SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X|ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1995
or
|_|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ to _______
Commission File No. 0-18728
INTERNEURON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 043047911
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE LEDGEMONT CENTER, 99 HAYDEN AVENUE, LEXINGTON, MA 02173
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 861-8444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value Redeemable
Class B Warrants
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such report(s)), and (2) has been subject to the filing
requirements for the past ninety (90) days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
The aggregate market value of the voting stock (excluding preferred stock
convertible into and having voting rights on certain matters equivalent to
622,221 shares of common stock) held by non-affiliates of the registrant was
approximately $285 million, based on the last sales price of the Common Stock as
of December 18, 1995.
As of December 18, 1995, 33,683,690 shares of Common Stock, $.001 par value, of
the registrant were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with respect to incorporation by reference from the
registrant's definitive proxy statement to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934 and the Exhibit Index hereto.
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PART I
Item 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS
Interneuron Pharmaceuticals, Inc. ("Interneuron") is a diversified
biopharmaceutical company engaged in the development and commercialization of a
portfolio of products primarily for the treatment or management of central
nervous system disorders. Interneuron is also developing diverse technologies
and products through four subsidiaries, Progenitor, Inc. ("Progenitor"),
Transcell Technologies, Inc. ("Transcell"), Intercardia, Inc. ("Intercardia"),
and InterNutria, Inc. ("InterNutria"). The technology or product areas of the
subsidiaries include: gene therapy, growth factors and stem cell production
through Progenitor; combinatorial chemistry, drug discovery and drug transport
through Transcell; cardiovascular and pulmonary disease through Intercardia; and
nutritional and food related products through InterNutria. Unless the context
indicates otherwise, all references to the Company include Interneuron and its
subsidiaries, Progenitor, Transcell, Intercardia, and InterNutria (the
"Subsidiaries").
Interneuron's strategy emphasizes the development of pharmaceutical
products with significant clinical data or international market experience and
which may provide treatments for disorders or diseases which are not effectively
addressed by available therapies. In addition, Interneuron is pursuing a
strategy of diversification within the healthcare field by acquisition,
in-licensing or establishing and providing initial funding to its Subsidiaries
to conduct research and development in specialized areas. The Company's goal is
for its Subsidiaries to establish independent operations and financing through
corporate alliances, third party financings, mergers or other business
combinations with Interneuron retaining an ongoing equity interest. The nature
of any such transaction is expected to vary depending on the business and
capital needs of each Subsidiary and the stage of development of their
respective technologies or products.
The Company requires significant additional funds and/or corporate
partners to complete the development, testing and commercialization of most of
its products. Substantially all of such products will also require approval by
the United States Food and Drug Administration ("FDA") prior to commercial
introduction.
The Company was originally incorporated in New York in October 1988 and
in March 1990 was reincorporated in Delaware. The Company's executive offices
are located at One Ledgemont Center, 99 Hayden Avenue, Suite 340, Lexington,
Massachusetts 02173, and its telephone number is (617) 861-8444.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in only one business segment.
(c) NARRATIVE DESCRIPTION OF BUSINESS
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INTERNEURON
PRODUCTS UNDER DEVELOPMENT
COMMERCIAL
PRODUCT INDICATION STATUS RIGHTS
- - ------- ---------- ------ ----------
INTERNEURON
Dexfenfluramine Obesity NDA (New Drug U.S.-licensed
Application) to American
filed May 1993; Home Products;
FDA Advisory Interneuron
Committee retains co-promotion
recommended and manufacturing
approval 11/16/95 rights
Citicoline Stroke Phase II/III U.S. and Canada
Pagoclone Anxiety Commence Phase II Worldwide, except for
in U.K. in 1996; France, where Rhone-
Phase I completed Poulenc Rorer retains
in U.K. rights
Low-dose Insomnia dietary Worldwide
melatonin supplement;
regional test
launch expected
in 1996
Dihydrexidine Parkinson's Phase I Worldwide
disease
SUBSIDIARIES
POTENTIAL PRODUCT/ CORE COMMERCIAL
APPLICATION TECHNOLOGY STATUS RIGHTS
- - ------------------ ---------- ------ ----------
PROGENITOR
Gene therapy for Gene transfer Pre-clinical, Worldwide, licensed
cancer and neuro- technologies Research to Chiron Corporation
degenerative diseases (vectors)
Growth factors for Novel growth Research Worldwide; licensed
blood and immune factors to Zymogenetics, Inc.
system disorders
Stem cell therapies Human yolk sac Pre-clinical, Worldwide
for blood and immune stem cells Research
system or neurological
disorders and for
blood vessel repair
Cancer therapy and Novel gene Research Worldwide
diagnosis, cardio- target (del-1)
vascular disorder
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SUBSIDIARIES (cont'd)
POTENTIAL PRODUCT/ CORE COMMERCIAL
APPLICATION TECHNOLOGY STATUS RIGHTS
- - ----------------- ---------- ------ ----------
TRANSCELL
TransphoresTM Compounds for Pre-clinical, Worldwide
trans-membrane Research
drug transport
Drug discovery Combinatorial Research Worldwide
carbohydrate
chemistry method
for synthesis and
library development
of oligosaccharides
Non-viral gene Novel non-viral Pre-clinical, Worldwide
delivery compounds for Research
transporting
DNA across cell
membranes
PRODUCT INDICATION STATUS RIGHTS
- - ------- ---------- ------ ------
INTERCARDIA
Bucindolol Congestive Phase III Worldwide;
heart failure licensed in U.S.
to Astra-Merck
Antioxidant Diseases Preclinical Worldwide
small molecules associated
with excess
oxygen free
radicals
INTERNUTRIA
PMS Escape(TM) Pre-menstrual Regional test Worldwide
syndrome launch expected
in 1996
Hearty Balance(TM) Parkinson's Pilot Worldwide -
disease launched licensed to
Elan
Corporation plc
Boston Sports Performance Regional test Worldwide
Supplement(TM) enhancement launch expected
in 1996
- - ------------------
This 10K contains trademarks and servicemarks of the Company and of other
parties.
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Interneuron focuses primarily on developing products that mimic or
affect neurotransmitters, which are chemicals carrying messages between nerve
cells of the central and peripheral nervous systems. Many neurological and
psychiatric diseases and disorders are believed to be related to the level or
functioning of neurotransmitters. The Company believes that treatments for many
of these disorders are unavailable, ineffective or inadequate. The Company's
objective is to develop products that are safer and more effective than
currently available therapies in treating many disorders, including:
- appetite abnormalities leading to obesity;
- motor and cognitive dysfunction resulting from stroke;
- hormonal imbalance causing insomnia;
- inappropriate neurotransmitter activity leading to anxiety; and
- neurotransmitter deficiency causing Parkinson's disease.
DEXFENFLURAMINE
- - ---------------
The Company is developing dexfenfluramine for use in the United States
as a prescription product to treat obesity. Dexfenfluramine is the
"right-handed" isomer of the compound fenfluramine, an FDA-approved drug.
Dexfenfluramine is believed to increase levels of the neurotransmitter serotonin
within brain synapses both by releasing it from nerve terminals and by blocking
its re-uptake into neurons. Interneuron believes, based upon clinical studies,
that dexfenfluramine, by releasing serotonin or prolonging its action in the
synapse, influences individuals to reduce food consumption.
The Company licensed exclusive rights to dexfenfluramine to treat
abnormal carbohydrate craving and/or obesity in the United States from Les
Laboratoires Servier ("Servier"), a French pharmaceutical company. The Company
has been advised by Servier that dexfenfluramine is currently marketed in over
60 countries outside the United States and has been taken by more than ten
million individuals. In November 1992, the Company granted American Home
Products Corp. (formerly American Cyanamid Company) ("AHP") exclusive rights to
market dexfenfluramine in the United States in exchange for royalties on product
sales and milestone-related cash payments and equity investments, while
retaining co-promotion and certain manufacturing rights. If FDA approval is
obtained, dexfenfluramine is expected to be marketed by AHP under the trade name
Reduxtm.
In May 1993, the Company submitted a New Drug Application ("NDA") to
the FDA for dexfenfluramine for the treatment of obesity. The NDA included 19
double-blind, placebo-controlled clinical studies involving over 4,000 patients,
conducted in the United States and several foreign countries by Interneuron and
others.
In November 1995, the Endocrinologic and Metabolic Advisory Committee
(the "Advisory Committee") of the FDA voted 6 to 5 to recommend the approval of
dexfenfluramine as a prescription treatment for obesity, clarifying a September
1995 meeting of the Advisory Committee which had adjourned without reaching a
final decision on whether to recommend such approval. The Advisory Committee
also recommended that Phase IV, or post-marketing, studies be conducted and that
certain labeling guidelines be implemented. Although the precise nature of these
studies and labeling guidelines has not yet been determined, Interneuron expects
that these studies will be designed to address certain
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safety issues relating to dexfenfluramine which have been highlighted at the
recent Advisory Committee meetings and during the FDA's review of the drug.
The safety issues highlighted included whether dexfenfluramine is
associated with certain neurochemical changes in the brain and whether there is
an association between anorectic drugs, including dexfenfluramine, and the
development of primary pulmonary hypertension ("PPH"), a rare but serious lung
disorder. Certain studies related to the first issue purport to show that very
high doses of dexfenfluramine cause prolonged serotonin depletion in certain
animals. The Company believes that, as demonstrated in human trials, these
animal studies are clinically irrelevant to humans because of pharmacokinetic
differences between animals and humans and because of the high dosages used in
the animal studies. With respect to PPH, an epidemiologic study conducted in
Europe examining risk factors for PPH which is being reviewed by several
European drug regulatory agencies, showed that among other factors, weight
reduction drugs including dexfenfluramine, systemic hypertension, and obesity
itself were associated with a higher risk of PPH.
Notwithstanding the Advisory Committee recommendation, there can be no
assurance that dexfenfluramine will receive FDA approval, or as to the timing of
such approval, if obtained. Redux cannot be marketed and Phase IV studies would
not commence until after issuance of an approval letter by the FDA. However,
Interneuron has begun to address and coordinate manufacturing and marketing
activities in order to be prepared for a launch of Redux, if approved. The
Company's agreements with Servier require launch of the product within six
months after an approval letter from the FDA is obtained. In November 1995,
Interneuron entered into a contract manufacturing agreement with Boehringer
Ingelheim Pharmaceuticals, Inc. ("Boehringer") for the supply of dexfenfluramine
capsules. Active ingredient of the drug will be supplied by Servier. Interneuron
has placed orders for active ingredient and capsules, and has received
corresponding orders from AHP. The Company is also addressing marketing issues
with AHP, including those relating to the Company's co-promotion rights. See
"Agreements" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
In September 1995, a joint committee of the Advisory Committee and the
Drug Abuse Advisory Committee of the FDA voted to remove fenfluramine and its
isomers, including dexfenfluramine, from Schedule IV of the Controlled
Substances Act. Controls imposed upon all Schedule IV substances relate to
record-keeping procedures for dispensing pharmacists and procedural mandates for
prescribing physicians. The Company is unable to predict whether or when the
descheduling of dexfenfluramine will occur and, accordingly, it is possible that
if dexfenfluramine is approved by the FDA, launch may occur prior to federal
descheduling. In addition to marketing factors which may be influenced by
dexfenfluramine's status as a controlled substance, this would impact the timing
of certain milestone payments to be received by the Company under its agreements
with AHP. Certain states will deschedule the drug automatically upon federal
descheduling while other states have varying procedures for descheduling.
CITICOLINE
- - ----------
Cytidyl diphosphocholine ("citicoline") is under development by the
Company as a potential treatment for memory and motor impairment due to ischemic
stroke. The Company believes that by
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raising blood levels of choline and cytidine, citicoline may be useful in
restoring the function of brain neurons which have been damaged by ischemic
stroke. Citicoline increases levels of the neurotransmitter acetylcholine,
believed to be associated with learning and memory functions, and of
phosphatidylcholine, a component of membranes in brain neurons. Citicoline is
believed to help stabilize the cell membrane and, as a result, decrease edema,
or brain swelling, caused when blood flow to brain cells is stopped, and to help
normal neurochemical function in the brain. In addition, citicoline has been
shown to be a neuroprotective-like agent and to reduce infarct size in relevant
animal models. Citicoline has been approved for marketing in 20 countries and is
currently marketed in several countries by Grupo Ferrer, AHP and Takeda Chemical
Industries, Ltd.
Following its November 1993 submission of an IND to the FDA, in April
1994, the Company initiated Phase II/III clinical trials in the U.S. with
citicoline to treat patients suffering from ischemic stroke. The double-blind,
placebo-controlled, dose-ranging trials have involved 260 patients on a
national, multi-center basis. The results of the first pivotal trial are
expected in early 1996. The Company recently commenced a second well-controlled
trial.
In January 1993, the Company licensed from Grupo Ferrer ("Ferrer"), a
Spanish pharmaceutical company, exclusive marketing and manufacturing rights
based on certain patent rights relating to citicoline, including certain patent
and know-how rights in the United States and know-how rights in Canada. The
compound citicoline is not covered by a composition of matter patent. The
licensed United States patent covering the administration of citicoline to treat
patients afflicted with conditions associated with the inadequate release of
brain acetylcholine expires in 2003. As described in the licensed patent, such
conditions may include the neurological syndromes associated with brain traumas
and stroke, but the claims of the licensed patent do not specifically include
the use o0f citicoline for the indications for which the IND has been filed. In
addition to any proprietary rights provided by this patent, the Company expects
to rely on certain marketing exclusivity regulations. In March 1995, the Company
filed a patent application relating to the use of citicoline to reduce the size
of the area of the stroke, or infarct size. See "Government Regulation" and
"Proprietary Rights."
There can be no assurance that citicoline will be found to be safe and
effective for the proposed use or that it will receive FDA approval for
marketing in the U.S. If approval is obtained, the Company plans to contract for
the manufacture of citicoline and may seek a development and marketing partner.
MELATONIN RELATED COMPOUNDS
- - ---------------------------
Melatonin is a hormone produced by the pineal gland that may play a key
role in regulating the body's circadian rhythm, or biologic clock. Research has
shown that when a person's melatonin level is high, sleep is induced, and when
it is low, wakefulness and vigilance are enhanced.
Although melatonin is available, generally at much higher doses, as a
dietary supplement in health food stores and other outlets, the Company believes
that lower doses, which mimic normal nighttime levels, and which are
manufactured in accordance with good manufacturing practices, can offer an
innovative inducement of sleep.
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The Company's research and development activities are focused primarily
on a low-dose form of naturally occurring melatonin and, to a lesser extent, on
IP-100-9, a novel compound with a chemical structure similar to melatonin. A
drug based upon a naturally occurring compound such as melatonin is believed to
offer significant advantages over currently available sleeping aids, which have
undesirable side effects, including amnesia, "hangover," deleterious ethanol
interaction and addiction.
Findings made by scientists at the Massachusetts Institute of
Technology ("MIT") have demonstrated that orally administered, natural
melatonin, taken at doses under one milligram, can effectively induce sleep in
volunteers. Additional studies by a team of researchers in the United Kingdom
have demonstrated that low doses of melatonin can reduce the time required to
fall asleep and improve the quality of sleep.
Interneuron has licensed from MIT a patent issued in September 1995
that covers the use of very low-doses of melatonin for the induction of sleep,
in exchange for royalties based on sales. This use patent is based upon a
discovery by a team of scientists at MIT led by Richard J. Wurtman, M.D.,
professor of neuroscience at MIT, and scientific founder and a director of
Interneuron. The Company is developing a melatonin product that will raise blood
melatonin levels to normal nighttime levels and will allow these levels to fall
again each morning, consistent with a normal day-night rhythm in blood melatonin
levels. The Company is currently formulating a commercialization strategy for a
low-dose melatonin product to be marketed as a dietary supplement under the
tradename MelzoneTM and, in 1996, the Company plans to conduct a regional test
launch of the product. See "Government Regulation."
With regard to IP 100-9, a patent was issued to Interneuron in May 1995
for a class of melatonin analogs that includes IP 100-9, under limited
pre-clinical development as a novel sleeping aid. The analogs were synthesized
through rational drug design computer modeling techniques, using naturally
occurring melatonin as a lead compound.
PAGOCLONE
- - ---------
Pagoclone is being developed by Interneuron as an anti-anxiety drug
with perceived advantages over currently available agents. Pagoclone appears to
increase the action of the neurotransmitter, GABA (gamma amino butyric acid),
thus reducing the excessive activity of certain neurons believed to responsible
for causing symptoms of anxiety and panic attacks. Current pharmacological
treatments for anxiety include benzodiazepines (such as Valium TM). Although
these drugs help to regulate GABA in the brain, they may also cause side effects
such as sedation, hangover, dizziness and the potential for addiction. In
addition, the sedative/hypnotic effects of these drugs are increased by alcohol
intake, leading to serious side effects that may include coma. Pagoclone appears
to be associated with reduced levels of drowsiness, lower addiction and
withdrawal potential and less alcohol interaction.
In 1994, the Company licensed from Rhone-Poulenc Rorer Pharmaceuticals
Inc. ("RPR") exclusive worldwide rights to this anti-anxiety compound, in
exchange for licensing, milestone and royalty payments to RPR.
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During 1995, a multiple-dose Phase I safety study with pagoclone was
concluded in the United Kingdom, involving 24 patients. Although the purpose of
this trial was to test safety, data from this study suggests there may be
evidence of pagoclone's safety and absence of sedating side effects among
volunteers when administered at multiple doses well above the anticipated
therapeutic dose. The Company expects to begin a Phase II trial in the U.K. in
1996. The Company currently intends to seek to sublicense marketing rights to
this product.
DIHYDREXIDINE
- - -------------
The Company is developing dihydrexidine, which belongs to a class of
compounds known as dopamine agonists, as a treatment for the symptoms of
Parkinson's disease, most likely as an adjunct to L-dopa therapy. Dopamine
agonists interact with receptors on brain cells, thus enabling the body to
exercise a certain type of muscle control normally made possible by the action
of the neurotransmitter dopamine, which diminishes in the course of Parkinson's
disease.
In February 1992, the Company licensed from the Purdue Research
Foundation ("Purdue") exclusive U.S. rights under a patent issued to Purdue for
dihydrexidine and to new analogs of this compound in exchange for royalties
based on sales. The Company has also filed patent applications for worldwide
rights to the use of dihydrexidine to treat dementia by improving cognition,
which includes claims directed to an active isomer of dihydrexidine.
An investigator IND was submitted for dihydrexidine in December 1994,
and in mid-1995 a Phase I clinical was initiated with the drug in patients with
Parkinson's disease at the National Institutes of Health. The study is assessing
the safety and certain parameters of efficacy of several doses of the drug among
patients with moderate to severe Parkinson's disease.
THE SUBSIDIARIES
INTERCARDIA, INC.
Through its 80% owned subsidiary, CPEC, Inc. (formerly Cardiovascular
Pharmacology Engineering and Consultants, Inc.), Intercardia has licensed
exclusive worldwide rights to bucindolol, a cardiovascular drug in advanced
clinical testing for the treatment of congestive heart failure.
Congestive heart failure is a syndrome of progressive degeneration of
cardiac function and is generally defined as the inability of the heart to pump
sufficient volume of blood for proper functioning of vital organs. Congestive
heart failure is caused by a number of conditions that produce a primary injury
or stress to the heart muscle. Regardless of the cause of the primary damage,
the body will activate compensatory mechanisms in an attempt to maintain cardiac
output. These mechanisms include activation of beta-adrenergic receptors on
cells located in the heart and vascular system. Chronic activation of these
receptors are believed to contribute to the continual worsening of cardiac
function and high mortality.
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Originally developed by Bristol-Myers Squibb Company ("BMS") and
licensed by BMS to CPEC in exchange for royalties based on sales, Bucindolol is
a non-selective beta-blocker with mild vasodilating properties that works by
blocking beta-adrenergic receptors on cells located in the heart and vascular
system. The Company believes that vasodilating non-selective beta-blockers such
as bucindolol possess potential advantages over earlier beta-blockers (some of
which are contra-indicated for congestive heart failure) and represent a
promising approach to the treatment of congestive heart failure. Bucindolol is
expected to be used in addition to other drugs for the treatment of congestive
heart failure.
A Phase III clinical trial began in June 1995 among patients with
congestive heart failure. Known as BEST (Beta-blocker Evaluation of Survival
Trial), the bucindolol study is being conducted by the National Institutes of
Health ("NIH") and the Department of Veterans Affairs ("VA"). The BEST study is
expected to include up to 2,800 patients at approximately 90 clinical centers
throughout the U.S. As of December 14, 1995, 348 patients had been randomized.
All patients are expected to receive a minimum follow-up of 18 months, giving a
potential maximum duration for the study of four and one-half years.
The NIH and VA have committed up to $15.75 million primary funding for
the BEST study, with specific levels of NIH and VA funding to be based upon
patient enrollment milestones. Intercardia has agreed to commit up to $2 million
over the course of the study (of which $750,000 has been paid), in addition to
supplying the drug and providing monitoring services estimated to cost an
additional $2.5 million.
In December 1995, Intercardia entered into an agreement with Astra
Merck Inc. ("Astra Merck") for the development, commercialization and marketing
in the U.S. of a twice-daily formulation of bucindolol for the treatment of
congestive heart failure. Under the terms of the agreement, Astra Merck made a
$5 million initial payment to Intercardia and agreed to fund development,
marketing and manufacturing costs for bucindolol, including Intercardia's costs
related to the BEST study. Astra Merck agreed to market bucindolol, with
Intercardia retaining certain co-promotion rights.
In addition, Intercardia would receive additional payments based upon
milestones related to FDA approval and the achievement of specified levels of
sales. Intercardia is entitled to royalties of 15% of the first $110 million per
year in net sales and 30% of yearly net sales above $110 million, adjusted for
inflation . Intercardia is committed to reimburse Astra Merck $10 million in
December 1997 and, through the first 12 months of commercial sales, to reimburse
one-third of the launch costs up to $11 million. In the event Intercardia does
not make these payments, the royalty rate declines to 7% of net sales.
The Company is aware that carvedilol, also a vasodilating
non-selective beta-blocker, is owned by Boehringer Mannheim GmbH and licensed in
the U.S. and certain other countries to SmithKline Beecham PLC, and could
receive approval by the FDA for marketing as a treatment for congestive heart
failure prior to bucindolol. See "Competition".
The U.S. composition of matter patent on bucindolol expires in 1997
prior to the anticipated launch of the product. Intercardia intends to pursue up
to five years' market exclusivity under the Drug Price Competition and Patent
Term Restoration Act of 1984 (commonly referred to as the Waxman-Hatch Act).
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The $1.8 million purchase price for the 80% of CPEC acquired by
Intercardia in September 1994 consisted of (i) 170,000 shares of Interneuron's
Common Stock, (ii) payments to shareholders of CPEC and other related expenses
and assumed liabilities totaling approximately $1 million and (iii) future
issuances of Interneuron's Common Stock based on achieving the milestones of
filing an NDA and receiving an approval letter from the FDA for bucindolol.
Interneuron intends to offer to purchase the remaining 20% of CPEC for shares of
Interneuron's Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Intercardia's preclinical research and development activities are
focused currently in the area of antioxidant small molecules. These compounds
have potential to address diseases involving toxicities associated with excess
oxygen free radicals and regulation of nitric oxide levels. These diseases
include asthma, neonatal respiratory syndrome, adult respiratory distress
syndrome and stroke.
Intercardia may implement its expansion strategy by establishing
additional subsidiaries for targeted development programs. Intercardia expects
to seek additional corporate collaborations to fund the development and
commercialization of bucindolol outside the U.S. and other projects. In December
1995, Intercardia filed a registration statement with the Securities and
Exchange Commission relating to a proposed initial public offering of 2,200,000
shares of Common Stock. Interneuron has expressed its interest in purchasing
$5,000,000 of Intercardia's Common Stock offered at the initial public offering
price. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." As of December 18, 1995, the Company owned approximately
88% of the outstanding securities of Intercardia, which percentage would
decrease to approximately 64% if the Intercardia initial public offering is
completed on the terms proposed, before exercise of any options or warrants.
Clayton I. Duncan is the president and chief executive officer of Intercardia,
which had eight employees as of December 18, 1995.
PROGENITOR, INC.
Progenitor is engaged in research and development of a group of
related, proprietary research technologies aimed at the discovery of medically
important targets and therapeutic drug leads. This system applies genomics
approaches to the discovery of novel receptors and growth factors using stem
cell sources from early developmental tissues. Genomics then are combined with
biology through assays which rely on the control of gene expression to define
the function of significant gene products, receptor targets and stem cells.
GENE THERAPY
- - ------------
Progenitor has acquired and is developing a number of gene therapy
vectors, or delivery systems, that are being investigated for their use to treat
a broad range of conditions. Progenitor is investigating a series of vectors
that can be used in dividing or non-dividing cells. These vectors, licensed from
Ohio University and from the Albert Einstein College of Medicine ("AECOM"), are
designed to provide flexibility in treating a variety of conditions through gene
therapy. Vectors under development by Progenitor include a nonviral, cytoplasmic
vector (T7T7); virus-based vectors that integrate with the host
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cell genome; and hybrid vectors, packaged and delivered as retroviral vectors
that enter the host cell nucleus but do not integrate.
Progenitor has also licensed from Vanderbilt University exclusive
worldwide rights to a gene known as del-1, including a related patent
application co-discovered by researchers at Progenitor and Vanderbilt. This gene
expresses a protein that may play a central role in the early development and
growth of blood vessels. Progenitor also has licensed rights to certain aspects
of its gene transfer technology from the Wisconsin Alumni Research Foundation.
The license was granted in exchange for royalties based on sales. Additional
patent applications have been filed to cover novel genes discovered by
Progenitor. One application covers a novel human hematopoietin receptor which
appears to play a role in the development of early stem cells in the blood
forming systems. This gene provides a new target for novel cancer drugs and
imaging agents. A patent application has also been filed relating to the T7T7
gene vector technology licensed from Ohio University. See "Agreements."
In April 1995, Progenitor and Chiron Corporation ("Chiron") signed an
agreement to collaborate in the development and commercialization of
Progenitor's proprietary gene therapy technology focused on Progenitor's
nonviral delivery and expression system. Progenitor licensed to Chiron
proprietary vector technology applicable to a number of therapeutic and vaccine
products for certain cancers, cardiovascular disorders and infectious diseases,
for which Chiron gains certain exclusive manufacturing and marketing rights. All
rights to product applications of the technology that are not specifically
included in the agreement are retained by Progenitor. The two companies will
jointly continue development of Progenitor's lead gene therapy product for the
treatment of solid-tumor cancers. Chiron will supply clinical and commercial
manufacturing for the collaboration's products and would be a preferred
manufacturer for the product fields retained by Progenitor.
Upon execution of the agreement with Chiron, Progenitor received an
initial payment of $2.5 million, and is required to spend up to $750,000 to
reimburse Chiron for manufacturing costs. Progenitor will receive an additional
$500,000 payment in January 1996. The agreement encompasses a minimum of eleven
potential products subject to the research and development collaboration.
Progenitor will receive additional payments for each product based upon the
achievement of defined mostly late-stage clinical development and regulatory
filing milestones. In addition, Progenitor would receive royalties from
commercial sales of products resulting from the collaboration. The first
application of the technology under the collaboration with Chiron is expected to
be the pre-clinical and clinical development of a highly selective treatment for
solid-tumor cancers that sensitizes tumors to destruction. Progenitor
anticipates the filing of an IND in 1996 to begin clinical testing with this
initial product.
HEMATOPOIETIC RECEPTORS AND GROWTH FACTORS
- - ------------------------------------------
Progenitor is engaged in identifying and isolating novel hematopoietic
receptors (proteins that span the cell membrane and convey signals within the
receiving cell) and growth factors critical in the maturation of early-stage
cells, known as progenitor stem cells, into cellular elements of the
hematopoietic system. The hematopoietic system contains the cellular components
of the blood and immune system.
Progenitor scientists have isolated, cloned and sequenced one novel
human hematopoietic receptor, have identified a number of additional receptors,
and are continuing to apply Progenitor's screening technology to identify
families of hematopoietic receptors in order to identify new receptors with
distinguishing characteristics.
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In addition, Progenitor is in the process of purifying and
characterizing a novel growth factor produced by murine yolk-sac derived
progenitor stem cells. Previously, most hematopoietic growth factors have been
isolated from adult tissue.
In June 1995, Progenitor and ZymoGenetics, Inc., a subsidiary of Novo
Nordisk A/S ("ZymoGenetics") , entered into a research, development and
commercialization agreement. Under the agreement, ZymoGenetics will gain access
to two proprietary therapeutic growth factor projects that address early
development of the hematopoietic system and may be valuable in cancer therapy
and as treatments for diseases of the blood and immune systems.
The initial stages of this agreement include the evaluation of the
technology and provision of scientific resources by ZymoGenetics for the
development of these two projects. If the first stage is completed successfully,
in later stages, Progenitor could also receive funding for research and
development and additional payments contingent on achieving late-stage
development and regulatory approval milestones for both products. Progenitor
would also receive royalties from commercial sales. ZymoGenetics has the right
to manufacture and market, on an exclusive worldwide basis, products developed
from this collaboration. Progenitor will retain its core discovery technologies
which gave rise to the product leads and all rights to additional leads, some
already identified, which are not subject to the agreement.
STEM CELLS
- - ----------
Progenitor has devised proprietary methods to isolate, culture and
characterize murine and human yolk sac stem cell lines. Stem cells are early
stage cells with the ability to reproduce and become secondary, more specific
kinds of cells. As stem cells differentiate, they commit themselves more and
more to a particular cell lineage, until they can form only one kind of cell.
Progenitor has derived certain cells from the yolk sac which can
self-replicate and are believed to be the precursors of cells responsible for
formation and function of endothelium (the cells that line the blood vessels and
the heart) and the hematopoietic system (the basis for proliferation and
function of the various cellular components of the blood and immune system).
Progenitor has licensed from Ohio University the exclusive worldwide
rights to patents relating to yolk sac stem cells and related technologies in
exchange for royalties based on sales and an equity investment in Progenitor.
One United States patent has been issued and several additional applications
have been filed in the United States
Progenitor's research is at a very early stage of development and
Progenitor requires significant additional funds to complete development,
conduct pre-clinical and clinical testing and pursue regulatory
13
<PAGE>
review of any potential products. Although Progenitor has entered into certain
corporate collaborations and is engaged in discussions with third parties
relating to other collaborations or business combinations there can be no
assurance that any collaborations or business combinations will result in
sufficient funding to develop and commercialize any products. In such event
Progenitor would be required to reduce or eliminate certain operations.
As of December 18, 1995, Progenitor had 23 full-time employees.
Douglass B. Given, M.D., Ph.D. is Progenitor's president and chief executive
officer. As of December 18, 1995, Interneuron owned 78% of the outstanding
securities of Progenitor.
TRANSCELL TECHNOLOGIES, INC.
Transcell is engaged in developing new pharmaceutical products using
core technologies in the field of carbohydrate chemistry. Transcell's core
technologies are directed toward (1) drug discovery based on the chemical
synthesis of complex carbohydrate compounds known as oligosaccharides, and (2)
the development of new carrier compounds for transport and/or targeted delivery
of a wide variety of drugs, including gene-based therapeutics, directly into
cells. Transcell holds the exclusive, worldwide license to its core technologies
from Princeton University, where Daniel Kahne, Ph.D., and Suzanne Walker, Ph.D.,
consultants to Transcell, performed Transcell's founding scientific research.
COMBINATORIAL CHEMISTRY
- - -----------------------
The drug synthesis technology under development by Transcell involves
methods of synthesizing oligosaccharides, which are novel, carbohydrate
molecules, for therapeutic use. Oligosaccharides are present on all cell
surfaces and, in different configurations, are integral to virtually all
inter-cellular activities, including viral, bacterial and immune system
interactions. Although oligosaccharides have become a major focus of current
research, the advancement of development programs for carbohydrate-based
products has been severely limited by the obstacles associated with traditional
methods of synthesizing oligosaccharides, such as lack of specificity, low
yields and relatively long production periods. Transcell believes its novel
carbohydrate synthesis technology may reduce these obstacles, producing
oligosaccharide compounds and glycoconjugates more efficiently and in fewer
steps, with both solution and the solid phase methods.
Transcell is applying this technology to produce libraries of
carbohydrates and glycoconjugates for screening lead drug candidates.
Transcell's combinatorial chemistry approach in this area is based upon
investigating the synthesis of both random libraries of carbohydrates and
carbohydrates directed to a specific therapeutic target. Transcell's technology
is also directed toward adding carbohydrate components to existing molecules
(glycoconjugates) to improve the overall efficacy and toxicity profile of the
parent compound. Three patent applications by Transcell are currently pending in
the U.S. covering various aspects of the synthesis of obligosaccharides, and
Transcell has received a notice of allowance of one of such patents.
14
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In December 1994, Transcell entered into a research collaboration and
license agreement with Biocure Ltd., a U.K. corporation, for the discovery and
development of certain oligosaccharides to treat cancer. Transcell is utilizing
its proprietary carbohydrate chemistry to synthesize more potent analogs of
Biocure's drug candidate, MT2, a small carbohydrate derivative. Transcell is
also responsible for the characterization of the key structural features
important to the activity of MT2. In addition to receiving a commitment from
Biocure to provide limited research funding through May 1996, Transcell will
receive the exclusive rights, including sublicensing rights, to MT2 and any
other compounds discovered under the agreement for anti-cancer indications in
the United States and Canada.
DRUG TRANSPORT
- - --------------
Transcell's second core technology is focused on the delivery of
therapeutic compounds across various membranes, utilizing a family of "carrier"
compounds known as TransphoresTM. Biological membranes are essentially
impermeable to many molecules, including proteins and oligonucleotides, thereby
decreasing the efficacy of diagnostics or therapeutics that are based on such
compounds. Limited pre-clinical studies involving Transphores and diverse
therapeutic compounds are being conducted in Transcell's laboratories, in
commercial contract research laboratories and by certain pharmaceutical
companies under material evaluation agreements or research collaboration
agreements. In addition to the gene therapy area, Transcell is targeting
Transphores for application for the resolution of bioavailability and toxicity
issues of drugs, including proteins, peptides and other small molecules, under
development by traditional pharmaceutical companies, and the extentions of the
proprietary position of existing FDA approved drugs coming off patent. Two
patents in the United States have been issued on this technology.
Other patent applications, including foreign counterparts, are pending.
GENE THERAPY
- - ------------
Transcell has synthesized a series of novel compounds which may permit
the transport (transfection) of DNA or antisense into cells without the use of a
virus-based delivery mechanisim. In connection with this technology Transcell
was awarded a Phase I Small Business Innovative Research (SBIR) grant to
evaluate its technology in delivering antisense compounds to diverse therapeutic
targets. Pre-clinical studies involving these compounds are being conducted in
Transcell's laboratories, in commercial contract research laboratories, at
academic institutions and by certain pharmaceutical companies under material
evaluation agreements or research collaboration agreements. Patent applications,
including foreign counterparts, covering these compounds and their use are
pending or are being filed.
Transcell's research is at a very early stage of development and
Transcell requires significant additional funds to complete development, conduct
pre-clinical and clinical testing and pursue regulatory review of any potential
products. Transcell is seeking to enter into collaborations or business
combinations to pursue development of its technologies but has no agreements
with respect to any significant collaborations. There can be no assurance that
Transcell's efforts to obtain such additional
15
<PAGE>
funding or collaborations will be successful, in which case Transcell would be
required to reduce or eliminate certain operations.
Elizabeth E. Tallett is the president and chief executive officer of
Transcell, which had 25 employees as of December 18, 1995. As of December 18,
1995, Interneuron owned 79% of the outstanding securities of Transcell.
INTERNUTRIA, INC.
In April 1995, Interneuron formed InterNutria to develop and market
nutritional products and support services for the dietary management of medical
and non-medical conditions.InterNutria is expected to have a consumer-oriented
commercialization focus. InterNutria will focus upon specially formulated
nutritional products primarily based on research conducted by its scientific
founder, Judith Wurtman, Ph.D., a research scientist at MIT.
Dr. Wurtman's research has examined the connection between food,
behavior and the brain, and how modifications of food intake can enhance the
synthesis and release of certain neurotransmitters and thus enhance control over
behavior, performance and disease states. InterNutria expects to market most of
its products as dietary supplements or medical foods. These are nutritional
products which have been uniquely developed to provide medical, health or
performance benefit, including the management of disease states.
In December 1995, InterNutria agreed to acquire technology, including a
patent application and know-how, from Walden Laboratories, Inc. ("Walden") that
is expected to lead to the first product of InterNutria, PMS EscapeTM in
exchange for $2.4 million, payable in two installments of Interneuron Common
Stock, the first in late 1996 and the second in late 1997, at the
then-prevailing market price. InterNutria plans to conduct a regional test
launch of the product in 1996. PMS Escape is being formulated as a dietary
supplement for women with pre-menstrual syndrome. Interneuron's Chairman and
principal stockholder and Judith Wurtman are stockholders of Walden, but will
not receive any of the purchase price.
James F. Pomroy is the chairman and Lewis D. Lepene is the president
and chief executive officer of InterNutria, which had four employees as of
December 18, 1995. As of December 18, 1995, the Company owned 100% of the
outstanding securities of InterNutria.
MANUFACTURING AND MARKETING
The Company has no manufacturing facilities and limited marketing
capabilities. In general, the Company intends to rely primarily on third parties
for manufacturing and marketing its products. For certain products, including
dexfenfluramine, low-dose melatonin and InterNutria's dietary supplements and
medical foods, the Company and its Subsidiaries may conduct certain marketing
activities in the United States directly. Such activities may include a
combination of educational programs to professional audiences, sales force
activities or direct advertising and promotion.
16
<PAGE>
With respect to the marketing and manufacture of dexfenfluramine, the
Company has sublicensed exclusive marketing rights to AHP, while retaining
co-promotion rights. Under the Servier Agreements, the Company is required to
purchase for five years from commercial introduction all requirements of
dexfenfluramine bulk chemical for incorporation into the finished dosage
formulation from a designee of Servier. In November 1995, Interneuron entered
into a contract manufacturing agreement with Boehringer for the production of
commercial scale quantities of the finished dosage formulation of
dexfenfluramine, in capsule form. Boehringer will process active material,
encapsulate and package the finished dexfenfluramine product. See "Agreements -
Dexfenfluramine Agreements."
In December 1995, Intercardia entered into an agreement with Astra
Merck for the U.S. development and marketing of bucindolol. A steering committee
consisting of representatives of Intercardia and Astra Merck will select a third
party manufacturer for bucindolol. Astra Merck agreed to conduct sales and
marketing of bucindolol in the U.S., with Intercardia retaining copromotion
rights. The two companies will share development and initial marketing costs for
bucindolol in the U.S., and Astra Merck will pay royalties to Intercardia on net
sales of bucindolol. See "Agreements - Intercardia Agreements."
In March 1995, Progenitor entered into an agreement with Chiron to
collaborate in the development and commercialization of Progenitor's gene
therapy technology. The agreement establishes a research and development
collaboration between Progenitor and Chiron in selected cancer fields, and
licenses to Chiron proprietary vector technology applicable to a number of
therapeutic and vaccine products for certain cancers, cardiovascular disorders
and infectious diseases, for which Chiron gains certain exclusive manufacturing
and marketing rights. Chiron agreed to supply clinical and commercial
manufacturing for any products resulting from the collaboration and would be a
preferred manufacturer for the product fields retained by Progenitor.
In May 1995, Progenitor and ZymoGenetics entered into a research,
development and commercialization agreement. Under the agreement, Novo Nordisk
will gain access to two proprietary therapeutic growth factor projects that
address early development of the hematopoietic (blood-cell formation) system and
may be valuable in cancer therapy and as treatments for diseases of the blood
and immune systems. ZymoGenetics has the right to manufacture and market, on an
exclusive worldwide basis, any products developed from this collaboration. See
"Agreements -Progenitor Agreements."
The Company expects that it will continue to seek to enter into
collaborative arrangements with pharmaceutical and other companies for the
development, manufacturing and marketing of products requiring broad marketing
capabilities and for overseas marketing. These collaborators are generally
expected to be responsible for funding or reimbursing all or a portion of the
development costs, including the costs of clinical testing necessary to obtain
regulatory clearances and for commercial scale manufacturing. These
collaborators are expected to be granted exclusive or semi-exclusive rights to
sell specific products in particular geographic territories in exchange for a
royalty, joint venture, equity investments, co-marketing or other
17
<PAGE>
financial interest. Such collaborative arrangements could result in lower
revenues than if the Company markets a product itself.
In the event the Company determines to establish its own manufacturing
or marketing capabilities, it will require substantial additional funds,
manufacturing facilities and equipment, and personnel. For example, the Company
may seek to market certain products, assuming FDA approval, if required, is
obtained, by developing an internal sales force or through contract sales
representatives, directly to selected groups of physician specialists likely to
prescribe the product and expects to conduct a regional test launch of Melzone
and PMS Escape. In such event, the Company would be responsible for all costs
associated with developing, manufacturing and marketing the product.
AGREEMENTS
DEXFENFLURAMINE AGREEMENTS
- - --------------------------
AHP AGREEMENTS
--------------
In November 1992, the Company entered into a series of agreements (the
"AHP Agreements") which granted American Home Products Corp. (formerly American
Cyanamid) ("AHP") the exclusive right to manufacture and market dexfenfluramine
in the United States for use in treating obesity associated with abnormal
carbohydrate craving, with Interneuron retaining co-promotion rights, for a term
of 15 years commencing on the date dexfenfluramine is first commercially
introduced by AHP subject to earlier termination.
Upon execution of the AHP Agreements, the Company received $2 million
in cash and sold to AHP 239,425 shares of Series B Preferred Stock for a
purchase price of $3 million. After the filing of the NDA in May 1993, the
Company received a milestone payment of $2.5 million from AHP and sold AHP 5,000
shares of Series C Preferred Stock for a purchase price of $500,000. As a result
of anti-dilution adjustments, as of December 18, 1995, AHP owned shares of
Interneuron Preferred Stock convertible into an aggregate of 622,221 shares of
Common Stock. AHP is obligated to make additional payments and purchase
additional shares of preferred stock pursuant to the AHP Agreements upon the
achievement of specified milestones, including approval of the NDA ,
descheduling of the drug, and the achievement of specified levels of net sales.
AHP is also responsible for reimbursing the Company for certain expenditures
related to clinical development, Phase IV studies and market surveillance for
abuse potential.
The AHP Agreements provide for base royalties to the Company of 11.5%
of AHP's net sales (equal to the royalty required to be paid by the Company to
Servier) and for additional royalties, ranging from a minimum of 5% of the first
$50 million of net sales if dexfenfluramine is not descheduled to a maximum of
12% of net sales over $200 million if dexfenfluramine is descheduled and the
Company does not manufacture the finished dosage formulation of dexfenfluramine
(subject to reduction if generic drug competition exceeds a specified market
share percentage).
18
<PAGE>
Interneuron also agreed to sell to AHP and AHP agreed to purchase from
Interneuron for five years from commercial introduction of dexfenfluramine all
of AHP's requirements for dexfenfluramine in bulk chemical form at a purchase
price equal to the price required to be paid by Interneuron to Servier. In the
event Interneuron is unable to supply bulk chemical for a specified period,
Servier will either provide it directly to AHP or arrange for it to be sold to
AHP on mutually acceptable terms.
Each of Interneuron and AHP agreed to indemnify the other from losses
or damages arising from breach of the AHP Agreements or from injuries resulting
from the use of the drug under certain conditions and Interneuron agreed to
indemnify AHP from any patent infringement action instituted by a third party.
AHP has the right to terminate its sublicense at any time prior to its
first commercial sale of dexfenfluramine or, upon 12 months notice to
Interneuron, after such first commercial sale. The AHP Agreements provide that
Servier has the right to withdraw its consent to the sublicense in the event
that any entity acquires stock in AHP sufficient to elect a majority of AHP's
Board of Directors or otherwise obtains control of AHP, provided that no such
termination shall occur if AHP or its successor achieves minimum net sales of
$75 million in the first marketing year or $100 million thereafter or pays
Servier amounts it would have been entitled to if AHP had achieved such minimum
net sales. Servier consented to the AHP acquisition of American Cyanamid.
SERVIER AGREEMENTS
------------------
The Servier Agreements, entered into in February 1990 and as
subsequently amended, grant the Company an exclusive right to market
dexfenfluramine in the United States to treat obesity associated with abnormal
carbohydrate craving for a term of 15 years from the date dexfenfluramine is
first marketed in the United States. The agreements provide for royalties of
11.5% of net sales, with minimum royalties based on the achievement of specified
net sales. Interneuron is entitled to retain all monetary or non-monetary
consideration received by Interneuron under the AHP Agreements, provided that
Interneuron continues to pay Servier an annual $300,000 advance royalty through
1996. Such advance royalties will not be credited against royalties payable by
the Company with respect to product sales. The license includes rights to
Servier's trademark Redux.
Servier has the right to terminate the license agreement upon the
occurrence of certain events, including a sale or transfer of a substantial part
of the Company's assets or a majority of its stockholdings (other than in
connection with a public offering), an acquisition by any party (other than
existing stockholders or their affiliates as of the date of the Servier
Agreements) of a 20% beneficial interest in the Company, or if the Company
manifests an intent to market a substantially similar pharmaceutical product.
An affiliate of Servier has agreed to supply the Company with, and the
Company has agreed to purchase, all of the Company's bulk chemical requirements
for dexfenfluramine for
19
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incorporation into the finished dosage formulation, subject to provisions for
alternate supply if the Company's requirements cannot be satisfied. The purchase
price is fixed, subject to annual increases to cover production costs. The
supply agreement is for a term expiring five years from the date of commercial
introduction of dexfenfluramine, and is automatically extended for an additional
five-year term, subject to provisions for termination for a third party supplier
under certain conditions.
BOEHRINGER INGELHEIM AGREEMENT
------------------------------
In November 1995, Interneuron entered into an exclusive manufacturing
agreement with Boehringer under which Boehringer agreed to supply, and
Interneuron agreed to purchase from Boehringer, all of its requirements for
dexfenfluramine capsules. The contract, which expires December 31, 1998,
contains certain minimum purchase and insurance commitments by Interneuron and
requires conformance by Boehringer to the FDA's Good Manufacturing Practices
regulations. The agreement provides for Interneuron to be able to qualify a
second source manufacturer under certain conditions.
FERRER AGREEMENT
----------------
In January 1993, the Company entered into a license and supply
agreement with Ferrer granting the Company the exclusive right to make, use and
sell any products or processes developed with respect to patent rights relating
to the use of citicoline in exchange for an up-front license fee to be credited
against royalties based on sales. The Company's license includes patent and
know-how rights in the United States and know-how rights in Canada, and is for a
period coextensive with Ferrer's license from MIT. The underlying United States
patent expires in 2003. See "Proprietary Rights". The agreement also provides
that Ferrer shall, subject to certain limitations, be the exclusive supplier at
a fixed price of raw materials required for the manufacture of any product
developed under such patent rights.
RPR AGREEMENT
-------------
In February 1994, the Company licensed from RPR exclusive worldwide
rights to Pagoclone, a patented compound, for use as an anti-anxiety drug,
together with related know-how, in exchange for license fees, millstone payments
and royalties based on sales.
ELAN AGREEMENT
--------------
In September l993, the Company licensed to Elan, upon Elan's exercise
of a April 1991 option, exclusive worldwide rights to manufacture and market the
Parkinson's product (Hearty Balance), including patent rights and related
know-how, in exchange for a $5.4 million advance royalty and running royalties
of 5% based on product sales. The advance royalty will be credited against 2% of
running royalties until recovered. The license includes two United States
patents, one United States patent application, and corresponding foreign patents
and patent applications and terminates on the last to expire of these patent
rights. The Company agreed not to market a
20
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competitive product, except for a drug which requires an NDA for marketing in
the U.S. Each of the Company and Elan agreed to indemnify the other for certain
claims and expenses.
MIT LICENSES
- - ------------
In March 1994, Interneuron entered into a license agreement with MIT
granting Interneuron an exclusive worldwide license to a number of patent rights
and related technology, including a patent covering a low-dose formulation of
melatonin for use in inducing sleep, in exchange for an initial license fee and
royalties based on sales.
Interneuron also licensed from MIT in February 1992, upon exercise of a
May 1989 option, a number of other patent rights in exchange for a license fee
and royalties based on sales (the "MIT License"). The MIT License covers a
number of U.S. patents and foreign counterparts and any related improvements
(subject to certain exclusions), with respect to which Dr. Wurtman was the
inventor or co-inventor. Interneuron's license is exclusive for the longer of
the first 12 years following commercialization of an individual licensed product
or 2007. The patents underlying the MIT License expire at various times
commencing in 1997.
The MIT License includes a patent covering the use of a choline source
to reduce fatigue caused by intense exercise. This license is subject to, and
limited by, a license previously granted by MIT to another company, which
licensed two United States patents relating to the use of lecithin in capsule,
granular or liquid form (but not in food form or as part of a prescription drug)
for raising blood choline levels. As the Company expects its proposed choline
sports drink to be in a food form (e.g., a drink), it does not believe this
license will materially restrict its ability to market this proposed product.
Although the Company believes this product will be considered a food or a
dietary supplement, there can be no assurance that the FDA will not regulate it
as a drug, thereby requiring the filing and approval of an NDA.
VERYFINE AGREEMENT
- - ------------------
In October 1995, the Company entered into a letter agreement with
Veryfine Products Inc. ("Veryfine") to re-acquire from Veryfine exclusive rights
to manufacture and sell in the United States a choline sports drink (Boston
Sports SupplementTM). InterNutria expects to test market the Boston Sports
Supplement on a regional basis in 1996.
PROGENITOR AGREEMENTS
- - ---------------------
CHIRON AGREEMENT
----------------
In March 1995, Progenitor entered into an agreement with Chiron to
collaborate in the development and commercialization of Progenitor's gene
therapy technology. The agreement establishes a research and development
collaboration between Progenitor and Chiron in selected cancer fields, and
licenses to Chiron proprietary vector technology applicable to a number of
therapeutic and vaccine products for certain cancers, cardiovascular disorders
and infectious
21
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diseases, for which Chiron gains certain exclusive manufacturing and marketing
rights. All rights to product applications of the technology that are not
specifically included in the agreement are retained by Progenitor. The two
companies will jointly continue development of Progenitor's lead gene therapy
product for the treatment of solid-tumor cancers. Progenitor retains rights to
co-invest and to participate in product revenues based on its contributions.
Chiron will supply clinical and commercial manufacturing for the collaboration's
products and would be a preferred manufacturer for the product fields retained
by Progenitor. Upon execution of the agreement, Progenitor received an initial
payment of $2.5 million, up to $750,000 of which is committed to share in
certain start-up nonviral gene therapy manufacturing costs at Chiron. The
agreement provides for Progenitor to receive an additional $500,000 in January
1996 and additional payments based upon the achievement of defined, mostly
late-stage clinical development and regulatory milestones. The agreement
encompasses a minimum of eleven potential products subject to the research and
development collaboration that Chiron may take forward for clinical development.
Progenitor would also receive royalties from commercial sales of any products
resulting from the collaboration.
ZYMOGENETICS AGREEMENT
----------------------
In May 1995, Progenitor and ZymoGenetics entered into a research,
development and commercialization agreement. Under the agreement, ZymoGenetics
will gain access to two proprietary therapeutic growth factor projects that
address early development of the hematopoietic (blood-cell formation) system and
may be valuable in cancer therapy and as treatments for diseases of the blood
and immune systems. The initial stages of this agreement will include the
provision of scientific resources by ZymoGenetics for the development of these
two projects. If the first stage is completed successfully, Progenitor could
also receive license fees and additional payments contingent on achieving late
stage development and regulatory approval milestones for both products. These
payments are contingent upon the achievement of all milestones for both
projects. Progenitor would also receive royalties from commercial sales.
ZymoGenetics has the right to manufacture and market, on an exclusive worldwide
basis, products developed from this collaboration.
OTHER PROGENITOR AGREEMENTS
---------------------------
Progenitor entered into a license agreement and a sponsored research
agreement with Ohio University in January 1992, as amended in October 1993. The
license agreement grants Progenitor the exclusive worldwide license to patent
and other rights to yolk sac stem cells, gene therapy technologies, and related
technologies in exchange for royalties based on net sales and an equity
investment in Progenitor. One United States patent and several foreign patents
have been issued, three patent applications are pending in the United States,
and certain corresponding foreign applications are pending. The research
agreement requires Progenitor to fund specified levels of research and related
expenses incurred by Ohio University, as well as any additional costs approved
in advance by Progenitor.
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In connection with the foregoing agreements, Progenitor issued 5% of
its equity to the Ohio University Foundation. Until an initial public offering
of Progenitor is consummated, the Ohio University Foundation is entitled to
increase its ownership interest to 6.25% by purchasing additional equity at a
price equal to 50% of the offering price of common stock in any such initial
public offering. The Ohio University Foundation currently owns approximately
4.5% of Progenitor's capital stock. If Progenitor has not completed an initial
public offering by March 27, 1998, the Ohio University Foundation can require
Progenitor to repurchase their stock at the appraised value.
The license agreement also contains certain requirements relating to
the management and operations of Progenitor, including the nomination of two
Ohio University designees to the Board of Directors of Progenitor.
In February 1994, Progenitor licensed from AECOM certain gene therapy
technology, including vectors for targeted gene delivery and any patent rights
obtained thereon, in exchange for a license fee and royalties based on sales.
Patent applications on this technology are currently being prepared.
In July 1995, Progenitor licensed from Vanderbilt University exclusive
worldwide rights to a patent application covering a gene that may play a role in
the development and growth of blood vessels. The gene was co-discovered by
Progenitor and Vanderbilt. The license was granted in exchange for royalties
based on sales.
TRANSCELL AGREEMENTS
- - --------------------
In January 1992 and October 1993, Transcell entered into license
agreements with Princeton pursuant to which Transcell was granted exclusive
worldwide licenses to specified patent applications and any patents that issue
therefrom, including any derivative patent applications or patents that issue,
relating to certain technology funded by Transcell and any licensed products, in
exchange for an upfront license fee and royalties based on sales. The license
agreements provide for Transcell to use its best efforts to commercialize the
licensed products or processes, including satisfying milestones.
INTERCARDIA AGREEMENTS
- - ----------------------
ASTRA MERCK AGREEMENT
---------------------
In December 1995, Intercardia executed a development and marketing
collaboration and license agreement with Astra Merck Inc. to provide for the
development, commercialization and marketing of a twice-daily formulation of
Bucindolol for the treatment of congestive heart failure in the U.S. (the "Astra
Merck Collaboration"). The Astra Merck Collaboration requires Astra Merck to
make certain payments to Intercardia (including a $5.0 million payment made upon
the execution of the Astra Merck Collaboration) and to assume Intercardia's
obligations with respect to the funding of the BEST study and to BMS. Astra
Merck and Intercardia will share the U.S.
23
<PAGE>
development and initial marketing costs of the formulation in the U.S.
Intercardia has retained U.S. rights to a once-daily formulation of bucindolol,
as well as rights for all formulations of bucindolol outside of the U.S.
BRISTOL-MYERS SQUIBB AGREEMENT
------------------------------
Through CPEC, Intercardia has an exclusive worldwide license to
bucindolol from BMS for pharmaceutical therapy for congestive heart failure and
left ventricular function. The license requires the Company to conduct all
appropriate and necessary clinical trials and to take all actions that are
reasonably necessary for the preparation and filing of an NDA and a comparable
application in at least one Western European country. Intercardia is obligated
to pay royalties on net product sales during the term of the bucindolol license,
and must pay all or a portion of patent prosecution, maintenance and defense
costs. Intercardia may terminate the bucindolol license on a country-by-country
basis by written notice to Bristol-Myers, and either party may terminate the
bucindolol license upon a breach by the other party which remains uncured for 60
days after receipt of written notice thereof. Unless so terminated, the
bucindolol license continues, with respect to each country, until the patent on
bucindolol issued in that country expires or has been found invalid, or, if
later, 15 years after first commercial sale of bucindolol (subject to two
five-year renewals at Intercardia's option).
GOVERNMENT REGULATION
Most of the Company's products will require regulatory clearance prior
to commercialization. The nature and extent of regulation differs with respect
to different products. In order to test, produce and market certain therapeutic
products in the United States, mandatory procedures and safety standards,
approval processes, and manufacturing and marketing practices established by the
FDA must be satisfied.
An IND application is required before human clinical use in the United
States of a new drug compound or biological product can commence. The IND
application includes results of pre-clinical (animal) studies evaluating the
safety and efficacy of the drug and detailed description of the clinical
investigations to be undertaken.
Clinical trials are normally done in three phases. Phase I trials are
concerned primarily with the safety and preliminary effectiveness of the
product. Phase II trials are designed primarily to demonstrate effectiveness in
treating the disease or condition for which the product is limited, although
short-term side effects and risks in people whose health is impaired may also be
examined. Phase III trials are expanded clinical trials intended to gather
additional information on safety and effectiveness needed to clarify the
product's benefit-risk relationship, discover less common side effects and
adverse reactions, and generate information for proper labeling of the drug. The
FDA receives reports on the progress of each phase of clinical testing, and may
require the modification, suspension, or termination of clinical trials if an
unwarranted risk is presented to patients.
24
<PAGE>
With certain exceptions, once clinical testing is completed, the
sponsor can submit an NDA for approval of a drug or Product License Application
("PLA") for approval of a biologic. The FDA's review of an NDA or PLA is
lengthy. In addition, an establishment license application is required to be
filed with and approved by the FDA for the manufacturing facility for a
biologic.
The precise regulatory standards to which Progenitor's proposed
products eventually will be held are uncertain due to the uniqueness of the
therapies under development and the lack of regulatory policy associated with
bone marrow transplantation. The Company assumes that Progenitor's therapeutic
products will be subjected to clinical testing similar to that of a drug in
addition to other FDA and international approval processes. The Company expects
that the majority, if not all, of the therapeutic products developed by
Progenitor will be classified by the FDA as biological products.
It is possible that certain of the products being developed by
Progenitor will be regulated by the FDA as drugs or as medical devices. The FDA
approval process for medical devices differs from that for drugs or biologics
but may also be expensive and time- consuming. Progenitor's activities may also
be subject to guidelines established by the NIH relating to the transfer of
recombinant DNA into humans. All such research, including clinical trials, must
be approved by the NIH Recombinant DNA Advisory Committee.
Under the Drug Price Competition and Patent Term Restoration Act of
1984 (commonly referred to as the "Waxman-Hatch Act"), a patent which claims a
product, use or method of manufacture covering certain drugs and certain other
products may be extended for up to five years to compensate the patent holder
for a portion of the time required for research and FDA review of the product.
Although Interneuron expects to apply for such protection for the use patent
covering dexfenfluramine, it is unlikely to receive such an extension. The
Waxman-Hatch Act also establishes periods of market exclusivity, which are
various periods of time following approval of a drug during which the FDA may
not approve, or in certain cases even accept, applications for certain similar
or identical drugs from other sponsors unless those sponsors provide their own
safety and effectiveness data. Under present regulatory interpretations, the
longest period of market exclusivity (five years) may not be available to
isomers, such as dexfenfluramine, of a previously approved drug (fenfluramine)
whose active ingredient is a mixture of related isomers. The Company is asking
the FDA to reconsider this interpretation and it is possible, but not likely,
that dexfenfluramine may qualify for this five year period of exclusivity.
However, it is probable that the FDA would recognize at least three years of
marketing exclusivity for dexfenfluramine such that generic drugs would not be
eligible to compete in the marketplace for the first three years after the FDA
has approved the marketing of dexfenfluramine.
The Company believes that citicoline and bucindolol may be entitled to
patent extension and to five years of market exclusivity, respectively, under
the Waxman-Hatch Act. However, there can be no assurance that the Company will
be able to take advantage of either the patent
25
<PAGE>
term extension or marketing exclusivity provisions or that other parties will
not challenge the Company's rights to such exclusivity.
Foods with health-related claims will be subject to regulation by the
FDA as foods, medical foods, dietary supplements or drugs, and a product's
classification will depend, in part, on its intended use as reflected in the
claims for the product. If represented for use in the cure, mitigation,
treatment or prevention of disease, the product will be regulated as a drug. If
no such claims are made, the product may be regulated as a food, a medical food,
or a dietary supplement. No explicit or implicit claim that "characterizes the
relationship" of a nutrient to a "disease or health-related condition" is
permitted in food labeling unless the FDA has authorized that claim by
regulation. Any food product that bears an unauthorized health claim is
considered misbranded. Medical foods are specifically exempted from the
restrictions of making health claims for foods. FDA regulations define a medical
food, in part, as "a food which is formulated to be consumed or administered
enterally under the supervision of a physician and which is intended for the
specific dietary management of a disease or condition for which distinctive
nutritional requirements, based on recognized scientific principles, are
established by medical evaluation." Medical foods occupy an intermediate
position between a "food" and a "drug." While a medical food is not now subject
to regulation as a drug or to any type of prior approval under the federal food
and drug laws, the FDA is in the process of reevaluating its regulation of
medical foods and there is no assurance that the FDA's regulatory policies on
medical foods will not change.
Hearty Balance has been marketed as a medical food, which does not at
this time require review or approval by the FDA prior to marketing. There can be
no assurance that this product will continue to be subject to regulation as a
medical food. Classification of this product as a medical food limits the type
of claims that can be made in marketing the product. Although the Company
believes the low-dose melatonin product and PMS Escape will be considered
dietary supplements, there can be no assurance that the FDA will not attempt to
regulate them as drugs, thereby requiring the filing of NDAs and review and
approval by the FDA prior to marketing. In addition, classification of these two
products as dietary supplements limits the types of claims that can be made in
marketing.
The FDA also regulates the substances that may be included in food
products. A substance intended for use as a food or to be added to a food may be
marketed only if it is generally recognized among qualified experts as safe for
its intended use or if it has received FDA approval for such use in the form of
a food additive regulation. If the Company develops a food which is, or which
contains, a substance that is not generally recognized as safe or approved by
the FDA in a food additive regulation for its intended use, then such approval
must be obtained prior to the marketing of the product. The Company will be
required to present studies showing, among other things, that the substance is
safe, and that its use will not promote deception of the consumer or otherwise
violate the Federal Food, Drug, and Cosmetic Act. Dietary ingredients used in
dietary supplements need not be generally recognized as safe, but they may not
present a significant or unreasonable risk of illness or injury.
26
<PAGE>
GENE THERAPY REGULATION
- - -----------------------
The NIH has established the NIH Recombinant DNA Advisory Committee (the
"RAC") to advise the NIH concerning approval of NIH-supported research involving
the use of recombinant DNA. A proposal will be considered by the RAC only after
the protocol has been approved by the local Institutional Review Board and
Institutional BioSafety Committee of the institution where the trial is to be
conducted, which address issues such as the provision of informed consent by
human research subjects and the risks to human subjects in relationship to
anticipated benefits of the research. All meetings of the RAC are open to the
press and public and therefore could subject Progenitor to unfavorable public
sentiment regarding human gene therapy which could serve to hinder or delay the
widespread commercialization of Progenitor's human gene therapy products.
Although the jurisdiction of the NIH currently applies only when NIH-funded
research or facilities are involved in any aspect of the protocol, the RAC
encourages all gene transfer protocols to be submitted for its review. NIH and
FDA are currently considering a revision to the RAC review process to make it
applicable only to specific protocols that raise novel issues. Progenitor
intends to comply with RAC and NIH guidelines even when, under present policy,
it may not be subject to them.
In addition, the FDA, which has jurisdiction over drug and biological
products intended for use in patients, must also review and authorize human
trials involving gene therapy, whether or not the research is federally funded,
before such human trials can proceed. The FDA requires the submission of an IND
application before human trials with new biological drugs can be conducted.
Because gene therapy is a novel therapeutic approach, the approval process for
clinical trials involving gene therapy is not yet clearly defined. There can be
no assurance that Progenitor will be able to comply with future requirements or
that its products will be approvable.
New human gene therapy products are expected to be subject to extensive
regulation by the FDA and comparable agencies in other countries. The precise
regulatory requirements that will have to be complied with are uncertain at this
time due to the novelty of the human gene therapies under development.
Currently, each protocol is reviewed by the FDA on a case by case basis. The FDA
has published a "Points to Consider" guidance document with respect to the
development of gene therapy protocols. The Company believes that certain
products developed by Progenitor will be regulated as biological products. In
addition, each vector containing a particular gene is expected to be regulated
as a separate biological product or new drug, depending upon its intended use
and FDA policy. New drugs are subject to regulation under the Federal Food, Drug
and Cosmetic Act, and biological products, in addition to being subject to
certain provisions of that Act, are regulated under the Public Health Service
Act. One or both statutes and the regulations promulgated thereunder govern,
among other things, the testing, manufacturing, safety, efficacy, labeling,
storage, record keeping, advertising and other promotional practices involving
biologics or new drugs. FDA approval or other clearances must be obtained before
clinical testing, and before manufacturing and marketing, of new biologics or
other new drug products. At the FDA, the Center for Biologics Evaluation and
Research
27
<PAGE>
("CBER") is responsible for the regulation of new biological drugs. CBER has a
Division of Cell and Gene Therapy, which is the primary group within the FDA to
oversee gene therapy products.
OTHER
- - -----
The Federal Food, Drug, and Cosmetic Act, the Public Health Service
Act, and other federal and state statutes and regulations govern or influence
the research, testing, manufacture, safety, labeling, storage, record keeping,
approval, advertising and promotion of drug, biological, medical device and food
products. Noncompliance with applicable requirements can result, among other
things, in fines, recall or seizure of products, refusal to permit products to
be imported into the United States, refusal of the government to approve product
approval applications or to allow Interneuron to enter into government supply
contracts, withdrawal of previously approved applications and criminal
prosecution. The FDA may also assess civil penalties for violations of the
Federal Food, Drug, and Cosmetic Act involving medical devices.
There can be no assurance that any required FDA or other governmental
approval will be granted, or if granted, will not be withdrawn. Governmental
regulation may prevent or substantially delay the marketing of the Company's
proposed products and cause Interneuron to undertake costly procedures. In
addition, the extent of potentially adverse government regulations which might
arise from future administrative action or legislation cannot be predicted.
PROPRIETARY RIGHTS
The Company has rights to a number of patents and patent applications.
Under the Servier Agreements, the Company has an exclusive license to sell
dexfenfluramine in the United States under a patent covering the use of
dexfenfluramine to treat abnormal carbohydrate craving, which has been
sublicensed by the Company to AHP. The compound patent on dexfenfluramine, which
was discovered by Servier, has expired. Use of dexfenfluramine for the treatment
of abnormal carbohydrate craving was patented by Drs. Richard Wurtman and Judith
Wurtman, consultants to the Company and directors of Interneuron and
InterNutria, respectively. This use patent was assigned to MIT and licensed by
MIT to Servier, and pursuant to the Servier Agreements, licensed to the Company.
The Drs. Wurtman have advised the Company that, in accordance with MIT policy,
they are entitled to 50% of the royalties received by MIT in connection with
MIT's licensing of dexfenfluramine to Servier. This use patent expires in 2000
although the Company intends to apply for an extension of the expiration date by
an amount of time relating to the FDA regulatory review process (but in any
event no longer than five additional years). The Company believes however, that
any such extension would be for no greater than two to three years, if at all.
Upon expiration of the patent, generic drugs claiming the same use covered by
the use patent may become available. Fenfluramine is already available in the
United States for the treatment of obesity. See "Competition" and "Government
Regulation."
The compound citicoline is not covered by a composition of matter
patent. The licensed United States patent covering the administration of
citicoline to treat patients afflicted with
28
<PAGE>
conditions associated with the inadequate release of brain acetylcholine expires
in 2003. As described in the licensed patent, such conditions may include the
neurological syndromes associated with brain traumas and stroke, but the claims
of the licensed patent do not specifically include the use of citicoline for the
indications for which the IND has been filed. In addition to any proprietary
rights provided by this patent, the Company expects to rely on certain marketing
exclusivity regulations of the FDA. In March 1995, the Company filed a patent
application relating to the use of citicoline to reduce the size of the area of
the stroke, or infarct size.
Progenitor has licensed from Ohio University one United States patent
and several pending United States patent applications relating to stem cell
technology and to gene transfer technologies, along with certain corresponding
foreign patents and applications. Progenitor has also licensed from AECOM
certain gene therapy technology, including any patent rights obtained thereon.
Patent applications are currently being prepared. In addition, Progenitor has
filed two patent applications filed on novel hematopoietic receptors.
Transcell has exclusive licenses under two U.S. patents assigned to
Princeton University relating to Transcell's drug transport technology.
Transcell also has exclusive rights under domestic patent applications and their
foreign counterparts relating to oligosaccharide synthesis/combinatorial
chemistry, drug transport and gene therapy technologies, and Transcell has
received a notice of allowance of a U.S. patent directed to aspects of
Transcell's oligosaccharide synthesis/combinatorial chemistry. See "Agreements".
CPEC has licensed from BMS a compound patent on bucindolol which
expires in 1997. Intercardia intends to pursue up to five years' market
exclusivity under the Waxman-Hatch Act and also intends to develop a once-daily
formulation of the drug. See "Government Regulation."
There can be no assurance that patent applications filed by the Company
or others, in which the Company has an interest as assignee, licensee or
prospective licensee, will result in patents being issued or that, if issued,
any of such patents will afford protection against competitors with similar
technology or products, or could not be designed around or challenged. If the
Company is unable to obtain strong proprietary rights protection of its products
after obtaining regulatory clearance, competitors may be able to market
competing products by obtaining regulatory clearance, through showing
equivalency to the Company's product, without being required to conduct the
lengthy clinical tests required to be conducted by the Company. The patent
situation in the field of biotechnology generally is highly uncertain and
involves complex legal, scientific and factual questions. To date, there has
emerged no consistent policy regarding the breadth of claims allowed in
biotechnology patents.
Products being developed by the Company may conflict with patents which
have been or may be granted to competitors, universities or others. Third
parties could bring legal actions against the Company claiming patent
infringement and seeking damages or to enjoin clinical testing, manufacturing
and marketing of the affected product or process. If any such actions are
successful, in addition to any potential liability for damages, the Company
could be required to obtain a license, which may not be available, in order to
continue to manufacture or market the
29
<PAGE>
affected product or use the affected process. The Company also relies upon
unpatented proprietary technology and may determine in some cases that its
interest would be better served by reliance on trade secrets or confidentiality
agreements rather than patents. No assurance can be made that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to such proprietary technology or disclose
such technology or that the Company can meaningfully protect its rights in such
unpatented proprietary technology. The Company also intends to conduct research
on other pharmaceutical compounds or technologies, the rights to which may be
held by, or be subject to, patent rights of third parties and accordingly, if
products based on such technologies are commercialized, they may infringe such
patents or other rights.
COMPETITION
The pharmaceutical and biotechnology industries are characterized by
rapidly evolving technology and intense competition. Many companies, including
major pharmaceutical companies and specialized biotechnology companies are
engaged in activities similar to those of the Company. Many of the Company's
competitors have substantially greater financial and other resources, larger
research and development staffs and, unlike the Company, have significant
experience in pre-clinical testing, human clinical trials and other regulatory
approval procedures.
In particular, the marketing of dexfenfluramine may be subject to
substantial competition from established pharmaceutical companies. The Company
is aware that BASF AG has filed an NDA for sibutramine to treat obesity, and
Neurogen Corporation has filed an IND for an anti-obesity drug, NGD 95-1, for
which clinical trials are expected to begin in 1996. AHP, also markets
fenfluramine under the brand name Pondimin to treat obesity. There can be no
assurance that dexfenfluramine, which is expected to be priced higher than
Pondimin, will achieve greater market acceptance than or replace sales of
Pondimin. AHP also has an anti-obesity compound which the Company believes is in
Phase II clinical trials. In addition, the Company is aware that Roche Holdings
Ltd. is developing a drug to block fat absorption that is in Phase II clinical
trials.
Competitive factors may include relative price of competitive drugs,
which will be a function to some extent of the dosage required for effectiveness
as well as the perceived safety and effectiveness of the drugs. In addition,
generic or other competitive drugs may be introduced in the United States if FDA
approval is obtained, particularly once the use patent expires. These drugs can
be expected to be available at a significantly lower price than dexfenfluramine,
especially due to the minimum royalties and fixed price provisions the Company
is subject to.
There are currently no FDA approved drugs with an indication for the
treatment of stroke. However, there are a number of drugs in clinical trials
pursuing such an indication.
The cardiovascular drug market is highly competitive with many drugs
marketed by major multi-national drug companies having substantially greater
technical, marketing and financial resources than Intercardia. In particular,
carvedilol, a non-selective beta-blocker with vasodilating properties is owned
by Boehringer Mannheim GmbH and licensed in the U.S. and
30
<PAGE>
certain other countries to SmithKline Beecham. Since 1991, carvedilol has been
approved as a treatment for hypertension in several European countries and in
September 1995, it was approved by the FDA for commercial marketing in the U.S.
as a twice-daily treatment for hypertension. In February 1995, the Phase III
studies of carvedilol for treatment of congestive heart failure were stopped
early due to carvedilol's unexpected effect in reducing mortality. In November
1995, SmithKline Beecham submitted data to the FDA to supplement its
hypertension NDA for carvedilol to cover the treatment of congestive heart
failure. Therefore, the Company believes that carvedilol could receive approval
for marketing as a treatment of CHF prior to bucindolol, which may adversely
affect the patient enrollment rate of the BEST study and could provide marketing
advantage to SmithKline Beecham. In addition, beta-blockers have not
historically been accepted by the medical community to treat congestive heart
failure and substantial educational efforts may be required to convince
physicians of the therapeutic benefits of bucindolol notwithstanding its action
as a beta-blocker. The Company is also aware of other drugs under development
for the treatment of heart failure.
A number of companies are also engaged in research and development of
technologies and therapies similar to those being pursued by the Company. There
can be no assurance that research and development by others will not render the
Company's potential products obsolete or uneconomical or result in treatments or
cures superior to any therapy developed by the Company or that any therapy
developed by the Company will be preferred to any existing or newly developed
technologies. Other companies may succeed in developing and commercializing
products earlier than the Company that are safer and more effective than those
proposed to be developed by the Company. Further, it is expected that
competition in these fields will intensify. Colleges, universities, governmental
agencies and other public and private research organizations continue to conduct
research and are becoming more active in seeking patent protection and licensing
arrangements to collect royalties for use of technology that they have
developed, some of which may be directly competitive with that of the Company.
In addition, these institutions may compete with the Company in recruiting
highly qualified scientific personnel. The Company expects technological
developments in its fields of research and development to occur at a rapid rate
and expects competition to intensify as advances in these fields are made.
Accordingly, the Company will be required to continue to devote substantial
resources and efforts to research and development activities.
The Company does not have the resources and does not intend to compete
directly with major pharmaceutical companies in drug manufacturing and
marketing, except for certain neuropharmaceutical and nutritional products and
food related products which the Company may directly market in the United
States. In the event the Company seeks to market any products directly, it will
compete with companies with well-established distribution networks and market
position. See "Manufacturing and Marketing" and "Government Regulation".
31
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EMPLOYEES
As of December 18, 1995, Interneuron and its Subsidiaries had 83
full-time employees, including 23 of Interneuron, 23 employees of Progenitor, 25
of Transcell, eight of Intercardia, four of InterNutria and a number of
part-time consultants, including Richard Wurtman, M.D. and Judith Wurtman, Ph.D.
and Lindsay Rosenwald, M.D., Interneuron's Chairman. None of the Company's
employees is represented by a labor union and the Company believes its employee
relations are satisfactory.
Item 2. PROPERTIES
----------
The Company leases an aggregate of approximately 19,500 square feet of
office and laboratory space in two buildings in Lexington, MA. The lease expires
in December 1996, provides for annual rent of approximately $356,000, and grants
the Company a right of first refusal for an additional 8,100 square feet of
laboratory space, subject to the present tenant electing not to remain in such
space. The lease may be renewed for an additional five-year term. The
Subsidiaries are parties to office leases providing for aggregate annual rental
of approximately $500,000. The Company has guaranteed the Subsidiaries'
obligations under these leases.
Item 3. LEGAL PROCEEDINGS
-----------------
The Company is not a party to any material legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
---------------------------------------------------
Not applicable
32
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EXECUTIVE OFFICERS AND KEY PERSONNEL
The following table sets forth the names and positions of the executive
officers and key personnel of the Company:
Name Age Position
EXECUTIVE OFFICERS --- ---------------------------------
------------------
Lindsay A. Rosenwald, M.D. 40 Chairman of the Board of Directors
Glenn L. Cooper, M.D. 43 President, Chief Executive Officer
and Director
Mark S. Butler 49 Executive Vice President, Chief
Administrative Officer and General
Counsel
Thomas F. Farb 39 Executive Vice President, Finance,
Chief Financial Officer and Treasurer
Bobby W. Sandage, Jr., Ph.D. 42 Executive Vice President, Research
and Development and Chief
Scientific Officer
KEY PERSONNEL
Brian R. Anderson 49 Senior Vice President, Marketing and
Commercial Development of
Interneuron
Clayton I. Duncan 46 President, Chief Executive Officer
and Director of Intercardia
Douglass B. Given, M.D., Ph.D. 43 President, Chief Executive Officer
and Director of Progenitor
James F. Pomroy 61 Chairman, InterNutria
Elizabeth E. Tallett 46 President, Chief Executive Officer
and Director of Transcell
33
<PAGE>
EXECUTIVE OFFICERS
- - ------------------
Lindsay A. Rosenwald, M.D. was a co-founder of the Company and since
February 1989 he has been Chairman of the Board of Directors of the Company. Dr.
Rosenwald has been the Chairman and President of The Castle Group, Ltd., a New
York medical venture capital firm ("Castle"), since October 1991 and the
Chairman and President of Paramount Capital, Inc., an investment banking firm,
since February 1992. Prior thereto, Dr. Rosenwald was a Managing Director,
Corporate Finance at D.H. Blair & Co., Inc., ("Blair"), an investment banking
firm. Prior to joining Blair, from September 1986 to June 1987, Dr. Rosenwald
was a Senior Analyst at Ladenburg Thalmann & Co., an investment banking firm.
Dr. Rosenwald received his M.D. from Temple University School of Medicine and
his B.A. in Finance from Pennsylvania State University. Dr. Rosenwald is also
Chairman of the Board of Transcell and a director. Dr. Rosenwald also is a
director of BioCryst Pharmaceuticals, Inc., Sparta Pharmaceuticals, Inc., Ansan,
Inc. and is Chairman of the Board or a director of a number of privately held
companies founded by Castle in biotechnology or pharmaceutical fields.
Glenn L. Cooper, M.D. has been President, Chief Executive Officer and a
director of the Company since May 1993. Dr. Cooper was also Progenitor's
President and Chief Executive Officer from September 1992 to June 1994 and is a
director of each of the Subsidiaries and Chairman of Progenitor and Intercardia.
Prior to joining Progenitor, Dr. Cooper was Executive Vice President and Chief
Operating Officer of Sphinx Pharmaceuticals Corporation from August 1990. Dr.
Cooper had been associated with Eli Lilly since 1985, most recently, from June
1987 to July 1990, as Director, Clinical Research, Europe, of Lilly Research
Center Limited; from October 1986 to May 1987 as International Medical Advisor,
International Research Coordination of Lilly Research Laboratories; and from
June 1985 to September 1986 as Medical Advisor, Regulatory Affairs, Chemotherapy
Division at Lilly Research Laboratories. Dr. Cooper received his M.D. from Tufts
University School of Medicine, performed his postdoctoral training in Internal
Medicine and Infectious Diseases at the New England Deaconess Hospital and
Massachusetts General Hospital and received his A.B. from Harvard College.
Mark S. Butler joined the Company in December 1993 as Senior Vice
President (and in December 1995 was appointed Executive Vice President), Chief
Administrative Officer and General Counsel. Prior to joining the company, Mr.
Butler was associated with the Warner-Lambert Company since l979, serving as
Vice President, Associate General Counsel since 1990, as Associate General
Counsel from 1987 to 1990, Assistant General Counsel from 1985 to 1987 and in
various other legal positions from 1979 to 1985. From 1975 to 1979, Mr.
Butler was an attorney with the law firm of Shearman & Sterling.
Thomas F. Farb joined the Company in April 1994 as Senior Vice
President (and in December 1995 was appointed Executive Vice President) Finance,
Chief Financial Officer and Treasurer. Prior to joining the Company, since
October 1992, Mr. Farb was the Vice President of Finance and Corporate
Development of Cytyc Corporation, a medical device and diagnostics company. From
April 1989 to October 1992, he was Senior Vice President, Chief Financial
Officer and a Director of Airfund Corporation, a commercial aircraft leasing
company, and from
34
<PAGE>
October 1983 to April 1989, he held various positions at Symbolics,
Inc., a computer and software manufacturer, including General Manager of Eastern
Operations, Vice President, Finance and Corporate Development and Chief
Financial Officer. Mr. Farb received an A.B. from Harvard College. He is a
member of the board of directors of HNC Software, Inc. and Redwood Trust, Inc.,
public companies.
Bobby W. Sandage, Jr., Ph.D. joined the Company in November l991 as
Vice President Medical and Scientific Affairs and was appointed Vice President -
Research and Development in February 1993, Senior Vice President - Research and
Development in February 1994 and was appointed Executive Vice President -
Research and Development and Chief Scientific Officer in December 1995. From
February 1989 to November 1991 he was Associate Director, Project Management for
the Cardiovascular Research and Development division of DuPont Merck
Pharmaceutical Company. From May 1985 to February 1989 he was affiliated with
the Medical Department of DuPont Critical Care, most recently as associate
medical director, medical development. Dr. Sandage is an adjunct professor in
the Department of Pharmacology at the Massachusetts College of Pharmacy. Dr.
Sandage received his Ph.D. in Clinical Pharmacy from Purdue University and his
B.S. in Pharmacy from the University of Arkansas.
KEY PERSONNEL
- - -------------
Brian Anderson joined Interneuron in September 1995 as Senior Vice
President, Marketing and Commercial Development. Prior to joining Interneuron,
Mr. Anderson was associated with Bristol-Myers Squibb since August 1987. Most
recently, since January 1994, he was Senior Director, CNS Marketing, U.S.
Pharmaceuticals of Bristol-Myers Squibb Pharmaceutical Group; from April 1, 1990
to December 1993 was Senior Director, CNS Business Planning and from August 1987
to April 1990 was Director, Business Development of Bristol-Myers International
Group. Prior to joining Bristol-Myers, Mr. Anderson was associated with The
Upjohn Company of Canada since 1971.
Clayton I. Duncan joined Intercardia as its President, Chief Executive
Officer and Director in January 1995. Mr. Duncan was President and Chief
Executive Officer of Sphinx Pharmaceuticals Corporation from April 1989 to
December 1993, was the Chairman of the Board of Sphinx from August 1988 to
August 1990, and was a member of the Board of Directors of Sphinx from August
1988 to September 1994. From 1987 to 1990, Mr. Duncan was Chairman of the Board
of CRX Medical, Inc., a medical products company founded by him. From 1987 to
1989, Mr. Duncan was General Partner of InterSouth Partners, a venture capital
fund and, from 1979 to 1987, was Executive Vice President and a director of
Carolina Securities Corporation, a regional investment banking firm.
Douglass B. Given, M.D., Ph.D. joined Progenitor in January 1993 as
Executive Vice President and was appointed President, Chief Executive Officer
and a Director of Progenitor in June 1994. From March 1989 to January 1993, Dr.
Given was Vice President for U.S. Regulatory Affairs at the Schering-Plough
Research Institute. From August 1986 to March 1989, Dr. Given was Vice President
of Project Management and Worldwide Regulatory Affairs at G.D.
35
<PAGE>
Searle. From August 1983 to August 1986, he held clinical investigation
positions at Eli Lilly. Dr. Given received his M.D. and Ph.D. from the
University of Chicago, performed his postdoctoral training in Internal Medicine
and Infectious Diseases at Harvard Medical School and Massachusetts General
Hospital, and received his M.B.A. from the Wharton School at the University of
Pennsylvania.
James F. Pomroy was named Chairman of InterNutria, Inc. in March 1995.
From January 1994 to February 1995, Mr. Pomroy was President and Chief Executive
Officer of Nutriceutical Products Corporation, and from January 1992 to January
1994, he served as Chairman and Chief Executive Officer of Everfresh Beverages.
Previously, Mr. Pomroy was President and Chief Executive Officer of Drake
Bakeries, Inc. from June 1989 to December 1991, and Chairman and Chief Executive
Officer of Sundor Brands. From November 1976 to March 1983, Mr. Pomroy was
Executive Vice President of Iroquois Brands, and from 1972 to 1976 he was Senior
Vice President of the Kitchens of Sara Lee. Mr. Pomroy holds an M.B.A. from
Harvard University Graduate School of Business.
Elizabeth E. Tallett joined Transcell as its President and Chief
Executive Officer in November 1992. From November 1987 to April l992, Ms.
Tallett was Executive Vice President of Centocor Inc. and President of the
Centocor Pharmaceuticals division of Centocor Inc. From April 1992 to November
l992 Ms. Tallett was on a sabbatical. From February to November 1987, Ms.
Tallett was President of Medical Education Systems, which provides educational
services to the pharmaceutical industry. Ms. Tallett was associated with the
Warner-Lambert Company from 1973 to 1987, initially in the United Kingdom, and
in the U.S. from 1981 to 1984, as director of corporate strategic planning for
Warner-Lambert Company and more recently, from 1984 to February 1987 as director
of marketing operations for Parke-Davis, a subsidiary of Warner-Lambert Company.
Ms. Tallett is a director of The Principal Mutual Life Insurance Company.
COMPLIANCE WITH SECTION l6(a) OF THE SECURITIES EXCHANGE ACT OF l934.
To the Company's knowledge, there were no reports required under
Section 16(a) of the Securities Exchange Act of l934 which were not timely filed
during fiscal 1995.
36
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
----------------------------------------------------------------------
(a) PRICE RANGE OF SECURITIES
-------------------------
Interneuron's Common Stock and Class B Warrants trade on the Nasdaq
National Market under the symbols IPIC and IPICZ, respectively. The following
sets forth the quarterly high and low sales prices from October 1, 1993 through
September 30, 1995 as reported by Nasdaq. These prices are based on quotations
between dealers, do not reflect retail mark-up, mark-down or commissions, and do
not necessarily represent actual transactions.
COMMON STOCK:
Fiscal Year Ended September 30, 1994 HIGH LOW
------ -----
October 1 through December 31, 1993 .... 10 1/8 8 1/8
January 1 through March 31 ............. 11 3/4 8 3/4
April 1 through June 30 ................ 9 4 7/8
July 1 through September 30 ............ 7 4 7/8
Fiscal Year Ended September 30, 1995
October 1 through December 31, 1994 .... 6 1/4 4
January 1 through March 31 ............. 8 4 1/8
April 1 through June 30 ................ 10 3/4 6 3/4
July 1 through September 30 ............ 19 1/4 9 1/8
CLASS B WARRANTS:
Fiscal Year Ended September 30, 1994
October 1 through December 31, 1993 .... 5 1/2 3 7/8
January 1 through March 31 ............. 7 1/4 4
April 1 through June 30 ................ 4 1/4 2
July 1 through September 30 ............ 2 7/8 1 1/2
Fiscal Year Ended September 30, 1995
October 1 through December 31, 1994 .... 2 1/2
January 1 through March 31 ............. 3 3/16 1 1/4
April 1 through June 30 ................ 6 1/4 2
July 1 through September 30 ............ 14 4 1/4
37
<PAGE>
(b) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
---------------------------------------------
The number of record holders of the Company's Common Stock as of
December 18, 1995 was approximately 600 and the Company believes that the number
of beneficial owners exceeds 5,000.
(c) DIVIDENDS
---------
The Company has never paid a cash dividend on its Common Stock and
anticipates that for the foreseeable future any earnings will be retained for
use in its business and, accordingly, does not anticipate the payment of cash
dividends. Any dividends will be subject to the preferential dividend of $.1253
per share on the outstanding Series B Preferred Stock ($30,000 per annum), $1.00
per share payable on the outstanding Series C Preferred Stock ($5,000 per annum)
and dividends payable on any other preferred stock issued by the Company.
Item 6. SELECTED FINANCIAL DATA.
------------------------
The selected financial data presented below summarizes certain
financial data and should be read in conjunction with the more detailed
financial statements of the Company and the notes thereto which have been
audited by Coopers & Lybrand L.L.P., independent accountants, whose report
thereon is included elsewhere in this Annual Report on Form 10-K along with said
financial statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
38
<PAGE>
<TABLE>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues:
Contract and
license fees $ 122,516 $ 67,486 $11,583,484 $100,809 $ 3,462,777
Investment income 556,685 758,508 938,342 504,977 1,039,528
------- ---------- ------------ --------- ---------
Total revenues 679,201 825,994 12,521,826 605,786 4,502,305
Research and
development
expenses 4,180,610 10,235,065 20,013,503 17,737,063 15,167,670
Net loss (5,454,637) (12,272,147) (12,733,986) (27,385,575) (17,980,725)
Net loss per
common share $ (.32) $ (.57) $ (.50) $ (.98) $ (.59)
Weighted average
common shares
outstanding 17,126,316 21,428,283 25,492,130 27,873,369 30,603,891
SEPTEMBER 30,
---------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
BALANCE SHEET DATA:
Working capital $6,199,759 $16,025,452 $19,444,338 $ 8,576,611 $25,754,934
Total assets 7,809,370 18,243,606 23,688,970 18,278,126 37,516,063
Capital lease obligations,
long-term portion 930 -- -- 1,025,201 781,563
Total liabilities 917,827 1,472,370 2,462,045 8,500,796 10,486,291
Accumulated deficit (8,419,670) (20,691,817) (33,425,803) (60,811,378) (78,792,103)
Stockholders'equity 6,891,543 16,771,236 21,226,925 9,777,330 21,391,620
</TABLE>
39
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------------------------------------------------
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
At September 30, 1995, the Company had cash, cash equivalents and
marketable securities of $34,989,000. The Company funds its activities primarily
from equity financings and certain corporate collaborations. During fiscal 1995,
the Company raised $35,700,000, net of related offering costs, through several
financing arrangements. Of this amount, Interneuron received $28,467,000
primarily from private placements of an aggregate of 3,009,045 shares of Common
Stock and 562,500 warrants, the exercise of Unit Purchase Options (including the
underlying Class A warrants) and the exercise of Class B warrants. In addition,
private placements of convertible preferred stock of the Subsidiaries (the
"Subsidiaries' Private Placements") resulted in net proceeds of $7,233,000. In
connection with certain of the Subsidiaries' Private Placements, Interneuron
issued to the investors (i) three-year warrants to purchase an aggregate of
218,125 shares of Common Stock (the "Warrants") and (ii) rights to sell varying
amounts of investors' convertible preferred stock in the Subsidiaries to
Interneuron (the "Put Protection Rights") in exchange for shares of Interneuron
Common Stock in the event certain conditions (including a public offering by the
applicable Subsidiary) are not met by June 30, 1998. Consequently, $1,163,000 of
the proceeds from the Subsidiaries' Private Placements related to the value of
the Warrants and the Put Protection Rights is recorded as an Interneuron equity
issuance.
Interneuron could be required to issue up to a maximum aggregate of
4,095,000 shares of Common Stock under certain circumstances if the Put
Protection Rights were exercised in full and Interneuron's Common Stock were
valued at $2.00 per share or less. Based upon the closing market price of
Interneuron's Common Stock on December 12, 1995 of $18.25 per share, a full
exercise of all Put Protection Rights would cause an issuance of approximately
449,000 shares of Interneuron's Common Stock.
As a result of these financings and the Subsidiaries' Private
Placements, the Company is obligated to register for resale at least 6,000,000
shares of its Common Stock which includes outstanding Common Stock and Common
Stock issuable upon exercise of warrants (but does not include shares issuable
pursuant to the Put Protection Rights which are not issuable and do not have
registration rights until 1998). The registration rights on certain of these
shares commence in January 1996 and the Company currently intends to file a
registration statement relating to the resale of such shares as well as certain
other shares in early 1996.
In May 1995, Interneuron extended the expiration date of its Class B
warrants to March 15, 1996. Each Class B warrant entitles the registered holder
to purchase one share of Interneuron's Common Stock at a price of $4.75 through
March 15, 1996, subject to earlier
40
<PAGE>
redemption at Interneuron's option, under certain circumstances. The total
number of outstanding Interneuron Class B warrants was 2,402,616 as of September
30, 1995. Exercise of all of these outstanding Class B warrants would result in
proceeds to the Company of approximately $11,412,000.
On November 16, 1995, the Endocrinologic and Metabolic Advisory
Committee of the FDA voted to recommend the approval of dexfenfluramine as a
prescription drug for the treatment of obesity. The Advisory Committee also
recommended that Phase IV, or post-marketing, studies be conducted and that
certain labeling guidelines be implemented. The Company is continuing to work
with the FDA to define the scope of such Phase IV studies and finalize the
labeling guidelines. The cost to the Company of such recommended Phase IV
studies cannot be estimated until their scope is finally determined. Pursuant to
the Company's sublicense agreement, AHP will be responsible for certain of such
costs. Dexfenfluramine is not permitted to be marketed, and Phase IV studies
would not commence, until after issuance of an approval letter by the FDA.
The Company is unable to predict when or if the FDA will issue such
approval letter. If the FDA issues such approval letter and dexfenfluramine is
descheduled within one year of FDA approval, the Company will receive from AHP
milestone payments aggregating $6,500,000 and equity investments aggregating
$3,500,000. In order to be in a position to launch dexfenfluramine if an FDA
approval letter is obtained, the Company has begun to order materials to be used
in the production of dexfenfluramine capsules. The Company's agreement with
Servier requires launch to occur within six months of approval. Additional
working capital may be required to finance production levels of dexfenfluramine
capsules. The Company has entered into a contract manufacturing agreement with
Boehringer to manufacture dexfenfluramine capsules. This agreement requires the
Company to purchase a certain annual minimum quantity of capsules if the FDA
approves the Company's NDA. In connection with the Company's right to co-promote
Redux, it may seek to establish a limited sales force to market the product to
certain specialists.
The Company expects to incur substantial research and development
expenses for several products for the foreseeable future. In particular, it is
performing Phase III clinical trials in the U.S. for citicoline to treat
ischemic stroke. The costs of the current clinical trial, not including internal
costs, are estimated to be $3,900,000 (of which approximately $1,800,000 has
been paid through September 30, 1995) including payments to the contract
research organization managing the trial and other consultants. This clinical
trial is continuing into fiscal 1996. Because additional clinical information
may be required prior to submission of an NDA, the Company has recently
commenced an additional clinical trial. This additional trial is estimated to
proceed into fiscal 1997 and cost approximately $3,500,000. Additional external
funding may be required for these clinical trials, the preparation and
submission of an NDA and for additional testing, if needed.
As additional consideration in connection with Intercardia's
acquisition of 80% of CPEC in September 1994, Interneuron agreed to issue two
additional installments of its common stock,
41
<PAGE>
each of which may be up to 75,000 shares, depending upon the fair market value
at the time of issuance, in the event each of two milestones are achieved
relating to the regulatory review of bucindolol. The Company may incur a
non-cash charge in connection with each issuance of such securities, based upon
their fair market value at the time of issuances, of a minimum of $750,000 and a
maximum of $1,875,000. Interneuron intends to offer to purchase the remaining
20% of CPEC for a purchase price of $8,000,000 payable in shares of Interneuron
Common Stock, which may also result in a non-cash charge to operations.
Intercardia is contractually committed to provide certain support to a
Phase III clinical trial for bucindolol, a drug for congestive heart failure,
which commenced in April 1995 and which is sponsored by the NIH and the VA.
Intercardia is committed to provide up to $2,000,000 during the course of the
BEST Study, of which $750,000 has been paid, as well as drug supplies and
monitoring costs of the study expected to aggregate an additional $2,500,000.
See "Agreements" and Note K of Notes to the Consolidated Financial Statements.
In December 1995, Intercardia received $5,000,000 under a collaborative
agreement with Astra Merck pursuant to which Astra Merck received U.S. marketing
rights to bucindolol and agreed to fund future U.S. development, marketing and
manufacturing costs and any payments due from Intercarida under the BEST trial
and to BMS. Intercardia will be entitled to royalties based on sales.
Intercardia has agreed to pay Astra Merck $10,000,000 in December 1997 and to
reimburse Astra Merck for one third of certain product launch costs, up to a
total of $11,000,000. In the event Intercardia elects not to make these
payments, royalties payable by Astra Merck to Intercardia will be substantially
reduced.
In December 1995, Intercardia filed a registration statement relating
to an initial public offering of 2,200,000 shares of its Common Stock at an
estimated initial public offering price between $12 and $14 per share.
Interneuron has expressed its interest in purchasing $5,000,000 of such
offering. If such offering is completed, the Put Protection Rights relating to
the Intercardia private placement (up to a maximum of 1,914,000 shares of
Interneuron Common Stock) would expire. In addition, Interneuron's ownership of
Intercardia would decrease from 88% to approximately 64%, before exercise of
options or warrants.
In April 1995, Progenitor received an initial payment from Chiron of
$2,500,000 and is committed to pay up to $750,000 of certain start-up
manufacturing costs at Chiron during calendar year 1995, of which approximately
$50,000 was paid as of September 30, 1995. The agreement provides for Progenitor
to receive an additional $500,000 milestone payment in January 1996, as well as
later stage milestone payments and royalties based upon sales. In June 1995,
Progenitor also received an award of an approximately $2,000,000 grant from the
National Institute of Standards and Technology to be paid over three years and
subject to certain conditions.
In fiscal 1995, Interneuron established InterNutria as a subsidiary to
license or acquire and commercialize a variety of products, which may include
Company products, primarily in the nutritional or food-related fields. In
December 1995, the Company agreed to acquire from
42
<PAGE>
Walden technology and know-how relating to a specially formulated dietary
supplement for women's use during their pre-menstrual period, expected to be
marketed under the trademark PMS Escape, in exchange for $2,400,000, payable in
two installments of Interneuron Common Stock, the first in late 1996 and the
second in late 1997, at the then-prevailing market price. The Company will incur
a charge to operations approximately equal to the purchase price. PMS Escape is
expected to be test-launched by InterNutria in a regional market in fiscal 1996.
The costs related to this test-launch are estimated to be approximately
$2,000,000 in fiscal 1996.
Consolidated cash, cash equivalents and marketable securities increased
$19,275,000 from $15,714,000 at September 30, 1994 to $34,989,000 at September
30, 1995. This increase primarily reflects net proceeds from financing
activities and the agreement with Chiron exceeding net cash used by operations
for the year ended September 30, 1995.
The Company believes it has sufficient cash for currently planned
expenditures in fiscal 1996. However, the Company may seek additional funds
through equity financings and corporate collaborations to provide working
capital financing and funding for new business opportunities and future growth.
In addition, Interneuron and certain Subsidiaries are exploring various
collaborations or business combinations in order to enable these Subsidiaries to
pursue development of their technologies. If such efforts are not successful,
certain activities at these Subsidiaries may be further reduced.
As of September 30, 1995, the Company and its Subsidiaries were party
to various consulting agreements and employment agreements with officers and
directors containing minimum aggregate annual payments of approximately
$1,500,000. Certain employment agreements are subject to additional bonuses and
annual increases as may be determined by the Company's Board of Directors.
Subsequent to September 30, 1995, Interneuron entered into a revised consulting
agreement with a director pursuant to which his annual consulting fee increased
by $51,000 per year to $150,000 and providing a $50,000 bonus upon receipt of
the FDA approval letter for dexfenfluramine.
RESULTS OF OPERATIONS
- - ---------------------
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1994
- - -------------------------------------------------------------------------------
Revenues increased $3,896,000 to $4,502,000 in fiscal 1995 from
$606,000 in fiscal 1994. This increase is primarily due to the receipt of
$2,500,000 by Progenitor under its license agreement with Chiron. The Company
had minimal contract and license fee revenues in fiscal 1994. Also contributing
to the increased revenues was a substantial increase in investment income
primarily resulting from higher invested balances as well as higher prevailing
interest rates. The Company may continue to experience significant fluctuations
in revenues from the timing of license fees, contract and royalty income and
milestone payments.
43
<PAGE>
Total costs and expenses decreased $4,945,000, or 18%, to $23,046,000
in fiscal 1995 from $27,991,000 in fiscal 1994. This decrease is due to a
general reduction in spending and prioritizing of resources and the
non-recurrence of a $1,852,000 charge during fiscal 1994 relating to the
purchase of technology rights associated with the acquisition of CPEC. See Note
K of the Notes to the Consolidated Financial Statements. Activities of the
Subsidiaries continue to represent a significant percentage of the Company's
consolidated expenses and represented 42% and 54% of consolidated expenses in
fiscal 1994 and 1995, respectively. While the rate of spending by Progenitor and
Transcell has decreased in fiscal 1995 and is not expected to increase
significantly in fiscal 1996, increased spending at Intercardia and InterNutria
are expected to increase the total amount of expenses pertaining to the
Subsidiaries.
Research and development expenses decreased $2,569,000, or 14%, to
$15,168,000 in fiscal 1995 from $17,737,000 in fiscal 1994. Substantial initial
expenses incurred in fiscal 1994 for the Phase III clinical trial for citicoline
caused a relative decrease in such spending in fiscal 1995. Also contributing to
this decrease were reduced spending on development of certain other products by
the Company and decreased spending by Transcell and Progenitor. Additionally,
fiscal 1994 included an initial license payment by Interneuron to Rhone-Poulenc
Rorer for the acquisition of pagaclone, a drug for anxiety, and a non-recurring
charge pertaining to the issuance of warrants to a licensee of the Company.
Partially offsetting these decreases in fiscal 1995 was a $750,000 charge for
Progenitor's obligation to fund certain manufacturing costs at Chiron,
Intercardia's increased funding of a Phase III clinical trial for bucindolol,
and the Company's increased spending to prepare for advisory committee meetings
occurring in September 1995. The level of future research and development
expenses will be dependent upon the results of the Company's development
activities, regulatory actions and the Company's ability to obtain funding.
General and administrative expenses decreased $524,000, or 6%, to
$7,878,000 in fiscal 1995 from $8,402,000 in fiscal 1994. This decrease is
primarily due to decreased recruiting, relocation and severance costs and
non-recurring business development costs which were partially offset by wage,
benefit and administrative costs related to management additions and business
development activity at Intercardia and InterNutria.
Primarily as a result of increased revenues, decreased costs and
expenses and the allocation of the net loss of certain Subsidaries to their
minority stockholders, net loss decreased $9,405,000, or 34%, to ($17,981,000)
in fiscal 1995 from ($27,386,000) in fiscal 1994. Net loss per share decreased
from ($.98) in fiscal 1994 to ($.59) in fiscal 1995 also reflecting an increase
in weighted average shares outstanding from 27,873,000 in fiscal 1994 to
30,604,000 in fiscal 1995 resulting from additional equity issuances.
Consistent with the Company's strategy of establishing separate
Subsidiaries and licensing-in new products and technology, the Company from time
to time explores various technology or product acquisition and/or financing
opportunities and is currently engaged in discussions relating to such
opportunities. Any such initiatives may involve the issuance of Interneuron's
Common Stock and/or financial commitments to fund product development, either of
which may adversely affect the Company's consolidated financial condition or
results of operations. Interneuron, in certain circumstances, may be the primary
source of funding for the Subsidiaries.
44
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 30, 1994 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1993
- - -------------------------------------------------------------------------------
Revenues decreased from $12,522,000 in fiscal 1993 to $606,000 in
fiscal 1994. Revenues in fiscal 1993 consisted of contract and license fees and
reimbursement of clinical trial expenses from AHP and license fees from Elan.
The Company did not earn such revenues in fiscal 1994. As a result, contract and
license fee income decreased from $11,583,000 in fiscal 1993 to $101,000 in
fiscal 1994. Investment income decreased $433,000, or 46%, from $938,000 in
fiscal 1993 to $505,000 in fiscal 1994, primarily as a result of a change in the
portfolio to investments with shorter maturities, which carry lower relative
interest rates.
Research and development expenses decreased $2,277,000, or 11%, from
$20,014,000 in fiscal 1993 to $17,737,000 in fiscal 1994. Costs related to the
development of dexfenfluramine decreased approximately $8,000,000 from fiscal
1993 to fiscal 1994 reflecting the submission of the NDA in May 1993. This
decrease was partially offset by approximately $4,000,000 of increased
development costs for other products including (a) citicoline, which entered
phase II/III trials in 1994; (b) dihydrexidine, for which pre-clinical
development was completed; and c) pagaclone, which entered phase I trials in
1994. Progenitor and Transcell increased their research and development expenses
by approximately $2,000,000 in fiscal 1994 over fiscal 1993.
General and administrative expenses increased $3,160,000, or 60%, from
$5,242,000 in fiscal 1993 to $8,402,000 in fiscal 1994. This increase reflects
the increased number of executive officers and business development personnel at
the Company and its subsidiaries and increased legal and professional fees
necessary to manage the Company's expanding portfolio of products and activities
at the corporate and subsidiary level.
During fiscal 1994, the Company incurred a charge of $1,852,000,
reflected as a purchase of technology rights, relating to the acquisition of
CPEC in the fourth quarter. Of this amount $759,000 was a non-cash charge
relating to the issuance of the Company's Common Stock as part of the purchase
price. Primarily as result of the lack of revenues from operations, increased
general and administrative expenses and the technology acquisition charge, net
loss increased from ($12,734,000), or ($.50) per share, in fiscal 1993 to
($27,386,000), or ($.98) per share, in fiscal 1994. Weighted average common
shares increased from 25,492,000 in fiscal 1993 to 27,873,000 in fiscal 1994
reflecting additional equity issuances.
Item 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
-------------------------------------------
The response to this item is included in a separate section of this
Report. See Index to Consolidated Financial Statements on Page F-1.
45
<PAGE>
Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTANT AND FINANCIAL
DISCLOSURE.
----------------------------------------------------------------------
Not applicable.
PART III
The information called by Item 10, Directors and Executive Officers of
the Registrant; Item 11, Executive Compensation; Item 12, Security Ownership of
Certain Beneficial Owners and Management; and Item 13, Certain Relationships and
Related Transactions will be included in and is incorporated by reference from
the Registrant's definitive proxy statement to be filed pursuant to Regulation
14A within 120 days after the close of its fiscal year.
46
<PAGE>
PART IV
14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS
--------------------
An index to Consolidated Financial Statements appears on page F-1
2. SCHEDULES
---------
All financial statement schedules are omitted because they are not
applicable, not required under the instructions or all the information
required is set forth in the financial statements or notes thereto.
3. EXHIBITS
--------
3.4 - Restated Certificate of Incorporation of Registrant (17)
3.5 - By-Laws of Registrant (1)
4.2 - Form of Warrant Agreement (1)
4.4 - Certificate of Designation establishing Series C Preferred Stock
(17)
4.5 - Warrant issued to Elan Corporation, plc (19)
4.6 - Form of Registrant Warrant issued in subsidiary private placement
(25)
4.7 - Form of Registrant Warrant to be issued to Paramount Capital,
Inc., D.H. Blair & Co., Inc. or designees (25)
10.5 (a) - Consultant and Non-competition Agreement between the Registrant,
Richard Wurtman, M.D.
10.5 (b) - Consultant and Non-competition Agreement between InterNutria,
Inc. and Judith Wurtman, Ph.D.
10.6 - Assignment of Invention and Agreement between Richard Wurtman,
M.D., Judith Wurtman and the Registrant (1)
10.7 - Management Agreement between the Registrant and Lindsay
Rosenwald, M.D. (1)
10.9(a) - Restated and Amended 1989 Stock Option Plan (7)
10.10 - Form of Indemnification Agreement (1)
10.11 - Restated Amendment to MIT Option Agreement (1)
10.12(a) - Patent and Know-How License Agreement between the Registrant and
Les Laboratoires Servier ("Servier") dated February 7, 1990
("License Agreement") (1)
10.12(b) - Revised Appendix A to License Agreement (1)
10.12(c) - Amendment Agreement between Registrant and Servier, Orsem and
Oril, Produits Chimiques dated November 19,1992(3)(12)
10.12(d) - Amendment Agreement dated April 28, 1993 between Registrant and
Servier (16)
10.12 (e)- Consent and Amendment Agreement among Servier, American Home
Products Corp. and Registrant.
10.13 - Trademark License Agreement between the Registrant and Orsem
dated February 7, 1990 (1)
10.14 - Supply Agreement between the Registrant and Oril Products
Chimiques dated February 7, 1990 (1)(3)
10.15(a) - Form of Indemnification Agreement between the Registrant and
Alexander M. Haig, Jr. (1)
10.16 - Assignment of Invention by Richard Wurtman, M.D. (1)
10.18 - Option Agreement between the Registrant and Alexander M. Haig,
Jr. (1)
10.19 - Option Agreement between the Registrant and Fountainhead Holdings
(Bermuda) Ltd. (1)
10.22(a) - License Agreement dated January 15, 1993, as amended, between the
Registrant and Grupo Ferrer (3)(16)
47
<PAGE>
10.25 - License Agreement between the Registrant and the Massachusetts
Institute of Technology (4)
10.27 - License Agreement dated July 1, 1991 between Whitby Research,
Inc. and the Registrant (6)
10.28 - Letter Agreement between the Registrant and Bobby W. Sandage,
Jr., Ph.D. (7)
10.29 - Amended Lease dated December 12, 1991 for Registrant's offices
in Lexington, Massachusetts (7)
10.29(a) - First Amendment to Lease dated as of October 14, 1994 between
Registrant and Ledgemont Realty Trust (25)
10.30 - License Agreement dated January 1, 1992 between the Trustees of
Princeton University and the Registrant (3)(8)
10.31 - Research Agreement dated as of July 1, 1991 between the
Registrant and the Trustees of Princeton University (3)(8)
10.32 - Consulting Agreement dated as of July 1, 1991 between the
Registrant and Daniel Kahne, Ph.D. (3)(8)
10.33 - License Agreement dated January 28, 1992 between Ohio University,
The Castle Group, Inc. and Scimark Corporation (assigned to
Progenitor, Inc.) (3)(8)
10.34 - Sponsored Research Agreement between Scimark Corporation
(assigned to Progenitor, Inc.) and Ohio University (3)(8)
10.34(a) - Letter Amendment between Progenitor, Inc. and Ohio University
(18)
10.35 - Technology License Contract dated December 18, 1991 between the
Registrant and the Mayo Foundation for Medical Education and
Research (3)(8)
10.36 - Exclusive License Agreement dated February 24, 1992 between the
Registrant and Purdue Research Foundation (9)
10.37 - License Agreement dated as of February 15, 1992 between the
Registrant and Massachusetts Institute of Technology (9)
10.38 - Employment Agreement between Progenitor, Inc. and Glenn Cooper,
M.D. dated September 3, 1992 (13)
10.39 - Employment Agreement between Transcell Technologies, Inc. and
Elizabeth Tallet dated November 11, 1992 and Guarantee by
Registrant (13)
10.40 - Patent and Know-How Sublicense and Supply Agreement between
Registrant and American Cyanamid Company dated November 19, 1992
(3)(12)
10.41 - Equity Investment Agreement between Registrant and American
Cyanamid Company dated November 19, 1992 (12)
10.42 - Trademark License Agreement between Registrant and American
Cyanamid Company dated November 19, 1992 (12)
10.43 - Consent Agreement between Registrant and Servier dated November
19,1992 (12)
10.44 - Patent and Know-How License Agreement between Registrant and
Veryfine Products, Inc. dated October 29, 1992 (3) (14)
48
<PAGE>
10.44(a) - Termination Letter to Registrant from Veryfine Products, Inc.,
dated October 30, 1995
10.45 - Agreement between Registrant and Parexel International
Corporation dated October 22, 1992 (as of July 21, 1992) (3) (14)
10.46 - License Agreement dated February 9, 1993 between the Registrant
and Massachusetts Institute of Technology (3)(15)
10.47 - Sublease between Enichem America and Transcell Technologies, Inc.
including guarantee by the Registrant (15)
10.48 - Employment Agreement dated May 21, 1993 between the Registrant
and Glenn L. Cooper, M.D., as amended (17)
10.49 - License Agreement between Registrant and Elan Corporation, plc
dated September 9, 1993 (3)(18)
10.50 - License Agreement between Transcell Technologies, Inc. and
Princeton University dated October 14, 1993 (3)(18)
10.51 - Letter Agreement between the Registrant and Mark S. Butler (18)
10.52 - License Agreement dated February 18, 1994 between Registrant and
Rhone-Poulenc Rorer, S.A. (20)
10.54 - Form of Purchase Agreement dated as of February 24, 1994 (20)
10.54(a) - Form of Amendment to Purchase Agreement (20)
10.55 - Patent License Agreement between Registrant and Massachusetts
Institute of Technology dated March 1, 1994 (20)
10.56 - License Agreement between Progenitor, Inc. and Albert Einstein
College of Medicine of Yeshiva University dated as of February
1, 1994 (20)
10.57 - Employment Letter dated February 28, 1994 between the Registrant
and Thomas F. Farb (21)
10.58 - Master Equipment Lease including Schedules and Exhibits between
Phoenix Leasing and Registrant (agreements for Transcell and
Progenitor are substantially identical), with form of continuing
guarantee for each of Transcell and Progenitor (22)
10.59 - Exhibit D to Agreement between Registrant and Parexel
International Corporation dated as of March 15, 1994. (3)(22)
10.60(a) - Acquisition Agreement dated as of May 13, 1994 among the
Registrant, Intercardia, Inc., Cardiovascular Pharmacology
Engineering Consultants, Inc. (CPEC), Myocor, Inc. and the
sellers named therein (23)
10.60(b) - Amendment dated June 15, 1994 to the Acquisition Agreement (23)
10.60(c) - Form of Consulting Agreement between Intercardia, Inc., CPEC and
Myocor, Inc.(23)
10.61 - License Agreement dated December 6, 1991 between Bristol-Myers
Squibb and CPEC, as amended (3)(23)
10.61(a) - Letter Agreement dated November 18, 1994 between CPEC and Bristol
- Myers Squibb (25)
10.62 - Lease Agreement between Thomas R. Eggers and Progenitor, Inc.
dated as of November 1994 with Registrant guaranty (25)
10.63 - Form of Stock Purchase Agreement dated December 15, 1994 (25)
49
<PAGE>
10.64 - Form of Investor Rights Agreement among Progenitor, Transcell,
Registrant and each investor in the subsidiary private placement
(25)
10.64(a) - Form of Investor Rights Agreement among Intercardia, the
Registrant and each investor in the Intercardia private placement
(25)
10.65 - 1994 Long-Term Incentive Plan (25)
10.66 - Guarantee by Lindsay A. Rosenwald, M.D. to Registrant (25)
10.67 - Employment Agreement between Intercardia and Clayton I. Duncan
with Registrant guarantee (25)
10.67(a) - Amendment to Employment Agreement between Intercardia, Inc. and
Clayton I. Duncan (27)
10.68 - Interneuron Pharmaceuticals, Inc. 1995 Employee Stock Purchase
Plan, as amended (27)
10.69 - Office Lease, dated April 24, 1995 between Intercardia, Inc. and
Highwoods/Forsyth Limited Partnership, with Registrant Guaranty
(27)
10.70 - Letter Agreement, dated March 31, 1995 between Progenitor, Inc.
and Chiron Corporation (3) (28)
10.70 (a) - License and Collaboration Agreement by and between Progenitor,
Inc., and Chrion Corporation dated March 31, 1995 (3) (30)
10.71 - Securities Purchase Agreement dated June 2, 1995 between the
Registrant and Reliance Insurance Company, including Warrant
and exhibits (29)
10.72 - Sponsored Research and License Agreement dated as of May 1, 1995
between Progenitor and Novo Nordisk (3) (30)
10.73 - Form of Stock Purchase Agreement dated as of June 28, 1995 (31)
10.74 - Securities Purchase Agreement dated as of August 16, 1995 between
the Registrant and BT Holdings (New York), Inc., including
Warrant issued to Momint (nominee of BT Holdings) (32)
10.75 - Stock Purchase Agreement dated as August 23, 1995 between the
Registrant and Paresco, Inc. (32)
10.76 - Stock Purchase Agreement dated as of September 15, 1995 between
the Registrant and Silverton International Fund Limited (32)
10.77 - Subscription Agreement dated September 21, 1995, as of August
31, 1995, including Registration Rights Agreement between
Registrant and GFL Advantage Fund Limited. (32)
10.78 - Contract Manufacturing Agreement dated November 20,1995 between
Registrant and Boehringer Ingelheim Pharmaceuticals, Inc. (3)
10.79 - Development and Marketing Collaboration and License Agreement
between Astra Merck, Inc., Intercardia, Inc. and CPEC, Inc.,
dated December 4, 1995. (33)
10.80 - Intercompany Services Agreement between Registrant and
Intercardia, Inc. (33)
10.81 - Asset Purchase Agreement dated November 14, 1995 among
Registrant, InterNutria, Inc., and Walden Laboratories, Inc.
19 - Letter to Stockholders dated May 18, 1994 (24).
20 - News Release dated August 10, 1994 including Rule 135(c) notice
(21)
50
<PAGE>
21 - Subsidiaries of the Registrant
23 - Consent of Coopers & Lybrand L.L.P.
27 - Financial Data Schedule
__________________
(1) Incorporated by reference to the Registrant's registration statement on
Form S-1 (File No. 33-32408) declared effective on March 8, 1990.
(3) Confidential Treatment requested for a portion of this Exhibit.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1990.
(6) Incorporated by reference to the Registrant's Quarterly report on Form
10-Q for the nine months ended June 30, 1991.
(7) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's registration statement on Form S-1 (File No. 33-32408) filed
December 18, 1991.
(8) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1991.
(9) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended March 31, 1992.
(10) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's registration statement on Form S-1 (File No. 33-32408) filed
July 12, 1992.
(11) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended June 30, 1992.
(12) Incorporated by reference to the Registrant's Form 8-K dated November
30, 1992.
(13) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form S-1 (File No. 33-32408) filed
on December 21, 1992.
(14) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1992.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1992
(16) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the six months ended March 31, 1993
(17) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the nine months ended June 30, 1993
(18) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1993
(19) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1993.
(20) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 or Amendment No. 1 (File no. 33-75826)
(21) Incorporated by reference to the Registrant's Form 8-K dated March 31,
1994
(22) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the six months ended March 31, 1994
(23) Incorporated by reference to the Registrant's Form 8-K dated June 20,
1994
(24) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the nine months ended June 30, 1994
51
<PAGE>
(25) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994
(26) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the three months ended December 31, 1994
(27) Incorporated by reference to the Registrant's Quarterly Report on From
10-Q for the six months ended March 31, 1995
(28) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q/A for the six months ended March 31, 1995
(29) Incorporated by reference to the Registrant's Quarterly Report on Form
8-K dated June 2, 1995 (30) Incorporated by reference to the
Registrant's Quarterly Report on Form 8-K dated May 16, 1995; Exhibit
10.70 (a) supersedes Exhibit 10.70.
(31) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the nine months ended June 30, 1995.
(32) Incorporated by referring to Registrant's Report on Form 8-K dated August
16, 1995.
(33) Incorporated by reference to Registration Statement filed on Form S-1
(No. 33-80219) by Intercardia, Inc. on December 8, 1995.
(b) Reports on Form 8-K
The Company filed reports on Form 8-K dated August 16, 1995 and
September 28, 1995.
52
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------
AUDITED FINANCIAL STATEMENTS PAGE
- - -----------------------------
Report of Independent Accountants...................................... F-2
Consolidated Balance Sheets -- September 30, 1994
and September 30, 1995 .............................................. F-3
Consolidated Statements of Operations --For the years ended
September 30, 1993, 1994 and 1995.................................... F-4
Consolidated Statements of Stockholders' Equity --
For the years ended September 30, 1993,
1994 and 1995........................................................ F-5
Consolidated Statements of Cash Flows --For the years
ended September 30, 1993, 1994 and 1995.............................. F-6
Notes to Consolidated Financial Statements............................. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
------------------------------------
To the Board of Directors and
Stockholders of Interneuron Pharmaceuticals, Inc.:
We have audited the accompanying consolidated balance sheets of Interneuron
Pharmaceuticals, Inc. as of September 30, 1994 and 1995 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1995. 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. These 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 consolidated financial position of Interneuron
Pharmaceuticals, Inc. as of September 30, 1994 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1995 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 13, 1995
F-2
<PAGE>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
September 30, September 30,
1994 1995
ASSETS
Current assets:
Cash and cash equivalents $11,357,351 $16,781,242
Marketable securities 4,356,860 18,207,642
Prepaids and other current assets 231,429 427,016
----------------- ----------------
Total current assets 15,945,640 35,415,900
Restricted cash 125,000 87,500
Property and equipment, net 1,894,464 1,671,116
Notes receivable 313,022 341,547
---------------- ---------------
$18,278,126 $37,516,063
=============== ==============
LIABILITIES
Current liabilities:
Accounts payable $ 1,116,956 $ 1,160,828
Accrued expenses 5,897,097 7,993,619
Current portion of capital lease obligations 354,976 506,519
---------- -----------
Total current liabilities 7,369,029 9,660,966
Long-term portion of capital lease obligations 1,025,201 781,563
Other long-term liabilities 106,566 43,762
Minority interest - 5,638,152
Commitments and contingencies - -
STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value, authorized 5,000,000 shares: Series B, 239,425
shares issued and outstanding at September 30, 1994 and 1995, respectively
(liquidation preference at September 30, 1995
$3,086,431) 240 240
Series C, 5,000 shares issued and outstanding at September 30, 1994
and 1995, respectively (liquidation preference at September 30, 1995
$511,575) 5 5
Common stock, par value $.001; 60,000,000 shares authorized; 29,016,367 and
33,284,006 shares issued and outstanding at
September 30, 1994 and 1995, respectively 29,016 33,284
Additional paid-in capital 70,559,447 100,150,194
Accumulated deficit (60,811,378) (78,792,103)
------------ --------------
Total stockholders' equity 9,777,330 21,391,620
-------------- ---------------
$18,278,126 $37,516,063
------------ --------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended September 30,
1993 1994 1995
---- ---- ----
Revenues:
Contract and license fees $ 11,583,484 $ 100,809 $ 3,462,777
Investment income 938,342 504,977 1,039,528
----------- ------------ -----------
Total revenues 12,521,826 605,786 4,502,305
Costs and expenses:
Research and development 20,013,503 17,737,063 15,167,670
General and administrative 5,242,309 8,402,298 7,878,204
Purchase of technology rights - 1,852,000 -
----------- ------------ -----------
Total costs and expenses 25,255,812 27,991,361 23,045,874
----------- ----------- -----------
Net loss from operations (12,733,986) (27,385,575) (18,543,569)
Minority interest - - 562,844
----------- ----------- -----------
Net loss ($12,733,986) ($27,385,575) ($17,980,725)
============= ============= ============
Net loss per common share ($0.50) ($0.98) ($0.59)
============= ============= ============
Weighted average common shares
outstanding 25,492,130 27,873,369 30,603,891
============= ============= ============
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
<PAGE>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
<TABLE>
COMMON STOCK PREFERRED STOCK
<S> <C> <C> <C> <C>
NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- --------
Balance at September 30, 1992 . . . . . . . . . . . . . . . 24,208,813 $ 24,209
Proceeds from exercise of stock options. . . . . . . . . . . 320,682 321
Proceeds from issuance of Series B preferred stock. . . . . 239,425 $ 240
Issuance of common stock to Mayo Foundation. . . . . . . . . 22,372 22
Public offering of common stock, net of issuance costs of
$1,521,000. . . . . . . . . . . . . . . . . . . . . 2,300,000 2,300
Proceeds from issuance of Series C preferred stock . . . . . 5,000 5
Cancellation of stock purchase option. . . . . . . . . . . .
Net loss for the year ended September 30, 1993. . . . . . .
---------- --------------- ----------- ----------
Balance at September 30, 1993. . . . . . . . . . . . . . . . 26,851,867 26,852 244,425 245
Proceeds from exercise of Class B warrants.. . . . . . . .. 177,000 177
Proceeds from exercise of stock options. . . . . . . . . . . 110,500 110
Private placements of common
stock, net of issuance costs of $1,609,000 . . . .. 1,707,000 1,707
Issuance of warrants. . . . . . . . . . . . . . . . . . . ..
Issuance of common stock for technology rights. . . . . . .. 170,000 170
Dividends on preferred stock. . . . . . . . . . . . . . . ..
Net loss for the year ended September 30, 1994. . . . . . ..
---------- --------------- ----------- ----------
Balance at September 30, 1994. . . . . . . . . . . . . . . . 29,016,367 29,016 244,425 245
Proceeds from exercise of Class B warrants. . . . . . . . .. 257,107 258
Proceeds from exercise of stock options. . . . . . . . . . . 61,200 61
Private placements of common stock, net of
issuance costs of $1,244,000. . . . . . . . . . . . 3,009,045 3,009
Dividends on preferred stock. . . . . . . . . . . . . . . ..
Proceeds from offerings of Employee Stock Purchase Plan 10,287 10
Proceeds from exercise of unit purchase options and
Class A warrants. . . . . . . . . . . . . . . . . . 930,000 930
Proceeds from issuance of Put Protection Rights and
Warrants issued pursuant to Subsidiaries Private
Placements. . . . . . . . . . . . . . . . . . . . .
Net loss for the year ended September 30, 1995. . . . . . .. __________ ________ ________ ______
Balance at September 30, 1995. . . . . . . . . . . . . . . . 33,284,006 $ 33,284 244,425 $245
========== ========= ======== ======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5(a)
<PAGE>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
CONTINUED...
<TABLE>
ADDITIONAL TOTAL
PAID IN ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT EQUITY
---------------- ----------------- --------------
<S> <C> <C> <C>
Balance at September 30, 1992 . . . . . . . . . . . . . . . $ 37,438,844 $ (20,691, 817) $ 16,771,236
Proceeds from exercise of stock options. . . . . . . . . . . 495,722 496,043
Proceeds from issuance of Series B preferred stock. . . . . 2,999,760 3,000,000
Issuance of common stock to Mayo Foundation. . . . . . . . . 164,978 165,000
Public offering of common stock, net of issuance costs of
$1,521,000. . . . . . . . . . . . . . . . . . . . . 13,426,332 13,428,632
Proceeds from issuance of Series C preferred stock . . . . . 499,995 500,000
Cancellation of stock purchase option. . . . . . . . . . . . (400,000) (400,000)
Net loss for the year ended September 30, 1993. . . . . . . (12,733,986) (12,733,986)
------------- ------------- -------------
Balance at September 30, 1993. . . . . . . . . . . . . . . . 54,625,631 (33,425,803) 21,226,925
Proceeds from exercise of Class B warrants.. . . . . . . .. 840,573 840,750
Proceeds from exercise of stock options. . . . . . . . . . . 465,900 466,010
Private placements of common stock, net of
issuance costs of $1,244,000. . . . . . . . . . . . 13,751,844 13,753,551
Issuance of Warrants. . . . . . . . . . . . . . . . . . . . 180,000 180,000
Issuance of common stock for technology rights. . . . . . .. 758,505 758,675
Dividends on preferred stock. . . . . . . . . . . . . . . .. (63,006) (63,006)
Net loss for the year ended September 30, 1994. . . . . . .. (27,385,575) (27,385,575)
------------- -------------- -------------
Balance at September 30, 1994. . . . . . . . . . . . . . . . 70,559,447 (60,811,378) 9,777,330
Proceeds from exercise of Class B warrants. . . . . . . . .. 1,221,001 1,221,259
Proceeds from exercise of stock options. . . . . . . . . . . 150,419 150,480
Private placements of common stock, net of
issuance costs of $1,244,000. . . . . . . . . . . . 24,697,882 24,700,891
Dividends on preferred stock. . . . . . . . . . . . . . . .. (35,000) (35,000)
Proceeds from offerings of Employee Stock Purchase Plan 69,941 69,951
Proceeds from exercise of unit purchase options and
Class A warrants. . . . . . . . . . . . . . . . . . 2,324,070 2,325,000
Proceeds from issuance of Put Protection Rights and
Warrants issued pursuant to Subsidiaries Private
Placements. . . . . . . . . . . . . . . . . . . . . 1,162,434 1,162,434
Net loss for the year ended September 30, 1995. . . . . . .. (17,980,725) (17,980,725)
------------ ------------- -------------
Balance at September 30, 1995. . . . . . . . . . . . . . . . $100,150,194 $(78,792,103) $21,391,620
============ ============= ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5(b)
<PAGE>
INTERNEURON PHARMACEUTICALS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
<TABLE>
For the years ended September 30,
<S> <C> <C> <C>
1993 1994 1995
------ ------- -------
Cash flows from operating activities:
Net loss ($12,733,986) ($27,385,575) ($17,980,725)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 380,570 685,298 715,337
(Gain) loss on disposal of fixed assets - 46,075 (34,609)
Amortization of bond premium 254,370 23,162 -
Minority interest in net loss of consolidated
subsidiaries - - (562,844)
Noncash license fee revenue (400,000) - -
Noncash license fee expense 165,000 180,000 -
Purchase of technology rights - 758,675 -
Noncash compensation - 326,250 -
Change in assets and liabilities:
Prepaids and other current assets (123,423) 933,550 (195,587)
Notes receivable and other assets (49,930) (83,022) 8,975
Accounts payable 440,455 535,226 43,872
Accrued expenses and other liabilities 549,220 4,123,948 2,129,249
------------ ------------ ------------
Net cash (used) by operating activities (11,517,724) (19,856,413) (15,876,332)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (1,132,543) (1,178,080) (504,438)
Purchase of marketable securities (20,773,845) (12,621,110) (22,462,912)
Proceeds from maturities and sales of
marketable securities 22,076,917 22,736,402 8,612,130
Restricted cash (75,000) -
Proceeds from sale of fixed assets - - 47,058
------------ ------------ ------------
Net cash provided (used) by investing activities 95,529 8,937,212 (14,308,162)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of stock and other
financing activities 17,424,675 14,671,055 29,630,015
Net proceeds from issuance of preferred stock
by subsidiaries - - 6,070,465
Proceeds from sale/leaseback - 1,497,548 323,978
Principal payments of capital lease obligations - (117,371) (416,073)
----------- ------------ -----------
Net cash provided by financing activities 17,424,675 16,051,232 35,608,385
=========== ----------- -----------
Net change in cash and cash equivalents 6,002,480 5,132,031 5,423,891
Cash and cash equivalents at beginning of period 222,840 6,225,320 11,357,351
----------- ------------ -----------
Cash and cash equivalents at end of period $ 6,225,320 $11,357,351 $16,781,242
============ ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
<PAGE>
INTERNEURON PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF THE BUSINESS:
-----------------------
Interneuron Pharmaceuticals, Inc. (the "Company") is a diversified
biopharmaceutical company engaged in the development and commercialization of a
portfolio of products for the treatment or management of central nervous system
(CNS) disorders and other areas. Interneuron is also developing diverse
technologies and products through four subsidiaries, Progenitor, Inc.
("Progenitor"), Transcell Technologies, Inc. ("Transcell"), Intercardia, Inc.
("Intercardia"), and InterNutria, Inc. ("InterNutria"). The technology or
product areas of the subsidiaries include: gene therapy, growth factors and stem
cell production through Progenitor; combinatorial chemistry and drug transport
through Transcell; cardiovascular and pulmonary disease through Intercardia; and
nutritional and food-related products through InterNutria. Unless the context
indicates otherwise, all references to the Company include Interneuron
Pharmaceuticals, Inc. ("Interneuron") and its subsidiaries, Progenitor,
Transcell, Intercardia, and InterNutria (the "Subsidiaries").
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Basis of Presentation: The consolidated financial statements include the
accounts of the Company and its wholly- and majority-owned Subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Property and Equipment: Property and equipment are stated at cost. The Company
provides for depreciation using the straight-line method based upon the
following estimated useful lives:
Estimated Useful Lives:
Office equipment. . . . . .. . . . . . . . . . . . . . . . . 3 to 5 years
Laboratory equipment.. . . . . . . . . . . . . . . . . . . .. 5 years
Leasehold improvements. . . . . . . . . . . . . . . . . . . . Shorter of lease
term or estimated useful life
Expenses for repairs and maintenance are charged to operations as incurred. Upon
retirement or sale, the cost of the assets disposed and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
credited or charged to operations.
Research and Development: Research and development costs are expensed in the
period incurred.
Revenue Recognition: Revenue is recognized under agreements when services are
performed or when contractual obligations are met.
Cash, Cash Equivalents and Marketable Securities: The Company invests available
cash in short-term bank deposits, money market funds, commercial paper and U.S.
Government securities. Cash and cash equivalents includes investments with
maturities of three months or less at date of
F-7
<PAGE>
purchase. Marketable securities consists of investments purchased with
maturities greater than three months. In fiscal 1995, the Company adopted
Statement of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115 requires that,
except for debt securities classified as "held-to-maturity" securities,
investments in debt and equity securities be reported at fair value. Debt
securities classified as "held-to-maturity" securities are reported at amortized
cost. The Company has classified all marketable securities held at September 30,
1995 as "held-to-maturity." The market value of marketable securities at
September 30, 1994 was $4,356,860.
Income Taxes: Deferred tax liabilities and assets are recognized based on
temporary differences between the financial statement basis and tax basis of
assets and liabilities using current statutory tax rates. A valuation allowance
against net deferred tax assets is established if, based on the available
evidence, it is more likely than not that some or all of the deferred tax assets
will not be realized (see Note H).
Reclassification: Certain amounts have been reclassified to conform with fiscal
1995 classifications.
C. MARKETABLE SECURITIES:
----------------------
Investments in marketable securities at September 30, 1995 consisted of the
following:
COST MARKET VALUE
-------- --------------
U.S. Treasury notes..... $ 499,579 $ 499,690
Federal agency notes ... 4,453,063 4,450,500
Corporate notes......... 13,255,000 13,255,000
---------- -----------
$ 18,207,642 $ 18,205,190
========== ==========
All of the above investments mature within one year from September 30, 1995.
Gross unrealized losses in the marketable securities portfolio at September 30,
1995 were $2,452.
D. PROPERTY AND EQUIPMENT:
-----------------------
At September 30, 1994 and 1995, property and equipment consisted of the
following:
1994 1995
---- ----
Office equipment........ $ 581,255 $ 796,628
Laboratory equipment.... 1,870,398 2,035,633
Leasehold improvements.. 455,456 336,759
----------- ----------
2,907,109 3,169,020
Less: accumulated depreciation
and amortization . . . . . (1,012,645) (1,497,904)
----------- -----------
$1,894,464 $1,671,116
========== ==========
F-8
<PAGE>
Included in the above amounts is property and equipment under capital lease
obligations of $1,498,000 and $1,890,000 at September 30, 1994 and 1995,
respectively, and related accumulated depreciation of $128,000 and $619,000 at
September 30, 1994 and 1995, respectively. Leased assets consist primarily of
laboratory equipment. The Company paid $61,000 and $146,000 in interest expense
during the years ended September 30, 1994 and 1995, respectively, related to
these capital lease obligations.
In fiscal 1994, the Company and its Subsidiaries entered into equipment lease
financing arrangements with several leasing companies whereby a net loss
resulted when certain equipment was sold and leased back. These transactions
yielded proceeds of $1,498,000. The net book value of the equipment leased under
these arrangements totaled $1,570,000 at the transaction dates and deferred
losses of $72,000 were recorded and are being amortized over the life of the
leases.
E. ACCRUED EXPENSES:
-----------------
At September 30, 1994 and 1995, accrued expenses consisted of the following:
1994 1995
---- ----
Professional fees. . . . . . . . . . . $ 578,323 $ 526,174
Clinical and sponsored research. . . . 3,180,205 3,737,034
Withholding taxes. . . . . . . . . . . 456,778 453,701
Compensation . . . . . . . . . . . . . 855,314 1,049,553
Shared manufacturing costs . . . . . . - 701,296
Other. . . . . . . . . . . . . . . . . 826,477 1,525,861
------------- ---------
$5,897,097 $7,993,619
============ ==========
F. COMMITMENTS:
------------
The Company leases its facilities, as well as certain laboratory equipment and
furniture, under non-cancelable operating leases. Certain operating leases can
be renewed for an additional five years at terms to be negotiated. Rent expense
under these leases was approximately $649,000, $913,000 and $1,055,000 for the
years ended September 30, 1993, 1994 and 1995, respectively. The Company also
leases certain property and equipment under capital leases.
At September 30, 1995, the Company's future minimum payments under lease
arrangements are as follows:
FISCAL YEAR OPERATING LEASES CAPITAL LEASES
1996 $ 932,354 $ 630,645
1997 332,630 630,928
1998 57,422 191,642
1999 57,339 56,136
2000 35,403 -
------------- ----------
Total lease payments $1,415,148 1,509,351
==========
Less: amount representing interest (221,269)
----------
Present value of net minimum lease payments $ 1,288,082
=========
F-9
<PAGE>
In connection with its facilities lease agreements, the Company has issued
letters of credit to lessors in the amount of $125,000. The letters of credit
are collateralized by Certificates of Deposit totaling $87,500. Accordingly,
this restricted cash amount has been classified as a non-current asset.
G. STOCKHOLDERS' EQUITY:
---------------------
Preferred Stock: The Certificate of Incorporation of the Company authorizes the
issuance of 5,000,000 shares of Preferred Stock. The Board of Directors has the
authority to issue preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions, including the dividend, conversion,
voting, redemption (including sinking fund provisions), and other rights,
liquidation preferences, and the number of shares constituting any series and
the designations of such series, without any further vote or action by the
stockholders of the Company. In 1993 the Company issued shares of Series B and
Series C Preferred Stock in connection with an agreement with American Home
Products Corp. (see Note J).
Common Stock and Warrants: In March 1990, the Company completed its initial
public offering of securities. The offering consisted of 1,782,500 units at
$6.00 per unit, each unit consisting of three shares of Common Stock, $.001 par
value, and three Class A warrants. Each Class A warrant entitled the holder to
purchase one share of Common Stock and one Class B warrant at an exercise price
of $2.20. As of February 1992, all such Class A warrants had been exercised.
Each Class B warrant entitles the holder to purchase one share of Common Stock
at $4.75 per share, from the date of issuance through March 15, 1996.
The Class B warrants are subject to redemption by the Company at $.05 per
warrant on 30 days prior written notice if the average of the closing bid price
of the Company's Common Stock exceeds $5.50 per share for 20 consecutive
business days ending within 15 days of notice of redemption. During fiscal 1995,
257,107 Class B warrants were exercised and proceeds of approximately $1,221,000
were realized by the Company. At September 30, 1995, 2,402,616 Class B warrants
were outstanding.
In connection with the initial public offering, the Company also provided the
underwriter with Unit Purchase Options to purchase up to 155,000 units for $8.40
per unit. These units were identical to the units sold in the Company's initial
public offering except that the Class A and Class B warrants are not redeemable.
In fiscal 1995, all 155,000 Unit Purchase Options and underlying Class A
warrants were exercised resulting in proceeds of $2,325,000 and issuance of
930,000 shares of the Company's Common Stock and 465,000 Class B warrants.
In fiscal 1993, the Company completed an additional public offering of 2,300,000
shares of its Common Stock. Net proceeds to the Company were approximately
$13,429,000.
In fiscal 1994, the Company completed a private placement of 1,707,000 shares of
its Common Stock resulting in net proceeds of approximately $13,754,000.
In fiscal 1995, the Company completed private placements of 3,009,045 shares of
its Common Stock, at prices ranging from $3.75 to $13.08 per share, which
resulted in net proceeds of approximately $24,701,000. Additionally as part of
the private placements, the Company issued warrants to purchase 500,000 and
62,500 shares of its Common Stock at $10.00 and $12.77 per
F-10
<PAGE>
share, respectively, which are exercisable through June 1, 2002 and August 16,
2000, respectively. In connection with these private placements, 91,000
additional warrants to purchase shares of the Company's Common Stock were issued
to certain financial intermediaries at prices ranging from $5.25 to $13.08 per
share which expire at various dates from July 5, 2000 to February 3, 2005.
Pursuant to a private placement agreement, an additional 48,786 shares of the
Company's Common Stock were issued subsequent to September 30, 1995.
During fiscal 1995, the Subsidiaries issued convertible preferred stock through
private placements which resulted in net proceeds of approximately $7,233,000
(the "Subsidiaries' Private Placements"). In connection with certain of the
Subsidiaries' Private Placements the Company issued 218,125 warrants to purchase
shares of the Company's Common Stock exercisable at $4.625 per share until June
30, 1998 (the "Warrants"). Additionally, investors in the private placements
have the ability on June 30, 1998 to cause the Company to purchase from them
certain amounts of the convertible preferred stock deemed to be illiquid but in
no circumstance for an amount greater than that initially paid by the investor
(the "Put Protection Rights"). Interneuron received approximately $1,163,000
from the proceeds of the offerings as consideration for its issuance of the
Warrants and the Put Protection Rights, recorded as an equity issuance by
Interneuron. The Company may pay cash or issue its Common Stock to settle any
obligations arising from the Put Protection Rights and intends to choose
settlement through issuance of its Common Stock. The Company could be required
to issue up to a maximum aggregate of approximately 4,095,000 shares of Common
Stock under certain circumstances if the Put Protection Rights were exercised in
full and Interneuron's Common Stock is valued at $2.00 per share or less.
Investors also received registration rights relating to the shares underlying
the Warrants and Put Protection Rights. In connection with these private
placements, the Company issued to designees of the Placement Agent (also, see
Note I), which is an affiliate of the Company, warrants to purchase
approximately 21,813 shares of Interneuron Common Stock at $4.625 per share,
exercisable through June 30, 1998.
In connection with the Company's fiscal 1995 financings and the Subsidiaries'
Private Placements, the Company is obligated to register for sale with the
Securities and Exchange Commission (the "SEC") a total of approximately
5,700,000 shares of its Common Stock which includes outstanding Common Stock and
Common Stock issuable upon exercise of warrants, but does not include the shares
issuable from the Put Protection Rights which are not calculable and do not have
registration rights until 1998.
The amount of Minority Interest reflected in the Consolidated Balance Sheet at
September 30, 1995 reflects the net proceeds of the Subsidiaries' Private
Placements less the $1,163,000 paid to the Company for its issuance of the
Warrants and Put Protection Rights, and less the minority interest shareholders'
proportionate share of the Subsidiaries' net loss for the periods subsequent to
such issuances. Of the $1,163,000 the Company received for its issuance of the
Warrants and Put Protection Rights, the Company loaned approximately $833,000 to
certain Subsidiaries on a long-term basis pursuant to convertible debentures.
In connection with the Subsidiaries' Private Placements, Interneuron converted
the amounts owed to Interneuron by these Subsidiaries as a result of
Interneuron's funding of the Subsidiaries' operations into convertible preferred
stock of these Subsidiaries. As a result of the private placements and the debt
conversion, the Company's percentage of ownership in Progenitor, Transcell and
Intercardia changed from 77%, 80% and 100%, respectively, at September 30, 1994,
to 78%, 79% and 88%, respectively, at September 30, 1995.
F-11
<PAGE>
Stock Option Plans: Under the Company's 1989 Stock Option Plan (the "1989
Plan"), incentive or non-qualified options to purchase 3,000,000 shares of the
Company's Common Stock may be granted to employees. The exercise price of
incentive options granted under the 1989 Plan must not be less than the fair
market value of the Common Stock as determined on the date of grant.
Under the Company's 1994 Long-Term Incentive Plan (the "1994 Plan"), employees,
directors and consultants to the Company may be granted incentive or
non-qualified options to purchase up to 2,700,000 shares of the Common Stock of
the Company and restricted stock awards of up to 300,000 shares of the Common
Stock of the Company. The exercise price of incentive options must not be less
than the fair market value of the Common Stock as determined on the date of the
grant. Restricted stock awards may be made without payment of consideration by
the recipient and may be subject to performance criteria and restriction
periods.
[Remainder of page intentionally left blank.]
F-12
<PAGE>
Stock option activity under the 1989 and 1994 Plans (the "Plans") was as
follows:
<TABLE>
INCENTIVE NON-QUALIFIED
STOCK OPTIONS STOCK OPTIONS
-------------------------- --------------------------
<S> <C> <C> <C> <C>
OPTION OPTION
SHARES PRICE SHARES PRICE
Outstanding at
September 30, 1992 889,530 $ .34-$10.00 341,177 $2.25-$12.63
Granted 186,068 $7.12-$ 9.63 830,023 $7.25-$ 8.75
Exercised (284,635) $ .34-$ 7.12 (18,322) $4.38-$ 7.00
Canceled (76,400) $4.38-$ 8.63 (75,000) $6.00
---------- --------
Outstanding at
September 30, 1993 714,563 $ .83-$10.00 1,077,878 $2.25-$12.63
Granted 275,533 $5.12-$10.00 590,967 $6.38-$ 9.88
Exercised (83,832) $0.00-$ 4.38 (26,668) $2.25-$ 6.25
Canceled (13,600) $4.38-$ 9.63 -
--------- -------
Outstanding at
September 30, 1994 892,664 $ .83-$10.00 1,642,177 $2.25-$12.63
Granted 65,596 $ 4.88-$9.88 1,159,604 $5.00-$9.88
Exercised (57,500) $.83 -$ 7.12 (3,700) $6.63
Canceled (2,400) $5.12-$ 7.12 -
--------- --------
Outstanding at
September 30, 1995 898,360 $ .83-$10.00 2,798,081 $2.25-$12.63
======== =========
At September 30, 1995, outstanding incentive and non-qualified stock options
were exercisable as follows:
Exercise Price Per Share: UNDER $5.00 $5.00 TO $10.00 OVER $10.00 TOTAL
----------- --------------- ----------- ------
Shares of:
Incentive stock options 188,845 702,915 6,600 898,360
Non-qualified stock options 35,555 2,692,526 70,000 2,798,081
-------- ---------- ------- ---------
Total Shares 224,400 3,395,441 76,600 3,696,441
======= ========= ======= =========
</TABLE>
At September 30, 1995, 521,449 incentive stock options and 925,589 non-qualified
stock options were exercisable and there were no awards of restricted stock.
F-13
<PAGE>
The Company has also granted options, outside of the Plans, to purchase shares
of the Company's Common Stock with option prices of $2.00-$7.00 per share. At
September 30, 1995, 385,000 of these options were outstanding and 347,500 were
exercisable at prices ranging from $2.00-$7.00 per share.
All outstanding options vest at various rates over periods up to six years.
In addition to warrants disclosed in this and other Notes to these Consolidated
Financial Statements, at September 30, 1995 there are outstanding warrants to
purchase the Company's Common Stock as follows:
EXERCISE PRICE
SHARES PER SHARE EXPIRATION DATE
-------- -------------- ---------------
1,000,000 $4.00 August 9, 1996
20,000 $9.00 August 11, 1998
100,000 $14.00 October 27, 1998
25,000 $5.12 July 7, 2004
Employee Stock Purchase Plan: On March 22, 1995, the stockholders approved the
Company's 1995 Employee Stock Purchase Plan covering an aggregate of 100,000
shares of Common Stock which is offered in one-year offerings ("an Offering"),
the first of which began April 1, 1995. Each Offering is divided into two
six-month Purchase Periods (the "Purchase Periods"). Employees may contribute up
to ten percent (10%) of gross wages, with certain limitations, via payroll
deduction, to the plan. Stock will be purchased at the end of each Purchase
Period with employee contributions at the lower of 85% of the last sale price of
the Company's Common Stock on the first day of an Offering or the last day of
the related Purchase Period. As of September 30, 1995, 10,287 shares of Common
Stock had been purchased pursuant to this plan.
In addition to the 33,284,000 shares of Common Stock outstanding at September
30, 1995, there were approximately 20,500,000 potentially issuable shares of
Common Stock ("Reserved Common Shares"). Included in the number of Reserved
Common Shares are the following: (i) 5,000,000 shares of Common Stock reserved
for issuance upon conversion of the Company's authorized Preferred Stock, of
which 622,221 shares of Common Stock are currently issuable; (ii) 4,095,000
shares reserved for the maximum number of shares issuable under the Put
Protection Rights, which assumes its exercise for the full amount possible;
(iii) 5,900,000 shares reserved for issuance under the 1989 and 1994 Plans and
the 1995 Employee Stock Purchase Plan (of this amount approximately 4,800,000
has been granted, not all of which was vested); and (iv) 2,402,616 shares
reserved for issuance upon exercise of the Class B Warrants.
H. INCOME TAXES:
-------------
No income tax provision or benefit has been provided for federal income tax
purposes as the Company has incurred losses since inception. As of September 30,
1995, net deferred tax assets totaled approximately $32,000,000 principally due
to net operating loss carry forwards of approximately $79,000,000. The use of
these net operating loss carry forwards may be subject to limitation under the
change in stock ownership rules of the Internal Revenue Code. These net
operating loss carry forwards will expire at various dates through 2010. Due to
the uncertainty surrounding the realization of these favorable tax attributes in
future tax returns, all of the net deferred tax assets have been fully offset by
a valuation allowance.
F-14
<PAGE>
I. RELATED PARTY TRANSACTIONS:
---------------------------
The Company licensed certain patents and technologies from Massachusetts
Institute of Technology ("MIT") relating to research of a principal shareholder
and director and his associates. The Company is obligated to reimburse MIT for
one half of any patent prosecution and maintenance costs to maintain certain of
these licenses.
During fiscal 1995, Paramount Capital, Inc. ("Paramount") served as placement
agent for the Subsidiaries' Private Placements. Lindsay A. Rosenwald, M.D., the
Chairman of the Board and a principal stockholder of Interneuron, is the
Chairman, Chief Executive Officer and sole stockholder of Paramount. Paramount
earned $657,433 in commissions related to the Subsidiaries' Private Placements.
In addition, Interneuron issued to Dr. Rosenwald and other designees of
Paramount warrants to purchase a total of 21,813 shares of Interneuron Common
Stock at $4.625 per share, exercisable through June 30, 1998.
D.H. Blair and Co., Inc. ("Blair") was a selected dealer associated with the
Subsidiaries' Private Placements. Blair is substantially owned by the sole
stockholder of the parent of D.H. Blair Investment Banking Corp., a principal
stockholder of Interneuron. Blair earned $112,586 in commissions related to the
Subsidiaries' Private Placements. Designees of Paramount (including Dr.
Rosenwald) and Blair also received warrants to purchase an aggregate of 10% of
the preferred stock of the Subsidiaries sold in the Subsidiaries' Private
Placements.
Under an agreement with the underwriter of the Company's initial public
offering, the Company was required to pay, under certain circumstances, a fee
equal to 4% of the gross proceeds of warrants exercised subsequent to March 7,
1991. In fiscal 1993, the underwriter agreed to waive the fee on all future
exercises of warrants. Certain of the Company's stockholders are also officers
of, or related to, the underwriter.
Under consulting agreements with two directors and a party related to a director
to provide scientific advice and administrative services, the Company is
obligated to make monthly payments, generally for a one year period subject to
annual renewals. Payments were $149,000, $163,000 and $174,000 for the years
ended September 30, 1993, 1994 and 1995, respectively. Another director has a
three year consulting agreement with the Company to provide services for a total
of $120,000. Payments under this agreement were $11,000 and $36,000 in fiscal
1994 and 1995, respectively.
Advances were provided to several executives of the Company and its subsidiaries
for moving and relocation costs. As of September 30, 1994 and 1995, these loans
totaled approximately $483,000 and $561,000 respectively. Certain amounts will
be repaid and certain amounts will be forgiven upon achievement of specific
milestones; remaining balances will be repaid by the earlier of four years from
the date of the note or termination of the executive's employment.
The Company made contributions of $93,000, $134,500 and $147,000 in the years
ended September 30, 1993, 1994 and 1995, respectively, to The Center for Brain
Science and Metabolism Charitable Trust of which one of the Company's directors
is the Scientific Director.
F-15
<PAGE>
J. AGREEMENTS:
-----------
Servier: In February 1990, as amended, the Company entered into a series of
agreements with Les Laboratoires Servier ("Licensor") under which the Company
will pursue activities designed to obtain approval by the Food and Drug
Administration ("FDA") to market dexfenfluramine, a prescription drug developed
by the Licensor for the treatment of obesity. Under the terms of the agreements,
the Company obtained marketing rights to the product in exchange for future
royalty payments based upon net product sales, as defined. These agreements
required royalties of $100,000 paid in February 1991, and $300,000 in each
subsequent February in which the agreements are in effect. Additionally, under
the terms of these agreements, the Company will be required to purchase the bulk
compound from an affiliate of the Licensor and will be required to pay minimum
royalties of approximately $2,000,000 over a five-year period commencing after
the first commercial sale. The Company is obliged to commercially market
dexfenfluramine within six months of receipt of an FDA approval letter. Servier
may terminate its license agreement with Interneuron if the Company does not
market dexfenfluramine within one year of the end of the above described
six-month period.
American Home Products: In November 1992, the Company entered into an agreement
with American Cyanamid (which subsequently was acquired by American Home
Products Corp.) ("American Home") for the development and marketing in the
United States of dexfenfluramine for use in treating obesity associated with
carbohydrate craving. On this date, the Company received $2,000,000 for a patent
license and sold to American Home 239,425 shares of its convertible Series B
Preferred Stock for $3,000,000. Holders of the Series B Preferred Stock are
entitled to vote on all matters submitted to a vote of stockholders generally,
other than the election of directors, holding the number of votes equal to the
number of shares of Common Stock into which such shares of Series B Preferred
Stock are convertible. Holders of Series B Preferred Stock are entitled to
receive mandatory dividends of $.1253 per share payable at the election of the
Company in cash or Common Stock. Such dividends are payable annually on April 1
of each year, accrue on a daily basis and are cumulative; as of September 30,
1995, $86,431 of mandatory dividends have been accrued. Holders of Series B
Preferred Stock are also entitled to a liquidation preference of $12.53 per
share, plus accumulated and unpaid dividends. Holders of Series B Preferred
Stock are entitled to convert such shares into an aggregate of 533,333 shares of
Common Stock (a conversion price of $5.625 per share) subject to adjustment in
the event of future dilution. The agreement provides for additional cash
payments for the patent license and additional purchases of Convertible
Preferred Stock based upon the Company's achievement of certain milestones.
The agreement also provides for American Home to reimburse the Company for 50%
of certain research and development expenses. Accordingly, the Company
recognized $1,326,975 and $368,548 of contract revenue pursuant to this
agreement in fiscal 1993 and fiscal 1995.
In June 1993, the Company received milestone payments from American Home in
connection with the submission of a New Drug Application ("NDA") for
dexfenfluramine, consisting of $2,500,000 in cash and $500,000 through the
purchase of 5,000 shares of convertible Series C Preferred Stock. Holders of the
Series C Preferred Stock are entitled to vote on all matters submitted to a vote
of stockholders generally, other than the elections of directors, holding the
number of votes equal to the number of Common Shares into which such shares of
Series C Preferred are convertible. Holders of Series C Preferred Stock are
entitled to receive mandatory dividends of $1.00 per share payable annually on
April first of each year, which accrue on a daily basis and are cumulative; as
of September 30, 1995, $11,575 of mandatory dividends have been accrued. Holders
of Series C Preferred Stock are also entitled to a
F-16
<PAGE>
liquidation preference of $100 per share, plus accumulated and unpaid dividends.
Holders of Series C Preferred Stock are entitled to convert such shares into an
aggregate of 88,888 shares of Common Stock of the Company (a conversion price of
$5.625 per share) subject to anti-dilution adjustment.
On September 29, 1995 dexfenfluramine was recommended for removal from Schedule
IV of the Controlled Substances Act by a joint committee of the Endocrinologic
and Metabolic Advisory Committee and Drug Abuse Advisory Committee of the FDA.
If the descheduling is effected within one year of NDA approval, Interneuron
would receive $6,500,000 as a milestone payment and $3,500,000 as an equity
investment from American Home.
American Home has the right to terminate its sublicense at any time prior to its
first commercial sale of dexfenfluramine or, upon twelve months notice to
Interneuron, after such first commercial sale. The American Home agreements
provide that Servier has the right to withdraw its consent to the sublicense in
the event that any entity acquires stock in American Home sufficient to elect a
majority of American Home's Board of Directors or otherwise obtains control of
American Home, provided that no such termination shall occur if American Home or
its successor achieves minimum net sales of $75 million in the first marketing
year or $100 million thereafter or pays Servier amounts to which it would have
been entitled if American Home had achieved such minimum net sales. Servier
consented to the American Home acquisition of American Cyanamid Company.
Elan: In September 1993, the Company entered into an agreement with Elan
Corporation, plc ("Elan") which granted to Elan exclusive worldwide rights to
the Company's nutritional products for use by patients with Parkinson's Disease.
Pursuant to this agreement, the Company received from Elan a total of $5,400,000
which is considered a non-refundable advance royalty. The agreement provides for
additional royalties to be paid to the Company in connection with future sales
of the product.
Rhone-Poulenc Rorer: In February 1994, the Company entered into a license
agreement with Rhone-Poulenc Rorer S.A., a French corporation, granting the
Company worldwide exclusive rights to an anti-anxiety compound designated
IP-456, and subsequently named pagoclone, for commercial manufacturing and sale.
The Company paid an upfront license fee of $250,000 upon execution of the
agreement. Additional payments totaling $1,250,000 relating to the initiation of
clinical trials and submission of an NDA will be due based upon achievement of
milestones. Payments made by the Company upon approval of an NDA will range from
$3,000,000 to $5,000,000, depending on the number of countries in which approval
is achieved. Additional royalties will be paid based on sales.
Ferrer: The Company has licensed from Ferrer International, S.A. exclusive
rights to citicoline for commercialization in the United States, Puerto Rico and
Canada. A license fee and future royalties for net sales of citicoline were
consideration provided to Ferrer.
Bristol-Myers Squibb: Through Intercardia, Inc.'s fiscal 1994 acquisition of
CPEC (See Note K), the Company assumed CPEC's exclusive license to bucindolol,
for use in the treatment of congestive heart failure, which CPEC acquired from
Bristol-Myers Squibb Company ("BMS"). This license permits Intercardia to make,
use and sell bucindolol worldwide. Royalties will be due to BMS based upon net
sales of the product.
Chiron: In April 1995, the Company's subsidiary, Progenitor, Inc., entered into
an agreement with Chiron Corporation to collaborate in the development and
commercialization of Progenitor's proprietary gene therapy technology.
Progenitor received an initial payment of $2,500,000 and is committed to pay up
to $750,000 of certain start-up manufacturing costs at Chiron during calender
year 1995. These
F-17
<PAGE>
amounts have been recognized as contract revenue and research and development
expense, respectively, in the year ended September 30,1995. Progenitor will
receive an additional $500,000 payment in January 1996, which will be recognized
as contract revenue when received.
K. ACQUISITION:
------------
In May 1994 the Company's subsidiary, Intercardia, Inc., entered into an
agreement to acquire eighty percent of the outstanding common stock of CPEC,
Inc. (formerly Cardiovascular Pharmacology Engineering and Consultants, Inc.),
("CPEC"), subject to conditions which were met on September 26, 1994, the
effective date of the acquisition. CPEC has an exclusive worldwide license in
North America and Europe to bucindolol, a non-selective beta-blocker currently
under development for congestive heart failure. Bucindolol began a Phase III
clinical trial, the Beta-blocker Evaluation of Survival Trial (the "BEST
Study"), for treatment of congestive heart failure in cooperation with the
National Institutes of Health (the "NIH") and The Department of Veteran Affairs
(the "VA") in April 1995. The NIH and VA have agreed to provide up to
$15,750,000 throughout the study and CPEC is obligated to provide up to an
additional $2,000,000, of which $750,000 has been paid through September 30,
1995, and fund other costs of the study including drug supply and clinical
monitoring.
The purchase price of CPEC was approximately $1,852,000 comprised of 170,000
shares of Common Stock of Interneuron, payments to stockholders of CPEC, assumed
liabilities, and other related expenses. Additionally, future issuances of the
Interneuron's Common Stock are required upon achieving the milestones of filing
an NDA and receiving an approval letter from the FDA. The value of these
additional shares is not included in the purchase price because their issuance
is contingent upon achieving these milestones. Substantially all of the purchase
price has been allocated to the bucindolol technology rights. However, because
bucindolol is not a currently commercializable product and future benefits are
dependent upon successful completion of clinical trials and FDA approval, the
Company recorded a charge to operations for the costs associated with this
transaction. Future issuances of Common Stock will result in additional charges.
Intercardia and CPEC also entered into a consulting agreement with a corporation
owned by the minority stockholders of CPEC providing for consulting fees
aggregating $300,000 over a three year period beginning October 1994.
Consolidated results of operations for the years ended September 30, 1993 and
1994 would not be materially different from those presented herein if CPEC were
included.
L. SUBSEQUENT EVENTS (UNAUDITED):
------------------------------
In November 1995, Interneuron entered into an exclusive manufacturing agreement
with Boehringer Ingleheim Pharmaceuticals, Inc. ("Boehringer") under which
Boehringer agreed to supply, and Interneuron agreed to purchase from Boehringer,
all of Interneuron's requirements for dexfenfluramine capsules. The contract,
which expires December 31, 1998, contains certain minimum purchase and insurance
commitments by Interneuron and requires conformance by Boehringer to the FDA's
Good Manufacturing Practices regulations. The agreement provides for Interneuron
to be able to qualify a second source manufacturer under certain conditions.
In December 1995, Intercardia executed a Development and Marketing Collaboration
and License Agreement with Astra Merck, Inc. ("the Astra Merck Collaboration")
to provide for the development and commercialization and marketing in the United
States of twice-daily formulation of bucindolol for
F-18
<PAGE>
the treatment of congestive heart failure. Intercardia received $5,000,000 upon
execution of the Astra Merck Collaboration and will receive additional payments
based upon achievement of certain milestones and royalties based on net sales in
the United States. Intercardia is required to make certain payments to Astra
Merck commencing December 1997 and aggregating up to $21 million; if such
payments are not made Intercardia's royalty will be substantially reduced.
In December 1995, Intercardia filed a registration statement with the Securities
and Exchange Commission ("SEC") relating to a proposed initial public offering
of 2,200,000 shares of Intercardia common stock at a price anticipated to be
between $12.00 and $14.00 per share. An issuance of 2,200,000 shares of
Intercardia common stock would cause the Company's ownership of Intercardia to
decrease from 88% to approximately 58%. Interneuron has expressed its interest
in acquiring $5,000,000 of the offering at the initial public offering price. If
such shares are purchased on the terms proposed, Interneuron's percentage
ownership of Intercardia after the offering would be approximately 64%, before
the exercise of any options or warrants.
In December 1995, the Company agreed to acquire from Walden Laboratories, Inc.,
the technology and know-how to produce a specially formulated dietary supplement
for women's use during their premenstrual period in exchange for $2,400,000,
payable in two tranches of Interneuron Common Stock, the first in late 1996 and
the second in late 1997, at the then-prevailing market price.
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNEURON PHARMACEUTICALS, INC.
Date: December 26, 1995 By: /S/ GLENN L. COOPER
--------------------
Glenn L. Cooper, M.D.,
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons in the capacity
and as of the date indicated.
NAME TITLE DATE
/S/ GLENN L. COOPER President and Chief Executive December 27, 1995
- - ----------------------- Officer and Director (Principal
Glenn L. Cooper, M.D. Executive Officer)
/S/ LINDSAY ROSENWALD Chairman of the December 27, 1995
- - ----------------------- Board of Directors
Lindsay Rosenwald, M.D.
- - ----------------------- Director December , 1995
Harry Gray
/S/ ALEXANDER M. HAIG Director December 27, 1995
- - -----------------------
Alexander M. Haig, Jr.
- - ----------------------- Director December , 1995
Peter Barton Hutt
/S/ MALCOLM MORVILLE Director December 27, 1995
- - -----------------------
Malcolm Morville
/S/ ROBERT K. MUELLER Director December 27, 1995
- - -----------------------
Robert K. Mueller
/S/ LEE J. SCHROEDER Director December 27, 1995
- - -----------------------
Lee J. Schroeder
/S/ DAVID S. SHARROCK Director December 27, 1995
- - -----------------------
David S. Sharrock
/S/ RICHARD WURTMAN Director December 27, 1995
- - -----------------------
Richard Wurtman, M.D.
/S/ THOMAS F. FARB Executive Vice President, December 27, 1995
- - ----------------------- Finance and Chief Financial
Thomas F. Farb Officer (Principal Financial
and Accounting Officer)
F-20
Exhibit Index
3.4 - Restated Certificate of Incorporation of Registrant (17)
3.5 - By-Laws of Registrant (1)
4.2 - Form of Warrant Agreement (1)
4.4 - Certificate of Designation establishing Series C Preferred Stock
(17)
4.5 - Warrant issued to Elan Corporation, plc (19)
4.6 - Form of Registrant Warrant issued in subsidiary private placement
(25)
4.7 - Form of Registrant Warrant to be issued to Paramount Capital,
Inc., D.H. Blair & Co., Inc. or designees (25)
10.5 (a) - Consultant and Non-competition Agreement between the Registrant,
Richard Wurtman, M.D.
10.5 (b) - Consultant and Non-competition Agreement between InterNutria,
Inc. and Judith Wurtman, Ph.D.
10.6 - Assignment of Invention and Agreement between Richard Wurtman,
M.D., Judith Wurtman and the Registrant (1)
10.7 - Management Agreement between the Registrant and Lindsay
Rosenwald, M.D. (1)
10.9(a) - Restated and Amended 1989 Stock Option Plan (7)
10.10 - Form of Indemnification Agreement (1)
10.11 - Restated Amendment to MIT Option Agreement (1)
10.12(a) - Patent and Know-How License Agreement between the Registrant and
Les Laboratoires Servier ("Servier") dated February 7, 1990
("License Agreement") (1)
10.12(b) - Revised Appendix A to License Agreement (1)
10.12(c) - Amendment Agreement between Registrant and Servier, Orsem and
Oril, Produits Chimiques dated November 19,1992(3)(12)
10.12(d) - Amendment Agreement dated April 28, 1993 between Registrant and
Servier (16)
10.12 (e)- Consent and Amendment Agreement among Servier, American Home
Products Corp. and Registrant.
10.13 - Trademark License Agreement between the Registrant and Orsem
dated February 7, 1990 (1)
10.14 - Supply Agreement between the Registrant and Oril Products
Chimiques dated February 7, 1990 (1)(3)
10.15(a) - Form of Indemnification Agreement between the Registrant and
Alexander M. Haig, Jr. (1)
10.16 - Assignment of Invention by Richard Wurtman, M.D. (1)
10.18 - Option Agreement between the Registrant and Alexander M. Haig,
Jr. (1)
10.19 - Option Agreement between the Registrant and Fountainhead Holdings
(Bermuda) Ltd. (1)
10.22(a) - License Agreement dated January 15, 1993, as amended, between the
Registrant and Grupo Ferrer (3)(16)
-1-
<PAGE>
10.25 - License Agreement between the Registrant and the Massachusetts
Institute of Technology (4)
10.27 - License Agreement dated July 1, 1991 between Whitby Research,
Inc. and the Registrant (6)
10.28 - Letter Agreement between the Registrant and Bobby W. Sandage,
Jr., Ph.D. (7)
10.29 - Amended Lease dated December 12, 1991 for Registrant's offices
in Lexington, Massachusetts (7)
10.29(a) - First Amendment to Lease dated as of October 14, 1994 between
Registrant and Ledgemont Realty Trust (25)
10.30 - License Agreement dated January 1, 1992 between the Trustees of
Princeton University and the Registrant (3)(8)
10.31 - Research Agreement dated as of July 1, 1991 between the
Registrant and the Trustees of Princeton University (3)(8)
10.32 - Consulting Agreement dated as of July 1, 1991 between the
Registrant and Daniel Kahne, Ph.D. (3)(8)
10.33 - License Agreement dated January 28, 1992 between Ohio University,
The Castle Group, Inc. and Scimark Corporation (assigned to
Progenitor, Inc.) (3)(8)
10.34 - Sponsored Research Agreement between Scimark Corporation
(assigned to Progenitor, Inc.) and Ohio University (3)(8)
10.34(a) - Letter Amendment between Progenitor, Inc. and Ohio University
(18)
10.35 - Technology License Contract dated December 18, 1991 between the
Registrant and the Mayo Foundation for Medical Education and
Research (3)(8)
10.36 - Exclusive License Agreement dated February 24, 1992 between the
Registrant and Purdue Research Foundation (9)
10.37 - License Agreement dated as of February 15, 1992 between the
Registrant and Massachusetts Institute of Technology (9)
10.38 - Employment Agreement between Progenitor, Inc. and Glenn Cooper,
M.D. dated September 3, 1992 (13)
10.39 - Employment Agreement between Transcell Technologies, Inc. and
Elizabeth Tallet dated November 11, 1992 and Guarantee by
Registrant (13)
10.40 - Patent and Know-How Sublicense and Supply Agreement between
Registrant and American Cyanamid Company dated November 19, 1992
(3)(12)
10.41 - Equity Investment Agreement between Registrant and American
Cyanamid Company dated November 19, 1992 (12)
10.42 - Trademark License Agreement between Registrant and American
Cyanamid Company dated November 19, 1992 (12)
10.43 - Consent Agreement between Registrant and Servier dated November
19,1992 (12)
10.44 - Patent and Know-How License Agreement between Registrant and
Veryfine Products, Inc. dated October 29, 1992 (3) (14)
-2-
<PAGE>
10.44(a) - Termination Letter to Registrant from Veryfine Products, Inc.,
dated October 30, 1995
10.45 - Agreement between Registrant and Parexel International
Corporation dated October 22, 1992 (as of July 21, 1992) (3) (14)
10.46 - License Agreement dated February 9, 1993 between the Registrant
and Massachusetts Institute of Technology (3)(15)
10.47 - Sublease between Enichem America and Transcell Technologies, Inc.
including guarantee by the Registrant (15)
10.48 - Employment Agreement dated May 21, 1993 between the Registrant
and Glenn L. Cooper, M.D., as amended (17)
10.49 - License Agreement between Registrant and Elan Corporation, plc
dated September 9, 1993 (3)(18)
10.50 - License Agreement between Transcell Technologies, Inc. and
Princeton University dated October 14, 1993 (3)(18)
10.51 - Letter Agreement between the Registrant and Mark S. Butler (18)
10.52 - License Agreement dated February 18, 1994 between Registrant and
Rhone-Poulenc Rorer, S.A. (20)
10.54 - Form of Purchase Agreement dated as of February 24, 1994 (20)
10.54(a) - Form of Amendment to Purchase Agreement (20)
10.55 - Patent License Agreement between Registrant and Massachusetts
Institute of Technology dated March 1, 1994 (20)
10.56 - License Agreement between Progenitor, Inc. and Albert Einstein
College of Medicine of Yeshiva University dated as of February
1, 1994 (20)
10.57 - Employment Letter dated February 28, 1994 between the Registrant
and Thomas F. Farb (21)
10.58 - Master Equipment Lease including Schedules and Exhibits between
Phoenix Leasing and Registrant (agreements for Transcell and
Progenitor are substantially identical), with form of continuing
guarantee for each of Transcell and Progenitor (22)
10.59 - Exhibit D to Agreement between Registrant and Parexel
International Corporation dated as of March 15, 1994. (3)(22)
10.60(a) - Acquisition Agreement dated as of May 13, 1994 among the
Registrant, Intercardia, Inc., Cardiovascular Pharmacology
Engineering Consultants, Inc. (CPEC), Myocor, Inc. and the
sellers named therein (23)
10.60(b) - Amendment dated June 15, 1994 to the Acquisition Agreement (23)
10.60(c) - Form of Consulting Agreement between Intercardia, Inc., CPEC and
Myocor, Inc.(23)
10.61 - License Agreement dated December 6, 1991 between Bristol-Myers
Squibb and CPEC, as amended (3)(23)
10.61(a) - Letter Agreement dated November 18, 1994 between CPEC and Bristol
- Myers Squibb (25)
10.62 - Lease Agreement between Thomas R. Eggers and Progenitor, Inc.
dated as of November 1994 with Registrant guaranty (25)
10.63 - Form of Stock Purchase Agreement dated December 15, 1994 (25)
-3-
<PAGE>
10.64 - Form of Investor Rights Agreement among Progenitor, Transcell,
Registrant and each investor in the subsidiary private placement
(25)
10.64(a) - Form of Investor Rights Agreement among Intercardia, the
Registrant and each investor in the Intercardia private placement
(25)
10.65 - 1994 Long-Term Incentive Plan (25)
10.66 - Guarantee by Lindsay A. Rosenwald, M.D. to Registrant (25)
10.67 - Employment Agreement between Intercardia and Clayton I. Duncan
with Registrant guarantee (25)
10.67(a) - Amendment to Employment Agreement between Intercardia, Inc. and
Clayton I. Duncan (27)
10.68 - Interneuron Pharmaceuticals, Inc. 1995 Employee Stock Purchase
Plan, as amended (27)
10.69 - Office Lease, dated April 24, 1995 between Intercardia, Inc. and
Highwoods/Forsyth Limited Partnership, with Registrant Guaranty
(27)
10.70 - Letter Agreement, dated March 31, 1995 between Progenitor, Inc.
and Chiron Corporation (3) (28)
10.70 (a) - License and Collaboration Agreement by and between Progenitor,
Inc., and Chrion Corporation dated March 31, 1995 (3) (30)
10.71 - Securities Purchase Agreement dated June 2, 1995 between the
Registrant and Reliance Insurance Company, including Warrant
and exhibits (29)
10.72 - Sponsored Research and License Agreement dated as of May 1, 1995
between Progenitor and Novo Nordisk (3) (30)
10.73 - Form of Stock Purchase Agreement dated as of June 28, 1995 (31)
10.74 - Securities Purchase Agreement dated as of August 16, 1995 between
the Registrant and BT Holdings (New York), Inc., including
Warrant issued to Momint (nominee of BT Holdings) (32)
10.75 - Stock Purchase Agreement dated as August 23, 1995 between the
Registrant and Paresco, Inc. (32)
10.76 - Stock Purchase Agreement dated as of September 15, 1995 between
the Registrant and Silverton International Fund Limited (32)
10.77 - Subscription Agreement dated September 21, 1995, as of August
31, 1995, including Registration Rights Agreement between
Registrant and GFL Advantage Fund Limited. (32)
10.78 - Contract Manufacturing Agreement dated November 20,1995 between
Registrant and Boehringer Ingelheim Pharmaceuticals, Inc. (3)
10.79 - Development and Marketing Collaboration and License Agreement
between Astra Merck, Inc., Intercardia, Inc. and CPEC, Inc.,
dated December 4, 1995. (33)
10.80 - Intercompany Services Agreement between Registrant and
Intercardia, Inc. (33)
10.81 - Asset Purchase Agreement dated November 14, 1995 among
Registrant, InterNutria, Inc., and Walden Laboratories, Inc.
19 - Letter to Stockholders dated May 18, 1994 (24).
20 - News Release dated August 10, 1994 including Rule 135(c) notice
(21)
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<PAGE>
21 - Subsidiaries of the Registrant
23 - Consent of Coopers & Lybrand L.L.P.
27 - Financial Data Schedule
__________________
(1) Incorporated by reference to the Registrant's registration statement on
Form S-1 (File No. 33-32408) declared effective on March 8, 1990.
(3) Confidential Treatment requested for a portion of this Exhibit.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended September 30, 1990.
(6) Incorporated by reference to the Registrant's Quarterly report on Form
10-Q for the nine months ended June 30, 1991.
(7) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's registration statement on Form S-1 (File No. 33-32408) filed
December 18, 1991.
(8) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1991.
(9) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended March 31, 1992.
(10) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's registration statement on Form S-1 (File No. 33-32408) filed
July 12, 1992.
(11) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended June 30, 1992.
(12) Incorporated by reference to the Registrant's Form 8-K dated November
30, 1992.
(13) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form S-1 (File No. 33-32408) filed
on December 21, 1992.
(14) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1992.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1992
(16) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the six months ended March 31, 1993
(17) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the nine months ended June 30, 1993
(18) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1993
(19) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the three months ended December 31, 1993.
(20) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 or Amendment No. 1 (File no. 33-75826)
(21) Incorporated by reference to the Registrant's Form 8-K dated March 31,
1994
(22) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the six months ended March 31, 1994
(23) Incorporated by reference to the Registrant's Form 8-K dated June 20,
1994
(24) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the nine months ended June 30, 1994
-5-
<PAGE>
(25) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994
(26) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the three months ended December 31, 1994
(27) Incorporated by reference to the Registrant's Quarterly Report on From
10-Q for the six months ended March 31, 1995
(28) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q/A for the six months ended March 31, 1995
(29) Incorporated by reference to the Registrant's Quarterly Report on Form
8-K dated June 2, 1995 (30) Incorporated by reference to the
Registrant's Quarterly Report on Form 8-K dated May 16, 1995; Exhibit
10.70 (a) supersedes Exhibit 10.70.
(31) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the nine months ended June 30, 1995.
(32) Incorporated by referring to Registrant's Report on Form 8-K dated August
16, 1995.
(33) Incorporated by reference to Registration Statement filed on Form S-1
(No. 33-80219) by Intercardia, Inc. on December 8, 1995.
-6-
<PAGE>
Ex.10.5 (a)
CONSULTANT AND NON-COMPETITION AGREEMENT
AGREEMENT dated as of October 26th, 1995, between Interneuron
Pharmaceuticals Inc., a Delaware corporation having a principal place of
business at One Ledgemont Center, 99 Hayden Avenue, Suite 340, Lexington,
Massachusetts 02173 (hereinafter referred to as the "Company") and Richard
Wurtman, M.D. (hereinafter referred to as the "Consultant") having an office at
the Massachusetts Institute of Technology ("MIT"), Cambridge, Massachusetts, and
residing at 300 Boylston Street, Boston, Massachusetts 02116.
W I T N E S S E T H:
WHEREAS, the Company and Consultant are party to a Consultant and Non-
Competition Agreement made on November 30, 1989 (the "1989 Agreement") and
desire to amend, modify and restate the 1989 Agreement upon the terms and
conditions hereinafter set forth and each of the Company and the Consultant are
willing to accept such terms and conditions;
WHEREAS, the Company desires to continue to retain the Consultant to
assist the Company in, among other things, developing and commercializing
certain compounds and products, including patent rights obtained thereon,
relating to the Business of the Company (as defined herein), and to serve as a
member of the Company's Scientific Advisory Board;
WHEREAS, the Company desires to have the right to license from the
Consultant any Inventions, Products, know-how and other proprietary rights which
relate to the Business of the Company, which have been developed in whole or in
part by the Consultant and which are not owned by, or required to be assigned by
Consultant, to MIT; and
WHEREAS, the Company desires that the Consultant not compete with the
Company, except as set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, the parties hereto do hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
and their variant forms shall have the meaning set forth below:
1.1 "BUSINESS" shall mean the research, development and
commercialization of pharmaceutical and nutritional products ("Products") for
neurological and behavioral disorders or diseases.
1.2 "INVENTION" shall mean any discovery, as well as any
improvements thereto, which is new or which the Consultant has a reasonable
basis to believe may be new and which the Company reasonably believes may be
patentable.
-1-
<PAGE>
1.3 "PROPRIETARY INFORMATION" shall mean:
(a) Information related to the Business of the Company,
(i) which derives economic value, actual or
potential, from not being generally known to or
readily ascertainable by other persons who can obtain
economic value from its disclosure or use; and
(ii) which is the subject of efforts that are
reasonable under the circumstances to maintain its
secrecy; and
(b) All tangible reproductions or embodiments of such
information including any patents or patent applications
covering such information.
Assuming the criteria in (a)(i) and (a)(ii) above are satisfied, Proprietary
Information includes, but is not limited to, technical and nontechnical data
related to the formulas, patterns, designs, compilations, programs, Inventions,
methods, techniques, drawings, processes, finances, actual or potential
customers and suppliers, existing and future products, and employees of the
Company. Proprietary Information also includes information which has been
disclosed to the Company by a third party and which the Company is obligated to
treat as confidential.
1.4 "SUBJECT INVENTION" shall mean any Invention which is
conceived by the Consultant alone or in a joint effort with others during the
Consultant's engagement by the Company which:
(a) may be reasonably expected to be used in the Company's
research and development efforts relative to the Business of
the Company, or in a product similar to a Company product or
future product of the Company; or
(b) is in an area of technology or research which is the same
as or substantially related to the areas of technology or
research with which the Consultant is involved in the
performance of his duties as a consultant to the Company;
and which is not owned by, or required to be assigned by Consultant to, MIT.
Subject Invention shall also include the Invention disclosed in U.S.
Patent Application No. 08/299, 560, for Composition of Melatonin and Analgesic
Agents and Methods of Use Thereof.
2. RETENTION; TERM
(a) The Company hereby retains the Consultant for a two-year
period commencing November 1, 1995 and the Consultant hereby accepts such
retention.
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<PAGE>
(b) The term of this Agreement shall automatically be extended
for consecutive periods of one year each, unless either party shall give notice
to the other at least 60 days before the expiration of the initial or then
current renewal term. The obligations of Consultant pursuant to Sections 6
through 10 of this Agreement shall survive the termination of the engagement of
Consultant hereunder.
3. DUTIES
Subject at all times to the consultation with the officers and
board of directors of the Company or their designated employees or
representatives, the Consultant shall be referred to as Consultant and
Scientific Founder and shall at the request of the Company, be available for a
minimum of four days per month to render advisory and consultation services to
the Company, in addition to attendance by the Consultant at Scientific Advisory
meetings. Such advisory and consultation services shall be approved in advance
by the Company and shall (i) be carried out at the facilities of the Company or
at such other place as may be mutually convenient and agreed to by the Company
and the Consultant, as appropriate, (ii) relate primarily to the identification,
research and development, clinical testing and commercialization of the Products
("Consulting Field"), (iii) include assisting the Company in obtaining licenses,
assignment or other rights to commercialize the patents or technologies
discovered by Consultant, as appropriate, subject to the provisions of Section 6
hereof and assist the Company in negotiations relating to such commercialization
and (iv) include public relations activities, such as public appearances and
interviews in support of the Company and the Products. The Company agrees to
include Consultant as a nominee for election as a director of the Company, and
to recommend such election, during the term of this Agreement.
4. COMPENSATION
(a) The Company shall pay to the Consultant for all services
as a consultant compensation at the rate of $99,000 per annum until October 31,
1995 and $150,000 per annum commencing November 1, 1995 during the term of this
Agreement; PROVIDED that commencing November 1, 1996 and, if the term of this
Agreement is extended pursuant to Section 2(b) hereof, November 1 of each year
thereafter, Consultant's compensation per annum shall be at least one hundred
and five percent (105%) of the annual compensation paid by the Company to
Consultant for the previous year. .
(b) The Company shall pay to the Consultant a bonus equal to
$50,000 upon receipt by the Company of an approval letter from the United States
Food and Drug Administration approving the Company's New Drug Application
relating to the use of dexfenfluramine to treat obesity.
5. REIMBURSEMENT FOR EXPENSES
During the term of this Agreement, the Consultant shall be
reimbursed for reasonable traveling expenses incurred in connection with his
activities hereunder, upon
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<PAGE>
submission of appropriate vouchers and in accordance with normal Company expense
reimbursement policy.
6. COVENANTS
(a) COVENANT NOT TO COMPETE
During the term of this Agreement and any renewal
term and for a period of one year thereafter, the Consultant covenants and
agrees not to consult with or become employed by, or enter into discussions or
negotiations to consult with to become employed by, any other entity which
competes, or which, through the services of Consultant, could compete, directly
or indirectly, with the Company in the Consulting Field, without the prior
written consent of the Company; provided, however that during the one year
period after this Agreement terminates (i) such consent will not be unreasonably
withheld and (ii) Consultant's covenant not to compete is subject to the Company
compensating Consultant (provided Consultant is in compliance with such
covenant) at the rate of 50% of the compensation paid to Consultant pursuant to
Section 4(a) hereunder in the immediately preceding year.
(b) NON-SOLICITATION
The Consultant expressly covenants and agrees that he
will not, at any time during the term of this Agreement, and for a period of one
(1) year thereafter, directly or indirectly, (a) induce or attempt to influence
any employee of, or consultant under contract with, the Company to leave its
employ; or (b) aid, or agree to aid, any competitor or supplier of the Company
in any attempt to hire any person who shall have been employed by, or who was a
consultant under contract with, the Company, within one year preceding such
requested aid; or (c) induce, or attempt to influence, any person who was a
supplier to the Company to transact business with a competitor of the Company;
provided, nothing contained herein shall otherwise prevent Consultant from
writing letters of recommendation for any such person if Consultant has
otherwise complied with the terms of this Consulting Agreement.
(c) COOPERATION IN LICENSING
Consultant agrees (i) if requested by the Company, to
use his best efforts to assist the Company in obtaining licenses or other rights
to use patents or other proprietary rights held by MIT or other inventors
relating to the Consulting Field and (ii) not to negotiate with any other entity
with respect to licensing to such entity rights in the Consulting Field, unless
the Company has expressed its intention not to seek a license of such rights.
For the purposes of this Section 6, the term
"directly or indirectly", . . . shall include participation as an officer,
director, employee, consultant agent, representative, shareholder, partner,
joint venturer or individual proprietor. The foregoing shall not be construed as
preventing Consultant from investing assets in such form or manner where
Consultant does not perform services for such company in which such investment
may be made. The ownership by the Consultant of stock listed on a national
securities exchange, of any
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<PAGE>
corporation conducting such competing business, provided Consultant and members
of Consultant's family, in the aggregate, do not beneficially own more than two
(2%) percent of the stock of such corporation, shall not be deemed a violation
of this Agreement.
7. INVENTIONS
(a) SUBJECT INVENTIONS CONCEIVED DURING CONSULTING ENGAGEMENT
The Consultant agrees that the Company shall have the
first right to license from Consultant any Subject Invention relating to the
Business of the Company, and any patent rights or other proprietary rights
relating to the Subject Invention, in exchange for compensation to Consultant.
The compensation to Consultant for any such license shall be a license fee of
$25,000 and royalties of between one and two percent of net sales (gross sales
less direct expenses), depending on the nature of the product licensed, unless
the parties mutually agree on other compensation.
(b) NOTIFICATION OF CONCEPTION OF INVENTION
The Consultant agrees that if he conceives an
Invention during his engagement by the Company and there is a reasonable basis
to believe that the Invention is a Subject Invention, he will promptly (and in
any event, prior to any submission for publication of such Invention) provide a
written description of the Invention to the Company adequate to allow evaluation
for a determination as to whether the Invention is a Subject Invention, whether
the Company will elect to license such Subject Invention from Consultant and ,
if so, to allow sufficient time for the preparation and filing of a patent
application relating to such Subject Invention prior to any proposed publication
of the Subject Invention, in accordance with Section 8 hereof.
In the event the Consultant has a reasonable basis to
believe the Subject Invention is patentable and, by the 10th business day after
receipt by the Company of Consultant's written description of the Invention, the
Company has not yet notified Consultant of its intention to retain patent
counsel to prepare a patent application on such Subject Invention, then
Consultant may prepare and file such a patent application using patent counsel
acceptable to the Company. Consultant's retention of patent counsel shall not
affect the Company's rights under Section 7(a), subject to the provisions of
Section 8.
(c) RECORDS
The Consultant shall maintain appropriate records of
all research and development activities adhering to any specific guidelines for
the same which are promulgated by the Company, which shall, if properly
maintained and promptly disclosed to the Company, satisfy the requirement of
providing a written disclosure of any Subject Inventions. Records kept
consistent with MIT procedures shall be deemed to be in compliance with the
record maintenance requirements of this paragraph.
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8. PATENT APPLICATIONS
The Consultant agrees that should the Company elect to file an
application for patent protection either in the United States or in any foreign
country, on a Subject Invention of which the Consultant was an inventor, he will
execute all necessary documentation relating to the patent applications.
The Consultant further agrees that he will cooperate with
attorneys or other persons designated by the Company by explaining the nature of
any Subject Invention for which the Company elects to file an application for
patent protection, reviewing applications and other papers and providing any
other cooperation required for prosecution of the patent applications. The
Company will be responsible for all expenses incurred by it for the preparation
and prosecution of all patent applications on Subject Inventions licensed to the
Company and will reimburse Consultant for out-of-pocket costs incurred by him
for the preparation and prosecution of any patent applications on Subject
Inventions licensed by the Company, upon submission of appropriate vouchers.
9. PROPRIETARY INFORMATION
(a) All Proprietary Information received or developed by the
Consultant while acting in his capacity as a consultant to the Company will
remain the sole and exclusive property of the Company.
(b) The Consultant will hold the Proprietary Information in
trust and strictest confidence, and will not use, reproduce, distribute,
disclose or otherwise disseminate the Proprietary Information except to the
extent necessary to perform the duties assigned to him by the Company.
(c) Upon termination of his engagement by the Company, the
Consultant will promptly deliver to the Company all property belonging to the
Company, including without limitation all Proprietary Information then in his
possession or control.
(d) Consultant has previously executed an agreement with the
Company relating to non-disclosure of confidential information and such
agreement shall remain in full force and effect.
10. CONSULTANT'S REPRESENTATIONS
(a) Consultant represents that with the exception of MIT and
the consulting agreements listed on Schedule 10(a) hereof, Consultant is not a
party to any consulting agreement with, nor does he consult with or have any
other obligation or understanding to provide services to any entity other than
the Company. Subject to the provisions of Section 6 hereof, Consultant shall not
be prohibited from consulting with or for any other entity, provided that (i)
the Consultant shall advise the Company prior to rendering any other such
consulting services and provide assurances acceptable to the Company of
compliance with Section 6 hereof
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and (ii) such consulting services will not interfere with Consultant's ability
to perform his obligations under this Agreement.
(b) The Consultant represents that he is not now under any
agreement, express or implied, nor has he previously at any time entered, nor
will he during the term of this agreement, enter into any agreement with any
person, firm or corporation which would or could in any manner preclude or
prevent his from entering into and performing this Agreement according to its
terms.
11. RELATIONSHIP OF PARTIES
(a) It is hereby agreed between the parties that the
Consultant is an independent contractor, and shall not hold himself out to be an
officer, partner or employee of the Company for any purpose whatsoever. The
Consultant shall control the manner and means of accomplishing the agreed
services, and shall be responsible for the full, adequate, and timely completion
of said services. The Company may, during the term of this Agreement, engage
other independent contractors to perform the same or similar work that the
Consultant performs hereunder.
(b) None of the benefits provided by the Company to its
employees, including but not limited to medical, life, accident, or disability
insurance, pension or profit sharing plans, unemployment or Worker's
Compensation, are available to Consultant. No withholding or Federal or state
income taxes, social security or related contributions shall be made from
payments made to the Consultant, and the Consultant shall be solely responsible
for payment of any such taxes or contributions due on account of payments
received under this Agreement.
(c) The Consultant shall observe all laws and governmental
regulations and all of the Company rules and regulations while providing
services.
12. NOTICES
Any notice or other communication under this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
against receipt therefor or when mailed registered or certified mail, postage
prepaid, return receipt requested, as follows:
(a) To the Company:
Interneuron Pharmaceuticals, Inc.
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
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(b) To the Consultant:
Massachusetts Institute of Technology
Massachusetts Avenue
Cambridge, Massachusetts 02139
or to such other address as either party shall have given by notice hereunder to
the other.
13. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a
Court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provision shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
14. ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and supersedes the 1989 Agreement and the
parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement which are not set forth herein. No
modification of this Agreement shall be valid unless made in writing and signed
by the parties hereto.
15. BINDING EFFECT
The rights, benefits, duties and obligations under this
Agreement shall inure to, and be binding upon, the Company, and its respective
successors and assigns and upon the Consultant and his representatives, heirs,
and legatees. Consultant may not assign his obligations hereunder.
16. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
17. UNIQUENESS; REMEDIES
It is expressly understood and agreed that the services to be
rendered hereunder by the Consultant are special, unique, and of extraordinary
character, and in the event of the breach or threatened breach by the Consultant
of any of the material terms and conditions of this Agreement, the Company shall
be entitled to institute and prosecute any proceedings in any court of competent
jurisdiction, either in law or equity, for such relief as it deems appropriate,
including without limitation, proceedings to obtain damages, to enforce specific
performance by
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the Consultant, or to enjoin Consultant from performing services rendered under
this Agreement for any other person or entity.
18. HEADINGS
The headings of the paragraphs herein are inserted for
convenience and shall not affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
INTERNEURON PHARMACEUTICALS, INC.
By: /S/ GLENN L. COOPER
Glenn L. Cooper, M.D., President and
Chief Executive Officer
CONSULTANT:
/S/ RICHARD J. WURTMAN
Richard J. Wurtman, M.D.
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INTERNEURON PHARMACEUTICALS, INC.
(the "Company")
SPECIAL TERMS AND CONDITIONS FOR CONFIDENTIAL INFORMATION
The Company has disclosed and may disclose certain confidential
information (the "Confidential Information") to you in connection with the
Business of the Company.
The Confidential Information heretofore or hereafter made available to you was
and will be made on the following terms and conditions.
1. You will maintain all the Confidential Information in secrecy,
will not disclose it to others, and will use it only for the
purposes of the Consultant and Non- Competition Agreement
executed simultaneously herewith.
2. You will disclose the Confidential Information only with the
permission of the Company, and only to those who have reason
to know and who have undertaken an obligation of secrecy to
you at least as extensive as that which you have to us under
the terms of this agreement.
3. Your obligations of secrecy and non-use under this agreement
will not extend to any information which:
a. is generally available to the public as of the date of this
agreement or subsequently becomes available to the public
through no fault of yours, or
b. was already known to you prior to your receipt from us, as
evidenced by your prior written records, or
c. is disclosed to you by a third party who did not derive the
information directly or indirectly from us.
4. All memoranda, papers, letters, notes, notebooks and other
written or printed matter and all copies thereof in any way
relating to the Business of the Company that come into your
possession or are made by you shall be held by you as our
property and returned to us promptly upon our request.
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If you are willing to accept the disclosures of the Confidential
Information under these terms and conditions, please indicate your acceptance by
signing the enclosed copy of this letter and returning it to us.
Very truly yours,
Interneuron Pharmaceuticals, Inc.
By: /S/ GLENN L. COOPER, M.D.
Glenn L. Cooper, M.D.
President and Chief Executive Officer
Accepted this 26th day of October, 1995
/S/ RICHARD J. WURTMAN, M.D.
Richard J. Wurtman, M.D.
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SCHEDULE 10(a)
Les Laboratoires Servier
Ferrer
Appied Medical Research
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Ex.10.5(b)
CONSULTANT AND NON-COMPETITION AGREEMENT
AGREEMENT effective as of April 5, 1995, between InterNutria, Inc., a
corporation duly organized and existing under the laws of the state of Delaware
and having a principal place of business at One Ledgemont Center, 99 Hayden
Avenue, Suite 340, Lexington, Massachusetts 02173 (hereinafter referred to as
the "Company") and Judith Wurtman, Ph.D. (hereinafter referred to as the
"Consultant") having an office at the Massachusetts Institute of Technology
("MIT"), Cambridge, Massachusetts, and residing at 300 Boylston Street, Boston,
Massachusetts 02116.
W I T N E S S E T H:
WHEREAS, the Company intends to engage in the business (the "Business")
of discovering, developing, manufacturing, marketing and selling of proprietary
and nonproprietary consumer nutritional food and beverage products or products
which would be deemed by the Food and Drug Administration ("FDA") to be foods or
nutritional supplements, including products intended to treat pre-menstrual
syndrome or obesity (the "Products")
WHEREAS, Consultant is an expert in scientific matters of particular
importance to the Company in achieving its objectives relating to the Business;
WHEREAS, the Company desires to retain the Consultant to assist the
Company in, among other things, developing and exploiting certain inventions and
confidential information, including patent rights obtained thereon, relating to
the Business and to serve as a member of the Company's Scientific Advisory
Board;
WHEREAS, the Company desires, in addition to the engagement of the
Consultant, the assignment from the Consultant of any inventions, know-how and
confidential information which relates to the Business and which have been
developed in whole or in part by the Consultant in exchange for the grant by the
Company to the Consultant of an equity interest in the Company;
WHEREAS, the Company desires that the Consultant not compete with
Company, provided, that the Company acknowledges that the Consultant is a
part-time professor at the Massachusetts Institute of Technology;
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, the parties hereto do hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
and their variant forms shall have the meaning set forth below:
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1.1 "INVENTION" shall mean any discovery, as well as any
improvements thereto, which is new or which the Consultant has a reasonable
basis to believe may be new and which the Company reasonably believes may be
patentable.
1.2 "PROPRIETARY INFORMATION" shall mean:
(a) Information related to the Business of the Company,
(i) which derives economic value, actual or
potential, from not being generally known to or
readily ascertainable by other persons who can obtain
economic value from its disclosure or use; and
(ii) which is the subject of efforts that are
reasonable under the circumstances to maintain its
secrecy; and
(b) All tangible reproductions or embodiments of such
information including any patents or patent applications
covering such information but excluding copyrightable works of
authorship created by Consultant which were not created at the
direction of or on behalf of the Company or in Consultant's
capacity as a Consultant to the Company.
Assuming the criteria in (a)(i) and (a)(ii) above are satisfied, Proprietary
Information includes, but is not limited to, technical and nontechnical data
related to the formulas, patterns, designs, compilations, programs, Inventions,
methods, techniques, drawings, processes, finances, actual or potential
customers and suppliers, existing and future products, and employees of the
Company. Proprietary Information also includes information which has been
disclosed to the Company by a third party and which the Company is obligated to
treat as confidential.
1.3 "SUBJECT INVENTION" shall mean any Invention which is
conceived by the Consultant alone or in a joint effort with others resulting
from work engaged in by the Consultant on behalf of or at the direction of the
Company during the Consultant's engagement by the Company or which:
(a) may be reasonably expected to be used in the Company's
research and development efforts relative to the Business of
the Company, or in a current product or future product of the
Company, or a product similar to a Company product or future
product; or
(b) is in an area of technology or research which is the same
as or substantially related to the areas of technology or
research with which the Consultant is involved in the
performance of her duties as a consultant to the Company
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and which is not owned by MIT; provided, however that a Subject Invention shall
not include an Invention which relates solely to a product or a potential
product if the Company has indicated in writing that it does not intend to
develop or commercialize such product (an "Excluded Product").
2. RETENTION; TERM
(a) Subject to the provisions of subsection 2(c) below, the
Company hereby retains the Consultant for a two-year period commencing as of
April 5, 1995 and the Consultant hereby accepts such retention.
(b) The term of this Agreement shall automatically be extended
for consecutive periods of one year each, unless either party shall give notice
to the other at least 60 days before the expiration of the initial or then
current renewal term. The obligations of Consultant pursuant to Sections 7
through 11 of this Agreement shall survive the termination of the engagement of
Consultant hereunder.
(c) The effectiveness of this Agreement is conditioned upon
the execution by Consultant and Interneuron Pharmaceuticals Inc. ("IPI") of an
agreement ( the "Termination Agreement") terminating Consultant's Consulting and
Non-Competition Agreement with Interneuron (the "IPI Consulting Agreement"). In
the event the acquisition by the Company from Walden Laboratories, Inc.
("Walden") of the product known as NutriFem PMS and all related intellectual
property rights (the "Assets") is not consummated, then the Company may
terminate this Agreement effective as of the end of the first year of this
Agreement.
3. DUTIES
Subject at all times to the consultation with the officers and
board of directors of the Company or their designated employees or
representatives, the Consultant shall be referred to as Consultant and
Scientific Founder and shall at the request of the Company, be available for a
minimum of four days per month during the first year of the Agreement and five
days per month thereafter, to render advisory and consultation services to the
Company, in addition to attendance by the Consultant at Scientific Advisory
meetings if a Scientific Advisory Board is established by the Company. Such
advisory and consultation services shall be approved in advance by the Company
and shall (i) be carried out at the facilities of the Company or at such other
place as may be mutually convenient and agreed to by the Company and the
Consultant, as appropriate, (ii) relate primarily to the identification,
research and development, clinical testing and commercialization of the Products
("Consulting Field"), (iii) include assisting the Company in obtaining licenses,
assignment or other rights to commercialize the patents or technologies
discovered by Consultant, as appropriate, subject to the provisions of Section 6
hereof and assist the Company in negotiations relating to such commercialization
and (iv) include public relations activities, such as public appearances and
interviews in support of the Company and the
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Products. The Company agrees to include Consultant as a nominee for election as
a director of the Company, and to recommend such election, during the term of
this Agreement.
4. COMPENSATION
(a) The Company shall pay to the Consultant for all services
as a consultant, compensation at the rate of $70,000 per annum for the first
year of this Agreement, $85,000 for the second year of this Agreement and, if
the term of this Agreement is extended pursuant to Section 2(b) hereof,
Consultant's compensation for each additional year shall be at least one hundred
and five percent (105%) of the annual compensation paid by the Company for the
Consultant for the previous year.
(b) In consideration for the representations, agreements and
covenants contained herein, the Company shall grant Consultant ten-year options
under the Company's 1995 Stock Option Plan (the "Plan") to purchase such number
of shares (the "Shares") of its Common Stock so that, assuming exercise in full
of such options and of all other outstanding options of the Company on the date
of this Agreement, Consultant would own five percent (5%) of the Common Stock of
the Company. The Options shall be exercisable at a price equal to the par value
of the Common Stock in installments of 25% per year, on a cumulative basis,
commencing on the day immediately preceding the first anniversary of the date of
this Agreement, and shall be subject to the terms and conditions of the Plan.
5. REIMBURSEMENT FOR EXPENSES
During the term of this Agreement, the Consultant shall be
reimbursed for reasonable traveling expenses incurred in connection with her
activities hereunder, only if such expenses are approved in advance by the
Company and upon submission of appropriate vouchers and in accordance with
normal Company expense reimbursement policy.
6. INTELLECTUAL PROPERTY; CONSULTANCIES
(a) Consultant represents that Schedule 6(a) hereto contains a
complete listing of patents or patent applications owned, filed, or discovered
by either Consultant alone or by Consultant jointly with a third party and not
assigned to MIT as of the date hereof.
(b) Consultant represents that with the exception of MIT and
IPI, and the entities listed on Schedule 6(b) hereto, Consultant is not a party
to any consulting agreement with, consults with or has any other obligation or
understanding to provide services to any entity other than the Company.
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7. COVENANTS
(a) COVENANT NOT TO COMPETE
During the term of this Agreement and any renewal
term, and for a period of one year thereafter, the Consultant agrees to consult
exclusively for the Company in the Consulting Field and not to consult with or
become employed by or enter into discussions or negotiations to consult with or
to become employed by or which relate to commercialization of products in the
Consulting Field with any other entity or to compete, directly or indirectly,
with the Company in the Consulting Field, except to the extent related to
Excluded Products, without the prior written consent of the Company, except that
Consultant as appropriate may provide consulting services to IPI so long as
Consultant's activities on behalf of IPI do not conflict with or directly
compete with the Company and provided that Consultant's covenant not to compete
during the one year period after this Agreement terminates is subject to the
Company compensating Consultant (provided Consultant is in compliance with such
covenant) during such one year period at the rate of 50% of the compensation
paid to Consultant during the immediately preceding year pursuant to Section
4(a) hereof.
(b) NON-SOLICITATION
The Consultant expressly covenants and agrees that
she will not, at any time during the term of this Consulting Agreement, and for
a period of one (1) year thereafter, directly or indirectly, (a) induce or
attempt to influence any employee of, or consultant under contract with, the
Company to leave its employ; or (b) aid, or agree to aid, any competitor or
supplier of the Company in any attempt to hire any person who shall have been
employed by, or who was a consultant under contract with, the Company, within
one year preceding such requested aid; or (c) induce, or attempt to influence,
any person who was a supplier to the Company to transact business with a
competitor of the Company; provided, nothing contained herein shall otherwise
prevent Consultant from writing letters of recommendation for any such person if
Consultant has otherwise complied with the terms of this Consulting Agreement.
(c) COOPERATION IN LICENSING
Consultant agrees (i) to use her best efforts to
assist the Company in obtaining licenses or other rights to use patents or other
proprietary rights held by MIT or other inventors relating to the Business of
the Company including, without limitation, any patents, patent applications,
know-how or proprietary information owned by Walden, and (ii) not to negotiate
with any other entity with respect to licensing to such entity rights in the
Consulting Field without first obtaining the Company's prior written consent,
unless the Company has expressed its intention not to seek a license of such
rights.
For the purposes of this Section 7, the term
"directly or indirectly", . . . shall include participation as an officer,
director, employee, consultant agent, representative, shareholder, partner,
joint venturer or individual proprietor. The foregoing shall not be
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construed as preventing Consultant from investing assets in such form or manner
where Consultant does not perform services for such company in which such
investment may be made. The ownership by the Consultant of stock listed on a
national securities exchange, of any corporation conducting such competing
business, provided Consultant and members of Consultant's family, in the
aggregate, do not beneficially own more than two (2%) percent of the stock of
such corporation, shall not be deemed a violation of this Agreement.
8. INVENTIONS
(a) SUBJECT INVENTIONS CONCEIVED DURING CONSULTING ENGAGEMENT
The Consultant agrees that all Subject Inventions
conceived or first practiced by her and relating to the Business of the Company,
and all patent rights and copyrights to the Subject Inventions, will become the
property of the Company, and the Consultant hereby irrevocably assigns to the
Company all of her rights to all Subject Inventions.
(b) NOTIFICATION OF CONCEPTION OF INVENTION
The Consultant agrees that if she conceives an
Invention during her engagement by the Company and there is a reasonable basis
to believe that the Invention is a Subject Invention, she will promptly (and in
any event prior to any submission for publication of such Invention) provide a
written description of the Invention to the Company adequate to allow evaluation
for a determination as to whether the Invention is a Subject Invention and to
allow sufficient time for the preparation and filing of a patent application
relating to such Subject Invention prior to any proposed publication of the
Subject Invention, in accordance with Section 8 hereof.
In the event the Consultant has a reasonable basis to
believe the Subject Invention is patentable and, by the 10th business day after
receipt by the Company of Consultant's written description of the Invention, the
Company has not yet notified Consultant of its intention to retain patent
counsel to prepare a patent application on such Subject Invention, then
Consultant may prepare and file such a patent application using patent counsel
acceptable to the Company. The Consultant's retention of patent counsel shall
not affect the Company's rights under Section 7(a), subject to the provisions of
Section 8.
(c) RECORDS
The Consultant shall maintain appropriate records of
all research and development activities adhering to any specific guidelines for
the same which are promulgated by the Company, which shall, if properly
maintained and promptly disclosed to the Company, satisfy the requirement of
providing a written disclosure of any Subject Inventions. It is agreed that all
the notebooks and written disclosures, and any copyrights or ideas therein, are
the sole and exclusive property of the Company.
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(d) NO PREVIOUSLY CONCEIVED INVENTIONS
The Consultant warrants and represents that she has
not, except as set forth on Exhibit B hereto, as of the date of this Agreement,
previously conceived any Invention or acquired any ownership interest in any
Invention (other than any Invention assigned by the Consultant to the Company
contemporaneously with the execution of this Agreement) which:
(i) Relates to the Business of the Company; and
(ii) Is the Consultant's property, or of which
she is a joint owner with another person or
company; and
(iii) Would be a Subject Invention if such
Invention were made while a consultant to
the Company; and
(iv) Which has not previously been transferred,
assigned or licensed to the Company.
In the event that the foregoing warranty and representation is breached by the
Consultant, the Invention in question shall be considered to be licensed to the
Company on a non-exclusive, perpetual, royalty free basis, for any use in or
reasonably related to the Business of the Company.
(e) CONSULTANT'S PRIOR PATENT RIGHTS
The Consultant does not own any patents, individually or
jointly with others, except those specifically described on Schedule 6(a)
attached hereto and incorporated herein by reference.
9. PATENT APPLICATIONS
The Consultant agrees that should the Company elect to file an
application for patent protection either in the United States or in any foreign
country, on a Subject Invention of which the Consultant was an inventor, she
will execute all necessary documentation relating to the patent applications,
including formal assignments to the Company.
The Consultant further agrees that she will cooperate with
attorneys or other persons designated by the Company by explaining the nature of
any Subject Invention for which the Company elects to file an application for
patent protection, reviewing applications and other papers and providing any
other cooperation required for prosecution of the patent applications. The
Company will be responsible for all expenses incurred for the preparation and
prosecution of all patent applications on Subject Inventions assigned to the
Company.
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10. PROPRIETARY INFORMATION
(a) OWNERSHIP OF PROPRIETARY INFORMATION
All Proprietary Information received or developed by
the Consultant while she is a consultant to the Company will remain the sole and
exclusive property of the Company.
(b) OBLIGATIONS OF THE CONSULTANT
The Consultant will hold the Proprietary Information
in trust and strictest confidence, and will not use, reproduce, distribute,
disclose or otherwise disseminate the Proprietary Information except to the
extent necessary to perform the duties assigned to her by the Company.
(c) DELIVERY UPON TERMINATION
Upon termination of her engagement by the Company,
the Consultant will promptly deliver to the Company all property belonging to
the Company, including without limitation all Proprietary Information then in
her possession or control.
11. CONFIDENTIAL INFORMATION
Consultant is executing simultaneously with the execution
hereof, the Company's standard form of special terms and conditions for
non-disclosure of confidential information, a copy of which is annexed hereto.
12. CONSULTANT'S REPRESENTATIONS
The Consultant represents that she is not now under any
agreement, express or implied, nor has she previously at any time entered, nor
will she during the term of this agreement, enter into any agreement with any
person, firm or corporation which would or could in any manner preclude or
prevent her from entering into and performing this Agreement according to its
terms.
13. RELATIONSHIP OF PARTIES
(a) It is hereby agreed between the parties that the
Consultant is an independent contractor, and shall not hold herself out to be an
officer, partner or employee of the Company for any purpose whatsoever. The
Consultant shall control the manner and means of accomplishing the agreed
services, and shall be responsible for the full, adequate, and timely completion
of said services. The Company may, during the term of this Agreement, engage
other independent contractors to perform the same or similar work that the
Consultant performs hereunder.
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(b) None of the benefits provided by the Company to its
employees, including but not limited to medical, life, accident, or disability
insurance, pension or profit sharing plans, unemployment or Worker's
Compensation, are available to Consultant. No withholding or Federal or state
income taxes, social security or related contributions shall be made from
payments made to the Consultant, and the Consultant shall be solely responsible
for payment of any such taxes or contributions due on account of payments
received under this Agreement.
(c) The Consultant shall observe all laws and governmental
regulations and all of the Company rules and regulations while providing
services.
14. NOTICES
Any notice or other communication under this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
against receipt therefor or when mailed registered or certified mail, postage
prepaid, return receipt requested, as follows:
(a) To the Company:
InterNutria, Inc.
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
(b) To the Consultant:
Massachusetts Institute of Technology
Massachusetts Avenue
Cambridge, Massachusetts 02139
or to such other address as either party shall have given by notice hereunder to
the other.
15. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a
Court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provision shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
16. ENTIRE AGREEMENT; MODIFICATION
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of this
Agreement which are not set forth herein. No
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modification of this Agreement shall be valid unless made in writing and signed
by the parties hereto.
17. BINDING EFFECT
The rights, benefits, duties and obligations under this
Agreement shall inure to, and be binding upon, the Company, and its respective
successors and assigns and upon the Consultant and her representatives, heirs,
and legatees. Consultant may not assign her obligations hereunder.
18. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
19. UNIQUENESS; REMEDIES
It is expressly understood and agreed that the services to be
rendered hereunder by the Consultant are special, unique, and of extraordinary
character, and in the event of the breach or threatened breach by the Consultant
of any of the material terms and conditions of this Agreement, the Company shall
be entitled to institute and prosecute any proceedings in any court of competent
jurisdiction, either in law or equity, for such relief as it deems appropriate,
including without limitation, proceedings to obtain damages, to enforce specific
performance by the Consultant, or to enjoin Consultant from performing services
rendered under this Agreement for any other person or entity.
20. HEADINGS
The headings of the paragraphs herein are inserted for
convenience and shall not affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
the day and year first above written.
InterNutria, Inc.
By: /S/ JAMES F. POMROY
James F. Pomroy, Chairman
Consultant:
/S/ JUDITH WURTMAN
Judith Wurtman, Ph.D.
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<PAGE>
INTERNUTRIA, INC.
(the "Company")
SPECIAL TERMS AND CONDITIONS FOR CONFIDENTIAL INFORMATION
The Company has or may disclose certain confidential information (the
"Confidential Information") to you in connection with the Business of the
Company.
The Confidential Information heretofore or hereafter made available to you was
and will be made on the following terms and conditions.
1. You will maintain all the Confidential Information in secrecy,
will not disclose it to others, and will use it only for the
purposes of the Consultant and Non- Competition Agreement
executed simultaneously herewith.
2. You will disclose the Confidential Information only with the
permission of the Company, and only to those who have reason
to know and who have undertaken an obligation of secrecy to
you at least as extensive as that which you have to us under
the terms of this agreement.
3. Your obligations of secrecy and non-use under this agreement
will not extend to any information which:
a. is generally available to the public as of the date of this
agreement or subsequently becomes available to the public
through no fault of yours, or
b. was already known to you prior to your receipt from us, as
evidenced by your prior written records, or
c. is disclosed to you by a third party who did not derive the
information directly or indirectly from us.
4. All memoranda, papers, letters, notes, notebooks and other
written or printed matter and all copies thereof in any way
relating to the business of the Company that come into your
possession or are made by you shall be held by you as our
property and returned to us promptly upon our request.
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<PAGE>
If you are willing to accept the disclosures of the Confidential
Information under these terms and conditions, please indicate your acceptance by
signing the enclosed copy of this letter and returning it to us.
Very truly yours,
InterNutria, Inc.
By: /S/ JAMES F. POMROY
James F. Pomroy, Chairman
Accepted this 12th day of April, 1995
/S/ JUDITH J. WURTMAN
Judith J. Wurtman, Ph.D.
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<PAGE>
SCHEDULE 6(A)
1) "Compositions for treating Pre-menstrual or Late Luteal Phase Syndrome
and methods of their use" (with Richard Wurtman).
U.S. Patent No: 111-771
2) Composition for treating Tobacco Withdrawal Symptoms and Methods for
their use" (with Richard Wurtman and Bonnie Spring).
U.S. Patent No: 262,625
3) "Composition Methods for Losing Weight".
U.S. Patent No: 08-1,481,624
-13-
<PAGE>
SCHEDULE 6(b)
Les Laboratoires Servier
-14-
Ex. 10.12(e)
CONSENT AND AMENDMENT AGREEMENT
AGREEMENT pursuant to the provisions of the Letter of Intent dated
February 10, 1995 and signed between LES LABORATOIRES SERVIER, ORSEM, AMERICAN
HOME PRODUCTS CORPORATION, AMERICAN CYANAMID COMPANY and INTERNEURON
PHARMACEUTICALS, INC. I. Effective as of November 21, 1994, Interneuron
Pharmaceuticals, Inc. and American Cyanamid Company amend the Patent and
Know-How Sublicense and Supply Agreement dated November 19, 1992 (the
"Sublicense Agreement") as follows:
1. Paragraph 1.1 is amended to read in its entirety:
"AFFILIATES" shall mean any corporation or business entity
other than a joint venture controlled by, controlling or under
common control with CYANAMID or INTERNEURON, as the case may
be. (For this purpose, "control" shall mean direct or indirect
beneficial ownership of more than forty percent (40%) of the
voting stock of, or a forty percent (40%) or greater interest
in the income of such corporation or other business entity, or
such other relationship as, in fact, constitutes actual
control.) Notwithstanding ownership of more than forty percent
(40%) of the voting stock of a business entity, if such
business entity is not actually controlled by or under common
control with a party because of a governance or similar
agreement, then such business entity will not be considered an
AFFILIATE for purposes of this AGREEMENT.
2. The following is added as Paragraph 2.4:
2.4 MARKET
CYANAMID and INTERNEURON acknowledge that the
SPECIALITY is intended to be marketed in the TERRITORY solely
as a prescription product.
3. The following is added as Paragraph 5.6:
5.6 COORDINATION COMMITTEE
5.6.1 The parties and SERVIER shall establish a
Coordination Committee which shall consist of up to six
members, with an equal number of appropriate representatives
from CYANAMID, INTERNEURON and SERVIER, with the understanding
that such number may be changed by the parties and SERVIER.
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<PAGE>
5.6.2 The Coordination Committee shall:
(i) address and coordinate key matters relating to:
(A) the regulatory process and approvals for the
PRODUCT, including development and clinical studies
related thereto, retention of consultants, and entry
into other agreements related to the PRODUCT; and (B)
the expeditious receipt and coordination of
information regarding the promotion, pre- marketing
and marketing of the approved SPECIALITY;
(ii) be comprised of representatives of each party
and SERVIER who are appropriate designees to address
the issues outlined in (i) above; and
(iii) meet at least once each year at SERVIER's
location and at least once each year at a mutually
agreed location in the United States.
4. Paragraph 9.4.4 is amended to read in its entirety:
CYANAMID shall not during the TERM OF THIS AGREEMENT develop
any product in the TERRITORY in which COMPOUND is combined
with any other active ingredient for the treatment of obesity
without the prior written consent of INTERNEURON, which
consent will not be unreasonably withheld. The prior consent
of SERVIER thereto shall be a precondition in any case to
INTERNEURON's consent. The provisions of the immediately
preceding two sentences shall not apply to products whose
development was started before February 10, 1995 by AMERICAN
HOME PRODUCTS CORPORATION or its AFFILIATES (other than
CYANAMID). CYANAMID also shall not during the TERM OF THIS
AGREEMENT market any substance, rights to which were acquired
from any person not an AFFILIATE, whose indication for use as
a human drug is directly competitive with SPECIALITY. If
CYANAMID or an AFFILIATE develops during the TERM of THIS
AGREEMENT any drug the primary mode of action of which is
identical to PRODUCT, and which competes directly with
SPECIALTY, then, prior to marketing such a drug in the
TERRITORY, SERVIER and CYANAMID shall meet to determine the
averse financial impact, if any, upon the sales of the
SPECIALTY in the TERRITORY, and, if such an impact is found,
CYANAMID and SERVIER shall agree to an appropriate
compensation to SERVIER from CYANAMID. In the event a business
entity of which 40% or more of voting stock is owned or
controlled by CYANAMID or its AFFILIATES intends to market in
the TERRITORY any drug the primary mode of action of which is
identical to PRODUCT and which competes directly with
SPECIALTY, then prior to marketing such a drug in the
TERRITORY, SERVIER and CYANAMID shall meet to determine the
adverse financial impact, if any, upon the sales of the
SPECIALTY in the TERRITORY,
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<PAGE>
and if such impact is found, CYANAMID and SERVIER shall agree
to an appropriate compensation to SERVIER from CYANAMID.
CYANAMID shall sell SPECIALTY exclusively within the TERRITORY
during the TERM OF THIS AGREEMENT. SERVIER shall not market in
the TERRITORY any pharmaceutical specialty containing PRODUCT
which directly competes with SPECIALTY in the treatment
obesity, including but not limited to obesity caused by
abnormal carbohydrate craving, without the prior written
consent of CYANAMID, which consent shall not be unreasonably
withheld.
5. Paragraph 9.4.3 is amended to read in its entirety:
9.4.3 CYANAMID understands that, as set forth in Paragraphs
2.2.7 of the SERVIER PATENT AGREEMENT and of the ORSEM
TRADEMARK AGREEMENT, this AGREEMENT may terminate in the event
of the termination of said SERVIER AGREEMENTS, at SERVIER's
Option. INTERNEURON agrees to exercise its best efforts to
avoid any such termination. Provided CYANAMID is not then in
default of this AGREEMENT, SERVIER agrees upon termination of
the SERVIER AGREEMENTS to take over INTERNEURON's position in
this AGREEMENT directly with CYANAMID on the same terms as
those set forth in this AGREEMENT, except as SERVIER and
CYANAMID may otherwise agree at the time, and SERVIER and
CYANAMID agree to continue this AGREEMENT thereafter for the
full term hereof with SERVIER substituted for INTERNEURON
hereunder.
-3-
<PAGE>
II. Effective as of November 21, 1994, ORSEM, INTERNEURON PHARMACEUTICALS,
INC. and AMERICAN CYANAMID COMPANY amend the Trademark License Agreement
dated November 19, 1992 (the "Trademark Agreement") as follows:
1. Paragraph 1.a. is amended to read in its entirety:
"Affiliate" shall mean any corporation or business entity
controlled by, controlling or under common control with ORSEM,
CYANAMID or INTERNEURON, as the case may be. (For this
purpose, "control" shall mean direct or indirect beneficial
ownership of more than forty percent (40%) of the voting stock
of, or a forty percent (40%) or greater interest in the income
of such corporation or other business entity, or such other
relationship as, in fact, constitutes actual control.)
Notwithstanding ownership of more than forty percent (40%) of
the voting stock of a business entity, if such business entity
is not actually controlled by or under common control with a
party because of a governance or similar agreement, then such
business entity will not be considered an Affiliate for
purposes of this Agreement.
2. Paragraph 4.b. is amended to read in its entirety:
-4-
<PAGE>
b. Except with ORSEM's prior written approval, as defined in
Section 2.2.2 of the Trademark Agreement, CYANAMID shall not
display or use any other trademark, service mark, trade name,
logo type, label design or other source- identifying symbol or
designation in connection with or in close proximity to the
Trademark, other than CYANAMID's own C DEVICE AND WORK
CYANAMID logo, the LEDERLY IN SCRIPT IN OVAL logo, the
ADVANTUS PHARMACEUTICALS logo, and WYETH and WYETH-AYERST in
any typeface or design and any and all logos associated
therewith, and any modification or replacements for same.
III. Nothwithstanding the provisions of Paragraph 9.4.4 of the Sublicense
Agreement, American Cyanamid Company, Interneuron Pharmaceuticals, Inc. and Les
Laboratoires Servier agree that American Home Products Corporation shall be free
to continue to market Pondimin and Mazindol subject to the following
requirements: (1) for as long as Dexfenfluramine remains commercially viable,
American Home Products Corporation will differentiate Dexfenfluramine for
promotional and marketing purposes and will not promote or market Pondimin or
Mazindol or any other product for the anti-obesity indication which competes
directly with Dexfenfluramine in a manner in each case which negatively affects
the existing or future market for Dexfenfluramine, and (2) the provisions of
this Section III will not apply to any product which American Cyanamid has under
development as of February 10, 1995, as to which Paragraph 9.4.4 of the
Sublicense Agreement will apply.
IV. Effective as of November 21, 1994, American Home Products Corporation,
acting through its Wyeth-Ayerst Laboratories division ("Wyerth-Ayerst"), is
subject to and benefits from all terms and conditions of the Sublicense
Agreement and the Trademark Agreement, as amended, except as expressly set forth
in this Consent and Amendment Agreement. Wyeth- Ayerst shall perform, or cause
to be performed, the obligations of American Cyanamid Company under the
Sublicense Agreement and the Trademark Agreement, as amended.
-5-
<PAGE>
V. Les Laboratoires Servier and Orsem hereby consent to the continuation of the
Sublicense Agreement and the Trademark Agreement, with the amendments set forth
above. Les Laboratoires Servier hereby irrevocably waives any right, express or
implied, that it may have to terminate the sublicense rights in the sublicense
Agreement, or to receive or claim any compensation, on account of the
acquisition of American Cyanamid Company by American Home Products Corporation,
and the merger of a subsidiary of American Home Products Corporation into
American Cyanamid Company.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be
executed by their duly authorized officers effective as of the date first
written above.
Acknowledged and Agreed by: Acknowledged and Agreed by:
INTERNEURON PHARMACEUTICALS, INC. ORSEM
Proxy
Name: /S/ GLENN L. COOPER Name: /S/ M. DEROME-TREMBLAY
-------------------------- -------------------------
Title: PRESIDENT Title: VICE PRESIDENT
Acknowledge and Agreed by: Acknowledge and Agreed by:
AMERICAN CYANAMID COMPANY LES LABORATOIRES SERVIER
Name: /S/ ROBERT DOUGAN Name: /S/ M. DEROME-TREMBLAY
-------------------------- --------------------------
Title: PRESIDENT Title: VICE PRESIDENT
Acknowledge and Agreed by:
AMERICAN HOME PRODUCTS CORPORATION
Name: /S/ CHARLES T. ROSS
--------------------------
Title: ASSISTANT SECRETARY
-6-
October 30, 1995 Ex. 10.44(a)
Mr. Lewis D. Lepene
Vice President - Business Development
Interneuron Pharmaceuticals, Inc.
One Ledgemont Center
99 Hayden Avenue, Suite 340
Lexington, MA 02173
Dear Lew:
This letter shall confirm the understanding we reached in our September 19, 1995
meeting regarding the choline sports drink. In that meeting, Veryfine and
Interneuron agreed to enter a transitional phase in their relationship. This
phase will involve the transfer of materials and information from Veryfine to
Interneuron covering Veryfine's research of the sports drink market and
approaches to launch the choline sports drink and provide the opportunity to
exchange ideas on these matters. These steps are taken with the objective of an
orderly transition of marketing and sales responsibility from Veryfine to
Interneuron.
Upon the successful conclusion to this transitional phase, but no later than
ninety days from the date of this letter, Veryfine and Interneuron agree to
terminate the current license agreement (the Patent and Know-How License
Agreement between Interneuron Pharmaceuticals, Inc. and Veryfine Products, Inc.
for Choline Sports Drink dated October 29, 1992, as amended). Upon termination,
Veryfine and Interneuron agree that each do not and shall not have any
obligations or liabilities to each other. Interneuron shall be free to enter
license agreements with other companies and Veryfine shall have no further
obligations to market and sell the choline sports drink. Interneuron and
Veryfine agree that any public comment on this understanding, including but not
limited to press releases, must be approved by both parties, such approval not
to be unreasonably withheld or delayed.
Veryfine and Interneuron remain interested in the possibility of working
together in the future, either on the choline sports drink when it is launched
as a liquid beverage in the mass market or other beverage products that
Interneuron or its subsidiary, InterNutria, may wish to introduce.
<PAGE>
Mr. Lewis D. Lepene
October 30, 1995
Page 2
If this letter reflects your understanding of the agreement reached in our last
meeting, please sign where indicated below and return a copy to me. We wish you
success with the choline sports drink and look forward to discussing other
opportunities with you in the future.
Sincerely,
By: /S/ AL CAROSI
Al Carosi
Vice President Marketing
Agreed To By: /S/ LEWIS D. LEPENE
Signature
PRESIDENT & CEO, INTERNUTRIA, INC.
Title
NOVEMBER 7, 1995
Date
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by * and [ ], have been
separately filed with the Commission.
Ex. 10.78 CONTRACT MANUFACTURING AGREEMENT
This Agreement is entered into as of this 21st day of November 1995, by
and between Boehringer Ingelheim Pharmaceuticals, Inc., 900 Ridgebury Road,
Ridgefield, Connecticut 06877 (hereinafter referred to as "BOEHRINGER"), and
Interneuron Pharmaceuticals, Inc., One Ledgemont Center, 99 Hayden Avenue,
Lexington, Massachusetts 02173 (hereinafter referred to
as "INTERNEURON").
WHEREAS, BOEHRINGER is a contract manufacturer of pharmaceutical
products; and
WHEREAS, INTERNEURON desires that BOEHRINGER manufacturer and supply to
INTERNEURON the Product, as hereinafter defined , and
WHEREAS, BOEHRINGER is willing to manufacture and supply the PRODUCT as
hereinafter defined, to INTERNEURON in accordance with the provisions hereof.
NOW THEREFORE, in consideration of the premises and the undertakings of
the parties hereinafter set forth, the parties agree as follows:
1. DEFINITIONS
1.1 "PRODUCT" shall mean the capsule dosage form of the pharmaceutical
product containing 15 mg. of dexfenfluramine HCl, packaged for sale in bottles
of either 60, 100, 500 or 1,000 capsules each, or in blister cards containing 10
capsules with 10 cards per package, or packaged for distribution as samples in a
form to be agreed upon by the parties, which meets the SPECIFICATIONS.
1.2 "SPECIFICATIONS" shall mean any and all specifications for the
manufacture, testing, labeling and packaging of the PRODUCT, as provided by
INTERNEURON to BOEHRINGER, attached as Exhibit A and as modified from time to
time. All SPECIFICATIONS and any changes agreed to by the parties from time to
time shall be in writing, dated and signed by the parties.
1.3 "NDA" shall mean the New Drug Application for the PRODUCT submitted
to the FDA and as subsequently approved by the FDA as the same may be
supplemented or amended from time to time.
1.4 "FDA" shall mean the U.S. Food and Drug Administration.
1.5 "DEA" shall mean the U.S. Drug Enforcement Administration.
1.6 "ACTIVE INGREDIENT" shall mean the active ingredient
dexfenfluramine HCl, provided to BOEHRINGER free of charge, for use in the
manufacture of the PRODUCT.
1.7 "BATCH(ES)" shall mean approximately 840,000 capsules of the
PRODUCT,
1
<PAGE>
presently containing approximately 12.6 kg of the ACTIVE INGREDIENT in the
manufacture of each such BATCH. INTERNEURON shall use its best efforts to have
the size of the BATCH increased to 3,360,000 capsules, containing approximately
50.4 kg of the ACTIVE INGREDIENT of the PRODUCT by the FDA, or such other size
as INTERNEURON and BOEHRINGER shall mutually agree. When the batch size is
increased it is expected that the BOEHRINGER cost structure would reflect the
resulting economies of scale.
1.8 "LAUNCH" shall mean the date of first commercial shipment of the
PRODUCT by INTERNEURON or its distributor to third parties other than its
affiliates or distributors after approval of the NDA.
1.9 "GOVERNMENTAL AGENCY" shall mean any federal or state government
authority that has jurisdiction over the manufacture, marketing, use and
distribution of the Product and includes, but is not limited to, the Food and
Drug Administration (FDA), Federal Trade Commission (FTC), Environmental
Protection Agency (EPA) and Drug Enforcement Agency (DEA).
1.10 "COST" shall include material, labor consumed and all applied
production overhead as defined in Schedule B.
1.11 "FDA's cGMP's" shall mean current good manufacturing practices
required by the FDA for the production of the PRODUCT as set forth under 21 CFR
210 and 211.
2. QUANTITY
2.1 Subject to the terms and conditions hereinafter set forth,
BOEHRINGER shall manufacture and sell to INTERNEURON and INTERNEURON shall
purchase from BOEHRINGER, such orders for the PRODUCT as shall be placed from
time to time by INTERNEURON on its own behalf and on behalf of its distributor
for sale in the United States during the Initial Term (as hereinafter defined in
Paragraph 3.1 hereof) of the Agreement. Subject to the terms and conditions
contained herein, BOEHRINGER shall convert the ACTIVE INGREDIENT, supplied to
BOEHRINGER, into PRODUCT and shall package, label and otherwise prepare for the
market the PRODUCT, all in accordance with the SPECIFICATIONS.
3. TERM OF AGREEMENT
3.1 The term of this Agreement shall extend from the date first set
forth above and shall continue through the Initial Term, which is defined as the
period following the date of final written approval of INTERNEURON's NDA from
the FDA of the PRODUCT through December 31, 1998.
2
<PAGE>
3.2 INTERNEURON may terminate its obligations under this Agreement upon
written notice, at any time before approval or up to ninety (90) days after
approval of the PRODUCT's NDA, if INTERNEURON decides for commercial reasons
that neither it nor its distributor will market or promote the PRODUCT in the
United States. In such event, INTERNEURON shall pay to BOEHRINGER the sum Four
Hundred Fifty Thousand ($450,000) dollars and reimburse BOEHRINGER as provided
in Paragraphs 3.8, 4.18 and 12.4. INTERNEURON's obligation to purchase minimum
quantities of PRODUCT, during the Initial Term, pursuant to Paragraph 3.5, would
cease upon termination under the operation of this Paragraph.
3.3 This Agreement may be terminated by written notice by either
INTERNEURON or BOEHRINGER in the event that the other is in breach of this
Agreement or has defaulted in any material manner and shall have failed to
remedy such breach or default within sixty (60) days after notice thereof from
the other party.
3.4 In the event INTERNEURON fails to secure approval from the FDA to
market the PRODUCT by November 23, 1997, BOEHRINGER may upon written notice
terminate this Agreement unless INTERNEURON agrees to pay to BOEHRINGER $62,500
for each three (3) month period (or a part thereof) commencing November 23, 1997
until the NDA receives FDA approval or the NDA is withdrawn. Payments to
BOEHRINGER pursuant to this paragraph shall be made within thirty (30) days of
the end of each three (3) month period. If FDA approval once received, is later
withdrawn or suspended for a period of six (6) months, BOEHRINGER or INTERNEURON
may at its option and upon written notice terminate this Agreement. If after
LAUNCH, the DEA changes the PRODUCT to a Schedule I or II drug, either
BOEHRINGER or INTERNEURON may at its option and upon written notice terminate
this Agreement.
3.5 INTERNEURON shall be required to purchase a minimum of five (5)
BATCHES of PRODUCT during each twelve (12) month period or part thereof of the
Initial Term, except that Product produced for INTERNEURON prior to LAUNCH shall
be credited towards satisfying INTERNEURON's minimum purchase obligation during
the first twelve (12) month period of the Initial Term. In the event INTERNEURON
fails to purchase the minimum quantities set forth in this Paragraph 3.5,
INTERNEURON shall pay to BOEHRINGER a sum equal to the difference between the
price of such minimum quantities pursuant to Paragraph 7.1 based on a blended
price computed by deriving the weighted average of the prices of the packaged
sizes ordered by INTERNEURON in the last three (3) month order period and in the
event no orders were placed, then based
on the price of bottles of 60. Payment to be made within thirty (30) days of
receipt of BOEHRINGER's invoice. INTERNEURON's obligation to purchase the
foregoing minimum quantities shall be suspended in the event that INTERNEURON's
inability to purchase such quantities is attributable solely to the fault of
BOEHRINGER.
3.6 If either INTERNEURON or BOEHRINGER shall commence as debtor to any
proceedings under any bankruptcy, insolvency, reorganization, readjustment of
debt, dissolution or liquidation law or statute of the Federal Government or any
State Government or any
3
<PAGE>
subdivision of either now or hereafter in effect; or if any such proceedings
shall be commenced against either party, or any trustee or receiver in respect
of either party shall be appointed in any such proceedings, and any such party
shall by any act or failure to act indicate approval of, or consent to or
acquiescence in such proceedings or in the appointment of any such trustee or
receiver; or if any such proceedings brought against either party shall be
approved by any court or shall remain undismissed for thirty (30) days; or if
any warrant of attachment shall be issued against all, or substantially all, of
the assets of either party and shall not be released within thirty (30) days
after its levy, then, in any such case, such other party not involved in such
proceedings, other than as a creditor, shall have the option to terminate this
Agreement by written notice and upon the giving of such notice this Agreement
shall immediately terminate.
3.7 If upon approval of INTERNEURON's NDA or during the Initial Term of
this Agreement, the PRODUCT, which is represented to be a Schedule IV drug, is
required by the FDA to be identified under 21 CFR 1308.13 as a Schedule III
drug, then the parties shall meet to determine the changes to be required in the
manufacturing facilities to enable BOEHRINGER to manufacture and/or store the
PRODUCT. The additional COSTS, if any, associated with a change in Schedule
shall be identified by BOEHRINGER. BOEHRINGER may upon written notice terminate
this Agreement unless INTERNEURON agrees to pay to BOEHRINGER the additional
COSTS required to enable BOEHRINGER to manufacture and/or store such Schedule
III drug. Notwithstanding anything to the contrary, BOEHRINGER shall not be
required or obligated to alter its facilities to manufacture or store Schedule I
or II drugs in the event that the PRODUCT is required to be listed as a Schedule
I or II drug.
3.8 Upon the expiry, termination or cancellation of this Agreement by
either party, for any reason other than BOEHRINGER's breach, INTERNEURON shall
purchase from BOEHRINGER all remaining PRODUCT which was ordered by INTERNEURON
at the price then in effect or in the case of work-in-process at BOEHRINGER's
COST. Ingredients (other than the ACTIVE INGREDIENT) and any packaging and/or
labeling components which are used to manufacture the PRODUCT shall be purchased
by INTERNEURON at BOEHRINGER's COST. The foregoing, as well as any ACTIVE
INGREDIENT, shall be shipped to INTERNEURON, or its designee F.O.B. BOEHRINGER's
warehouse in Danbury, Connecticut. INTERNEURON shall also be responsible for
reimbursing BOEHRINGER for any actual out-of-pocket costs incurred by BOEHRINGER
as the result of binding purchase commitments it has made with respect to the
PRODUCT, but which BOEHRINGER cannot terminate prior to the termination or
cancellation of the Agreement. Notwithstanding the foregoing, BOEHRINGER shall
purchase from INTERNEURON such quantities of packaging components and /or
ingredients that it can use itself at its Danbury, Connecticut manufacturing
facility.
4. PERFORMANCE
4
<PAGE>
4.1 INTERNEURON shall supply BOEHRINGER with copies of the chemical,
manufacturing control and approved labeling sections of the NDA and any
amendments thereto, which shall be identified as SPECIFICATIONS and attached as
Exhibit A. INTERNEURON shall cooperate fully with BOEHRINGER in providing
technical assistance and associated services to enable BOEHRINGER to produce the
PRODUCT, labeling components and packaging components in conformity with the
SPECIFICATIONS. BOEHRINGER will manufacture PRODUCT in accordance with FDA
cGMP's. Any process deviations, associated with manufacturing , packaging,
labeling or testing the PRODUCT will be reported by BOEHRINGER to INTERNEURON.
4.2 Except for the ACTIVE INGREDIENT, and finished camera ready art for
all labeling, which will be provided by or on behalf of INTERNEURON, BOEHRINGER
shall supply all other ingredients and all packaging and labeling components as
set forth in the SPECIFICATIONS. INTERNEURON shall also advise BOEHRINGER of the
identity of the PRODUCT's distributor so that the labeling components are
properly prepared.
4.3 The ACTIVE INGREDIENT required by BOEHRINGER for the manufacture of
PRODUCT will be supplied by or on behalf of INTERNEURON at no charge, in lot
size quantities as determined by the manufacturer of the ACTIVE INGREDIENT.
4.4 With respect to the ACTIVE INGREDIENT, INTERNEURON shall provide to
BOEHRINGER a copy of any Supplement to the NDA, as submitted to the FDA and the
changes thereto. In the event BOEHRINGER considers such change(s) may affect its
manufacture of the PRODUCT, BOEHRINGER may run such additional validation
testing as both BOEHRINGER and INTERNEURON deem necessary, the COST of such
additional testing shall be billed to and paid for by INTERNEURON.
4.5 INTERNEURON, or the ACTIVE INGREDIENT supplier shall test or cause
to be tested the ACTIVE INGREDIENT prior to delivery to BOEHRINGER. A written
certificate of analysis shall be sent to BOEHRINGER by INTERNEURON with the
shipment.
4.6 Upon receipt of the ACTIVE INGREDIENT in bulk form, BOEHRINGER
shall inspect such ACTIVE INGREDIENT and assay samples thereof in accordance
with the same monograph procedures provided by and used by INTERNEURON or the
ACTIVE INGREDIENT supplier, attached as Exhibit C and as modified from time to
time. BOEHRINGER shall notify INTERNEURON within twenty-eight (28) business days
of receipt of any shipment of ACTIVE INGREDIENT which does not meet monograph
specifications and shall cooperate with INTERNEURON or the ACTIVE INGREDIENT
supplier in verifying the non-conformity of such ACTIVE INGREDIENT.
4.7 Any questions raised by BOEHRINGER with respect to the ACTIVE
INGREDIENT or the certificate of analysis shall be directed to INTERNEURON, who
shall use its best efforts to quickly answer such questions and/or investigate
the cause of any non-conformity. BOEHRINGER's COSTS for testing any
non-conforming ACTIVE INGREDIENT and for returning it to INTERNEURON or the
supplier of the ACTIVE INGREDIENT, shall be paid by INTERNEURON. Except as
otherwise set forth herein, upon
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delivery to the carrier, BOEHRINGER shall have no liability with respect to the
non-conforming ACTIVE INGREDIENT.
4.8 Failure of BOEHRINGER to give written notice to INTERNEURON within
twenty-eight (28) business days of receipt that any shipment of ACTIVE
INGREDIENT does not meet SPECIFICATIONS shall constitute the presumption that
such ACTIVE INGREDIENT does meet SPECIFICATIONS. Notwithstanding any other
provision of this Agreement, BOEHRINGER shall not be liable for losses of ACTIVE
INGREDIENT or PRODUCT caused by the failure of ACTIVE INGREDIENT to meet
SPECIFICATIONS if such failure could not have been detected by BOEHRINGER at the
time of delivery or if the ACTIVE INGREDIENT was produced following a route of
synthesis different than the route of synthesis described in the PRODUCT's NDA.
4.9 BOEHRINGER agrees that it will use the ACTIVE INGREDIENT only for
the purpose of manufacturing PRODUCT for INTERNEURON. INTERNEURON or its
designee shall at all times have sole title to all ACTIVE INGREDIENT and to
finished camera ready art for labeling supplied by INTERNEURON or its designee
to BOEHRINGER hereunder. All ACTIVE INGREDIENT, and any other materials supplied
by INTERNEURON or its designee and PRODUCT manufactured hereunder shall be
clearly identified as the property of INTERNEURON. Upon the termination or
expiry of this Agreement, the ACTIVE INGREDIENT and other materials supplied by
INTERNEURON or its designee remaining in the possession of BOEHRINGER which have
not been manufactured and packaged as PRODUCT shall be returned to INTERNEURON
or its designee pursuant to Paragraph 3.8.
4.10 INTERNEURON shall arrange and pay for transportation and transit
insurance for the shipment of the ACTIVE INGREDIENT to BOEHRINGER's facility in
Connecticut and its return to INTERNEURON or its designee, if necessary.
INTERNEURON will cooperate with BOEHRINGER so that each shipment of the ACTIVE
INGREDIENT shall arrive at BOEHRINGER's facility not more than one hundred
eighty (180) days, but at least ninety (90) days prior to its planned use (based
upon INTERNEURON's forecast) by BOEHRINGER.
4.11 The parties agree, that except as otherwise provided in Paragraphs
4.8, 4.13, 14.2 and this Paragraph, BOEHRINGER shall not be liable to
INTERNEURON for any loss, damage, or destruction of the ACTIVE INGREDIENT.
During the term of this Agreement, BOEHRINGER shall maintain insurance against
the risk of damage to or loss of ACTIVE INGREDIENT and other materials supplied
by INTERNEURON or its designee hereunder and PRODUCT manufactured by BOEHRINGER.
BOEHRINGER's insurance policy shall include INTERNEURON as an additional
insured. BOEHRINGER shall furnish INTERNEURON, at its request, with
certification of insurance showing the above coverage, signed by an authorized
agent of the insurance company.
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The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
4.12 BOEHRINGER shall keep appropriate and complete records to monitor
inventory levels and utilization of the ACTIVE INGREDIENT, and materials
provided by INTERNEURON or its designee, and the PRODUCT. Copies of such reports
shall be forwarded to INTERNEURON within twenty (20) days of the end of each
calendar quarter or more frequently as requested by INTERNEURON, but in no event
more than once per month. INTERNEURON or its designee shall be given access to
BOEHRINGER's facilities to visually inspect the ACTIVE INGREDIENT and any
inventories of materials it provides to BOEHRINGER as set forth in Paragraph
13.1.
4.13 In manufacturing PRODUCT and in conducting quality control tests
some losses of ACTIVE INGREDIENT are considered inevitable and expected. Losses
of ACTIVE INGREDIENT in excess of five (5%) percent of the amount of ACTIVE
INGREDIENT used annually during the manufacture of the PRODUCT or in conducting
quality control tests is considered to be excessive. BOEHRINGER shall take all
reasonable steps to minimize ACTIVE INGREDIENT losses. BOEHRINGER shall provide
to INTERNEURON an inventory reconciliation report for each lot of ACTIVE
INGREDIENT. Such report shall be forwarded to INTERNEURON within thirty (30)
days after each lot of ACTIVE INGREDIENT is completely utilized. BOEHRINGER
shall reimburse INTERNEURON, or issue a credit to INTERNEURON, offsetable within
sixty (60) days of the end of a calendar year for any loss of the ACTIVE
INGREDIENT in the actual manufacturing/testing process, which is in excess of
five (5%) percent of the amount of ACTIVE INGREDIENT required to manufacture the
number of BATCHES of PRODUCT delivered to INTERNEURON or its designee during
such calendar year. For the purposes of this paragraph, the ACTIVE INGREDIENT
shall be valued at the lowest cost available to INTERNEURON, (presently
[******]/kg.) .
4.14 BOEHRINGER agrees that, during the term of this Agreement and for
three (3) years following termination, it will not manufacture the PRODUCT for,
nor sell the PRODUCT to, any person other than INTERNEURON, (provided
INTERNEURON or its designee, is still actively marketing or promoting the
PRODUCT). BOEHRINGER recognizes that the confidentiality obligations as set
forth in Paragraph 10 survives the expiry or termination of this Agreement.
4.15 BOEHRINGER shall test and release the PRODUCT prior to shipment to
INTERNEURON or its designee. The number and location of shipping point(s), shall
be agreed upon by the parties, but in no event shall the number of shipping
points exceed eight (8). BOEHRINGER shall be under no obligation to ship PRODUCT
to any shipping points in quantities that do not constitute full pallet load(s)
of each package size.
4.16 INTERNEURON or its designee may test or cause to be tested the
PRODUCT after receipt. If, within forty-six (46) calendar days after receipt of
the PRODUCT by INTERNEURON or its designee, INTERNEURON notifies BOEHRINGER in
writing that the PRODUCT does not meet SPECIFICATIONS, BOEHRINGER shall with
reasonable promptness replace all such non-conforming PRODUCT, with PRODUCT
meeting SPECIFICATIONS at no cost to INTERNEURON. BOEHRINGER shall bear freight,
tax, insurance and any actual out-of-pocket cost incurred by INTERNEURON in
transporting such replacement PRODUCT to one of INTERNEURON's eight (8)
designated shipping points.
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The parties acknowledge that BOEHRINGER shall not be responsible for any loss,
costs or claims associated with such non-conforming PRODUCT, if INTERNEURON or
its designee have shipped PRODUCT to their customers either prior to
ascertaining the results of any pre- release testing performed by INTERNEURON
and/or its designee or if INTERNEURON or its designee has negligently performed
such test. Notwithstanding the foregoing, it is understood and agreed by the
parties that INTERNEURON or its designee shall have no obligation to test each
batch of the PRODUCT provided to it by BOEHRINGER. Notification by INTERNEURON
to BOEHRINGER of non-conforming PRODUCT shall indicate the SPECIFICATION claimed
to be unmet and the test procedure used in making this conclusion.
Non-conforming PRODUCT shall, upon mutual agreement by BOEHRINGER and
INTERNEURON and at BOEHRINGER's sole expense, either (i) be returned to
BOEHRINGER within a reasonable period of time and relabelled or reworked as
permitted in the NDA or if permitted by the FDA or (ii) destroyed. A credit
shall be issued by BOEHRINGER within thirty (30) days of agreement that the
PRODUCT is non-conforming or such determination of non- conformance is made by
an independent testing laboratory. Such credit shall include the cost of any
ACTIVE INGREDIENT provided to BOEHRINGER by INTERNEURON or its designee which
was destroyed or otherwise lost in connection with such non-conforming PRODUCT.
INTERNEURON's or its designee's failure to notify BOEHRINGER of a failure to
meet SPECIFICATIONS within forty-six (46) calendar days after INTERNEURON's
receipt of PRODUCT shall constitute irrevocable acceptance of such PRODUCT by
INTERNEURON.
If the analysis or assay of a sample of the PRODUCT performed by
either party differs from the other party's analysis or assay of its sample from
the same shipment or BATCH, the parties shall conduct a joint investigation to
determine whether the PRODUCT met SPECIFICATIONS and the cause of the PRODUCT
not meeting SPECIFICATIONS.
4.17 Either of the parties hereunder shall have the right to request
changes to the SPECIFICATIONS. Recommendations to change any SPECIFICATIONS
shall be in writing. No change in the SPECIFICATIONS shall be implemented by
BOEHRINGER, whether requested by INTERNEURON or requested or required by any
Governmental Agency, until the parties have agreed in writing to such change and
the implementation date of such change. The COSTS associated with any changes to
the SPECIFICATIONS requested by INTERNEURON shall be paid by INTERNEURON and any
savings shall be credited to INTERNEURON.
4.18 Inventories of PRODUCT, ingredients (other than ACTIVE
INGREDIENT), packaging and labeling components, and in-process work which cannot
be used by BOEHRINGER as the result of a change in the SPECIFICATIONS or as the
result of the termination or expiration of this Agreement shall be identified by
BOEHRINGER and purchased by INTERNEURON from BOEHRINGER at BOEHRINGER's direct,
out-of-pocket cost. BOEHRINGER agrees to maintain inventories at levels
consistent with its customary business policy.
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4.19 BOEHRINGER shall promptly notify INTERNEURON of any problems or
unusual production situations which have the potential to adversely affect
production of the PRODUCT, or its timely delivery to INTERNEURON or its
distributor. INTERNEURON shall promptly notify BOEHRINGER of any problems which
have the potential to affect INTERNEURON's obligation to deliver ACTIVE
INGREDIENT to BOEHRINGER.
4.20 In the event BOEHRINGER shall be unable to manufacture or have
manufactured and deliver PRODUCT in sufficient quantities to satisfy
INTERNEURON's forecasted requirements, (due to any cause, except an act or
omission of INTERNEURON or its designee), and such inability shall continue or
is projected to persist for a period in excess of ninety (90) days, INTERNEURON
may manufacture the PRODUCT, or have the PRODUCT manufactured by a third party,
during the continuation of such period of inability to manufacture. BOEHRINGER
shall inform INTERNEURON of the expected duration of its inability to
manufacture PRODUCT and shall keep INTERNEURON informed on a timely basis of
developments during any such period of time. The parties shall cooperate to
expedite the scheduling of the resumption of manufacture of PRODUCT by
BOEHRINGER when any such inability has been alleviated.
4.21 INTERNEURON shall have the right to qualify a second source of
supply at any time during the term of this Agreement. The PRODUCT produced by
such second source during the process of validating the second source, and/or
thereafter during the term of this Agreement, may be sold by INTERNEURON itself
or through its distributor in the United States without being considered a
breach of this Agreement, provided, however, that (a) INTERNEURON may obtain
from such second source an amount of PRODUCT equal to a maximum of ten percent
(10%) of any amount of the PRODUCT produced by BOEHRINGER for so long as
BOEHRINGER's annual production amount of the PRODUCT supplied to INTERNEURON in
such calendar year is less than 113 million capsules of PRODUCT; and (b) if
BOEHRINGER's annual production amount of PRODUCT supplied to INTERNEURON is
greater than 113 million capsules of PRODUCT, INTERNEURON shall have the right
to obtain all or any part of its requirements of the PRODUCT in excess of 113
million capsules of PRODUCT from such second source.
4.22 BOEHRINGER shall initiate and maintain a product stability program
according to the stated commitment described in INTERNEURON's NDA. Any results
not meeting the SPECIFICATIONS will be reported to INTERNEURON within
twenty-four (24) hours.
5. ADVERSE DRUG AND PRODUCT COMPLAINT REPORTS
5.1 INTERNEURON or its designee shall be responsible for reporting to
the FDA, if required, any adverse drug experiences associated with the PRODUCT
and for modifying the PRODUCT's labeling if necessary. On a quarterly basis, for
the first contract year and annually thereafter, BOEHRINGER shall be provided
with a copy of all adverse drug reports that have been submitted to the FDA by
INTERNEURON.
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5.2 If BOEHRINGER receives any reports of adverse drug experience
associated with the PRODUCT, or other complaints about the PRODUCT, BOEHRINGER
shall provide INTERNEURON with a copy of such report(s) within three (3)
business days of the receipt of same, except that reports of serious injury or
death shall be reported by BOEHRINGER within two (2) business days, with a
written report to follow promptly thereafter. INTERNEURON or its designee shall
be responsible for investigating such reports, for reporting them to the FDA, or
other Governmental Agency, if necessary, and for corresponding with the
complainant. BOEHRINGER shall cooperate fully with INTERNEURON or its
distributor to help INTERNEURON investigate adverse events or product complaints
involving the manufacture of the PRODUCT, whether initially reported to
BOEHRINGER or INTERNEURON, but BOEHRINGER shall not be required to perform any
test or analysis that would not customarily be performed by BOEHRINGER had
BOEHRINGER been the NDA holder. The COST of any testing undertaken by BOEHRINGER
at INTERNEURON's request shall be borne by INTERNEURON.
6. ORDER PROCEDURE
6.1 INTERNEURON agrees to purchase the PRODUCT in production BATCH
quantities or multiples thereof.
6.2 PRODUCT shall be ordered on INTERNEURON or its designees' standard
purchase order forms (the "Purchase Order").
6.3 The only function of the Purchase Order is to set forth the
quantities of PRODUCT desired by package size and the desired delivery dates for
the quantity of PRODUCT ordered and destination of the PRODUCT. Within five (5)
business days, BOEHRINGER will either acknowledge receipt of INTERNEURON's
Purchase Order on BOEHRINGER's standard acknowledgment form, or contact
INTERNEURON about BOEHRINGER's ability to supply quantities of PRODUCT in excess
of the forecast, and /or alternative ship dates which shall be agreed to in
writing using the purchase order form and acknowledgment form. Except as
otherwise set forth above, the only function of BOEHRINGER's acknowledgment form
is to acknowledge receipt of INTERNEURON's Purchase Order. All other terms and
conditions of either the Purchase Orders or the acknowledgment forms are void
and of no effect, and the terms and conditions of this Agreement shall control.
6.4 A twelve (12) month rolling forecast of purchases of the PRODUCT,
including desired delivery dates, shall be submitted to BOEHRINGER every month
during the term of this Agreement. Except for the initial order, the first three
(3) months of each forecast shall be a firm order by INTERNEURON, against which
BOEHRINGER is authorized to institute production and INTERNEURON is authorized
to give shipping orders. Together with the issuance of INTERNEURON's next
forecast, INTERNEURON
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shall forward to BOEHRINGER a new purchase order for the new month of the firm
order requirement. INTERNEURON will exercise reasonable efforts to level load
its production requirements in recognition of BOEHRINGER's finite capacity and
the lead times necessary for production. Except for the quantities of PRODUCT
ordered for the LAUNCH, BOEHRINGER will exercise reasonable efforts to ship the
quantities ordered, including up to twenty-five (25%) percent in excess of the
forecast, within ninety (90) days of receipt of INTERNEURON's Purchase Orders,
and within one hundred eighty (180) days for orders for those amounts which are
in excess of twenty-five (25%) percent of the forecast. Notwithstanding the
foregoing and considering BOEHRINGER's required ninety (90) day lead time for
production, INTERNEURON shall not submit orders for PRODUCT which shall require
production by BOEHRINGER after December 31, 1998.
6.5 The parties acknowledge that as of the date of this Agreement,
BOEHRINGER's encapsulation capacity working one(1) shift per day is at 2.4M
capsules per week. It is agreed by the parties that BOEHRINGER's production of
the PRODUCT is not limited to one shift per day. Notwithstanding the foregoing,
BOEHRINGER shall be under no obligation to fill orders in excess of 226 million
capsules per year.
6.6 Except for Product manufactured for LAUNCH, PRODUCT manufactured by
BOEHRINGER shall not be held in bulk or packaged and labeled form for greater
than six (6) months prior to shipment to INTERNEURON or its designee.
7. PAYMENTS
7.1 BOEHRINGER agrees to sell and INTERNEURON agrees to purchase the
PRODUCT manufactured by BOEHRINGER at the prices set forth in Exhibit C attached
hereto and made a part hereof, F.O.B. Danbury, Connecticut. PRODUCT produced
pursuant to INTERNEURON's Purchase Order(s) which is manufactured on an
accelerated basis (delivery requested by INTERNEURON or its designee and
delivered in less than one hundred twenty (120) days after receipt of components
which are to be provided by INTERNEURON), will be priced to reflect a 10%
premium on delivery price for such effort. All PRODUCT shall be invoiced at the
time BOEHRINGER releases the PRODUCT. Payment terms are net 30 days. All
payments to BOEHRINGER shall be by wire transfer to BOEHRINGER's account No.
68403, The Northern Trust Company, Chicago, Illinois, ABA # 071000152.
7.2 The parties agree that the purchase prices set forth in Exhibit D
shall remain in effect through December 31, 1995 and the prices set forth in
Exhibit D shall remain in effect through December 31, 1996. Thereafter,
BOEHRINGER shall notify INTERNEURON by November 30 of each year during the term
of the Agreement and the prices for the subsequent year shall be increased or
decreased annually on all orders for delivery after January 1 to reflect any
increase or decrease in COSTS incurred by BOEHRINGER in purchasing the
ingredients of the PRODUCT, and/or the packaging and/or labeling components and
labor and/or overhead for the next calendar year but in no event shall any
annual price increase exceed seven (7%) percent, except if there is a change in
the SPECIFICATIONS as set forth in Paragraph 4.17. The elements that constitute
overhead are set forth in Exhibit B which if changed pursuant to a change in
BOEHRINGER's policy, shall be applied to all parties for whom BOEHRINGER is
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providing third party manufacturing services. In addition to any price increase
as set forth above, in the event that annual production quantities are in excess
of 113 million capsules in any twelve(12) month period, the cost of PRODUCT in
excess of 113 million during the remainder of such twelve (12) month period
shall be increased by two (2%) percent ; provided, however, that BOEHRINGER
offset any such price increases by amounts saved by BOEHRINGER due to economics
of scale resulting from such increased production quantities.
7.3 During the Term of this Agreement, INTERNEURON shall have the right
to have a certified public accounting firm to which BOEHRINGER has no reasonable
objection, examine the relevant books and records of BOEHRINGER, and shall
certify to INTERNEURON that BOEHRINGER's calculation of costs of production of
the PRODUCT was made in accordance with generally accepted accounting
principles. The cost of such review is to be paid for by INTERNEURON, unless the
certified public accounting firm cannot make the foregoing certification, in
which case the cost of the audit shall be paid by BOEHRINGER.
8. LABELS, LABELING
8.1 INTERNEURON shall specify the trade name, tradedress, trademark and
the name of the distributor which will appear on the label, and package inserts
identifying the PRODUCT. INTERNEURON or its designee will supply BOEHRINGER with
finished camera art for all labeling. INTERNEURON will also specify the exact
wording which is to appear on all labels and package inserts. No labels or
labeling shall be used by BOEHRINGER which have not first been approved by
INTERNEURON.
8.2 BOEHRINGER shall have responsibility for ordering and purchasing
all inactive ingredients, packaging components and labeling components pursuant
to the NDA and SPECIFICATIONS.
9. TRADEMARKS
9.1 The trademark(s) selected by INTERNEURON for use with the PRODUCT
shall be those which have been duly licensed to INTERNEURON or its designee and
to which INTERNEURON has the right to permit BOEHRINGER to use for purposes of
performing this Agreement. BOEHRINGER shall not pay any of the expenses incurred
in either securing registration for and maintaining any trademark to be used by
INTERNEURON.
9.2 BOEHRINGER recognizes and agrees that it will have no right in or
to the said trademark(s), except as otherwise provided in this Agreement.
10. CONFIDENTIALITY
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10.1 Each party undertakes to keep secret and confidential and not to
disclose to any third party, except as it is necessary in carrying out the
purposes of this Agreement, during the term of this Agreement and for a period
of five (5) years thereafter, any information, data or know-how disclosed to it
by the other party or otherwise pursuant to this agreement.
10.2 The confidential obligations of this article shall not apply to:
a. information, data and know-how which at the time of
disclosure is in the public domain or publicly known
or available;
b. information, data and know-how which, after
disclosure, becomes part of the public domain or
publicly known or available by publication or
otherwise, except by breach of this Agreement by the
receiving party.
c. information, data and know-how which the receiving
party can establish was in its possession at the time
of disclosure by the other party, or was received in
good faith from a source other than the other party.
d. information, data or know-how which the receiver derives
independently of such disclosure; or
e. information, data, or know-how which must be
disclosed as the result of judicial or administrative
process or other requirements of law. The party being
compelled to disclose, shall provide the other with
as much notice as it reasonably can under the
circumstances, so that the party not being compelled
may, at its option, seek an appropriate order.
11. WARRANTIES
11.1 BOEHRINGER represents and warrants to INTERNEURON as follows:
a. The PRODUCT at the time of delivery to carrier for
shipment shall conform to the PRODUCT SPECIFICATIONS and
be manufactured, tested and stored in accordance with the
SPECIFICATIONS and with FDA's cGMP's DEA regulations, if
applicable, and other applicable federal, state and local
laws and regulations. Any failure of the PRODUCT to meet
the foregoing which is due to a defect in the
SPECIFICATIONS, technical material or other supplies
(including the ACTIVE INGREDIENT and camera ready art)
provided by INTERNEURON to BOEHRINGER shall be excluded
from BOEHRINGER's representations and warranties
hereunder.
b. BOEHRINGER has the right to enter into this Agreement
and to undertake the obligations set forth herein.
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c. AT THE TIME OF DELIVERY TO THE CARRIER, THE PRODUCT
SHALL NOT AS THE RESULT OF ITS UNDERTAKINGS OR ITS
FAILURE TO PERFORM ITS UNDERTAKINGS AS SET FORTH IN
THIS AGREEMENT (I) BE ADULTERATED OR MISBRANDED
WITHIN THE MEANING OF SECTION 404 OR 505 OF THE
FEDERAL FOOD, DRUG AND COSMETIC ACT, ("THE ACT") AS
AMENDED, AND THE REGULATIONS ISSUED THEREUNDER OR
WITHIN THE MEANING OF ANY APPLICABLE STATE OR
LOCAL LAW, THE ADULTERATION AND MISBRANDING
PROVISIONS OF WHICH ARE SIMILAR TO THE FEDERAL ACT,
OR (ii) BE PROHIBITED FROM BEING INTRODUCED INTO
INTERSTATE COMMERCE. EXCEPT AS SET FORTH IN
PARAGRAPH 11.1, BOEHRINGER MAKES NO OTHER
WARRANTIES OF ANY KIND WHATEVER, EXPRESS OR
IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, WHICH
WARRANTIES ARE HEREBY DISCLAIMED BY BOEHRINGER
AND EXCLUDED FROM THIS AGREEMENT.
11.2 INTERNEURON represents and warrants to BOEHRINGER as
follows:
a. SPECIFICATIONS, label copy, information and materials
supplied to BOEHRINGER shall be true, accurate and
complete and if applicable, be in compliance with the
PRODUCT's NDA and applicable FDA and DEA regulations
and other applicable federal, state and local laws
and regulations.
b. INTERNEURON will use its best efforts to maintain the
PRODUCT's NDA and to provide ACTIVE INGREDIENT
produced following the validated route of synthesis
filed in compliance with cGMP regulations and the
PRODUCT's NDA and to identify any changes to the
validated manufacturing process, specifications, raw
materials, sources of raw materials or the analytical
method for the manufacture and testing of the ACTIVE
INGREDIENT.
12. INDEMNITY
12.1 INTERNEURON shall defend, indemnify, protect, save and hold
harmless BOEHRINGER and each of its directors, and officers, from all claims,
demands, suits, or proceedings for damages, costs (including reasonable
attorney's fees), expenses and losses which arise (1) from any claim or charge
by a third party for trademark or patent infringement arising out of or in
connection with the promotion, marketing, distribution or sale of the
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PRODUCT or of the use and manufacture of the PRODUCT in conformity with the NDA
or (2) as the result of any breach of this Agreement by INTERNEURON or (3) out
of any claim for product liability arising from the use of the PRODUCT;
provided, however, that BOEHRINGER will not be indemnified under this Paragraph
for any claims arising in whole or in part as the result of the manufacture and
packaging of the PRODUCT which fails to conform to the SPECIFICATIONS or is in
violation of any of the warranties set forth in Article 11 or (4) from any claim
or charge by INTERNEURON's distributor or designees, or as the result of any act
of a INTERNEURON distributor or designee resulting from their undertakings or
INTERNEURON's under this Agreement.
12.2 BOEHRINGER will defend, indemnify, protect, save and hold harmless
INTERNEURON and each of its directors, and officers from all claims, demands,
suits or proceeding for damages and costs (including reasonable attorney's fees)
expenses and losses which arise as the result of BOEHRINGER's failure to provide
the PRODUCT in conformity with the SPECIFICATIONS, or breach of this Agreement,
or as the result of a violation of its warranties as set forth in Article 11.
12.3 Except as otherwise provided in Paragraph 4.16, BOEHRINGER shall
reimburse INTERNEURON for its expense in the event of a recall, stop sale or
governmental action or directive, resulting solely from a breach of this
Agreement by BOEHRINGER, to the extent of providing a quantity of conforming
PRODUCT to INTERNEURON sufficient to replace that quantity of PRODUCT that was
recalled or the subject of such stop sale, governmental action or directive
without charge to INTERNEURON and with all transportation charges prepaid as
well as for necessary and proven out of pocket expenses incurred in connection
with such recall of any PRODUCT.
12.4 In the event of any claim under Paragraph 12.1, 12.2 or 12.3
hereof, the party claiming the right to indemnity (the "Claimant") shall
promptly notify the indemnifying party (the "Indemnitor") in writing of such
claim. The notice shall describe such claim in reasonable detail.
a. Indemnitor shall have twenty (20) days after receipt of such notice
to decide whether it will undertake, conduct and control, through
counsel of its own choosing and at its own expense, the settlement or
defense of the tendered claim; provided, however, that Claimant shall
have the right to consent to such counsel, which consent shall not be
unreasonably withheld. Notwithstanding anything in this Agreement,
Claimant shall have the right to employ its own counsel at its own
expense if Claimant deems such action necessary or advisable to fully
protect its interests.
b. Indemnitor shall not settle or compromise any action, or consent to
the entry of any judgment in any tendered claim, without the written
consent of Claimant, which shall not be unreasonably withheld.
Indemnitor's obligation to defend and indemnify Claimant shall survive
any settlement, compromise or judgment that does not include as an
unconditional term thereof the delivery by the underlying claimant or
plaintiff to Claimant of a duly executed written release of Claimant
from all liability in respect to such action, which release shall be
reasonably satisfactory in form and substance to Claimant's counsel.
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c. In the event Indemnitor does not notify Claimant in writing within
twenty (20) days after receipt of notice of the tendered claim that it
elects to undertake its defense, Claimant shall have the right to
contest, settle or compromise such claim, but shall not thereby waive
any right to indemnity from Indemnitor for such claim. Notwithstanding
the foregoing, Indemnitor shall have the right to assume the defense of
such claim with counsel reasonably satisfactory to Claimant at any time
prior to settlement, compromise or final determination.
d. Claimant and Indemnitor shall cooperate fully in the defense of any
claim for which indemnity is sought pursuant to this Agreement
including providing each other with reasonable access to their
employees during regular business hours (including as witnesses) and
other reasonably necessary information. Claimant to be reimbursed for
any out-of-pocket expense resulting from such cooperation.
12.5 Effective throughout the term of this Agreement and thereafter,
for a period of not less than six (6) years, the parties shall each carry and
maintain in full force and effect insurance, or maintain adequate self-insurance
reserves, insuring themselves for Commercial General Liability, including
Product Liability. In any such insurance policy from an insurance company, each
party shall include the other as an additional insured thereon, said insurance
policies shall be obtained from an insurance company having a Best's rating of
B+, Class IV or higher. Commercial General Liability insurance or adequate
reserves providing coverage for liability of not less than $25,000,000 Combined
Single Limit, Bodily Injury and Property Damages shall be secured as of the date
of the first commercial shipment of PRODUCT. Each party shall furnish the other
with certificates of said Commercial General Liability and Product Liability
insurance policy naming the other as an additional insured thereon, which shall
provide to each party that thirty (30) days prior written notice of cancellation
or material changes in said insurance policies shall be given to such other
party. The indemnification obligations herein shall apply on a first dollar
basis without limitation or reduction due to any deductible or self-insured
retention which either party may have under their respective insurance coverage.
12.6 INTERNEURON shall reimburse BOEHRINGER for any provable damages
incurred by BOEHRINGER resulting from a recall, stop sale or governmental action
or direction resulting from a breach of this Agreement by INTERNEURON or its
designee or early termination, by INTERNEURON including termination pursuant to
Paragraph 3.2 or as the result of the removal of the PRODUCT from the market, or
the cessation of sale of the PRODUCT prior to the expiry date of this Agreement
resulting from a breach of the Agreement by INTERNEURON.
13. PRODUCTION FACILITY INSPECTION
16
<PAGE>
13.1 Appropriate representatives of INTERNEURON or its designee
(provided they have executed a confidentiality agreement) shall have the right,
as provided in Paragraph 4.12, to inspect those sections of BOEHRINGER's
manufacturing, laboratory, packaging and warehousing facilities used in the
manufacture, packaging, labeling storage, testing, shipping or receiving of the
PRODUCT or its components, and its manufacturing and production batch records,
upon forty-eight (48) hours notice and during regular business hours, provided
the PRODUCT or its components are actually in the foregoing areas at the time of
inspection.
13.2 With respect to PRODUCT supplied by it, BOEHRINGER shall be
responsible for all process and equipment validation required by the FDA and
shall take all steps necessary to pass government inspection by the FDA, DEA or
other GOVERNMENTAL AGENCY. BOEHRINGER shall also assist INTERNEURON in preparing
and updating any required regulatory submission and all other documents required
by the FDA for approval of the PRODUCT, including providing INTERNEURON with a
right of reference to any Drug Master File for the facility provided such
request is made on reasonable notice; BOEHRINGER has the capacity to provide
such assistance and BOEHRINGER is reasonably compensated for such assistance.
BOEHRINGER will make no amendment to such Drug Master File without notification
to INTERNEURON. BOEHRINGER shall maintain all appropriate original regulatory
documents retention samples and records relating to its responsibilities with
respect to the manufacturing of the PRODUCT according to cGMP's. Copies of the
PRODUCT's manufacturing and packaging batch records and certificates of analysis
will be provided to INTERNEURON and or its designee upon request.
13.3 In the event that BOEHRINGER's facilities are the subject of an
inspection by any duly authorized agency of the federal, state, local or any
foreign government and the inspection is specific for the PRODUCT, BOEHRINGER
shall thereafter notify INTERNEURON of such inspection within one (1) business
day and shall promptly thereafter provide to INTERNEURON a written summary of
findings as directly relates to the manufacture of the PRODUCT and corrective
action(s) taken or planned by BOEHRINGER. Any Form 483 comments related to the
PRODUCT shall be provided to INTERNEURON. Any response to such 483 comments
shall be provided to INTERNEURON.
13.4 In the event that INTERNEURON's facilities or the facilities of the
manufacturer of the ACTIVE INGREDIENT, are the subject of an inspection by any
duly authorized agency of the federal, state, local or any foreign government
and the inspection is specific for the ACTIVE INGREDIENT, INTERNEURON shall
notify BOEHRINGER of such inspection within one day from INTERNEURON's notice.
INTERNEURON shall thereafter use its best efforts to provide BOEHRINGER with any
information about such inspection which may effect the ACTIVE INGREDIENT or
BOEHRINGER's manufacture of the Product.
14. SAFETY; ACCIDENTS DURING TRANSPORTATION
14.1 INTERNEURON shall furnish or cause to be furnished BOEHRINGER
with
17
<PAGE>
material safety data sheets for ACTIVE INGREDIENT supplied by INTERNEURON or the
ACTIVE INGREDIENT supplier hereunder.
14.2 In the event of an accidental release of ACTIVE INGREDIENT or
PRODUCT, as between BOEHRINGER and INTERNEURON, responsibility for cleaning up
any spilled ACTIVE INGREDIENT or PRODUCT, disposing of same in accordance with
applicable laws and regulations and notifying appropriate authorities shall be
allocated as follows:
a. INTERNEURON shall have such responsibility with
respect to the ACTIVE INGREDIENT from the time it
leaves INTERNEURON or its designee's facility until
it arrives at BOEHRINGER's facilities in Danbury,
Connecticut.
b. INTERNEURON shall have such responsibility with
respect to PRODUCT from the time it is loaded aboard
transportation equipment or otherwise delivered at
the FOB Point for PRODUCT specified in Paragraph 7.1.
c. BOEHRINGER shall have such responsibility with
respect to the ACTIVE INGREDIENT, from the time it
arrives at the FOB Point for ACTIVE INGREDIENT
specified in Article 3.8; with respect to PRODUCT,
until such time as it is loaded aboard
transportation.
d. BOEHRINGER and INTERNEURON shall each advise each
other of any accidental spill or discharge of ACTIVE
INGREDIENT or PRODUCT in transit promptly after
learning of such spill or discharge.
15. SAFETY AND ENVIRONMENTAL
15.1 In performing services hereunder, BOEHRINGER shall:
a. not utilize INTERNEURON's SPECIFICATIONS and other technical
information to manufacture and/or package PRODUCT until a safe
procedure of operation has been established and mutually
agreed upon;
b. permit INTERNEURON or its designated representative to inspect
BOEHRINGER's facilities as provided in Paragraph 13.1 where
PRODUCT is manufactured, packaged, labeled, tested or stored
to evaluate BOEHRINGER's work practices; review BOEHRINGER's
compliance with applicable safety, health, and environmental
regulations and good manufacturing practices and procedures;
and evaluate BOEHRINGER's capability for responding
effectively to any spills or releases of hazardous materials
utilized or produced by
18
<PAGE>
BOEHRINGER in the manufacture or PRODUCT; INTERNEURON will
provide a copy of any such evaluations to BOEHRINGER;
c. except as otherwise provided for herein, report to
INTERNEURON, as soon as possible, all environmental accidents
related to the manufacture and/or packaging of the PRODUCT
which:
(1) result in personal injuries requiring more
than first aid treatment or
(2) result in illness and/or loss of consciousness; or
(3) result in property damage; or
(4) result in environmental damage; or
(5) any other accident which potentially could result in
serious consequences.
d. prior to commencement of manufacture and/or packaging
of PRODUCT using INTERNEURON's SPECIFICATIONS and other
technical information, and at least once during each
contract year, BOEHRINGER will permit INTERNEURON or its
designated representative to review BOEHRINGER's licenses
and permits relating to the facilities and operations
utilized by BOEHRINGER in the manufacture and/or
packaging of PRODUCT. Such review shall be conducted
during ordinary business hours, on mutually agreeable
dates; and
e. identify to INTERNEURON all haulers and disposal sites
utilized for disposal of waste material generated by
BOEHRINGER in connection with the manufacture and/or
packaging of PRODUCT and BOEHRINGER will permit, or cause
those with whom BOEHRINGER contracts for the disposal of
waste to permit, INTERNEURON or its designated
representative to visit all disposal sites for hazardous
waste as defined in 40 CFR 261, generated in connection
with the manufacture and/or packaging of PRODUCT.
16. GENERAL TERMS
16.1 This Agreement shall be governed and construed in
accordance with the laws of the State of Connecticut and any and all disputes
arising under or concerning this Agreement shall be before the Courts of the
State of Connecticut.
16.2 Any notice, required or permitted to be given under this
Agreement, shall be deemed sufficient if: sent prepaid through a nationally
recognized overnight courier service such as Federal Express, to the other party
to the address shown below or to such other address as either party may
designate pursuant to these provisions. Any notice sent pursuant to this
paragraph shall be deemed received one (1) business day after it is sent.
19
<PAGE>
If to BOEHRINGER:
President
Boehringer Ingelheim
Pharmaceuticals, Inc.
900 Ridgebury Road
Ridgefield, CT 06877
Copy to Corporate Counsel
If to INTERNEURON:
President
Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue
Lexington, MA 02173
Copy to Corporate Counsel
16.3 No liability shall result from delay in performance in
whole or in part if performance has been made impracticable by compliance in
good faith with any applicable or domestic governmental regulations or order
whether or not it later proves to be invalid, or by the occurrence of a
contingency the non- occurrence of which was a basic assumption on which this
Agreement was made, including, but not limited to, acts of God, fire, flood,
accident, riot, war, sabotage, strike, labor trouble or shortage, embargo. If
any such circumstances affect only a part of BOEHRINGER's capacity to perform,
BOEHRINGER shall have the right to allocate production and deliveries among all
of its customers and its own requirements based on their previous purchases over
the immediately proceeding twenty four (24) month period prior to such fire,
flood, etc. Quantities affected by this paragraph may, at the option of either
party, be eliminated from the Agreement without liability, but the Agreement
shall remain otherwise unaffected.
16.4 The failure of either INTERNEURON or BOEHRINGER to insist
on the strict performance of any provision or to take advantage of any right
hereunder shall not be construed as a waiver or any subsequent performance of
such provision or right.
16.5 The headings and captions contained herein are for
reference only and shall not constitute a substantive part of this Agreement.
16.6 The parties are and will remain at all times independent
contractors, and no agency, partnership, joint venture or employment
relationship exists between them.
16.7 This Agreement may not be assigned by any of the parties
without the prior written consent of the others (which consent shall not be
unreasonably withheld) except to an affiliate (meaning any business entity
controlled by, controlling or under common control with INTERNEURON or
BOEHRINGER. "Control" shall mean direct or indirect beneficial ownership of
forty percent (40%) or more of the voting stock or a forty percent (40%) or
greater interest in the income thereof) or in the case of sale or transfer of
all or substantially all of its assets or business by way of acquisition,
consolidation or merger.
16.8 If any provisions of this Agreement are held invalid or
unenforceable, by a Court or body of competent jurisdiction unless the
invalidity or unenforceability substantially frustrates the underlying intent
and sense of the remainder of the Agreement, such invalidity and
unenforceability shall not affect the validity or enforceability of any other
provisions of the Agreement except those where the invalidated or unenforceable
provisions comprise an integral part of, or are otherwise clearly inseparable
from, the intent and sense of the Agreement. In the event any provision is held
invalid or unenforceable, the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute for such invalid or
20
<PAGE>
unenforceable provision in light of the intent of this Agreement and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
16.9 This document contains the entire agreement between the
parties pertaining to its subject matters and shall not be altered or modified,
except in a writing signed by the party to be bound by such alteration or
modification.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
and year first written above.
BOEHRINGER INGELHEIM INTERNEURON PHARMACEUTICALS, INC.
PHARMACEUTICALS, INC.
BY: /s/ R.L. Charles BY: /s/ Dr. Glenn Cooper
--------------------- -------------------------
DATE: November 20, 1995 DATE: November 21, 1995
21
<PAGE>
EXHIBIT A
PRODUCT SPECIFICATIONS
<PAGE>
EXHIBIT B
ELEMENTS OF PRODUCTION OVERHEAD
The followingdepartments support the production process in the plant:
MATERIALS OVERHEAD:
* Production Purchasing
* Production Planning
* Raw Material Component Warehouse
* Packaging Material Control Labs
* Raw Material Control Labs
PRODUCTION OVERHEAD:
* Production Mechanical Services
* Production Staging
* Packaging Engineering
* Production Tech Support
* Sanitation
* Industrial Engineering
* Production Training
* Production Administration (excluding VP)
QUALITY CONTROL:
* Quality Assurance
* Quality Control Laboratories
* Quality Control Administration (excluding VP)
* GMP Compliance and Training
FACILITY COST:
* Depreciation
* Energy
* Insurance
* Property Taxes
* Engineering Services
* Security
Departments that are excluded and offered as contract services based on service
rendered:
* Production Technology
* Quality Control Technical Support
* Environmental Engineering
<PAGE>
EXHIBIT C
ACTIVE INGREDIENT SPECIFICATIONS
AND METHODS
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
SCHEDULE D
BIPI
DEXENFLURAMINE 15 MG
1996 DELIVERY PRICES
[******] [*****] [*****] [*****] [******]
[***] [***] [***] [******]
[******] [***] [***] [***] [***]
[******] [***] [***] [***] [***]
[********************************************************************]
[*****************************************************************]
Ex. 10.81
Walden Laboratories, Inc.
and
InterNutria, Inc.
and
Interneuron Pharmaceuticals, Inc.
ASSET PURCHASE AGREEMENT
November 14, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
1. Definitions..................................................... 1
2. Purchase and Sale of Assets..................................... 4
3. Confidentiality................................................. 5
4. Representations and Warranties of Seller;
Covenants of Seller............................................. 6
5. Representations and Warranties of Purchaser
and/or IPI; Covenants of Purchaser.............................. 11
6. Conditions Precedent to Closing................................. 12
7. Termination..................................................... 13
8. Competition..................................................... 14
9. Arbitration..................................................... 14
10. Assignment...................................................... 15
11. Payments, Notices and Other Communications...................... 16
12. Miscellaneous Provisions........................................ 17
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is made and entered into this 14th day of
November 1995, by and between WALDEN LABORATORIES, INC., a Delaware corporation
having an office at 375 Park Avenue, 15th Floor, New York, NY 10152 ("Seller"),
INTERNUTRIA, INC., a Delaware corporation having an office at One Ledgemont
Center, 99 Hayden Avenue, Suite 340, Lexington, MA 02173 ("Purchaser"), and
INTERNEURON PHARMACEUTICALS, INC., a Delaware corporation having an office at
One Ledgemont Center, 99 Hayden Avenue, Suite 340, Lexington, MA 02173 ("IPI").
W I T N E S S E T H
WHEREAS, Seller is the owner of the Assets and desires to and has the
right to sell, grant, transfer, convey, assign and deliver the Assets to
Purchaser in accordance with and subject to the conditions set forth in this
Agreement; and
WHEREAS, Purchaser desires to purchase, acquire and accept the Assets
from Seller in accordance with and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following words and phrases shall
have the following meanings:
1.1 "Assets" shall mean the Intellectual Property Rights and PMS
Product.
1.2 "Closing Date" shall mean the date on which all conditions
hereunder are satisfied, but no later than December 31, 1995.
1.3 "Common Stock" shall mean the common stock, par value $.001
per share, of Seller.
1.4 "Database" shall mean (i) the database of an estimated 10,000
people who participated in the seminars written and/or presented by Dr. J.
Wurtman and others entitled "Emotions, Overeating and the Brain," and (ii) any
scripts, workbooks or similar documents prepared for or related to, or
subsequent materials distributed in relation to either the Emotions, Overeating
and the Brain Seminar or the seminar written and presented by Dr. J. Wurtman and
others entitled the "Pre-Menstrual Syndrome Seminar."
1.5 "Disinterested Holders" shall mean holders of Common Stock of
Seller as listed in Appendix A.
1
<PAGE>
1.6 "Encumbrances" shall mean, to the extent applicable, all liens,
mortgages, security interests, charges, claims, leases, options, rights of first
refusal, easements, restrictions, rights-of-way or other similar encumbrances of
any nature whatsoever.
1.7 "Fair Market Value" shall mean the average of the closing sale
price of the Stock for the last twenty (20) trading days on which the Nasdaq
National Market is open for trading immediately prior to the date any payment of
Stock may be required pursuant to the terms of this Agreement or, if the Stock
is not traded on the Nasdaq National Market, the average of the closing bid and
asked prices as reported by Nasdaq, or if not traded on Nasdaq, as reported by
the National Quotation Bureau, Inc., for such 20 day period.
1.8 "First Installment" shall have the meaning set forth in Section
2.3 of this Agreement.
1.9 "Formula" shall mean the formulation of the PMS Product and any
and all materials, documents and supplies owned by Seller and which are
necessary and desirable to manufacture and develop the PMS Product.
1.10 "Installment" shall have the meaning set forth in Section 2.3
of this Agreement.
1.11 "Intellectual Property Rights" shall mean the Patent Rights,
Know-How, Formula and the Database.
1.12 "Know-How" shall mean any and all technical information,
expertise, knowledge and the like which relates to the PMS Product and Patent
Rights including, without limitation, all chemical, toxicological, clinical,
assay control, manufacturing data, marketing research and sales information and
any other information or designs used or useful for the development,
manufacture, packaging and/or marketing of the PMS Product.
1.13 "Myers" shall mean Dayne Myers, the former President and Chief
Executive Officer.
1.14 "Patent Rights" shall mean
(a) the United States and foreign patents and patent
applications listed in Appendix B; and
(b) the United States and foreign trademarks, service
marks, copyrights, packaging designs and tradenames,
and any registrations, applications and goodwill
pertaining thereto, of Seller relating to the PMS
Product.
1.15 "PMS Product" shall mean any product intended for use as an
over-the-counter nutritional, dietary, medicinal and/or elixorative food,
supplement or drug which is used or to be used by people afflicted with or
diagnosed as having pre-menstrual syndrome or similar symptoms or conditions
which was or is under development by Seller, including, without limitation, the
NutriFem PMS Product.
2
<PAGE>
1.16 "Purchase Price" shall have the meaning set forth in Section
2.3 of this Agreement.
1.17 "Preferred Holders" shall mean the holders of record of Preferred
Stock, as of the Closing Date, as listed in Appendix C.
1.18 "Preferred Stock" shall mean the Series A Convertible Preferred
Stock of Seller, par value $.01 per share.
1.19 "Record Date" shall mean the Closing Date.
1.20 "Registration Rights Agreement" shall mean the registration rights
agreement in the form set forth in Exhibit A, entered into on the Closing Date
by and between Seller, Purchaser and IPI.
1.21 "Sale" shall have the meaning set forth in Section 2.1 of this
Agreement.
1.22 "Second Installment" shall have the meaning set forth in
Section 2.3 of this Agreement
1.23 "Seller's Stockholders" shall mean the holders of Common Stock as
of the Record Date, as listed in Appendix D, together with the Preferred
Holders.
1.24 "Stock" shall mean the Common Stock, $.001 par value, of IPI.
1.25 "Dr. J. Wurtman" shall mean Dr. Judith Wurtman.
ARTICLE II - PURCHASE AND SALE OF ASSETS
2.1 Upon the terms and subject to the conditions of this Agreement and
the performance by the parties hereto of their respective obligations hereunder
Seller hereby agrees to sell, grant, transfer, convey, assign and deliver to
Purchaser, and Purchaser hereby agrees to purchase, acquire and accept from
Seller (such transactions being herein referred to as the "Sale") on the Closing
Date all of Seller's right, title and interest in and to the Assets, free and
clear of all Encumbrances.
2.2 The transfer of the Assets pursuant to Section 2.1 shall be
effected by such specific bills of sale, endorsements, assignments and other
instruments of transfer and conveyance delivered by Seller to Purchaser on the
Closing Date substantially in the form of Exhibits C and D hereto, sufficient to
vest in Purchaser good and marketable title to the Assets, free and clear of all
Encumbrances. Seller further covenants and agrees that it will, from and after
the Closing Date execute, acknowledge, and deliver such other instruments of
conveyance and transfer and take such other actions as Purchaser may reasonably
request, to sell, grant, transfer, convey, assign and deliver the Assets to
Purchaser including, without limitation, the filing of appropriate documents
transferring the assignment of the Patent Rights in form and substance
satisfactory to Seller, Purchaser and their respective counsel (the "Patent
Assignments). Seller agrees to execute a power of attorney in favor of Purchaser
with respect to the Patent Rights upon signing of this Agreement.
3
<PAGE>
2.3 (a) Upon the terms and subject to the conditions of this Agreement,
in consideration of the sale, grant, assignment, transfer, conveyance,
assignment and delivery of the Assets, Purchaser shall purchase, acquire and
accept the Assets from Seller. The aggregate purchase price is $2,400,000 (the
"Purchase Price") payable in accordance with Section 2.3(b).
(b) IPI shall pay the Purchase Price to Seller, which shall
consist of a payment to Seller (i) on the first anniversary of the Closing Date
(each payment herein referred to as an "Installment"), of such number of shares
of Stock having an aggregate Fair Market Value equal to $1,200,000 (the "First
Installment") and (ii) on the second anniversary of the Closing Date, of such
number of shares of Stock having a Fair Market Value equal to $1,200,000 (the
"Second Installment"); provided that if, at the time of payment of any
Installment, IPI has insufficient authorized Stock, then the portion of the
consideration that cannot be paid with Stock shall be paid by Purchaser in cash.
2.4 Contemporaneously with the Closing Date, Seller shall file with the
Secretary of State of the State of Delaware an amendment to its Certificate of
Incorporation, in the form attached hereto as Exhibit B (the "Certificate of
Amendment").
2.5 On the Closing Date, Seller shall deliver to Purchaser the
following:
(a) The instruments of transfer required pursuant to
Section 2.2;
(b) The Assets;
(c) Certificate dated the Closing Date of Seller
certifying that the representations and warranties of
Seller contained in this Agreement are true and
correct in all material respects at and as of the
Closing Date, except for representations and
warranties specifically relating to a time or times
other than the Closing Date, which shall be true and
correct in all material respects at such time or
times;
(d) Certificate dated the Closing Date of the Secretary
of Seller as to the resolutions of Seller's
Stockholders approving the Sale; and
(e) Certificate of the Secretary of State of the State
of Delaware certifying as to the filing of the
Certificate of Amendment.
and simultaneously with such deliveries, all such steps will be taken as may be
required to put Purchaser in actual possession and operating control of the
Assets.
2.6 On the Closing Date, IPI and Purchaser shall deliver to Seller a
certificate dated the Closing Date of Purchaser and IPI certifying that the
representations and warranties of IPI and Purchaser contained in this Agreement
are true and correct in all material respects at and as of the Closing Date.
4
<PAGE>
ARTICLE III - CONFIDENTIALITY
3.1 From and after the Closing Date each party shall keep confidential
and not disclose or use, for a period of three years from the date of this
Agreement, except in compliance with the provisions of this Agreement, any
information which is or comes into its possession and which is related to the
Assets. The foregoing obligation shall not apply to:
(a) any information which at the time of disclosure or
acquisition is part of the public knowledge or
literature, or thereafter becomes part of the public
knowledge or literature otherwise than by
unauthorized disclosure by the recipient;
(b) any disclosure of information to the United States
Food and Drug Administration or other relevant
governmental authorities for the purpose of complying
with regulatory requirements with respect to the
Assets;
(c) any information which at the time of disclosure or
acquisition was in the recipient's possession as
evidenced by its written records;
(d) any information which became available to the
recipient from another source not bound to secrecy
to the disclosing party with respect to such
information;
(e) disclosure by the recipient to third parties under
provisions of confidentiality similar to those
contained in this Agreement for the purposes of
development or marketing of the PMS Product;
(f) disclosure to investment bankers and to individuals
and organizations conducting due diligence with
respect to potential equity investments; and
(g) any disclosure of information required by applicable
law.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF SELLER; COVENANTS OF SELLER
4.1 Seller represents and warrants that Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to carry on its business as it is now
being conducted and to own the properties and assets it now owns. The copy of
the Certificate of Incorporation of Seller dated September 18, 1992 and amended
on October 26, 1992, heretofore delivered to Purchaser (the "Certificate of
Incorporation") is a complete and correct copy of such instrument as in effect
prior to the filing of the Certificate of Amendment.
4.2 Seller represents and warrants that Seller has full corporate power
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. All corporate acts and other proceedings required to be
taken by or on the part of Seller to authorize the execution, delivery and
consummation of this Agreement have been duly and properly taken. This Agreement
has been
5
<PAGE>
duly executed and delivered by Seller and constitutes the valid and binding
obligation of Seller enforceable against it in accordance with its terms except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally or by equitable principles
(whether considered in an action at law or in equity).
4.3 Seller represents and warrants that neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will violate any provision of the Certificate of Incorporation or By-laws
of Seller, or violate, or be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or cause the acceleration of the maturity of any debt or obligation pursuant
to, or result in the creation or imposition of any Encumbrance upon any property
or assets of Seller, including the Assets, under any indenture, note, agreement,
mortgage, lease or commitment to which Seller is a party or by which Seller is
bound, or to which the property of Seller is subject, or violate any statute or
law of any judgment, decree, order, regulation or rule of any court or
governmental authority.
4.4 Seller represents and warrants that as of or prior to the
Closing Date:
(a) Seller has solicited written consents in lieu of a
meeting of Seller's Stockholders for the purpose of
approving the Sale of the Assets;
(b) Seller's Board of Directors has recommended approval
and adoption by Seller's Stockholders of the Sale of
the Assets;
(c) Seller has obtained the requisite approval and
adoption of the Sale of the Assets by holders of:
(i) a majority of the shares of outstanding Preferred
Stock;
(ii) a majority of the shares of outstanding Common
Stock and Preferred Stock in the aggregate; and
(iii) a majority of the shares of the Disinterested
Holders of Common Stock and the holders of
Preferred Stock in the aggregate.
4.5 Seller represents and warrants that Seller has not and does not, as
of the Closing Date other than pursuant to this Agreement, or in connection with
the transactions contemplated hereby:
(a) Permitted or allowed the Assets to be subjected
to any Encumbrance;
(b) Have actual knowledge of any fact or event which
materially adversely affects the Assets;
(c) Sold, transferred, assigned, used, disposed, or
otherwise employed, or allowed any third party
other than Purchaser, IPI, and their respective
employees, agents,
6
<PAGE>
advisors and counsel to have access to, or provided
copies, with respect to Assets embodied in a tangible
medium, all or any part of the Assets;
(d) consented to the manufacture, use or sale of any of
the Assets by a third party, other than contract
manufacturing of the PMS Product used in human
trials, for which no Intellectual Property Rights
were transferred to such manufacturer; or
(e) Agreed or arranged, whether in writing or otherwise,
to take any action described in this Section.
4.6 Seller represents and warrants that there is no pending, or to the
best of its knowledge after due inquiry, threatened, action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission against or involving Seller
relating to the Assets or this Agreement or any action taken or to be taken by
Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby.
4.7 Seller represents and warrants that, as of the Closing Date:
(a) Seller owns and holds the entire right, title and
interest in to and under the Assets, free and
clear of Encumbrances;
(b) Seller is the owner of the Intellectual Property
Rights pursuant to a valid and enforceable
assignment;
(c) To Seller's knowledge, the inventors under the
Patent Rights have disclosed to the United States
Patent and Trademark office all information
"material to patentability", as such is defined
in 37 C.F.R. ss.1.56;
(d) Seller has no knowledge of any claims by a third
party that the activities of the Seller,
including the use of the Assets or the sale of
the PMS Product by Seller would infringe rights
of any third party and there is no valid basis
for any such claims; and
(e) To Seller's knowledge, Seller has maintained the
pendency of all domestic and foreign patent
applications included in the Patent Rights except
for U.S. Patent Application Serial No.
08/168,492.
4.8 Seller represents and warrants that no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required on its part for the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby by Seller other than the filing of the Certificate of
Amendment and the Patent Assignment. No consent, approval or authorization of
any third party other than Seller's Stockholders, which consent has been
obtained as described in Section 4.4, is necessary to the consummation of the
transactions contemplated hereby by Seller.
7
<PAGE>
4.9 Seller represents and warrants that Seller has not entered into any
agreement pursuant to which any person or entity is entitled to receive, either
directly or indirectly, compensation from Seller for services rendered as a
finder or broker in connection with the transactions contemplated hereby.
4.10 (a) The Settlement Agreement and Mutual Release Agreement dated as
of May 27, 1995 between Seller and Dr. J. Wurtman, which includes the following
terms, remains in full force and effect and all conditions thereunder shall have
been satisfied:
(i) Dr. J. Wurtman shall have returned to Seller any and all
intellectual property developed in whole or in part by Dr. J.
Wurtman while a consultant or employee of Seller, except such
intellectual property as is included in the Intellectuual
Property Rights and except for any intellectual property not
related to the Assets that Dr. J. Wurtman has renounced in
writing;
(ii) the return to Seller of all securities of Seller issued to and
held by Dr. J. Wurtman; and
(iii) mutual releases between Seller and Dr. J. Wurtman;
(b) The letter agreement dated April 24, 1995 between Seller and Myers,
which includes the following terms, shall remain in full force and
effect and all conditions thereunder shall have been satisfied:
(i) Seller's employment agreement with Myers and of any other
obligations by Seller to compensate Myers shall have been
terminated, in exchange for which Seller shall have agreed to
pay to Mr. Myers compensation not in excess of (i) $75,000
payable over a 12-month period, and (ii) as and when the Stock
is paid pursuant to this Agreement, Seller will transfer to
Myers 4.15% of the Stock that comprises the applicable
installment of the Purchase Price being paid at that time (or
at Seller's option, the value of such stock payable in cash);
and
(ii) the return by Myers to Seller of all stock, together with
options to purchase stock, of Seller issued to and held by
Myers.
4.11 Seller has delivered to Buyer an unaudited balance sheet of Seller
as of June 30, 1995. Such balance sheet is true, complete and correct in all
material respects and presents fairly the assets and liabilities of Seller at
the balance sheet date all in accordance with GAAP. Seller has no liabilities or
obligations that were not fully reflected or reserved against in the balance
sheet, except for approximately $150,000 of debt incurred (of which $75,000 was
used to reduce other liabilities and liabilities and obligations incurred in the
ordinary course of business since the date thereof).
4.12 Seller shall, contemporaneously with Seller's receipt of each
of the First and Second Installments:
(i) Distribute 95.85% of the Stock to the
Preferred Holders on a pro rata basis; and
8
<PAGE>
(ii) Distribute 4.15% of the Stock (or a cash
payment equal to the value thereof) to
Myers;
(the Preferred Holders and Myers are referred to
collectively as the "Stock Distributees")
PROVIDED, HOWEVER, that (x) if at the time of any
Installment any indebtedness of Seller outstanding on
the Closing Date is then outstanding and due and
payable, Seller will cause such indebtedness to be
paid or provided for, whether by use of available
cash, refinancing or replacement proceeds, by
redirecting and reducing the percentages of the Stock
payable in accordance with (i) and (ii) above in
order to satisfy such indebtedness and (y) to the
extent that any Stock Distributee would be entitled
to a fractional share of Stock at the time of either
Installment, a cash payment equal to the value of
such fractional share shall be made by Purchaser to
such Stock Distributee in lieu of such fractional
share.
Seller may direct Purchaser and IPI to issue the Purchase Price to the
Stock Distributees in accordance with the above allocation.
The Stock Distributees shall have the rights set forth in the
Registration Rights Agreement.
4.13 From and after the Closing Date, Purchaser shall defend, indemnify
and hold harmless, Seller, its employees, agents, officers, directors,
attorneys, advisors, agents and representatives from and against any and all
claims, liabilities, losses, actions, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees) directly or indirectly, in whole
or in part suffered or incurred by, or imposed upon or asserted against any of
the foregoing (individually, a "Liability", and collectively, the "Liabilities")
and arising out of, related to or in respect of any of the Assets, excluding any
Liability which arose out of the use, manufacture, promotion, sale or other
disposition, of any Asset prior to the date of this Agreement. Seller shall
defend, indemnify and hold harmless Purchaser, its employees, agents, officers,
directors, attorneys, advisors, agents, Affiliates and representatives to the
same extent as the foregoing indemnification from Purchaser, provided that such
Liability arose out of the use, manufacture, promotion, sale or other
disposition of any Asset prior to the date of this Agreement.
Without limiting the foregoing, each indemnifying party
referred to above (an "Indemnifying Party") shall defend, indemnify and hold
harmless each indemnified party referred to above (an "Indemnified Party"), as
applicable, for and against:
(1) any product liability or other claim of any kind related
to the use by a third party of an Asset that was manufactured, sold or otherwise
disposed of or used by the Indemnifying Party, its assignees, sublicensees,
vendors or other third parties;
(2) a claim by a third party that the design, composition,
formula, manufacture, use, sale or other disposition of any Asset infringes or
violates any patent, copyright, trademark or other intellectual property rights
of any third party; and
9
<PAGE>
(3) clinical trial or studies conducted by or on behalf of the
Indemnifying Party relating to the Assets, including, without limitation, any
claim by or on behalf of any human subject of any such clinical trial or study,
any claim arising from the procedures specified in any protocol used in any such
clinical trial or study, any claim of deviation, authorized or unauthorized,
from the protocols of any such clinical trial or study, and any claim resulting
from or arising out of the manufacture or quality control by a third party or
any substance administered in any clinical trial or study.
4.14 The Indemnified Party shall give reasonable written notice to the
Indemnifying Party of any claim or action giving rise to Liabilities subject to
the provisions of the foregoing Section 4.13. The Indemnifying Party shall have
the right to defend any such claim or action, at its sole cost and expense. The
Indemnifying Party shall not settle or compromise any such claim or action in a
manner that imposes any restrictions, liabilities or obligations on an
Indemnified Party without such person's prior written consent. If the
Indemnifying Party fails or declines to assume the defense of any such claim or
action within 30 days after notice thereof (or to admit, upon written request,
in writing its obligation to do so within five days of such notice), an
Indemnified Party may assume such defense at the expense of the Indemnifying
Party. The indemnification rights of an Indemnified Party contained herein are
in addition to all other rights which such Indemnified Party may have at law or
in equity or otherwise.
4.15 If requested by Purchaser or IPI in connection with a financing by
IPI or Purchaser, Seller agrees to make its financial and other records relating
to the period prior to the Closing Date available during normal business hours
upon reasonable prior notice to Purchaser's financial and accounting staff and
Purchaser's outside accountants in order to permit Purchaser's accountants to
perform an audit of Seller and to otherwise cooperate with Purchaser's and IPI's
reasonable requests in connection therewith. Such audit shall be at Purchaser's
and IPI's expense.
4.16 Seller represents that Section 5 of the employment agreement dated
August 19, 1991 between Myers and Sellers has not been terminated. Seller shall
use its reasonable best efforts to enforce against Myers the provisions such
Section 5.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND/OR IPI; COVENANTS OF PURCHASER
5.1 Each of Purchaser and IPI represents and warrants that Purchaser or
IPI, as applicable, is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power and
authority to carry on its business as now being conducted and to own the
properties and assets it now owns. IPI represents that it owns the majority of
the outstanding capital stock of Purchaser.
5.2 Each of Purchaser and IPI represents and warrants that Purchaser or
IPI, as applicable, has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. All corporate
acts and other proceedings required to be taken by or on the part of Purchaser
or IPI to authorize the execution, delivery and consummation of this Agreement
have been duly and properly taken. This Agreement has been duly executed and
delivered by Purchaser and IPI and constitutes the valid and binding obligation
of Purchaser and IPI enforceable against it in
10
<PAGE>
accordance with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally or by equitable principles (whether considered in an action at law or
in equity).
5.3 Each of Purchaser and IPI represents and warrants that neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any provision of the respective
Certificate of Incorporation or By-laws of Purchaser or IPI, as applicable or
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any Encumbrance upon any property or
assets of Purchaser or IPI, including the Assets, under any indenture, note,
agreement, mortgage, lease or commitment to which Purchaser or IPI is a party or
by which Purchaser or IPI is bound, or to which the property of Purchaser or IPI
is subject, or violate any statute or law of any judgment, decree, order,
regulation or rule of any applicable court or governmental authority.
5.4 IPI represents that the Stock that constitutes the Purchase Price
hereunder, will be, as of the date of issuance, duly authorized, validly issued,
fully paid and non-assessable.
5.5 Each of Purchaser and IPI represents and warrants that neither
Purchaser nor IPI, as applicable, has entered into any agreement pursuant to
which any person or entity is entitled to receive, either directly or
indirectly, compensation from the Purchaser or IPI for services rendered as a
finder or broker in connection with the transactions contemplated hereby.
ARTICLE VI - CONDITIONS PRECEDENT TO CLOSING
6.1 Prior to or simultaneously with the execution of this Agreement,
the following events shall occur, and are conditions precedent to performance of
Purchaser's and IPI's obligations under this Agreement:
(a) the execution of the Registration Rights Agreement;
(b) Seller shall have performed and complied with all
agreements, obligations and conditions required by
this Agreement to be performed or complied with by it
on or prior to the Closing Date, including, but not
limited to the following:
(i) the representations and warranties of Seller
contained in this Agreement are true and
correct in all material respects at and as
of the Closing Date, except for
representations and warranties specifically
relating to a time or times other than the
Closing Date, which shall be true and
correct in all material respects at such
time or times;
(ii) There shall be no pending or threatened
action, suit, inquiry, proceeding or
investigation by or before any court of
governmental or other regulatory or
administrative agency or commission pending
or
11
<PAGE>
threatened against or involving Seller or
its Assets, or which questions or challenges
the validity of this Agreement or any action
taken or to be taken by Seller pursuant to
this Agreement or in connection with the
transactions contemplated hereby; nor is
there any valid basis for any such action,
proceeding or investigation. Seller is not
in violation of, or in default with respect
to, any law, rule, regulations, order,
judgement, or decree; nor is Seller required
to take any action in order to avoid such
violation or default. The Seller is not
subject to any judgment, order or decree
entered in any lawsuit or proceeding which
may have an adverse effect on its business
practices or on its ability to acquire any
property or conduct its business in any
area.
(c) Purchaser and IPI shall have received a letter from
each of the Stock Distributees, substantially in the
form of Exhibit E .
ARTICLE VII - TERMINATION
7.1 IPI may terminate the transactions contemplated herein at any time
prior to the Closing Date only if it the conditions set forth in Section 6.1 are
not satisfied in all material respects.
7.2 Without prejudice to its rights prior to the Closing Date under
Section 7.1, Seller may terminate the transactions contemplated herein at any
time prior to the Closing Date if the representations and warranties of
Purchaser and IPI contained in this Agreement were incorrect in any material
respect when made, or if all of the conditions precedent to the obligations of
Seller set forth in this Agreement are not fulfilled.
7.3 If the transactions contemplated by this Agreement are terminated
as provided herein:
(a) Nothing herein shall be construed to release either
party from any obligation that matured prior to the
effective date of such termination.
(b) To the extent not otherwise required by law, each
party will return all documents, work papers and
other material of any other party relating to the
transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the party
furnishing the same, except those documents which are
in the public domain. All information received by any
party hereto with respect to the business of any
other party shall not be subject to the use
restrictions of the confidentiality provisions of
Article III hereof.
ARTICLE VIII - COMPETITION
8.1 Seller shall not, for a period of three years following the Closing
Date, develop, manufacture or market, or act as a consultant or advisor to any
company with respect to the development, manufacture or marketing, of any
product or substance, including any PMS Product, rights thereto which were not
acquired from the Purchaser (or such successor in interest in respect of
12
<PAGE>
the PMS Product, including a licensee or sublicensee), whose use is or
reasonably may be deemed competitive with the PMS Product.
ARTICLE IX - ARBITRATION
9.1 Any dispute, controversy or claim that arises under, out of, or in
connection with, or relating to this Agreement, or any breach, termination or
alleged invalidity of this Agreement, shall be resolved by binding arbitration
in New York, New York in accordance with the then existing Rules of the American
Arbitration Association. The decision of the Arbitration Tribunal in any such
arbitration shall be final and not appealable, and shall be enforceable in any
court of competent jurisdiction. No punitive damages will be recoverable by
either Party in such a proceeding. The Parties agree that the service of any
notice in the course of such arbitration proceeding at their respective
addresses as provided for in Article XI of this Agreement shall be valid and
sufficient but such method shall be a nonexclusive means of providing the
requisite notice.
9.2 The appointing authority shall be the American Arbitration
Association.
9.3 Unless agreed otherwise by the Parties, in any arbitration
proceeding hereunder, there shall be three (3) arbitrators. Each Party shall
appoint one (1) arbitrator, and the two (2) arbitrators so appointed shall, by
mutual agreement, appoint the third arbitrator, who shall be the chairman of the
Arbitration Tribunal. In the event that any party fails to appoint an arbitrator
within one (1) month after the commencement of the arbitration proceeding, such
arbitrator shall, at the written request of the party requesting the
arbitration, be appointed by the then-President or presiding officer of the
American Arbitration Association in accordance with its then-existing rules of
appointment. For the purposes of this Agreement, "commencement of the
arbitration proceeding" shall mean the date on which all of the following
actions have been undertaken: (a) a written demand for the arbitration is
received by the American Arbitration Association, (b) the appropriate fee is
paid therewith, and (c) a copy of the written demand is served on the
non-arbitration requesting party. The decision of a majority of the arbitrators
shall be final and binding on the Parties, each arbitrator having one vote.
9.4 In any arbitration proceeding, the rights of the parties shall be
determined according to the governing law set forth in Section 12.1 of this
Agreement, and the arbitrators shall apply such law without regard to the
conflicts of law principles thereof.
9.5 In the event that either Party has a substantial need for discovery
in order to prepare for the arbitration, the Parties shall attempt in good faith
to agree on a minimum plan for strictly necessary, expeditious discovery. Should
the Parties fail to reach agreement, any Party may request a joint meeting with
the Arbitration Tribunal to explain points of agreement and disagreement. The
Arbitration Tribunal shall promptly make a recommendation as to the scope of
discovery and time allowed therefore. In the event that a Party shall fail to
cooperate with discovery ordered by the Arbitration Tribunal, the Arbitration
Tribunal shall have the power to take such corrective steps as they deem
appropriate, including, without limitation, imposition of sanctions, including
striking a demand for arbitration, or specific claims or defenses.
13
<PAGE>
9.6 In the event either Party contends that there has been fraud or bad
faith by the other Party or the Arbitration Tribunal, a second arbitration shall
be held to determine whether there has been fraud or bad faith, the Arbitration
Tribunal shall vacate the decision affected by fraud or bad faith and shall
order that another arbitration be held to resolve the original dispute. The
losing party in any such arbitral proceeding shall promptly pay the costs of
such proceeding, including, without limitation, the legal fees and expenses of
the prevailing party.
ARTICLE X - ASSIGNMENT
10.1 Seller may not assign or transfer its rights and/or duties under
this Agreement, other than in connection with (a) the sale of substantially all
of its assets, (b) a merger in which it is not the surviving corporation or (c)
a merger in which it becomes a subsidiary of another corporation, without first
having obtained the written consent of Purchaser and IPI. Any such purported
assignment or transfer, without the written consent of Purchaser and IPI, shall
be null, void and of no effect. Purchaser or IPI, as applicable, may assign or
transfer its rights and/or duties under this Agreement at any time except that
IPI shall not assign or transfer its obligation to issue the Stock or to
indemnify Seller and any other indemnitees without the written consent of
Seller. Any such purported assignment or transfer, without the written consent
of Seller, shall be null, void and of no effect.
ARTICLE XI - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
11.1 Any payment, notice or other communication pursuant to this
Agreement shall be sufficiently made or given on the date of mailing if sent to
such party by certified or registered first class mail, postage prepaid, or by
recognized public courier (e.g. Federal Express) addressed to it at its address
below or as it shall designate by written notice given to the other party:
In the case of Seller:
Walden Laboratories, Inc.
375 Park Avenue, 15th Floor
New York, NY 10152
Attention: Michael S. Weiss, Esq.
with a copy to:
Roberts, Sheridan & Kotel,
a Professional Corporation
640 Fifth Avenue
New York, NY 10019
Attention: Ira L. Kotel, Esq.
14
<PAGE>
In the case of Purchaser:
InterNutria, Inc.
One Ledgemont Center
99 Hayden Avenue, Suite 340
Lexington, MA 02173
In the case of IPI:
Interneuron Pharmaceuticals, Inc.
One Ledgemont Center
99 Hayden Avenue, Suite 340
Lexington, MA 02173
Attn: Glenn L. Cooper, M.D., President
with a copy to:
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017
Attn: Jill Cohen, Esq.
ARTICLE XII - MISCELLANEOUS PROVISIONS
12.1 This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the State of New York, U.S.A. without
regard to the principles of conflicts of laws, except those questions affecting
the construction and effect of any patent shall be determined by the law of the
country in which the patent was granted.
12.2 The failure of either party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
12.3 In case any one or more of the provisions of this Agreement shall
be invalid, illegal or unenforceable in any respect, such provisions shall be
ineffective to the extent of such invalidity, illegality or unenforceability and
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.
12.4 Whether or not the transactions contemplated by this Agreement
shall be consummated, Seller agrees that all fees and expenses incurred by it in
connection with this Agreement shall be borne by it provided that the fees and
expenses of Seller's attorneys shall be payable by Purchaser at Closing in an
amount not to exceed $25,000 and each of Purchaser and IPI agrees that all fees
and expenses incurred by it in connection with this Agreement shall be borne by
it, including, without limitation as to Seller or Purchaser or IPI, all fees of
counsel, actuaries and accountants. In addition Purchaser or
15
<PAGE>
IPI shall reimburse or pay all of Seller's patent fees and expenses that are
documented to be incurred with respect to the Assets. The Purchaser agrees that
it will pay all transfer or other taxes which may be payable in connection with
the transactions contemplated by this Agreement.
12.5 Subject to Article X, this Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors, legal representatives, and assigns.
12.6 Seller shall not make or issue, or cause to be made or issued, any
announcement or written statement concerning this Agreement or the transactions
contemplated hereby for dissemination to the general public without the prior
written consent of Purchaser and IPI. This provision shall not apply, however,
to any announcement or written statement required to be made by law or the
regulations of any federal or state governmental agency or any stock exchange or
market, except that the party required to make such announcement shall, whenever
practicable, consult with the other party concerning the timing and content of
such announcement before such announcement is made.
12.7 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.
12.8 The parties hereby acknowledge that this Agreement, including the
Appendices, Exhibits and Schedules hereto; and the other documents and
certificates delivered pursuant to the terms hereof, set forth the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein, and no prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto shall be
of any force or effect, nor shall this Agreement be subject to any change or
modification, except by the execution of a subsequent written instrument
subscribed to by the parties hereto.
12.9 Except as specifically set forth or referred to herein, nothing
herein expressed or implied is intended or shall be construed to confer upon or
give to any person or corporation other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
12.10 All representations, warranties, covenants and agreement of the
parties contained in this Agreement or in any instrument, certificate or other
writing provided for in it, shall survive the execution of this Agreement and
not be deemed waived.
12.11 Seller represents and warrants as follows:
THE ASSETS ARE BEING SOLD, GRANTED, TRANSFERRED, CONVEYED, ASSIGNED AND
DELIVERED TO PURCHASER BY SELLER ON AN "AS IS" BASIS, AND SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE EXCEPT AS
16
<PAGE>
SPECIFICALLY PROVIDED IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be affixed hereto, all as
of the day and year first above written.
WALDEN LABORATORIES, INC.
By: /S/ CARL SPANA
Name:
Title:
INTERNUTRIA, INC.
By: /S/ JAMES POMROY
Name:
Title:
INTERNEURON PHARMACEUTICALS
INC.
By: /S/ GLENN COOPER
Name:
Title:
17
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Name Jurisdiction of Incorporation
Progenitor, Inc. Delaware
Trascell Technologies, Inc. Delaware
InterCardia, Inc. Delaware
CPEC, Inc. Nevada
InterNutria, Inc. Delaware
-1-
Ex. 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Interneuron Pharmaceuticals, Inc. on Form S-8 (File Nos. 33-58742, 33-76652,
33-94730, 33-94736) and on Forms S-3 (33-75826 and 33-32408) of our report dated
November 13, 1995 on our audits of the consolidated financial statements of
Interneuron Pharmaceuticals, Inc. as of September 30, 1994 and 1995 and for each
of the three years in the period ended September 30, 1995, which report is
included in the Company's 1995 Annual Report on Form 10-K.
/S/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 22, 1995
-1-
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THR BALANCE
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TO SUCH FINANCIAL STSTEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 16,781,242
<SECURITIES> 18,207,642
<RECEIVABLES> 236,724
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,415,900
<PP&E> 3,169,020
<DEPRECIATION> (1,497,904)
<TOTAL-ASSETS> 37,516,063
<CURRENT-LIABILITIES> 9,660,966
<BONDS> 0
<COMMON> 33,284
0
245
<OTHER-SE> 21,358,091
<TOTAL-LIABILITY-AND-EQUITY> 37,516,063
<SALES> 0
<TOTAL-REVENUES> 4,502,305
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,045,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146,000
<INCOME-PRETAX> (17,980,725)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,980,725)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,980,725)
<EPS-PRIMARY> (0.59)
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