<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- -----------
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
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. 0-19153
________________________
VIMRX PHARMACEUTICALS INC.
(Exact name of Registrant as specified in its Charter)
________________________
DELAWARE 06-1192468
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
2751 CENTERVILLE ROAD, SUITE 210, WILMINGTON, DELAWARE 19808
(Address of principal executive offices)
Registrant's telephone number, including area code: (302) 998-1734
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 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- ______
The aggregate number of Registrant's shares outstanding on November 13,
1998 was 67,830,139 shares of Common Stock, $.001 par value.
________________________
<PAGE>
VIMRX PHARMACEUTICALS, INC.
INDEX
-----
<TABLE>
<CAPTION>
<S> <C>
PART I FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997......................... 3
Consolidated Statements of Operations (unaudited) for the three
months and nine months ended
September 30, 1998 and 1997.............................. 4
Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 1998
and 1997................................................. 5
Notes to Consolidated Financial Statements (unaudited).............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 12
Item 2. Changes in Securities................................................. 12
Item 3. Defaults upon Senior Securities....................................... 12
Item 4. Submission of Matters to a Vote of Security Holders................... 12
Item 5. Other Information..................................................... 12
Item 6. Exhibits.............................................................. 12
SIGNATURES .............................................................. 13
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30,
1998 December 31,
(unaudited) 1997
------------------------ -----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 41,567,000 $ 57,830,000
Receivables from related party 1,435,000 4,235,000
Inventory 2,321,000 2,227,000
Other current assets 369,000 922,000
------------------------ -----------------------
Total current assets 45,692,000 65,214,000
Fixed assets net 12,309,000 15,464,000
Intangible assets- net 38,476,000 40,773,000
Other assets 460,000 496,000
------------------------ -----------------------
Total assets $ 96,937,000 $ 121,947,000
======================== =======================
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 9,982,000 $ 3,380,000
Long-term debt current portion 130,000 130,000
Capital leases current portion 214,000 350,000
------------------------ -----------------------
Total current liabilities 10,326,000 3,860,000
Long-term debt ($31,544,000 and $30,075,000) from related party 31,609,000 30,171,000
Capital leases 90,000 208,000
------------------------ -----------------------
Total liabilities 42,025,000 34,239,000
======================== =======================
Minority interest in subsidiary 318,000 4,161,000
SHAREHOLDERS' EQUITY
Class A Convertible Preferred Stock; $.001 Par value
150,000 authorized shares; 66,304 issued and outstanding at
September 30, 1998 (liquidation value $69,266,000) and
December 31, 1997 (liquidation value $66,304,000) 100 100
Common Stock; $.001 Par value, 120,000 shares authorized,
67,830,000 and 66,498,000 shares issued and outstanding at June
30, 1998 and December 31, 1997, respectively. 67,000 67,000
Unrealized gain (loss) on investment 570,000 --
Additional paid-in capital 182,538,900 182,538,900
Unearned compensation (321,000) (449,000)
Cumulative translation adjustment 36,000 (40,000)
Accumulated deficit (128,297,000) (98,570,000)
------------------------ -----------------------
Total shareholders' equity 54,594,000 83,547,000
------------------------ -----------------------
Total liabilities and shareholders' equity $ 96,937,000 $ 121,947,000
======================== =======================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
1998 1997 1998 1997
------------- ------------ ------------- -------------
Revenue $ 3,039,000 $ -- $ 9,125,000 $ --
Cost of goods sold 1,841,000 -- 5,998,000 --
------------- ------------ ------------- -------------
Gross Profit 1,198,000 -- 3,127,000 --
------------- ------------ ------------- -------------
Operating expenses:
Research and development 5,668,000 3,379,000 20,640,000 10,093,000
Purchased research and development -- -- -- 1,800,000
General and administrative 2,536,000 1,414,000 8,383,000 5,336,000
Goodwill amortization 883,000 103,000 2,644,000 309,000
Selling and marketing 1,305,000 -- 3,161,000 --
Closure of facilities and related costs 1,930,000 -- 1,930,000 --
------------- ------------ ------------- -------------
Total operating expenses 12,322,000 4,896,000 36,758,000 17,538,000
Operating (loss) (11,124,000) (4,896,000) (33,631,000) (17,538,000)
------------- ------------ ------------- -------------
Other (income) expenses:
Royalty (income) expense (52,000) -- (372,000) 100,000
Minority interest in net loss of
consolidated subsidiaries (925,000) (1,086,000) (3,842,000) (2,962,000)
Contract settlement 900,000 -- 900,000 --
Interest income (674,000) (527,000) (2,156,000) (1,809,000)
Interest expense 498,000 35,000 1,544,000 118,000
Other, net (219,000) (70,000) 22,000 (30,000)
------------- ------------ ------------- -------------
Total other (income) expenses (472,000) (1,648,000) (3,904,000) (4,583,000)
Net (loss) (10,652,000) (3,248,000) (29,727,000) (12,955,000)
Preferred Stock Dividends 986,000 -- 2,962,000 --
------------- ------------ ------------- -------------
Net (loss) applicable to Common Stock $ (11,638,000) (3,248,000) (32,689,000) (12,955,000)
============= ============ ============= =============
Basic loss per share $ (0.17) $ (0.06) $ (0.49) $ (0.24)
------------- ------------ ------------- -------------
Weighted average number of shares of
common stock outstanding 67,493,850 55,311,877 67,099,065 54,856,335
============= ============ ============= =============
Diluted loss per share $ (0.17) $ (0.06) $ (0.49) $ (0.24)
------------- ------------ ------------- -------------
Weighted average number of shares of
common stock and dilutive equivalent
shares outstanding 67,493,850 55,311,877 67,099,065 54,856,335
============= ============ ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
VIMRX PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------------
1998 1997
-------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................... $(29,727,000) $(12,955,000)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and amortization.................................... 5,459,000 794,000
Noncash compensation............................................. 128,000 309,000
Purchased in process research and development.................... -- 1,200,000
Closure of Facilities and Related Costs.......................... 1,930,000 --
Minority interest in net loss.................................... (3,842,000) (1,913,000)
Changes in operating assets and liabilities:
Decrease in other current assets and other assets............... 3,306,000 136,000
Increase (decrease) in accounts payable and accrued
expenses...................................................... 6,023,000 (641,000)
-------------------- ---------------------
Net cash (used in) operating activities........................... (16,723,000) (13,070,000)
-------------------- ---------------------
Cash flows from investing activities:
Unrealized gain on securities.................................... 570,000 --
Net sales of short-term investments.............................. -- 7,006,000
Purchases of equipment........................................... (1,337,000) (686,000)
-------------------- ---------------------
Net cash provided by (used in) investing activities............... (767,000) 6,320,000
-------------------- ---------------------
Cash flows from financing activities:
Proceeds from issuance of common stock in connection
with the exercise of warrants/options........................... -- 745,000
Increase in long term debt due to interest from related
parties......................................................... 1,469,000 --
Repayment of capital leases...................................... (253,000) (335,000)
-------------------- ---------------------
Net cash provided by financing activities..................... 1,216,000 410,000
-------------------- ---------------------
Effect of exchange rate changes on cash........................... 11,000 (36,000)
-------------------- ---------------------
Net (decrease) in cash and cash equivalents....................... (16,263,000) (6,376,000)
Cash and cash equivalents at beginning of period.................. 57,830,000 8,611,000
-------------------- ---------------------
Cash and cash equivalents at end of period........................ $ 41,567,000 $ 2,235,000
==================== =====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
VIMRX PHARMACEUTICALS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
(1) FINANCIAL STATEMENT PRESENTATION
The unaudited financial statements of VIMRX Pharmaceuticals Inc. and
subsidiaries (the "Company") herein have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC) and in the
opinion of management, reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results of operations
for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements, prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. However,
management believes that the disclosures are adequate to make the
information presented not misleading. These unaudited financial statements
have been prepared in conformity with the accounting principles applied in
our 1997 Annual Report on Form 10-K for the year ended December 31, 1997.
These financial statements and the notes thereto should be read in
conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997. The results for the interim periods are not necessarily indicative
of the results for the full fiscal year.
(2) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
VIMRX and its subsidiaries, Nexell Therapeutics Inc., VIMRX Genomics, Inc.
("VGI") and Innovir Laboratories. Inc. All significant intercompany balances
and transactions have been eliminated.
(3) RESEARCH AGREEMENTS
In March 1997, VIMRX entered into a research agreement relating to the
discovery, mapping, sequencing and validation of disease-related genes with
Columbia University ("Columbia"). The agreement provided for VIMRX, through
VGI, to provide $30 million in funding to the Center over a 5-year period
and for VGI to receive an exclusive license to develop, manufacture, use,
sell or market products resulting from any invention, research information
and biological materials developed by the Center and funded under the
agreement. The agreement was terminable by either Columbia or VGI during the
initial five-year term upon nine months' notice, but in no event earlier
than September 7, 1999. Under the agreement, VIMRX issued 200,000 shares of
Common Stock to Columbia, which shares have subsequently been registered
under the Securities Act of 1933, as amended. VGI had paid Columbia $6.0
million in funding in quarterly installments in respect of its obligations
for 1997 under the Agreement.
6
<PAGE>
VGI has sought technology collaborations with pharmaceutical and/or
diagnostic companies and has solicited equity investments in VGI from
potential technology partners and other investors, but has been unable to
consummate any such transactions on reasonable terms.
As a result, the Company, after attempting to restructure its relationship,
has agreed to terminate its research agreement with Columbia University with
regard to VIMRX Genomics, Inc. and Ventiv BioGroup. The parties mutually
agreed to terminate the collaborative relationship and the Company has
agreed to pay Columbia approximately $900,000 to cover existing obligations.
Through this agreement, the Company will release all rights to develop
technology owned by Columbia including VM201, a Factor IXa inhibitor and two
Columbia discovered cancer genes.
(4) ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This
Statement requires that all items recognized under accounting standards as
components of comprehensive earnings be reported in an annual financial
statement that is displayed with the same prominence as other annual
financial statements. This Statement also requires that an entity classify
items of other comprehensive earnings by their nature in an annual financial
statement. For example, other comprehensive earnings may include foreign
currency translation adjustments, minimum pension liability adjustments and
unrealized gains and losses on marketable securities classified as
available-for-sale. Annual financial statements for prior periods will be
reclassified, as required. The Company's total comprehensive earnings were
as follows.
<TABLE>
<CAPTION>
Nine months Ended September 30,
-----------------------------------------------
1998 1997
----------------- --------------------
<S> <C> <C>
Net Loss 29,727,000 $12,955,000
Foreign currency translation (76,000) (36,000)
Unrealized (gain) loss on investments (570,000) (96,000)
----------------- --------------------
Comprehensive loss $29,081,000 $12,823,000
================= ====================
</TABLE>
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share". Adoption of this Statement, which requires
restatement of previously reported amounts, had no impact on prior year loss
per share. Basic loss per share is calculated by dividing loss by the
weighted average number of common shares outstanding during the period. For
diluted loss per share, net loss is divided by the weighted average number
of common and potentially dilutive shares outstanding during the period.
Potentially dilutive common shares consist of stock options and warrants
using the treasury stock method, but are excluded if their effect is
antidilutive.
7
<PAGE>
(5) CLOSURE OF FACILITIES AND RELATED COSTS
Closure of Facilities and Related Costs: Innovir has begun closing research
and development operations (New York, Gottingen, Germany and Cambridge,
England) to reduce operating expenses. Innovir's headquarters and core
technology will move to the VIMRX corporate office in Wilmington, Delaware.
Innovir continues to seek partners, investors or purchasers for its core
oligozyme technology including the lead EGS, the FRS/GSFRS, the RILON(TM)
technology and related research technologies.
The restructuring of Innovir has caused related expenses to be recorded,
made up of severance costs, the write off of the remaining goodwill and the
write down of fixed assets held for sale.
As the closedown of the research and development facilities progresses,
other costs may be identified which will cause additional restructuring
expenses to be recorded.
8
<PAGE>
VIMRX PHARMACEUTICALS INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
------- ---------------------------------------------------------------
Results of Operations.
----------------------
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q and with the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
Three Months Ended September 30, 1998 and 1997
Revenue of $3,039,000 resulted from sales generated by Nexell Therapeutics
Inc., a majority owned subsidiary acquired in December 1997. This revenue
was offset by cost of goods sold $1,841,000 to net a gross profit of
$1,198,000.
Total operating expenses increased by $7,426,000 or 152% due to increases in
research and development, $2,289,000 or 68%, general and administration,
$1,122,000 or 79%. Goodwill amortization, $780,000, sales and marketing,
$1,305,000 and a one time charge for closure of facilities and related costs
($1,930,000).
The $2,289,000 increase in research and development expenses results
primarily from the inclusion of the operations of Nexell ($4,314,000) fully
for the first time in 1998. This was offset by spending decreases in Innovir
($304,000), VIMRX ($556,000) and VGI ($1,165,000) programs.
General and administrative expenses increased $1,122,000 due to the
inclusion of Nexell ($1,671,000) and increased cost related to VGI
($86,000), offset by decreases in costs related to Innovir ($262,000) and
VIMRX ($373,000).
The increase in goodwill amortization ($780,000) is due to the inclusion of
Nexell.
Selling and marketing expenses results from the ramp up of Nexell's
marketing efforts.
The one time charge for closure of facilities and related costs are
severance costs ($548,000) and the write down of fixed assets ($870,000) and
goodwill ($517,000) related to the closure of Innovir's research and
development operations in the United States and Europe during the third
quarter of the Fiscal 1998 year. Innovir began closing operations in New
York and Europe.
Royalty (income) expense includes $472,000 royalty income from Baxter
Pharmaceuticals Inc. in 1998.
Minority interest in the net loss of consolidated subsidiaries decreased
$161,000, due principally to a decrease in the participation of minority
interests in the losses of Innovir, offset by the loss incurred by Nexell
which was not included in the third quarter of 1997.
9
<PAGE>
The charge for contract settlement relates to the termination of the
research agreement with Columbia University (see Footnote 3 to the Financial
Statements).
The increase in interest income of $147,000 or 28% is mainly due to an
increase in the cash and cash equivalents average of 1998 as compared to the
average cash and marketable securities balance in the same period in 1997.
Interest expense increased $463,000 due principally to the interest related
to the long-term debt due to a related party.
Other income/expenses net increased $149,000 due principally to the
inclusion of Nexell expenses.
The foregoing resulted in an increase in the net loss of $7,404,000.
Nine months Ended September 30, 1998 and 1997
Operating loss for the nine months ended September 30, 1998 increased
$16,093,000 or 92% from the same period in 1997, due principally to
acquisitions of companies and technologies made at various times during
1997. During that period, research and development expenses increased
$10,547,000 or 104%, general and administrative expenses increased
$3,047,000 or 57%, amortization of goodwill increased $2,335,000, selling
and marketing expenses were recorded for the first time at $3,161,000 and
one time expenses for closure of facilities and related costs amounting to
$1,930,000 were recorded. These increases were offset by a $1,800,000
decrease in purchased research and development.
The $10,547,000 or 104% increase in research and development expense is due
principally to the inclusion of Nexell $13,391,000 offset by decreases in
the Innovir, VGI and VIMRX programs.
General and administrative expenses increased $3,047,000 or 57% principally
due to the inclusion of Nexell's operations ($4,793,000) offset by decreases
in VIMRX's expenses.
Goodwill amortization increased due to the inclusion of Nexell in 1998.
Selling and marketing expenses were fully incurred for the first time in
1998 due to the inclusion of Nexell.
Closure of facilities and related costs were incurred by Innovir as a result
of the restructuring of Innovir (see Footnote 5 to the Financial
Statements).
Minority interest in net loss of consolidated subsidiaries increased
$880,000 or 30% due principally to the inclusion of Nexell in 1998, offset
by a decrease in the participation of the minority interest in the losses of
Innovir.
10
<PAGE>
The contrast settlement expense results from the termination of the research
agreement with Columbia University (see Footnote 3 to the Financial
Statements).
Interest income increased $347,000 or 19% due to an increase on average
funds available for investment. Interest expense increases $1,426,000
principally due to the interest on the long-term debt due to a related
party.
The foregoing resulted in a $16,772,000 or 129% increase in the net loss for
the nine months ended September 30, 1998.
Liquidity and Capital Resources
Before fiscal 1997, the Company had not realized any operating revenues and
has financed its operation through the sale of its securities.
The Company had $41,567,000 in cash and cash equivalents at September 30,
1998 as compared to $57,830,000 in cash and cash equivalents at December 31,
1997 and working capital of $35,366,000 at September 30, 1998 as compared to
$61,354,000 at December 31, 1998. The decrease in cash was due principally
to the cash used in operations of the Company ($16,723,000) and purchases of
equipment, offset by the increase in long term debt due to the accrual of
interest payable to a related party which is payable initially on November
30, 2002. The decrease in working capital is principally a result of the
step-up of operations of Nexell.
The Company expects to incur substantial expenditures in the foreseeable
future for the research and development and commercialization of its
proposed products as well as the step up of marketing activities at Nexell.
Based on current projections, which are subject to change, the Company's
management believes that the present balance of cash and cash equivalents is
sufficient to fund its operations for approximately two years, assuming no
capital infusions are received. Thereafter, the Company will require
additional funds, which it may seek through public or private equity or debt
financing, collaborative or other arrangements with corporate sources or
through other sources of financing.
YEAR 2000 ISSUES
The Company is aware of and has addressed many of the "Year 2000" issues
associated with both information technology ("IT") and non-IT systems which
could cause problems and network failures should the systems fail to
recognize year designations after 1999.
The Company has reviewed its own computer, communication, software and
operating systems and is satisfied they are Year 2000 compliant.
Furthermore, the company has taken proactive measures to ensure the systems
are Year 2000 compliant by upgrading all server and workstation operating
systems. All system servers and workstations' BIOS have been reprogrammed
and are Year 2000 compliant (the BIOS is responsible for starting the
computer by providing a basic set of instructions. It performs all the tasks
which need to be done at start-up time).
11
<PAGE>
The Company has upgraded all productivity, communication and accounting
software to meet Year 2000 compliance. The Company has tested the
accounting systems with the Year 2000 date and feels confident that they are
compliant.
The Company will plan system-wide testing in the first quarter of 1999. Any
system failures will be addressed at that time. The Company feels its Year
2000 risks are very minimal. The Company has spent approximately $710,000 to
upgrade its systems which brought the Company into Year 2000 readiness.
Direct costs related to the review of year 2000 issues have been immaterial.
The Company will continue to contact critical suppliers, collaborators,
partners and vendors to determine if their operations, as they relate to the
Company, are Year 2000 compliant.
Although the Company will take all practical measures to prevent problems
related with the Year 2000 programming problem, such problems and failures
may occur which could seriously affect the Company's progress. Because of
the unprecedented nature of such problems, the extent of the effect on the
Company's progress cannot be certain.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION
On November 11, 1998, the Company and Columbia University entered into a
Termination Agreement pursuant to which all further obligations of the
Company and its subsidiary, VIMRX Genomics, Inc. (d/b/a/ Ventiv Biogroup,
Inc.) ("VGI") to Columbia University under the Research Agreement dated
March 7, 1997 by and between VGI and Columbia University (the "Research
Agreement"), and under the Blood Factor IXai Research Agreement dated March
28, 1997 ("Factor IX Agreement") by and between Columbia University and the
Company, were terminated, and all claims related thereto released, in
consideration of the payment of $900,000 by the Company to Columbia. The
Termination Agreement also provided for termination of the licenses granted
to VGI and the Company pursuant to the Research Agreement and the Factor IX
Research Agreement and the return to Columbia University of all intellectual
property delivered to, or developed by, the Company or VGI pursuant to those
licenses. In connection with the termination of the relationship with
Columbia, Dr. Richard Kouri resigned as Senior Vice-President, Research of
the Company and as President of VGI. The Company will honor the terms of Dr.
Kouri's employment agreement with the Company, which provides for him to
receive severance payments equal to one year's salary, payable in regular
installments.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
10.36 Termination Agreement.
27 Financial Data Schedule.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 13, 1998
VIMRX PHARMACEUTICALS INC.
a Delaware Corporation
(Registrant)
By: /s/ Richard L. Dunning
--------------------------------
Richard L. Dunning
President and
Chief Executive Officer
By: /s/ Francis M. O'Connell
---------------------------------
Francis M. O'Connell
Chief Accounting Officer
13
<PAGE>
Exhibit 10.36
TERMINATION AGREEMENT
TERMINATION AGREEMENT (this "Agreement"), dated November 11, 1998
among THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a New York
corporation ("Columbia" or "Columbia Innovation Enterprise"), VIMRX
PHARMACEUTICALS INC., a Delaware corporation (the "Company"), and VIMRX
GENOMICS, INC., a Delaware corporation d/b/a Ventiv BioGroup, Inc. ("VGI").
W I T N E S S E T H :
WHEREAS, Columbia and the Company entered into a Research Agreement,
dated March 7, 1997 and several other agreements related thereto; and
WHEREAS, the parties desire to terminate all such agreements and to
resolve all disputes between them.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. Termination of Agreements. The following agreements and licenses, to
-------------------------
which Columbia and the Company, and/or VGI are parties, are hereby terminated
and of no further force or effect:
(a) Research Agreement dated March 7, 1997 ("Research Agreement") by
and between The Trustees of Columbia University in the City of New
York ("Columbia") and VGI;
(b) Subscription and Shareholders Agreement dated March 7, 1997 by and
among VIMRX, Columbia and VGI;
(c) Royalty Agreement (BCL-6) ("BCL-6 Royalty Agreement") dated October
31, 1997 by and between Columbia and VGI;
(d) Exclusive License Agreement (MUM-1) dated July 31, 1997 ("MUM-1
License") by and between Columbia and VGI;
(e) Blood Factor IXai Research Agreement dated March 28, 1997 ("Factor
IX Agreement") by and between Columbia and VIMRX;
(f) Exclusive License Agreement (Blood Factor IXai) dated March 28,
1997 ("Factor IX License") by and between Columbia and VIMRX; and
(g) License Agreement dated May 15, 1997 by and between Columbia and
VGI (with respect to office space).
The Company and VGI acknowledge and agree that, effective upon such
termination, neither of them has or will have any rights (i) to any of the
intellectual property licensed from
<PAGE>
Columbia under any of the foregoing agreements, including, without limitation,
to any Patents, Information Research Information, Research Project Information,
Products or Materials as defined in the MUM-1 License, the Factor IX License and
the Research Agreement, or any improvements, modifications, and developments,
whether patentable or not, based on, related to, or derived from any of the
foregoing (collectively, the "Technology"). The Company and VGI have destroyed
or returned to Columbia any and all documents and materials containing,
embodying, or consisting of any Technology.
2. Sublicenses. The Company and VGI further represent that neither of
-----------
them has granted any sublicenses or other rights to any third party under any of
the agreements or licenses listed in Paragraph 1.
3. Factor IX and RAGE. The Company will deliver to Columbia its
------------------
analysis of Columbia's intellectual property holdings and strategies for both
Factor IX and RAGE (Receptor for Advanced Glycation End Products), together with
its recommendations for strengthening the patent portfolios for the Factor IX
and RAGE technologies. No representation or warranty is made as to the accuracy,
adequacy or completeness of any analysis or recommendations delivered pursuant
to this Agreement.
4. Releases.
---------
(a) Columbia Release of VIMRX and VGI. Columbia hereby releases and
discharges VIMRX, VGI, and their respective agents, employees, officers,
directors and shareholders and their respective heirs, executors,
administrators, successors and assigns (the "VIMRX Parties") from all actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law, admiralty or equity, which against the VIMRX
Parties, Columbia, its agents, employees, faculty, officers and trustees and
their respective heirs, executors, administrators, successors and assigns (the
"Columbia Parties") ever had, now or hereafter can, shall or may have for, upon,
or by reason of any matter, cause or thing whatsoever arising out of or related
to the agreements listed in paragraph 1 of this Agreement, other than the
obligations of the VIMRX Parties arising out of this Agreement.
(b) VIMRX and VGI Release of Columbia. VIMRX and VGI, jointly and
severally, hereby release and discharge the Columbia Parties from all actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law, admiralty or equity, which against the Columbia
Parties, the VIMRX Parties ever had, now or hereafter can, shall or may have
for, upon, or by reason of any matter, cause or thing whatsoever arising out of
or related to the agreements listed in paragraph 1 of this Agreement, other than
the obligations of the Columbia Parties arising out of this Agreement.
(c) BCL-6 Termination. Simultaneously with the execution and delivery of
this Agreement, the parties hereto and Sloan-Kettering Institute for Cancer
Research are entering into a Termination Agreement (BCL-6) pursuant to which the
parties are exchanging releases and
2
<PAGE>
terminating their respective obligations under that certain Exclusive License
Agreement (BCL-6) dated October 31, 1997 ("BCL-6 License") by and among,
Columbia, Sloan-Kettering Institute for Cancer Research and VGI.
(d) VM301 Agreement. It is understood and agreed that the Clinical
Trial Agreement (VM301 Ointment) dated as of December __, 1997 (the "VM 301
Agreement") does not arise out of or relate to any of the agreements listed in
Paragraph 1 of this Agreement, and therefore the obligations of the parties
hereto under the VM 301 Agreement are not affected by the releases set forth in
Subparagraphs 4(a) or 4(b).
5. Return of VGI Shares. Simultaneously with the execution and delivery
--------------------
of this Agreement, Columbia shall transfer to VGI its one hundred shares of
common stock of VGI, represented by Certificate Number 3, together with a stock
power executed in blank as to such shares.
6. Payment. In consideration of the termination of the obligations of
-------
VGI and VIMRX under the agreements described in subparagraphs 1(a) and 1(e)
above, the Company shall pay Columbia $900,000 by check delivered simultaneously
with the execution and delivery of this Agreement. In addition, Columbia may
retain the 200,000 shares of VIMRX common stock delivered to Columbia pursuant
to the Research Agreement. The Company acknowledges that such shares are
eligible for sale under Rule 144 under the Securities Act of 1933, as amended
(the "Act"), and agrees to cooperate with Columbia, in order to permit the
transfer of such shares upon receipt by the Company of an opinion of counsel
with respect to the exemption of such transfer from registration under the Act
in form and substance reasonably satisfactory to the Company.
7. Notices. Any notice required or permitted to be given under this
-------
Agreement shall be in writing and shall be either personally delivered
(including by recognized overnight delivery services such as FedEx) or sent by
certified mail (return receipt requested), postage or other charges prepaid,
if to Columbia, to: Executive Director
Columbia Innovation Enterprise
Columbia University
500 West 120th St., Mail Code 2206
363 Engineering Terrace
New York, New York 10027
copy to: General Counsel
Columbia University
535 West 116th St., Mail Code 4308
110 Low Memorial Library
New York, New York 10027
if to the Company, to: VIMRX Pharmaceuticals Inc.
2751 Centerville Road
Wilmington, Delaware 19808
Attn: Richard L. Dunning, President
3
<PAGE>
copy to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attn: Lowell S. Lifschultz, Esq.
or to such other address as a party may specify by notice given in accordance
with the terms hereof. All notices shall be deemed given upon receipt. is
provision.
8. Entire Agreement; Amendment. This Agreement sets forth the entire
---------------------------
agreement between the parties relating to the subject matter hereof and
supersedes all previous agreements, written or oral. This Agreement may be
amended only by an instrument in writing duly executed on behalf of the parties.
9. Governing Law. This Agreement shall be governed by New York law
-------------
applicable to agreements made and to be performed in New York. Each party hereby
submits to the jurisdiction of the state and federal courts sitting in the
County of New York, and agrees that service of process may be effected by
written notice given in accordance with the terms hereof.
10. Waiver of Breach. The waiver by a party of a breach or violation by
----------------
the other party of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach or violation by any party of the
same or any other provision of this Agreement. No such waiver shall be effective
unless in writing signed by the party claimed to have made the waiver.
11. Headings. The headings of the sections and paragraphs of this
--------
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
12. Multiple Counterparts. This Agreement may be signed in any number
---------------------
of counterparts which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized representatives as of the day
and year first written above.
THE TRUSTEES OF COLUMBIA UNIVERSITY
IN THE CITY OF NEW YORK
By: /s/ Jack M. Granowitz
-------------------------
Jack M. Granowitz,
Executive Director, Columbia
Innovation Enterprise
4
<PAGE>
VIMRX PHARMACEUTICALS INC.
By: Richard L. Dunning
------------------------------
Richard L. Dunning
President
VIMRX GENOMICS, INC.
By: /s/ Richard L. Dunning
------------------------------
Richard L. Dunning
President
5
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