTHENTICITY: Reactive with gp 120 and anti-CD4 monoclonal and
polyclonal antibodies.
Glycosylation pattern identical to natural
human product.
ACTIVITY: Binds HIV gp 120; inhibits binding of HIV to CD4+
lymphocytes and infection of CD4+ lymophoeytes with
HIV.
<PAGE>
[LETTERHEAD]
Reference is made to the Agreement entered into the 3rd day of November, 1993,
as amended between NEN Life Science Products, a division of E.I. DuPont de
Nemours and Company (NEN) and Progenics Pharmaceuticals, Inc. (Progenics)
relative to the purchase of sCD4 by NEN. It is hereby mutually agreed to
further amend the aforesaid Agreement in the following manner effective July 1,
1996.
This amendment is being made to update pricing for a three year period as
follows:
July 1, 1996 through June 30, 1997: [***]
July 1, 1997 through June 30, 1998: [***]
July 1, 1998 through June 30, 1999: [***]
All other terms and conditions of the current Agreement, except as modified in
the above manner, shall continue in full force and effect. Please indicate your
acceptance of this amendment by signing both copies in the space provided below
and return the copy marked "NEN M&L Copy" to Judy Lima-Ziegler, E.I.DuPont de
Nemours and Company, Purchasing Department, 549 Albany Street, Boston, MA 02118,
keeping the original for your files.
Very truly yours,
ProgensPharmaceuticals, Inc. NEN LIFE SCIENCE PRODUCTS
BY: BY: /s/ Robert M. Hand
TITLE: SR DIRECTOR, GRP. DEV. TITLE: Sr. Purchasing Agent
-----------------------------
DATE: June 26, 1996 DATE: June 13, 1996
------------------------------
[*** Confidential Treatment Requested]
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(Amendment No. 3) (File No. 333-13627) of our report dated October 28, 1996
on our audits of the financial statements of Progenics Pharmaceuticals, Inc.
We also consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts."
Coopers & Lybrand L.L.P.
New York, New York
November 20, 1996
