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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number: 0-19117
IMMULOGIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3397957
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
610 Lincoln Street
Waltham, Massachusetts 02154
(617) 466-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
Preferred Stock Purchase Rights,
Par Value $.01
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 .
--- ---
Indicate by a 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 the
Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based on the last sale price of the Common Stock reported on the
Nasdaq National Market on March 21, 1997 was $100,891,924. .
The number of shares of Common Stock outstanding as of March 21, 1997 was
20,241,640.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the ImmuLogic Pharmaceutical Corporation definitive Proxy Statement
for the 1997 Annual Meeting of Stockholders to be held on May 13, 1997 are
incorporated by reference in Part III
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PART I
ITEM 1. BUSINESS
GENERAL
ImmuLogic Pharmaceutical Corporation (ImmuLogic or the Company) is a
biopharmaceutical company developing novel products with a primary emphasis on
the treatment of allergies and autoimmune diseases. ImmuLogic's technological
approach is based on proprietary discoveries and an advanced understanding of
the molecular events controlling the human immune system. The Company is
developing its ALLERVAX(R) family of allergy therapeutics, with the ALLERVAX(R)
CAT and ALLERVAX(R) RAGWEED therapeutics, the lead products in the family, both
in advanced clinical development stages. Three earlier stage ALLERVAX(R)
products for the treatment of house dust mite, spring grasses and Japanese
cedar pollen have been defined. The autoimmune disease program is focused on
developing therapeutics to treat T cell mediated autoimmune diseases. As a
result of recently announced changes in management and the composition of the
Company's Board of Directors, the Company has redefined its priorities for
product development and plans to focus most of its resources in 1997 on the
development of its ALLERVAX(R) RAGWEED and ALLERVAX(R) CAT therapeutics.
The Company was incorporated under the laws of the State of Delaware on
March 26, 1987. None of the Company's products have completed human clinical
testing, therefore the Company does not expect to market any product
commercially for at least several years.
THE IMMUNE RESPONSE
The immune system is a major biological defense system responsible for
protection against disease. It functions through a complex interplay of
components which allow the body to detect and defend against foreign invaders.
These invaders include bacteria, viruses, parasites and other substances. The
immune system recognizes and distinguishes foreign substances (non-self),
generally termed antigens, from the body's own tissue (self). The immune system
is able to react continually to a wide variety of antigens, to "remember" a
foreign substance to which it has been exposed previously, and to rid the body
of the foreign substance and its effects on the biological system.
The recognition and memory processes of the immune system are
controlled by the activity of two types of cells, T cells and B cells. T cells
are pivotal control cells for the entire antigen-specific immune response
system, playing a critical role in recognizing the antigen, initiating the
immune response and regulating the resulting cascade of immunological events. B
cells secrete antibodies, which play a role in recognizing and in neutralizing
the foreign invader.
When a foreign substance enters the body, antigen presenting cells
physically engulf the foreign antigen. The foreign antigen which triggers immune
responses is commonly a protein, which is composed of a linear sequence of
smaller molecular building blocks called amino acids. The antigen also has a
three-dimensional conformation, determined by the chemical interactions among
the amino acids. Foreign antigens engulfed by antigen-presenting cells are
broken down by enzymes, and smaller fragments of the foreign antigen, called
peptides, are formed. A specific peptide is transported to the cell surface of
the antigen presenting cell and presented, bound to receptors called the HLA
(human leukocyte antigen) complex, to T cells which recognize a specific amino
acid sequence within the peptide called the T cell epitope. HLA molecules are
found on the surface of a variety of cells in the body. The HLA
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molecules are encoded by a gene complex called the Major Histocompatibility
Complex, or MHC. The terms HLA and MHC are sometimes used interchangeably.
Specificity of this recognition of the HLA-epitope complex by T cells occurs
through a receptor on the cell surface, the T cell receptor. The Company refers
to the molecular complex consisting of a T cell, epitope-containing peptide
bound to the HLA molecule, and the T cell receptor as the recognition triad.
The formation of the recognition triad initiates a series of events
characteristic of all immune responses designed to eliminate the foreign
substances. Although the immune system is designed to be beneficial, the system
can mount inappropriate reactions to foreign antigens such as cat dander or
ragweed pollen and to self antigens such as proteins in the body. When these
antigens are perceived incorrectly as harmful, allergies and autoimmune
disease can result.
TECHNOLOGY AND PRODUCT CANDIDATES
PRIMARY THERAPEUTIC APPROACH: T CELL DOWN REGULATION
ImmuLogic's primary therapeutic approach is to intervene at the
recognition triad, the starting point of the aberrant immune response. The
Company's potential therapeutic products target the underlying cause of disease
by modulating the antigen-specific T cell responses involved in initiating and
maintaining the immune cascade through administration of T cell
epitope-containing peptides derived from the disease-causing antigen. ImmuLogic
is designing drugs targeted at the antigen-specific components that provoke an
undesirable immune response. Accordingly, the Company believes that its products
are unlikely to cause general suppression of the immune system while
down-regulating the undesirable immune response in an antigen-specific manner.
In its allergy program, ImmuLogic has obtained experimental evidence in
animals showing that administration of T cell epitope-containing peptides
derived from a known allergen reduces the responsiveness of the T cells
responsible for stimulation of the immune response to that antigen.
Experimental results from other researchers in the field provide support for
the Company's findings and for its belief that the T cell down regulation
approach represents an opportunity to develop therapies to treat allergies and
autoimmune diseases, which are caused by inappropriate immune responses to
innocuous environmental antigens or self antigens.
ALLERGY PROGRAM
Overview. Allergy can be thought of as inappropriate immune system
responses to certain substances which do not in themselves cause disease. Most
individuals mount an immune response to pollens, certain animal proteins and
other environmental antigens. However, in non-allergic individuals, the immune
system responds in a way that does not result in allergic symptoms. In allergic
individuals, the immune system responds inappropriately, resulting in the
sneezing associated with allergic rhinitis and the wheezing associated with
asthma. In a severe allergic reaction, anaphylaxis, which can involve extreme
respiratory distress and vascular collapse, can result.
An allergen, such as a pollen protein, enters the body and is processed
by antigen-presenting cells. T cells bind to the HLA-peptide complex, forming
the recognition triad. Cytokines are released by the activated T cells and act
as signaling agents which regulate the ongoing and subsequent responses of the
immune system such as cell proliferation, inflammation and antibody production.
These cytokines can either stimulate or prevent the migration of additional
immune cells into the area, resulting in tissue inflammation and swelling
associated with allergic responses. Cytokines also play a role in regulating B
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cells to produce antibodies. In allergic diseases, it is the production of IgE
antibodies to the allergen which is responsible for the development and
persistence of allergic responses. The IgE antibodies bind to effector cells
(blood basophils and tissue mast cells) which store and release histamine and
other inflammatory activators upon exposure to allergens. The release of
histamine and other mediators results in allergic symptoms.
Allergic Diseases - Market Opportunity. Allergic symptoms include
rhinitis, asthma and skin eruptions. Allergies afflict substantial numbers of
people worldwide, including approximately 50 million or 20% of the U.S.
population. The Company estimates that 11 million allergy sufferers in the
United States each year seek a physician's care for allergic rhinitis and other
allergy symptoms. Most are treated symptomatically with either antihistamines,
decongestants, steroids, prescription or non-prescription cough and cold
medications, or a combination of these drugs. For many patients, these
medications cause side effects such as drowsiness, are inconvenient to take, and
fail to eliminate symptoms completely.
In the United States, two to three million people receive allergy
shots, called immunotherapy. Immunotherapy consists of a series of
desensitization injections which contain extracts of whole allergens and are
administered weekly or monthly for three to five years with the risk of
significant side-effects.
The Company believes that there is a strong desire on the part of
allergy sufferers and physicians for new treatments for allergic diseases.
Although immunotherapy treatments can be effective, relatively few patients,
generally only the most severely affected, are willing to undergo this therapy,
primarily because the shots must be given frequently over a prolonged period of
time. The lengthy treatment protocols have been developed in large part because
immunotherapy carries a risk that a severe allergic reaction, including
anaphylaxis, may occur if effective doses are given too rapidly. Conventional
drug treatments are palliative, must be taken indefinitely, and frequently fail
to offer adequate symptomatic relief. The Company's ALLERVAX(R) products will
initially target patients who are identified as candidates for immunotherapy,
but have chosen not to receive immunotherapy or who have terminated treatment.
Over half of the candidates for immunotherapy (approximately two to three
million people) discontinue or choose not to receive immunotherapy.
Although there are hundreds of substances in the environment to which
people are allergic, important allergens, including those in cat dander, house
dust mite and common pollens, are similar around the world. This similarity
enables the ALLERVAX(R) products to be developed for worldwide use.
ALLERVAX(R) Products. ImmuLogic is developing a new class of allergy
therapeutic products to be administered via subcutaneous injection which it
believes will provide substantial improvement in effectiveness, safety and
convenience over existing immunotherapy. The Company's approach has been to
identify the proteins that cause the allergic response and to define the
relevant T cell epitopes from each of these proteins. ImmuLogic's ALLERVAX(R)
products contain peptides which have been shown to be part of the recognition
triad in allergic humans. The Company believes that these peptides will down
regulate the immune response, thereby alleviating the symptoms associated with
specific allergies. The Company has shown in animal studies that it is possible,
through subcutaneous administration of T cell epitope-containing peptides
derived from an allergen, to down regulate T cell responses responsible for
initiating and maintaining the allergen-specific immune response. The Company
believes that clinical data demonstrate that the peptides are well tolerated and
are able to down regulate allergen-specific T cell activation in these patients.
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The Company, in cooperation with several university-based
collaborators, has cloned and sequenced relevant allergenic proteins of cat
dander, ragweed pollen, house dust mite, Japanese Cedar pollen, and certain
grass pollens. ImmuLogic has successfully identified the T cell epitopes of
these antigens which cause the immune response resulting in allergic symptoms.
ImmuLogic has chosen certain of these epitopes, each approximately 20 to 27
amino acids in length, to synthesize and combine to create the ALLERVAX(R)
products for each specific allergy.
<TABLE>
<CAPTION>
Approximate Approximate
percentage of size of
Allergy population population
- ------- ------------- ------------
<S> <C> <C>
Cat (1) ..................... 2% 5 million
Ragweed (1) ................. 10% 25 million
House dust mite (1) ......... 6% 15 million
Grasses (1) ................. 10% 25 million
Japanese Cedar pollen (2) ... 10% 13 million
- -----------------
(1) U.S. population. (Source: NHANES II National Health Survey Series 11,
No. 235)
(2) Japanese population.
</TABLE>
Cat: Cat allergy is particularly troublesome because it can be
manifested as asthmatic as well as rhinitic symptoms, and because of the chronic
nature of exposure.
Ragweed: Ragweed allergy is a major allergy in North America. It can
cause debilitating symptoms during a season of six to eight weeks in the late
summer and early fall when the ragweed plant releases pollen into the air.
House dust mite: Dust mite allergy is an important worldwide allergy.
Dust mites are ubiquitous in homes, thriving in beds, draperies and carpets.
Allergic individuals are constantly exposed to this allergen. As with cat
allergy, this constant exposure may cause the allergic condition to worsen with
time. Dust mite allergies are associated with asthmatic symptoms.
Grasses: It is estimated that five species of grass are responsible for
most spring grass allergies. Work performed by ImmuLogic and others indicates
that there appears to be a high degree of similarity among the relevant
allergens in different grass species. For this reason, ImmuLogic believes that a
single therapy may be effective against allergy to several grasses.
Japanese Cedar pollen: Japanese Cedar pollen allergy is one of the most
troubling allergies in Japan, causing debilitating symptoms during a season of
approximately three months when this tree releases pollen.
For its cat allergy product, ALLERVAX(R) CAT, the Company has been
conducting human clinical studies since April 1992. The Company has completed a
number of Phase I and Phase II clinical studies. The Company has chosen the cat
room model as the appropriate clinical model in which to establish efficacy. Two
cat room trials have been completed, the first in March 1994. In this cat room
trial, the Company studied 92 cat allergic patients in a controlled dander
environment and compared their symptoms to placebo recipients before and after
treatment. The trial results demonstrated a statistically significant
improvement in patients' self-rated symptoms in the two high dose groups.
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Based on these results and additional information attained from other
clinical studies, the Company conducted a second cat room challenge trial
completed in 1996. The results of this 270 patient, multi-center,
placebo-controlled trial were reported in April 1996 and showed that patients in
the most intensive treatment group, those receiving four 750 microgram doses,
two times a week for two weeks, reported a statistically significant
improvement in total allergy symptom scores, the primary endpoint of the study
compared to placebo recipients.
Following the results of this cat room challenge trial the Company met
with the FDA to discuss future development plans for the product. As a result
of these discussions, the Company will be required to conduct additional
clinical trial or trials prior to filing a Product License Application for the
ALLERVAX(R) CAT product. These trials will be designed to maximize
pulmonary symptom improvement and will include objective measurements of
efficacy along with symptom ratings. Pending the results of further
discussions with FDA, the Company expects to initiate these trials in 1997.
For its ragweed allergy product, ALLERVAX(R) RAGWEED, the Company began
human clinical testing in 1994. The Company has completed both Phase I and Phase
II trials of the ALLERVAX (R) RAGWEED product and conducted in-season clinical
trials of the ALLERVAX(R) RAGWEED product during the 1995 and 1996 ragweed
allergy seasons (August-October). Nasal, rhinoconjunctival (nasal and eyes) and
total allergy symptoms were evaluated during the 1995 ragweed allergy season. In
February 1996, the Company reported positive results obtained in the 1995
trials. Data from the double-blind, placebo-controlled trials conducted in 960
patients at 27 centers in the United States and Canada, showed that the
ALLERVAX(R) RAGWEED product was well tolerated and decreased allergy symptoms
over the total allergy season.
The Company met with the FDA in mid 1996 to discuss plans for a 1996
ragweed season trial. The trial was designed with input from the FDA and was
initiated in July, prior to the start of the ragweed season. It was a
double-blind, placebo-controlled trial of 500 patients at 22 centers in the U.S.
Results from this trial were reported in January 1997. The results show that
eight doses of 250 micrograms of the ALLERVAX(R) RAGWEED administered prior to
the start of the ragweed season improved symptoms across the allergy season and
reduced the use of antihistamine and decongestant medications during the season.
Based on the results of this trial and pending the outcome of further
discussions with the FDA, the Company plans to conduct additional clinical
trials, including pivotal trial or trials, in 1997. Because ragweed allergies
are a seasonal condition, these trials must be commenced no later than late
summer 1997 when the ragweed season begins.
The Company has defined the composition of house dust mite, grass
pollen and Japanese Cedar pollen product candidates. These three candidates will
be advanced in development if and when a partner is identified.
ImmuLogic believes that it will be able to conduct the steps necessary
to initiate and conduct clinical studies with its product candidates, but there
can be no assurance that approvals will be obtained, or that the results of
future clinical trials in humans will be sufficient to establish the safety
and efficacy of any product candidates or will confirm or be consistent with
the results obtained in earlier trials.
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AUTOIMMUNE DISEASE PROGRAM
Overview. Autoimmune diseases result from the failure of the immune
system to correctly distinguish self from non-self, resulting in an immune
attack on the body's own tissue. Autoimmune diseases include, among others,
multiple sclerosis, in which immune responses cause destruction of the myelin
sheath covering the nerves of the central nervous system, resulting in paralysis
and debility, Type I (insulin-dependent) diabetes, in which the pancreatic
islets are destroyed, thus preventing the body from making a key hormone
required for regulation of blood sugar, and rheumatoid arthritis, in which
inflammation and subsequent deterioration of joints results in pain and lack of
mobility. These diseases are chronic, require lifelong treatment, and are often
progressive.
The autoimmune response begins by the coupling of an autoantigen or
foreign antigen which mimics an autoantigen to an antigen-presenting cell. In
autoimmune diseases, it is generally believed that a T cell epitope derived from
the autoantigen is presented by an HLA molecule. This HLA-epitope complex is
recognized by a receptor on an autoreactive T cell ("helper" T cell), forming
the recognition triad. The T cell becomes activated and produces cytokines which
cause T and B cell responses, resulting in inflammation. Activation of a
specific type of T cell (cytotoxic or "killer" T cell) can result in a direct
attack on cells bearing the autoantigenic epitope on their surface, leading to
destruction of specific tissues or organs (myelin in the case of multiple
sclerosis).
ImmuLogic's primary technological approach is to develop therapeutics
to prevent the initiation or progression of autoimmune diseases through down
regulation of autoantigen specific immune responses. ImmuLogic has initiated
proprietary programs aimed at the identification of the specific autoantigens
that cause multiple sclerosis and other autoimmune diseases. Characterization of
autoantigens makes it possible to identify T cell reactive epitopes of these
autoantigens and to develop therapies with the potential to modulate these
aberrant immune responses. This approach is similar in principle to that being
employed in the ALLERVAX(R) program. Data from the ALLERVAX(R) program, both
from preclinical and clinical research, provide support for a peptide-based
approach to treat autoimmune diseases.
Multiple Sclerosis. The Company's principal effort in the autoimmune
disease area is in developing a peptide-based therapeutic to treat multiple
sclerosis. It is estimated that at least 300,000 people in North America suffer
from multiple sclerosis. The Company has obtained pre-clinical data results
through a collaboration with Stanford University that support the concept of T
cell modulation in autoimmune diseases. In an animal model of multiple
sclerosis, experimental administration of peptides derived from autoantigens
not only prevented disease but also ameliorated the symptoms of the ongoing
disease and improved survival. In December 1996, ImmuLogic filed an IND
application to begin clinical trials of an injectable peptide immunotherapeutic
to treat multiple sclerosis. In connection with the reorganization of the
Company's development plans in March 1997 and the decision to focus most of the
Company's resources on the ALLERVAX(R) RAGWEED and ALLERVAX(R) CAT
therapeutics, the Company is reviewing plans for the efficient development of
its multiple sclerosis product.
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OTHER PROGRAMS
Substance Abuse Program. The Company is utilizing more traditional
vaccine approaches to develop therapeutic products to help motivated
individuals recover from substance dependence. The vaccine is expected to
induce specific antibodies which are capable of binding the substances in the
blood and minimizing the passage of the substances into the brain. The Company
published preclinical studies relating to its cocaine vaccine program in the
October 1996 issue of the journal Nature Medicine. The published data show that
antibodies against cocaine can significantly decrease drug-seeking behavior for
cocaine in an animal model of addiction. Also, the vaccine decreased the
passage of cocaine into the brain in animals receiving cocaine intravenously, a
route comparable to that used by human abusers of the drug. ImmuLogic received
a $700,000 Small Business Innovation Research grant from the National Institute
on Drug Abuse (NIDA) in August 1996 to fund the early development of this
vaccine.
Contact Hypersensitivity Program. Applying the same concept as in
allergies and autoimmune diseases, the Company has conducted research and
preclinical studies to develop a therapeutic to treat contact hypersensitivity
to poison ivy and poison oak.
Poison ivy and poison oak are widespread, resulting in various degrees
of morbidity. Such hypersensitivity, caused by a substance called urushiol found
in the poison ivy/oak plant, may compromise management of medical conditions and
disrupt productivity in the workplace. The effector cells responsible for
hypersensitivity to poison ivy and poison oak are urushiol-specific T cells. The
Company has focused on an immunotherapeutic approach to down-regulate
urushiol-specific T cells. To devote sufficient resources to other late stage
clinical development candidates, the Company has suspended development of the
poison ivy/poison oak sensitivity product and may make this product candidate
available for license to third-parties.
COLLABORATION AGREEMENTS
Hoechst Marion Roussel, Inc. (formerly Marion Merrell Dow Inc.). In
February 1992, the Company entered into a collaboration agreement with Hoechst
Marion Roussel, Inc. (HMR) (formerly Marion Merrell Dow, Inc.) relating to the
worldwide development and commercialization of the Company's family of five
injectable ALLERVAX(R) allergy therapeutic products (the Collaboration
Agreement). In March 1995, the Company and HMR signed a letter agreement for the
joint manufacture of ALLERVAX(R) products. On March 7, 1996, HMR notified the
Company that it was withdrawing from the Collaboration Agreement, effective
September 7, 1996. The Company and HMR worked together to effect an orderly
transition of responsibilities as the ALLERVAX(R) program shifted entirely to
the Company. On October 30, 1996, the Company received a payment in the amount
of $7,000,000, resolving all obligations relating to the program in a manner
agreeable to both the Company and HMR. In addition, HMR transferred ALLERVAX(R)
CEDAR and MITE peptide inventories to the Company to be used in future product
development activities. No value has been attributed to these peptides in the
Company's December 31, 1996 balance sheet as the Company is still considering
plans to develop these programs beyond the research stage. Under the terms of
the Collaboration Agreement, upon termination of the collaboration, the Company
regained all rights to the Company's ALLERVAX(R) allergy program including all
injectable and oral therapeutics and complimentary recombinant allergy
diagnostics.
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At the time of execution of the Collaboration Agreement, HMR made a
$7,000,000 payment to the Company and through December 31, 1996 had made license
and milestone payments of $17,000,000 and a final settlement payment of
$7,000,000 which is recorded as other revenues in the Company's 1996 statement
of operations. In addition, HMR purchased, in December 1991, 1,000,000 shares of
the Company's Common Stock for $18,000,000. As of March 22, 1996, HMR had sold
these shares on the open market.
Schering AG, Germany. In March 1995, the Company signed a collaboration
agreement with Schering AG for the joint development and commercialization of
the Company's peptide therapeutic to treat multiple sclerosis. Under this
agreement, the Company would have received up to $7,500,000 in research support
($4,375,000 of which has been received through December 31, 1996) and up to
$20,000,000 in milestone payments. The Company would pay one-third of the costs
associated with clinical development and would receive a substantial royalty on
net sales, if any. During 1996, the parties agreed in concept to changes in the
collaboration agreement under which milestone payments will be restructured to
payments made after successful product demonstration and annual research
support funding from Schering AG during 1997 will be reduced from $2,500,000 to
$1,250,000. This funding will be dedicated exclusively to the development of a
nonparenterally administered therapeutic product for multiple sclerosis. The
Company will fund all clinical development costs for the injectable therapeutic
product for multiple sclerosis. Schering AG has the right, at its election, to
participate in the development and commercialization of the injectable dosage
form. If Schering AG elects to participate, it will be required to reimburse
the Company for a significant portion of these development costs and will be
obligated to make certain milestone payments to the Company upon achievement
of development milestones. Schering AG has the right to terminate the
collaboration agreement upon 30 days prior written notice to the Company. See
Factors Which May Affect Future Results -- Relationship with Schering AG.
In addition, Schering Berlin Venture Corporation purchased 1,042,345
shares of the Company's Common Stock for $8,000,000 at the time of entering into
the agreement. In April 1996, ImmuLogic registered these shares under the
Securities Act of 1933 pursuant to the registration rights granted to Schering
Berlin Venture Corporation in the stock purchase agreement. Upon registration,
Schering Berlin Venture Corporation sold these shares on the open market.
COMPETITION
The pharmaceutical and biotechnology industries are characterized by
rapidly evolving technology and intense competition. Many companies, including
major pharmaceutical and chemical companies, as well as specialized
biotechnology companies, are engaged in activities similar to those of the
Company. Certain of these companies have substantially greater financial and
other resources, larger research and development staffs, and more extensive
marketing and manufacturing organizations than the Company. Many of these
companies have significant experience in preclinical testing, conducting human
clinical trials and other regulatory approval procedures. In addition, colleges,
universities, governmental agencies and other public and private research
organizations conduct research and may market commercial products on their own
or through joint ventures. These institutions are becoming more active in
seeking patent protection and licensing arrangements to collect royalties for
use of technology that they have developed. These institutions also compete with
the Company in recruiting and retaining highly-qualified scientific personnel.
There is substantial competition for the Company's products in the
allergy area. Many pharmaceutical companies have programs focused on enhancing
current therapies, such as non-sedating antihistamines, and on developing
products which affect immune system mediators further down the
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allergic cascade. Most of these approaches are aimed at relieving symptoms,
reducing side effects, and addressing the inconvenience to the patient. While
the Company believes that its ALLERVAX(R) products, if successfully developed,
would have therapeutic advantages over currently available treatments, there can
be no assurance that such advantages will materialize. The Company expects that
its ALLERVAX(R) products could encounter significant competition.
There are numerous pharmaceutical and biotechnology companies
developing therapies to treat autoimmune diseases. Many pharmaceutical companies
are working on products to treat multiple sclerosis. Current therapies improve
disease symptoms or delay the time between exacerbations. Other potential
therapeutics which target the underlying disease state include oral tolerance
therapy. Autoimmune diseases are a major target for many companies developing
therapeutics, and it is unclear which approaches will work best.
The Company believes that its ability to compete effectively will be
based on its ability to create and maintain scientifically advanced technology,
attract and retain scientific personnel with a broad range of expertise, obtain
patent protection or otherwise develop proprietary products or processes, obtain
required government approvals on a timely basis, select and pursue research and
development projects in areas in which significant market opportunities exist or
are likely to develop, manufacture its products on a cost-effective basis and
successfully market its products either alone or through third parties. Many of
the Company's competitors have substantially greater financial resources, more
clinical and regulatory experience, manufacturing facilities and sales and
marketing organizations than the Company.
PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS
The Company's strategy is to pursue aggressively a strong patent
portfolio. As of December 31, 1996, the Company had ownership rights to
approximately 60 patent applications in the United States. Of these
applications, 46 have corresponding applications on file with the World
Intellectual Property Organization (WIPO) or in one or more of the following
national or regional patent offices: Canada, Japan, Australia, Finland, Norway,
Mexico, South Africa, Portugal, New Zealand, Israel, South Korea, Taiwan and
Europe. Of these original patent applications: 8 have general application in
allergy and autoimmune disease including the technology licensed from the
Massachusetts Institute of Technology ("MIT") as described below; 37 are related
to the Company's allergy program; 8 are related to the Company's autoimmune
disease program; and the remaining 7 are related to other inventions. In
addition, the Company owns or has exclusive rights to 8 United States patents, 6
Australian patents, 1 Canadian patent, 1 European patent, 8 South African
patents and 1 New Zealand patent.
The Company has entered into a number of licensing arrangements
pursuant to which it has obtained exclusive rights to certain technologies. In
1987, ImmuLogic licensed a patent application from MIT claiming methods and
compositions for modulating the immune response of a cellular system. One United
States patent was issued in May, 1991, with claims related to methods for use of
compositions as vaccines and therapeutics. A United States patent application
covering other aspects of the original MIT patent application is pending. The
issued claims relate to potential approaches to vaccine therapy and are
unrelated to the Company's current research programs in allergy and autoimmune
diseases. Under its agreement with MIT, as amended, ImmuLogic is required to
make certain benchmark and royalty payments to MIT, including a $750,000 patent
allowance fee due in installments.
In addition, the Company has obtained exclusive licenses from the
University of North Carolina, TVW Telethon ICHR (Perth, Australia) and
University of Melbourne covering inventions and patent applications relating to
therapeutic uses of allergenic proteins and peptides of ragweed, house dust mite
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and grasses, respectively. Under these license agreements, the Company is
required to pay royalties based on sales of products derived from the licensed
inventions. The Company cannot at this time make a meaningful estimate of its
total future costs under the MIT license and its other licensing arrangements
because such costs depend on several factors, including the level of future
product sales.
ImmuLogic has filed or licensed patent applications on the protein
sequences for specific allergenic proteins and portions thereof, use of the
sequences, and the use of certain T cell epitopes from these sequences in
therapeutic compositions. This work was primarily based on extensive in vitro
studies using human samples, as well as in vivo animal work, to determine the
manner in which T cells respond to allergens and their epitopes.
Patent applications have also been filed on work conducted at ImmuLogic
relating to the multiple sclerosis, contact hypersensitivity and drugs of abuse
therapeutic programs. ImmuLogic has licensed patents pertaining to the drugs of
abuse therapeutic program for which the Company pays royalties.
There can be no assurance that patent applications owned by or licensed
to the Company will issue or that, if issued, they will provide the Company
with significant protection against competitors. In addition, the Company is
aware of one issued European patent and one pending European patent application
belonging to third parties which may adversely affect the Company's ability to
commercialize its multiple sclerosis therapeutic candidate. If the claims
contained in these patents are sustained, the Company may need to acquire
licenses to those technologies in order to commercialize its multiple sclerosis
therapeutic candidate in Europe. The cost or availability of licenses for these
technologies is unknown. There may be additional domestic and foreign patent
applications pending of which the Company is unaware at this time and which may
affect the Company's ability to commercialize any of its products if
corresponding patents are issued. There can be no assurance that ImmuLogic will
not need to acquire licenses under patents belonging to others for technology
potentially useful or necessary to ImmuLogic and, with the exception of the
Cohen-Boyer patents on recombinant DNA under which ImmuLogic has acquired a
non-exclusive license, the cost or availability of such potential licenses is
currently unknown. Moreover, there can be no assurance that any patents issued
to or licensed by the Company will not be infringed upon or designed around by
others.
Some of the Company's know-how and technology is not patentable. To
protect its rights, the Company requires all employees, consultants, advisors
and collaborators to enter into confidentiality agreements with ImmuLogic. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure. Further, in the
absence of patent protection, the Company's business may be adversely affected
by competitors who independently develop substantially equivalent technology.
GOVERNMENT REGULATION
The production and marketing of the Company's products and its research
and development activities are subject to regulation for safety and
effectiveness by numerous governmental authorities in the United States and
other countries. Pharmaceutical products intended for therapeutic or diagnostic
use in humans are governed by FDA regulations in the United States and by
comparable regulations in foreign countries. The process of completing clinical
testing and obtaining FDA approval for a new human drug or biological product
requires a number of years and the expenditure of substantial resources.
The steps required before a new human pharmaceutical product may be
marketed in the United States include (1) preclinical laboratory and animal
tests, (2) the submission to the FDA of an application for an IND, (3) adequate
and well-controlled human clinical trials to establish the safety and
effectiveness of the drug, (4) the submission of a Product License Application
(PLA) or a New Drug Application (NDA) to the FDA, and (5) FDA approval of the
PLA or NDA prior to any commercial sale or shipment of the drug.
Preclinical studies are commonly conducted in a laboratory in animal
models or on human samples in vitro. The results of these studies are submitted
to the FDA as part of the IND application
11
<PAGE> 12
prior to commencement of clinical testing in humans. Clinical trials are
characterized by three stages. Phase I trials are designed to provide
information about product safety and pharmacology. Phase II trials are designed
to provide additional information on safety, preliminary evidence of clinical
efficacy and definition of an effective dosing regimen. Phase III trials are
large-scale studies designed to provide statistical evidence of effectiveness
and safety in humans at the designated dose and dosing regimen. Upon completion
of clinical testing, which must demonstrate that the product is safe and
effective for a specific indication, a PLA or NDA may be filed with the FDA.
This application includes details of the manufacturing and testing processes,
preclinical studies and clinical trials. FDA approval of the application is
required before the applicant may market the new product.
Even after initial FDA approval has been obtained, further studies may
be required to provide additional data on safety or effectiveness. Also, the FDA
may require post-marketing and surveillance programs to monitor the drug's
effects.
In addition to obtaining FDA approval for each product, each
manufacturing establishment for new drugs and biologics must receive some form
of approval by the FDA. Under current rules for biologics, the facility must
obtain an approved Established License Application (ELA) from the FDA. The
facility must be inspected by the FDA, and the approval obtained, prior to
interstate marketing of any product. Among the conditions for such approval is
the requirement that the prospective manufacturer's quality control and
manufacturing procedures conform to the FDA's Good Manufacturing Practice (GMP)
regulations, which must be followed at all times. Manufacturing establishments,
both foreign and domestic, also are subject to inspections by or under the
authority of the FDA and by other federal, state or local agencies. The Company
currently has the capability to manufacturing GMP-grade materials at its
headquarters in Waltham, Massachusetts for the production of human clinical
trial materials and, in the event the Company receives the necessary regulatory
approvals to market the ALLERVAX(R) CAT product, for production of materials for
the product launch. Filling and packaging will be sub-contracted to a third
party who must comply with GMP's.
In addition to regulations enforced by the FDA, the Company also is
subject to regulation relating to occupational health and safety, environmental
protection, hazardous substance control, radioactive materials control and waste
management and disposal. Although the Company believes that its safety
procedures for handling and disposing of hazardous and radioactive materials
comply with federal, state and local regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated.
For marketing outside the United States, the Company will be subject to
foreign regulatory requirements governing human clinical trials and marketing
approval for drugs and devices. The requirements relating to the conduct of
clinical trials, product licensing, pricing and reimbursement vary widely from
country to country, and may differ from requirements in the United States.
Results of clinical trials conducted outside the United States, if any, may have
bearing on the U.S.
regulatory processes.
There can be no assurance that FDA approval of any ELA, NDA or PLA
submitted by the Company will be obtained, or that if obtained, that any such
approval will be obtained in a timely manner.
FACTORS WHICH MAY AFFECT FUTURE RESULTS
Development Stage of the Company's Products. None of the Company's
products has completed human clinical testing. Although the Company's two lead
products, ALLERVAX(R) CAT and
12
<PAGE> 13
ALLERVAX(R) RAGWEED, are in clinical development, significant additional
development, laboratory and clinical testing will be required for all of the
Company's potential products prior to commercialization. In particular, the
Company will be required to conduct pivotal clinical trials for both its
ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products. Consequently, the Company
does not expect regulatory approval for commercial sales of any of its products
for several years. In addition, results of clinical trials conducted to date
relating to the ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products are not
necessarily indicative of the results that will be obtained in future clinical
trials and there can be no assurance that regulatory approval to commercialize
any product will be granted. Clinical trials may be terminated at any time for
many reasons including unanticipitated toxicity, significant adverse events or a
lack of efficacy.
Additional Financing Requirements and Access to Capital. ImmuLogic has
funded its operations to date primarily through the sale of equity securities,
sponsored research revenues, license payments and earnings on invested capital.
The Company has expended substantial funds for the research and development of
its products, and will in the future expend substantial funds for further
research and development, establishment of commercial-scale manufacturing
capabilities, and the marketing of its products. The Company will seek to obtain
additional funds for these purposes through equity or debt financings,
collaborative arrangements with corporate partners or from other sources.
However, such additional funds may not be available to the Company for such
purposes on acceptable terms, if at all. Insufficient funds could require the
Company to delay, scale back or eliminate certain of its research and
development programs or to license third parties to commercialize products or
technologies that the Company would otherwise develop or commercialize itself.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".
Relationship with Schering AG. The Company has entered into a
collaboration agreement with Schering AG for the joint development and
commercialization of the Company's peptide therapeutic to treat multiple
sclerosis. All funding from Schering AG will be dedicated to the development of
a nonparenterally administered therapeutic product for multiple sclerosis. The
Company will fund all clinical costs for the development of the injectable
therapeutic product, including any clinical trials. Although Schering AG has
the right, at its election, to participate in the development and
commercialization of the injectable dosage form (in which event it would be
required to provide additional research funding and make milestone payments
after successful product demonstration relating to the injectable product),
there can be no assurance that Schering AG will elect to participate.
Furthermore, Schering AG has the right to terminate the collaboration agreement
upon 30 days prior written notice to the Company. There can be no assurance
that Schering AG will not terminate the collaboration agreement, or that it
will devote the resources necessary to develop and commercialize any products
resulting from the collaboration.
Product Liability. The testing, marketing and sale of human health care
products entail an inherent risk of allegations of product defects, and there
can be no assurance that substantial product liability claims will not be
asserted against the Company. To manage its potential liability, the Company
maintains clinical trial liability insurance coverage (although it does not
currently maintain product liability coverage) and seeks to include indemnity
provisions in its contracts with clinical investigators. These indemnities
generally do not protect the Company against certain of its own actions such as
those involving its negligence or misconduct. In some cases, the Company is
required to indemnify its investigators and others against its own actions. All
such indemnities are subject to negotiation and their terms and scope may vary.
The Company bears the risk that an indemnifying party may not have the
financial resources to fulfill its obligations. In addition, the Company could
be materially and adversely affected if it were required to pay damages or
incur defense expenses (a) in connection with an indemnity claim, or (b) beyond
the level of its insurance coverage. There is also no assurance that adequate
product liability insurance will be available at acceptable cost, if at all, if
and when the Company's products are commercialized.
Patents and Proprietary Rights. The patent position of biotechnology
and pharmaceutical firms is highly uncertain and involves complex legal and
factual questions. There is no consistent policy regarding the breadth of claims
allowed in biotechnology patents. Accordingly, there can be no assurance that
patent applications relating to the Company's products or technology will result
in patents being issued or that, if issued, the patents will afford protection
against competitors with similar technology. In addition, companies that obtain
patents claiming products or processes that are necessary for or useful to the
development of the Company's products can bring legal actions against the
Company claiming infringement. The Company may be required to obtain licenses
from others to develop, manufacture or market its products. There can be no
assurance that the Company will be able to obtain such licenses on commercially
reasonable terms, if at all, or that the patents underlying the licenses will be
valid and enforceable.
In addition, the Company is aware of one issued European patent and
one pending European patent application belonging to third parites which may
adversely affect the Company's ability to commercialize its multiple sclerosis
therapeutic candidate. If the claims contained in these patents are sustained,
the Company may need to acquire licenses to those technologies in order to
commercialize its multiple sclerosis therapeutic candidate in Europe. The cost
or availability of licenses for these technologies is unknown. There may be
additional domestic and foreign patent applications pending of which the
Company in unaware at this time and which may affect the Company's ability to
commercialize any of its products if corresponding patents are issued.
Some of the Company's know-how and technology is not patentable. To
protect its rights, the Company requires all employees, consultants, advisors
and collaborators to enter into confidentiality agreements. There can be no
assurance, however, that these agreements will provide meaningful protection for
the Company's trade secrets, know-how or other proprietary information in the
event of any unauthorized use or disclosure. Further, in the absence of patent
protection, the Company's business may be adversely affected by competitors who
independently develop substantially equivalent technology. See "Business -
Patents and Proprietary Rights".
Manufacturing and Marketing. The Company has not yet commercialized any
products and has limited manufacturing experience. The Company has built a GMP
grade manufacturing area in its Waltham, Massachusetts facility for the
production of ALLERVAX(R) products. To date, the Company has manufactured the
ALLERVAX(R) CAT product to be used in its clinical trials as well as its cocaine
vaccine, and the Company has relied upon third party contractors to manufacture
its ALLERVAX(R) RAGWEED and multiple sclerosis therapeutics for use in its
clinical trials. Filling and packing of the Company's products have been and
will in all likelihood continue to be conducted by third party
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<PAGE> 14
contractors. The Company expects to utilize its manufacturing capacity, upon
receiving the necessary regulatory approval, for the product launches of
ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED. No assurance can be given that the
Company will be able to manufacture the required clinical or commercial
quantities of the ALLERVAX(R) products. To the extent that the Company relies
upon contract manufacturers, there can be no assurance that such parties will
perform their obligations in a timely manner.
The Company currently has no direct sales or marketing capability. If
the Company elects to commercialize and market its products itself, the Company
will need to develop additional capabilities, and there can be no assurance that
the Company will be successful in developing such capabilities. If the Company
elects to commercialize any products with third parties, there can be no
assurance that the Company will be successful in reaching satisfactory
arrangements with such parties.
Competition. The biotechnology and pharmaceutical industries are
subject to rapid and significant technological change. Competitors of the
Company in the United States and abroad are numerous and include, among others,
major pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. There can be no assurance that the
Company's competitors will not succeed in developing technologies and products
that are more effective than any which are being developed by the Company or
which would render the Company's technology and products obsolete and
noncompetitive. Many of these competitors have substantially greater financial
and technical resources and production and marketing capabilities than the
Company. In addition, many of the Company's competitors have significantly
greater experience than the Company in preclinical testing and human clinical
trials or pharmaceutical products and obtaining the United States Food and Drug
Administration (FDA) and other regulatory approvals of products for use in
health care. Accordingly, the Company's competitors may succeed in obtaining FDA
approval for products more rapidly than the Company. If the Company commences
significant commercial sales of its products, it will also be competing with
respect to manufacturing efficiency and marketing capabilities, areas in which
it has limited or no experience. See "Business - Competition".
Attraction and Retention of Key Employees and Consultants. As the
Company continues its research, development and clinical testing and expands
into areas and activities requiring additional expertise such as production and
marketing, recruiting and retaining qualified scientific and other personnel
will be critical to the Company's success. There can be no assurance that the
Company will be able to attract and retain such personnel on acceptable terms.
The failure to attract and retain management personnel or to develop additional
expertise could adversely affect the Company's business.
Government Regulation. The production and marketing of the Company's
products and its ongoing research and development activities are subject to
regulation by numerous governmental authorities in the United States and other
countries. The rigorous preclinical and clinical testing requirements and
regulatory approval process can take a number of years and require the
expenditure of substantial resources. Delays in obtaining regulatory approvals
would adversely affect the marketing of products developed by the Company and
the Company's ability to receive product revenues or royalties. In addition, the
Company cannot predict the extent to which government regulations might have an
adverse effect on the production and marketing of the Company's products. See
"Business - Government Regulation".
Third-Party Reimbursement. In both the domestic and foreign markets,
sales of the Company's proposed products will depend in part on the availability
of reimbursement from third-party payers such as government health
administration authorities, private health insurers and other organizations.
Third-
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<PAGE> 15
party payers are increasingly challenging the price and cost effectiveness of
medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. Legislation and
regulations affecting the pricing of pharmaceuticals may change before any of
the Company's proposed products are approved for marketing. Adoption of such
legislation could further limit reimbursement for medical products and services.
EMPLOYEES
As of December 31, 1996, the Company had 151 full-time employees, 23 of
whom hold Ph.D. degrees. The Company considers its relations with its employees
to be good. No Company employee is covered by a collective bargaining agreement.
ITEM 2. PROPERTIES
The Company's 85,000 square foot headquarters and research and
development facility is located in Waltham, Massachusetts under a lease
agreement which expires in August 2002. The Company believes that its current
facilities will be adequate to meet its requirements for the foreseeable future.
The Company's operating lease for its former Palo Alto, California facility
which expires in March 1999, was sub-leased under two agreements which cover the
Company's future obligations under this lease.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their respective ages and
positions with the Company as of March 27, 1997 are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
J. Joseph Marr, M.D. 58 Acting President and Chief Executive Officer, Executive
Vice President, Research and Development and Chief
Scientific Officer
Brian D. Bollwage 41 Vice President, Regulatory Affairs
Kevin P. Lawler 36 Vice President, Human Resources
John E. Morrison 41 Treasurer
Christopher F. Nicodemus, M.D. 39 Vice President, Medical Affairs
David A. Tolley 45 Vice President, Process Development and Manufacturing
</TABLE>
15
<PAGE> 16
DR. J. JOSEPH MARR was appointed Acting President and CEO in December
1996. In addition he retained his position as Executive Vice President, Research
and Development and Chief Scientific Officer. He joined ImmuLogic in July 1996
as Executive Vice President Research, Chief Scientific Officer. From 1993 to
1996, Dr. Marr held the position of Vice President, Research and Development at
Ribozyme Pharmaceuticals. From 1989 to 1993, Dr. Marr was Senior Vice President,
Discovery Research at Searle Research and Development where he managed a group
of 240 scientists. Dr. Marr also was a consultant with the World Health
Organization from 1982 to 1992 during which time he designed and implemented
certain late stage clinical trials for WHO. Dr. Marr held academic positions
from 1982 to 1990 including Professor, Department of Medicine and Department of
Biochemistry and Director of Clinical Laboratories at the University of Colorado
Health Sciences Center. From 1970 to 1982 he was employed by Washington
University School of Medicine where he was Associate Professor of Medicine and
Director, Microbiology Laboratories and by St. Louis University School of
Medicine where he rose to the position of Vice Chairman, Department of Medicine,
Professor of Medicine and Microbiology. Dr. Marr received his B.S. degree from
Xavier University and M.D. degree from Johns Hopkins University School of
Medicine.
MR. BRIAN D. BOLLWAGE joined ImmuLogic in December 1995 as Vice
President, Regulatory Affairs. Prior to joining the Company he was at Enzon,
Inc. from 1993 to 1995, most recently holding the position of Vice President,
Regulatory Affairs, Quality Assurance and Quality Control. From 1986 to 1993,
Mr. Bollwage held the position of Associate Director, Drug Regulatory Affairs at
Hoechst-Roussel Pharmaceuticals, Inc. From 1982 to 1986, he held regulatory
affairs positions at Pharmacia, Inc. and from 1979 to 1982, Mr. Bollwage held
research and regulatory affairs positions at Johnson & Johnson. He received a
B.A. from the University of Bridgeport, his M.S. from Rutgers University, an
M.B.A. from Fairleigh Dickinson University, and a J.D. from Rutgers Law School.
MR. KEVIN P. LAWLER has held the position of Vice President, Human
Resources since February 1994. Mr. Lawler served as Director, Human Resources
from the time he joined the Company in July 1990 until January 1994. Prior to
joining the Company he served as Manager, Human Resources in the Systems
Development Division of Data General Corporation from 1985 to 1990. From 1984 to
1985 he served as employment manager with Frito Lay Inc., and as an Industrial
Relations Supervisor with American Cyanamid Corporation from 1982 to 1984. He
received a B.S. in Industrial and Labor Relations from Cornell University.
MR. JOHN E. MORRISON joined ImmuLogic as Director of Finance/Controller
in August 1996. He was named Treasurer in January 1997. From 1988 to 1996, Mr.
Morrison was employed by Laser Science, Inc. as Chief Financial Officer. From
1986 to 1988 Mr. Morrison was Manager of Costs, Budgets and Planning at Sipex
Corporation. Previously he was Corporate Controller at Azonix Corporation from
1984 to 1986. Mr. Morrison received a B.S. degree from Boston College, a Master
of Business Administration degree from Bentley College, and is a Certified
Management Accountant (C.M.A.).
DR. CHRISTOPHER F. NICODEMUS joined the Company in January 1993 as
Senior Director of Medical Affairs and was promoted to Vice President in
February 1994. Dr. Nicodemus was most recently employed as Senior Associate
Medical Director for Pfizer Inc. Dr. Nicodemus is a specialist in allergy and
immunology and a Lecturer in the Department of Medicine, Harvard Medical School.
He has conducted research in the mast cell biology group, Department of
Rheumatology and Immunology, Brigham & Women's Hospital, Boston. He received his
B.A. from Harvard College and his M.D. from SUNY Upstate Medical Center and is
board certified in Internal Medicine and Allergy and Clinical Immunology.
16
<PAGE> 17
MR. DAVID A. TOLLEY joined the Company in September 1994 as Senior
Director of Manufacturing and was promoted to Vice President, Process
Development and Manufacturing in December 1995. From 1975 to 1994, Mr. Tolley
was employed by the Dow Chemical Company most recently as Research Manager for
the Pharmaceutical Process Research Group. While at Dow Chemical he held
positions in pharmaceutical manufacturing, agricultural chemicals manufacturing,
fine chemicals manufacturing, and basic research. Mr. Tolley received a B.S. in
Chemical Engineering from the University of Cincinnati.
Executive officers of the Company are elected by the Board of Directors
on an annual basis and serve at the discretion of the Board of Directors. There
is no family relationship among any of the officers or directors.
17
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded in the over-the-counter market on
the Nasdaq National Market under the symbol IMUL. The following table sets forth
for the periods indicated the range of high and low closing sale prices per
share of the Common Stock as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
1995 High Low
<S> <C> <C>
First Quarter $ 8 1/4 $ 6 1/2
Second Quarter 8 1/2 6 3/8
Third Quarter 13 5/16 7 3/4
Fourth Quarter 19 1/4 10 7/8
1996
First Quarter $21 $10 5/8
Second Quarter 13 1/4 8 5/8
Third Quarter 9 1/16 6 1/2
Fourth Quarter 10 1/8 6 3/8
</TABLE>
On December 31, 1996, there were approximately 319 holders of record of
the Company's Common Stock. The Company has never declared or paid any cash
dividends on its capital stock. The Company currently intends to retain all
earnings, if any, for use in its business and does not anticipate paying any
cash dividends in the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Information required by this item is included in this report on page 27
and should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and the Report of Independent Accountants, included in this report
on pages 28 through 43.
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since inception, the Company has focused on the research and clinical
development of products to treat allergies and autoimmune diseases. The
Company's primary sources of working capital have been from the sale of equity
securities, interest earned on invested capital and sponsored research funding
from collaboration agreements.
In 1996, the Company expended significant resources on the clinical
development of the ALLERVAX(R) CAT (the Company's therapeutic product for
individuals allergic to cats) and ALLERVAX(R) RAGWEED (the Company's therapeutic
product for individuals allergic to ragweed pollen) products. A majority of the
clinical spending related to a 500 patient clinical trial conducted in the
United States for the Company's ALLERVAX(R) RAGWEED product. The Company also
incurred costs for two trials for the Company's ALLERVAX(R) CAT product.
Following analysis of the trial data from both the ALLERVAX(R) CAT and
ALLERVAX(R) RAGWEED therapeutic trials conducted during 1996 and as a result of
conversations with the United States Food and Drug Administration (FDA)
regarding these programs, the Company plans to expend funds for additional
trials for both the ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products in 1997. As
a result of recently announced changes in management and the composition of the
Company's Board of Directors, the Company redefined its priorities for product
development in March 1997 and plans to focus most of its resources in 1997 on
the efficient development of its ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED
therapeutics.
The Company's development during 1996 also focused on advancing a
multiple sclerosis peptide therapeutic to the clinical development stage. An
investigational new drug (IND) application for an injectable form of this
therapeutic was filed with the Food and Drug Administration on December 30,
1996. As a result of the change in focus in the development priorities noted
above, the Company is reviewing its plans for the development of the multiple
sclerosis product. The Company also expects to expend certain funds in 1997 for
the development of a nonparenteral dosage form of its multiple sclerosis
therapeutic. Partial funding for the nonparenteral dosage product is currently
being provided by Schering AG, Germany (Schering AG).
19
<PAGE> 20
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total revenues in 1996 were $9,239,000 compared to $7,758,000 in 1995.
The increase in total revenues in 1996 was primarily due to a $7,000,000 payment
received from Hoechst Marion Roussel, Inc. (HMR) resolving all obligations
related to the collaboration agreement between the Company and HMR, which was
terminated by HMR on September 7, 1996. Revenues in 1995 included a license and
milestone payment from HMR in the amount of $5,000,000. Offsetting this
increase, in part, was lower sponsored research funding received under a license
and collaboration agreement with Schering AG. Sponsored research funding from
Schering AG was $1,875,000 and $2,500,000 in 1996 and 1995, respectively.
Total operating expenses were $32,712,000 in 1996 compared to
$31,142,000 in 1995. 1995 expenses included $2,130,000 for exit costs relating
to the closing of the Company's Palo Alto facility. Research and development
expenses were $25,882,000 in 1996 compared to $24,709,000 in 1995, an increase
of $1,173,000 or 4.7%. The increase in research and development expenses was
primarily due to increased headcount and related costs in the development,
clinical, and regulatory areas to support the continuing clinical development of
the ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products. In addition, research and
development costs increased due to severance payments made and other costs
incurred in connection with the resignation of two executive officers of the
Company during 1996. Clinical trial costs increased over the prior year,
primarily as a result of the 1996 seasonal ALLERVAX(R) RAGWEED trial. Partially
offsetting these increases in research and development were savings from reduced
headcount and related costs as a result of the closing of the Company's Palo
Alto research facility in May 1995.
General and administrative expenses were $6,830,000 in 1996 compared to
$6,433,000 in 1995, an increase of $397,000 or 6.2%. The increase in general and
administrative costs was due primarily to severance payments made and other
costs incurred in connection with the resignation of three additional executive
officers of the Company during 1996. This was offset in part by lower headcount
and related costs as a result of closing the Company's Palo Alto research
facility in May 1995.
Net interest income was $4,603,000 in 1996 compared to $4,233,000 in
1995, an increase of $370,000 or 8.7%. The increase resulted primarily from a
higher average investable cash and investment balance which was due to the sale
of equity securities through two public offerings during the third quarter of
1995. This was offset in part by cash spent on operations during 1996. In
addition, increased interest received from HMR related to capital expenditures
made by the Company with respect to the joint manufacture of the ALLERVAX(R)
family of allergy therapeutics contributed to the increase in interest income.
The net loss decreased in the fourth quarter of 1996 as compared to the
first three quarters as the result of a one-time $7,000,000 payment from HMR.
This payment resolved all outstanding obligations related to the terminated
collaboration between the Company and HMR for the development of the ALLERVAX(R)
products.
20
<PAGE> 21
YEARS ENDED DECEMBER 31, 1995 AND 1994
Total revenues in 1995 were $7,758,000 compared to $6,335,000 in 1994. The
increase in total revenues in 1995 was primarily due to $2,500,000 of sponsored
research funding under a license and collaboration agreement with Schering AG,
offset in part by lower milestone payments from HMR. Revenues also included
license and milestone payments from HMR of $5,000,000 and $6,000,000 in 1995 and
1994, respectively.
Total operating expenses were $31,142,000 in 1995 compared to
$34,455,000 in 1994. 1995 expenses included $2,130,000 for exit costs related to
the closing of the Company's Palo Alto facility. Research and development
expenses were $24,709,000 in 1995 compared to $27,074,000 in 1994, a decrease of
$2,365,000 or 8.7%. The decrease in research and development expenses was
primarily due to reduced headcount and related costs resulting from the
consolidation of the Company's research operations and lower start-up costs
associated with the establishment of an in-house GMP-grade manufacturing
facility, offset in part by increased costs associated with the continuing
clinical development of the ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED products.
General and administrative expenses were $6,433,000 in 1995 compared to
$7,381,000 in 1994, a decrease of $948,000 or 12.8%. The decrease in general and
administrative expenses related primarily to lower salary and related costs as
compared to 1994 which included severance and other expenses associated with the
resignation of an executive officer and other general and administrative staff
reductions. In addition, lower headcount costs as a result of closing the
Company's Palo Alto facility contributed to the decrease in general and
administrative costs.
Net interest income was $4,233,000 in 1995 compared to $2,814,000 in
1994, an increase of $1,419,000 or 50.4%. The increase resulted primarily from
the effect of higher interest rates earned on the Company's investments. In
addition, interest received from HMR relating to capital expenditures made by
the Company with respect to the joint manufacture of the ALLERVAX(R) family of
allergy therapeutics contributed to the increase in interest income.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, ImmuLogic has financed its operations through the sale of
equity securities, sponsored research revenues, license and milestone payments,
and interest earned on invested capital. The Company's total cash and
investments balance at December 31, 1996 was $70,047,000, which included cash
and cash equivalents of $23,742,000, short-term investments of $30,881,000 and
long-term investments of $15,424,000. The Company has raised $134,100,000 from
public equity offerings, received $24,000,000 from HMR in payments related to
the joint collaboration agreement for its ALLERVAX(R) products, $7,000,000 from
HMR for a final settlement payment upon the termination of the collaboration
agreement between the Company and HMR, and $19,163,000 from HMR related to a
Common Stock and a stock option purchase. In addition, the Company has received
research support payments of $4,375,000 from Schering AG under a joint
collaboration agreement for its multiple sclerosis peptide therapeutic product
and $8,000,000 in equity financing from Schering Berlin Venture Corporation. The
Company also received a SBIR grant during 1996 from NIDA totaling approximately
$700,000 to complete the preclinical development of the Company's therapy to
treat cocaine addiction. Net cash used in operating activities was $16,156,000
in 1996 compared to $14,802,000 and $21,127,000 in 1995 and 1994, respectively.
As of December 31, 1996, the Company had invested $19,292,000 in
21
<PAGE> 22
property and equipment primarily in facility renovations, laboratory equipment,
and the buildout of a GMP-grade manufacturing facility at the Company's Waltham,
Massachusetts headquarters.
In March 1995, to help the Company support its capital requirements,
the Company signed a collaboration agreement with Schering AG for the joint
development and commercialization of the Company's peptide therapeutic to treat
multiple sclerosis. Under this agreement, the Company would have received up to
$7,500,000 in research support ($4,375,000 of which has been received through
December 31, 1996) and up to $20,000,000 in milestone payments. The Company
would pay one-third of the costs associated with clinical development and would
receive a royalty on net sales, if any. During 1996, the parties agreed in
concept to changes in the collaboration agreement under which milestone
payments will be restructured to payments made after successful product
demonstration and annual research support funding from Schering AG during 1997
will be reduced from $2,500,000 to $1,250,000. This funding will be dedicated
exclusively to the development of a nonparenterally administered therapeutic
product for multiple sclerosis. The Company will fund all clinical development
costs for the injectable therapeutic product for multiple sclerosis. Schering
AG has the right, at its election, to participate in the development and
commercialization of the injectable dosage form. If Schering AG elects to
participate, it will be required to reimburse the Company for a significant
portion of these development costs and will be obligated to make certain
milestone payments to the Company upon achievement of development milestones.
Schering AG has the right to terminate the collaboration agreement upon 30
days prior written notice to the Company. There can be no assurance that
Schering AG will not terminate the collaboration agreement or that it will
devote the resources necessary to develop and commercialize any products
resulting from the collaboration.
In February 1992, the Company entered into a collaboration agreement
with HMR (formerly Marion Merrell Dow, Inc.) for the worldwide development and
commercialization of injectable dosage forms of five ALLERVAX(R) therapeutics.
At the time of execution of the agreement, HMR made a $7,000,000 payment to the
Company and through December 31, 1996 had made license and milestone payments of
$17,000,000. On March 7, 1996, the Company received notification from HMR of its
withdrawal from this joint collaboration, effective September 7, 1996. The
Company and HMR worked together to effect an orderly transition of
responsibilities as the ALLERVAX(R) program shifted entirely to the Company. On
October 30, 1996, the Company received a payment in the amount of $7,000,000,
resolving all obligations relating to the program in a manner agreeable to both
the Company and HMR. Under the terms of the agreement, upon termination of the
collaboration the Company regained all rights to the ALLERVAX(R) allergy program
including all injectable and oral therapeutics and complementary recombinant
allergy diagnostics.
The Company has expended substantial funds for the research and
development of its products, and will continue to expend substantial funds for
further research and development, establishment of commercial-scale
manufacturing capabilities, and the marketing of its products. The Company will
seek to obtain additional funds for these purposes through equity or debt
financings, collaborative arrangements with corporate partners, or from other
sources. No assurance can be given that such additional funds will be available
to the Company for such purposes on acceptable terms, if at all. Insufficient
funds could require the Company to delay, scale back, or eliminate certain of
its research and development programs or to license third parties to
commercialize products or technologies that the Company would otherwise develop
or commercialize itself. The Company anticipates that its existing capital
resources will enable it to maintain its current and planned operations through
at least December 31, 1998.
FUTURE OPERATING RESULTS
This Annual Report to Stockholders contains forward-looking statements.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," expects," intends"
and similar expressions are intended to identify forward-looking statements.
There are
22
<PAGE> 23
a number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set forth below, in the Section
titled "Business - Factors Which May Affect Future Results" and elsewhere in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The Company expects to incur losses for at least the next several
years. The Company will require substantial additional funds for its research
and product development programs, operating expenses, the pursuit of regulatory
approvals and expansion of its production, sales and marketing capabilities.
Adequate funds for these purposes, whether through equity or debt financings,
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or on terms acceptable to the Company.
Insufficient funds could require the Company to delay, scale back or eliminate
certain of its research product development programs or to license to third
parties to commercialize products or technologies that the Company would
otherwise develop or commercialize itself.
None of the Company's products have completed human clinical testing.
Although the Company's two lead products, ALLERVAX(R) CAT and ALLERVAX(R)
RAGWEED, are in clinical development, significant additional development costs
will be incurred prior to commercialization. During 1997, the Company expects
to incur significant costs in connection with the planned initiation of
clinical trials for its ALLERVAX(R) CAT and ALLERVAX(R) RAGWEED product
candidates. There is no assurance that the Company's clinical trials will yield
favorable results, that the Company's products will be granted the required
regulatory approvals within the time periods contemplated by the Company, or at
all, that the Company will be able to produce its products in commercial
quantities, or that such products will be successfully marketed. In addition,
the Company faces intense competition from commercial and academic
organizations, many of which are larger and better financed.
The Company's strategy for development and commercialization of
products depends upon the formation and maintenance of various strategic
alliances and licensing arrangements. In particular, the Company has entered
into a collaboration with Schering AG relating to the development of a
therapeutic to treat multiple sclerosis. Schering AG has the right to terminate
the collaboration on 30 days notice to the Company. There can be no assurance
that the collaboration with Schering AG will not be terminated by Schering AG
or ultimately will be successful. In addition there can be no assurance that
future arrangements can be made when needed or on terms acceptable to the
Company.
Proprietary rights relating to the products, methods and services of
the Company will be protected from unauthorized use by third parties only to
the extent that they are covered by valid and enforceable patents or are
maintained in confidence as trade secrets. There can be no assurance that any
pending patent applications relating to the products of the Company will result
in patents being issued or that any such patents will afford protection against
competitors with similar technology. In addition, the Company is aware of one
issued European patent and one pending European patent application belonging to
third parties which may adversely affect the Company's ability to commercialize
its multiple sclerosis therapeutic candidate. If the claims contained in these
patents are sustained, the Company may need to acquire licenses to those
technologies in order to commercialize its multiple sclerosis therapeutic
candidate in Europe. The cost or availability of licenses for these
technologies is unknown. There may be additional domestic and foreign patent
applications pending of which the Company is unaware at this time and which may
affect the Company's ability to commercialize any of its products if
corresponding patents are issued. It is likely that significant funds would be
required to defend any claim that the Company infringes a third-party patent.
There can be no assurance that any license required under any such patent would
be made available.
As recently announced, the Company's Chief Executive Officer resigned
in December 1996. In addition, in March, 1997, the majority of the Company's
Board of Directors, including the Chairman of the Board, resigned after
consultation with several major stockholders of the Company, and five new
Directors were added to the Board to fill those vacancies. The significant
changes in management at the executive and Board levels could result in
additional shifts in the strategic direction of the Company, including changes
in priorities of the Company's existing development programs.
23
<PAGE> 24
Other factors that may affect the Company's future operating results
include the inherent risk of product liability claims which may result from the
testing, marketing and sale of pharmaceutical products, the Company's
fluctuations in quarterly operating results, the Company's ability to continue
to attract and retain qualified management and scientific staff, and its ability
to obtain on a timely basis regulatory approvals for the marketing and sale of
its products and to compete successfully in the market.
NEW ACCOUNTING PRONOUNCEMENT
In 1997, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share". SFAS
128 specifies the computation, presentation, and disclosure requirements for
earnings per share and is substantially similar to the standards recently
issued by the International Accounting Standards, Earnings per Share (IAS33).
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. SFAS 128 requires restatement of
all prior-period EPS data presented. Management has not yet determined the
impact of SFAS 128 on the Company's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes thereto and the Report
of Independent Accountants as listed under Item 14(a) are included in this
report on pages 28 through 43.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
24
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from
the section titled "Election of Directors" in the definitive proxy statement for
the Company's 1997 Annual Meeting of Stockholders ("1997 Proxy Statement"),
which the Company intends to file with the Securities and Exchange Commission
(the "Commission") no later than April 30, 1997.
Information relating to the Company's executive officers as of March
27, 1996 is furnished in Part I hereof under a separate unnumbered caption
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
the section titled "Executive Compensation" in the Company's 1997 Proxy
Statement, which the Company intends to file with the Commission no later than
April 30, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference from
the section titled "Security Ownership of Certain Beneficial Owners and
Management" and " Election of Directors" in the Company's 1997 Proxy Statement,
which the Company intends to file with the Commission no later than April 30,
1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
the section titled "Certain Transactions" in the Company's 1997 Proxy Statement,
which the Company intends to file with the Commission no later than April 30,
1997.
25
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
The Consolidated Financial Statements, related Notes and
Report of Independent Accountants are included in this report on the
following pages:
Pages
-----
Report of Independent Accounts 28
Consolidated Balance Sheets as of December 31, 1996 and 1995 29
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 30
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 31
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994 32
Notes to Consolidated Financial Statements 33-43
2. Financial Statement Schedules
The Financial Statement Schedules have been omitted because they are
either not applicable or the required information is included in the
Consolidated Financial Statements or Notes thereto.
3. Exhibits Required by Item 601 of Regulation S-K
The Exhibit Index is set forth on page 45 of this Form 10-K immediately
preceding the exhibits filed as part of this annual report on Form
10-K.
(b) Reports filed on Form 8-K for the quarter ended December 31, 1996.
On December 16, 1996, the Company filed with the Securities and
Exchange Commission a Current Report on Form 8-K relating to the
resignation of certain executive officers of the Company.
26
<PAGE> 27
IMMULOGIC PHARMACEUTICAL CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Consolidated Statement of Operations Data:
Total revenues $ 9,239 $ 7,758 $ 6,335 $ 7,971 $ 10,063
Research and development expenses 25,882 24,709 27,074 23,096 16,345
General and administrative expenses 6,830 6,433 7,381 6,592 5,491
Net loss (18,870) (19,151) (25,306) (18,837) (8,584)
Net loss per shares $ (0.93) $ (1.12) $ (1.70) $ (1.30) $ (0.70)
Weighted average number of
common shares outstanding 20,206 17,035 14,843 14,451 12,282
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents and
short and long-term investments $ 70,047 $ 85,960 $ 55,912 $ 79,504 $ 78,336
Total assets 79,654 97,579 70,026 94,123 89,582
Long-term obligations 375 425 475 525 910
Stockholders' equity $ 71,926 $ 89,535 $ 62,284 $ 87,052 $ 83,521
</TABLE>
27
<PAGE> 28
Report of Independent Accountants
To the Board of Directors and Stockholders of ImmuLogic Pharmaceutical
Corporation
We have audited the accompanying consolidated balance sheets of ImmuLogic
Pharmaceutical Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ImmuLogic Pharmaceutical Corporation as of December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1997, except for the
information contained in Note M,
as to which the date is March 5, 1997
28
<PAGE> 29
IMMULOGIC PHARMACEUTICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 23,742,140 $ 19,066,793
Short-term investments 30,880,824 41,921,305
Prepaid expenses and other current assets 625,128 731,502
------------- -------------
Total current assets 55,248,092 61,719,600
Property and equipment, net 8,932,660 10,833,864
Long term investments 15,423,981 24,972,294
Other assets 48,790 53,590
------------- -------------
Total assets $ 79,653,523 $ 97,579,348
============= =============
LIABILITIES
Current liabilities:
Accounts payable $ 789,331 $ 894,701
Accrued expenses 6,513,391 6,674,459
Other current liabilities 50,000 50,000
------------- -------------
Total current liabilities 7,352,722 7,619,160
Long-term liabilities 375,000 425,000
------------- -------------
Total liabilities $ 7,727,722 $ 8,044,160
============= =============
Commitments
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000 shares -- --
authorized; no shares issued or outstanding
Common stock, $.01 par value; 40,000,000 shares
authorized; 20,224,516 and 19,924,471 shares
issued and outstanding at December 31, 1996
and 1995, respectively $ 202,245 $ 199,245
Additional paid-in-capital 185,039,606 183,796,108
Less: Deferred compensation -- (14,000)
Accumulated deficit (113,316,050) (94,446,165)
------------- -------------
Total stockholders' equity 71,925,801 89,535,188
------------- -------------
Total liabilities and stockholders' equity $ 79,653,523 $ 97,579,348
============= =============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
29
<PAGE> 30
IMMULOGIC PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
License fees -- $ 5,000,000 $ 6,000,000
Sponsored research revenues $ 2,239,340 2,758,121 334,910
Other revenues 7,000,000 -- --
------------ ------------ ------------
Total revenues 9,239,340 7,758,121 6,334,910
------------ ------------ ------------
Operating expenses:
Proprietary research and development 24,061,291 22,096,555 25,239,082
Sponsored research and development 1,820,929 2,612,061 1,835,271
General and administrative 6,829,889 6,433,344 7,381,032
------------ ------------ ------------
Total operating expenses 32,712,109 31,141,960 34,455,385
------------ ------------ ------------
Operating loss (23,472,769) (23,383,839) (28,120,475)
Net interest income 4,602,884 4,233,191 2,814,461
------------ ------------ ------------
Net loss $(18,869,885) $(19,150,648) $(25,306,014)
============ ============ ============
Net loss per common share $ (0.93) $ (1.12) $ (1.70)
============ ============ ============
Weighted average number of common shares
outstanding 20,206,004 17,034,565 14,842,799
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
30
<PAGE> 31
IMMULOGIC PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(18,869,885) $(19,150,648) $(25,306,014)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,786,851 3,050,605 3,124,232
Write-off of leasehold improvements -- 945,000 --
Shares issued for 401(k) employer match 150,963 144,360 --
Gain on sale of equipment (18,828) (48,842) --
Changes in assets and liabilities:
Prepaid expenses and other current assets 106,374 22,302 (112,404)
Other assets 4,800 3,694 162,070
Accounts payable and accrued expenses (266,438) 281,457 1,055,038
Other liabilities (50,000) (50,000) (50,000)
------------ ------------ ------------
Total adjustments 2,713,722 4,348,576 4,178,936
------------ ------------ ------------
Net cash used in operating activities (16,156,163) (14,802,072) (21,127,078)
Cash flows from investing activities:
Purchase of equipment (653,613) (898,151) (1,432,623)
Purchase of leasehold improvements (27,368) (978,506) (1,001,921)
Proceeds from sale of equipment 18,828 608,500 --
Purchase of short-term investments (59,995,778) (76,530,629) (52,862,100)
Redemption of short-term investments 71,036,259 70,711,444 54,608,254
Purchase of long-term investments (5,965,026) (24,809,476) (6,154,797)
Redemption of long-term investments 15,513,339 6,039,556 10,778,794
------------ ------------ ------------
Net cash provided by (used in) investing activities 19,926,641 (25,857,262) 3,935,607
Cash flows from financing activities:
Issuance of common stock -- 45,701,500 --
Exercise of stock options 904,869 416,633 304,803
Principal payments under capital lease obligation -- -- (334,573)
------------ ------------ ------------
Net cash provided by (used in) financing activities 904,869 46,118,133 (29,770)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 4,675,347 5,458,799 (17,221,241)
Cash and cash equivalents at beginning of period 19,066,793 13,607,994 30,829,235
------------ ------------ ------------
Cash and cash equivalents at end of period $ 23,742,140 $ 19,066,793 $ 13,607,994
============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
31
<PAGE> 32
IMMULOGIC PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Number of Additional Deferred Total
Shares of Common Paid-in Compen- Accumulated Stockholders'
Common Stock Stock Capital sation Deficit Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,1993 14,763,895 $ 147,639 $137,275,657 $ (381,798) $ (49,989,503) $87,051,995
Exercise of common stock
options 256,564 2,566 302,237 304,803
Acceleration of stock options 225,000 (225,000) --
Amortization of deferred
compensation (149,147) 382,474 233,327
Net loss (25,306,014) (25,306,014)
----------- ------------ ------------ ------------ ------------- -----------
Balance at December 31,1994 15,020,459 150,205 137,653,747 (224,324) (75,295,517) 62,284,111
========== ============ ============ ============ ============= ===========
Issuance of common stock 4,802,345 48,023 45,653,477 45,701,500
Exercise of common stock
options 92,363 924 415,709 416,633
401(k) employer match 9,304 93 73,175 73,268
Amortization of deferred
compensation 210,324 210,324
Net loss (19,150,648) (19,150,648)
----------- ------------ ------------ ------------ ------------- -----------
Balance at December 31,1995 19,924,471 199,245 183,796,108 (14,000) (94,446,165) 89,535,188
----------- ------------ ------------ ------------ ------------- -----------
Exercise of common stock
options 287,599 2,876 901,993 904,869
401(k) employer match 12,446 124 150,839 150,963
Acceleration of stock options 190,666 (190,666) --
Amortization of deferred
compensation 204,666 204,666
Net loss (18,869,885) (18,869,885)
----------- ------------ ------------ ------------ ------------- -----------
Balance at December 31,1996 20,224,516 $ 202,245 $185,039,606 $ -- $(113,316,050) $71,925,801
========== ============ ============ ============ ============= ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
32
<PAGE> 33
ImmuLogic Pharmaceutical Corporation
Notes to Consolidated Financial Statements
A. NATURE OF BUSINESS
ImmuLogic Pharmaceutical Corporation (ImmuLogic or the Company) is a
biopharmaceutical company developing novel products with a primary emphasis on
the treatment of allergies and autoimmune diseases. The Company is also
developing therapeutics to treat substance abuse. ImmuLogic's technological
approach is based on proprietary discoveries and an advanced understanding of
the molecular events controlling the human immune system. The Company is
developing its ALLERVAX(R) family of allergy therapeutics, with the ALLERVAX(R)
CAT and ALLERVAX(R) RAGWEED therapeutics, the lead products in the family, both
in advanced clinical development stages. Three earlier stage ALLERVAX(R)
products for the treatment of house dust mite, spring grasses and Japanese
cedar pollen have been defined. The autoimmune disease program is focused on
developing therapeutics to treat T cell mediated autoimmune diseases. An
Investigational New Drug (IND) application to initiate human clinical trials
for a peptide-based immunotherapeutic to treat multiple sclerosis was filed
with the FDA in December 1996. The Company is subject to risks common to
companies in the biotechnology industry including, but not limited to,
development by the Company or competitors of new technological innovations,
dependence on key personnel, protection of proprietary technology and
compliance with FDA government regulations and approval requirements.
B. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, ImmuLogic Securities Corporation. All
intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term interest-bearing instruments,
primarily U.S. government sponsored agency notes, commercial paper, and money
market accounts with original maturities of three months or less at the date of
purchase. These investments are carried at cost plus accrued interest, which
approximates market value.
33
<PAGE> 34
SHORT-TERM INVESTMENTS
Short-term investments, with a maturity of more than three months but less than
twelve months when purchased, consisted of high-grade commercial paper
($28,437,000), and a U.S. government treasury bill ($2,444,000) at December 31,
1996, and high-grade commercial paper ($26,876,000), U.S. government sponsored
agency notes ($9,783,000), and highly-liquid bank certificates of deposit
($5,262,000) at December 31, 1995. Short-term investments are stated at
amortized cost plus accrued interest, which approximates market value.
LONG-TERM INVESTMENTS
Long-term investments, with a maturity of more than twelve months when
purchased, consisted of highly-liquid bank certificates of deposit ($6,188,000),
high-grade commercial paper ($5,182,000), and U.S. government sponsored agency
notes ($4,054,000) at December 31, 1996 and high-grade commercial paper
($15,809,000), and U.S. government sponsored agency notes ($9,163,000) at
December 31, 1995. Long-term investments are stated at amortized cost plus
accrued interest, which approximates market value.
The amortized cost plus accrued interest which approximates market value of
securities "held-to-maturity" by contractual maturity at December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
HELD-TO-MATURITY
- ----------------------------------------------------------------------------------
<S> <C>
Cash $ 2,100,000
Due within one year 67,947,000
Due after one year through five years --
-----------
Total cash and cash equivalents and investments $70,047,000
-----------
</TABLE>
Actual maturities may differ from contractual maturities because the issuers of
these securities may have the right to prepay obligations without prepayment
penalties.
REVENUE RECOGNITION
Payments associated with rights to license or sublicense the Company's
technology are recognized as revenue when payments are received. Payments in
connection with sponsored research are recognized as revenue is earned under the
terms of the agreements.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the related assets,
generally three years for office equipment and five years for laboratory
equipment, furniture, and fixtures. Leasehold improvements are stated at cost
and are amortized over the lesser of the life of the lease or their estimated
useful lives. Maintenance and repairs are charged to expense as incurred, while
major betterments are capitalized. When assets are retired or otherwise disposed
of, the assets and related allowances for depreciation and amortization are
eliminated from the accounts and any resulting gain or loss is reflected in
income.
RESEARCH AND DEVELOPMENT
All research and development costs are expensed as incurred.
34
<PAGE> 35
INCOME TAXES
The Company follows the liability method of accounting for income taxes whereby
a deferred tax liability is measured by the enacted tax rates which will be in
effect when any differences between the financial statements and tax basis of
assets reverse. The deferred tax liability can be reduced by net operating
losses being carried forward for tax purposes.
NET LOSS PER COMMON SHARE
The net loss per common share is computed based upon the weighted average number
of common shares outstanding. Common equivalent shares are not included in the
per share calculation since the effect of their inclusion would be
anti-dilutive.
NEW ACCOUNTING PRONOUNCEMENT
In 1997, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 128 (SFAS128), "Earnings per Share". SFAS
128 specifies the computation, presentation and disclosure requirements for
earnings per share and is substantially similar to the standards recently
issued by the International Accounting Standards, Earnings per Share (IAS33).
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. SFAS 128 requires restatement of
all prior period EPS data presented. Management has not yet determined the
impact of SFAS 128 on the Company's financial statements.
C. PROPERTY AND EQUIPMENT
At December 31, 1996 and 1995, property and equipment consisted of:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Leasehold improvements $ 9,634,653 $ 9,607,285
Laboratory equipment 8,012,674 7,667,266
Furniture and fixtures 700,931 636,453
Office equipment 943,551 774,504
----------- -----------
$19,291,809 $18,685,508
Less accumulated depreciation and amortization 10,359,149 7,851,644
----------- -----------
Property and equipment, net $ 8,932,660 $10,833,864
----------- -----------
</TABLE>
Depreciation and amortization expense associated with property and equipment was
approximately $2,582,000, $2,840,000, and $2,891,000 in 1996, 1995, and 1994,
respectively.
D. PALO ALTO FACILITY CONSOLIDATION
In 1995, the Company consolidated its research operations resulting in the
closure of the Company's research facility in Palo Alto, California. The closure
of the Palo Alto facility resulted in exit costs of $2,130,000, consisting of
$430,000 for termination benefits, $945,000 for the write-down of leasehold
improvements, $610,000 for rent payments and expenses during shutdown, and
$145,000 for other exit costs. Exit costs related to non-cash items were
$1,050,000, primarily the writedown of leasehold improvements to estimated net
realizable value. In addition, the Company has entered into sub-lease agreements
for the Palo Alto, California facility that cover its remaining lease
obligations which expire in March 1999. At December 31, 1996 amounts remaining
in accrued expenses relating to the shutdown totaled $344,000, primarily for the
loss resulting from the writedown of leasehold improvements which will be
charged against subtenant lease payments received over the remainder of the
lease.
35
<PAGE> 36
E. ACCRUED EXPENSES
At December 31, 1996 and 1995, accrued expenses consisted of:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Clinical trials $1,355,450 $1,860,641
Payroll and payroll taxes 1,239,791 354,471
Rent 832,546 894,918
Legal and audit 424,924 453,626
Drug supply 457,295 1,000,434
Outside services 282,411 403,805
Other 1,920,974 1,706,564
---------- ----------
Total accrued expenses $6,513,391 $6,674,459
---------- ----------
</TABLE>
F. AGREEMENT WITH HOECHST MARION ROUSSEL
In February 1992, the Company entered into a collaboration agreement with
Hoechst Marion Roussel, Inc. (HMR) (formerly Marion Merrell Dow, Inc.) relating
to the worldwide development and commercialization of the Company's family of
five injectable ALLERVAX(R) allergy therapeutic products (the Collaboration
Agreement). In March 1995, the Company and HMR signed a letter agreement for the
joint manufacture of ALLERVAX(R) products. On March 7, 1996, HMR notified the
Company that it was withdrawing from the Collaboration Agreement, effective
September 7, 1996. The Company and HMR worked together to effect an orderly
transition of responsibilities as the ALLERVAX(R) program shifted entirely to
the Company. On October 30, 1996, the Company received a payment in the amount
of $7,000,000, resolving all obligations relating to the program in a manner
agreeable to both the Company and HMR. In addition, HMR transferred ALLERVAX(R)
CEDAR and MITE peptide inventories to the Company to be used in future product
development activities. No value has been attributed to these peptides in the
Company's December 31, 1996 financial statements as the Company is still
considering plans to develop these programs beyond the research stage. Under
the terms of the Collaboration Agreement, upon termination of the
collaboration, the Company regained all rights to the Company's ALLERVAX(R)
allergy program including all injectable and oral therapeutics and
complimentary recombinant allergy diagnostics.
At the time of execution of the Collaboration Agreement, HMR made a
$7,000,000 payment to the Company and through December 31, 1996 had made license
and milestone payments of $17,000,000 and a final settlement payment of
$7,000,000 which is recorded as other revenues in the Company's 1996 statement
of operations. In addition, HMR purchased, in December 1991, 1,000,000 shares of
the Company's Common Stock for $18,000,000. As of March 22, 1996, HMR had sold
these shares on the open market.
36
<PAGE> 37
G. AGREEMENT WITH SCHERING AG
In March 1995, the Company signed a collaboration agreement with
Schering AG for the joint development and commercialization of the Company's
peptide therapeutic to treat multiple sclerosis. Under this agreement, the
Company would have received up to $7,500,000 in research support ($4,375,000 of
which has been received through December 31, 1996) and up to $20,000,000 in
milestone payments. The Company would pay one-third of the costs associated
with clinical development and would receive a royalty on net sales, if any.
During 1996, the parties agreed in concept to changes in the collaboration
agreement under which milestone payments will be restructured to payments made
after successful product demonstration and annual research support funding from
Schering AG during 1997 will be reduced from $2,500,000 to $1,250,000. This
funding will be dedicated exclusively to the development of a nonparenterally
administered therapeutic product for multiple sclerosis. The Company will fund
all clinical development costs for the injectable therapeutic product for
multiple sclerosis. Schering AG has the right, at its election, to participate
in the development and commercialization of the injectable dosage form. If
Schering AG elects to participate, it will be required to reimburse the
Company for a significant portion of these development costs and will be
obligated to make certain milestone payments to the Company upon achievement of
development milestones. Schering AG has the right to terminate the
collaboration agreement upon 30 days prior written notice to the Company.
In addition, Schering Berlin Venture Corporation purchased 1,042,345 shares of
the Company's Common Stock for $8,000,000 at the time of entering into the
agreement. In April 1996, ImmuLogic registered these shares under the Securities
Act of 1933 pursuant to the registration rights granted to Schering Berlin
Venture Corporation in the stock purchase agreement. Upon registration, Schering
Berlin Venture Corporation sold these shares on the open market.
H. STOCKHOLDERS' EQUITY
COMMON STOCK
At December 31, there were 20,224,516 and 19,924,471 common shares outstanding
for the years 1996 and 1995 respectively.
PREFERRED STOCK
The Company has authorized a single class of preferred stock, par value $.01,
consisting of 1,000,000 shares. This preferred stock may be issued in series
with such rights, preferences and privileges as the Board of Directors may
determine.
SHAREHOLDER RIGHTS PLAN
On July 11, 1995, the Board of the Company declared a dividend of one preferred
stock purchase right (a Right) for each outstanding share of the Company's
Common Stock to stockholders of record at the close of business on August 1,
1995. The Company adopted the plan to protect shareholders against unsolicited
attempts to acquire control of the Company that do not offer what the Company
believes to be an adequate price to all shareholders. Each Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-thousandth of a share of Series A Junior Participating Preferred Stock, $.01
par value (the Preferred Stock), at a purchase price of $75 in cash per unit
subject to adjustment.
37
<PAGE> 38
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
Acquiring Person) has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of Common Stock, or (ii) 10
business days following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 30% or more of such
outstanding shares of Common Stock.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on August 1, 2005, unless earlier redeemed or
exchanged by the Company as described below.
In the event that any stockholder becomes an Acquiring Person, except
pursuant to a Permitted Offer, each Right will thereafter entitle the holder
thereof to receive, upon exercise, that number of shares of Common Stock which
equals the exercise price of the Right divided by one-half of the current market
price (as defined in the Rights Agreement) of the Common Stock at the date of
the occurrence of the event.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $10 per share and will be entitled to
an aggregate dividend of 1,000 times the dividend declared per share on Common
Stock. In the event of liquidation, the holders of the Preferred Stock will be
entitled to a minimum preferential liquidation payment of $1,000 per share and
will be entitled to an aggregate payment of 1,000 times the payment made per
share of Common Stock. Each share of Preferred Stock will have 1,000 votes,
voting together with the Common Stock. Finally, in the event of any merger,
consolidation, or other transaction in which Common Stock is exchanged, each
share of Preferred Stock will be entitled to receive 1,000 times the amount
received per share of Common Stock. These rights are subject to adjustment for
any stock split, stock dividend, recapitalization, or similar event. At December
31, 1996, 20,224,516 preferred stock purchase rights were outstanding.
STOCK OPTIONS
The Company has two stock option plans under which incentive and nonqualified
stock options to purchase a total of 4,000,000 shares of Common Stock may be
granted to employees (including officers and directors who are employees). The
options are generally granted at fair market value on the date of the grant,
generally vest ratably over a three, four or five year period, and expire ten
years from the date of grant. In addition, the Company has issued to certain
consultants, one of whom is a former director and one of whom is a current
director, nonqualified stock options to purchase an aggregate of 606,001 shares
(net of cancellations) of its Common Stock outside its stock option plan. These
stock options generally vest ratably over a four-year period commencing with the
date of grant. The Company also has a Directors Stock Option Plan under which
nonqualified stock options to purchase 300,000 shares of the Company's Common
Stock may be granted to the directors of the Company who are neither officers
nor
38
<PAGE> 39
employees. The options are granted at fair market value on the date of grant and
vest ratably over a four-year period and expire ten years from the date of
grant. At December 31, 1996, the Company had issued 166,000 shares (net of
cancellations) under this plan. At December 31, 1996, there were 3,510,247
shares of Common Stock reserved for issuance under all the Company's stock
option plans.
SFAS 123, "Accounting for Stock-Based Compensation" requires that companies
either recognize compensation expense for grants of stock, stock options, and
other equity instruments based on fair value, or provide pro forma disclosure of
net income and earnings per share in the notes to the financial statements. The
Company has adopted the disclosure provisions of SFAS 123 in 1996 and has
applied APB Opinion 25 and related Interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its employee stock
option plans. The Company has recorded, for options granted to outside
consultants, compensation costs in the amount of $7,559 for the year ended
December 31, 1996. Had compensation costs for the Company's employee and
director stock-based compensation plans been determined based on the fair value
at the grant dates as calculated in accordance with SFAS 123, the Company's net
loss and loss per share for the years ended December 31, 1996 and 1995
would have been as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
Net Loss Loss Per Share Net Loss Loss Per Share
-------- -------------- -------- --------------
<S> <C> <C> <C> <C>
As Reported $(18,870) ($ 0.93) $(19,151) ($ 1.12)
======== ======== ======== ========
Proforma $(20,740) ($ 1.03) $(19,534) ($ 1.15)
======== ======== ======== ========
</TABLE>
The effects of applying SFAS 123 in this proforma disclosure are not
likely to be representative of the effects on reported net income for future
years. SFAS 123 does not apply to awards granted prior to 1995 and additional
awards are anticipated in future years.
The fair value of each stock option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: an expected life of approximately 4 years,
expected volatility of 63%, a dividend yield of 0% and a risk-free interest rate
of 6.26% and 6.18% for the years ended December 31, 1996 and 1995 respectively.
From inception through December 31, 1996, the Company has granted
options for 3,373,976 shares (net of cancellations) under its employee stock
option plans, of which options for 858,087 shares have been exercised. The
Company has granted options for 772,001 shares (net of cancellations) to
consultants and outside directors, of which options for 537,667 shares have been
exercised. During 1994, 37,500 shares under the employee stock option plans were
accelerated in connection with the resignation of an executive officer of the
Company. Accordingly, an increase in deferred compensation and additional
paid-in-capital in the amount of $225,000 to recognize the acceleration, was
recorded. The deferred compensation was amortized over a twelve-month period. In
1996, 247,500 shares under the employee stock option
39
<PAGE> 40
plans were accelerated in connection with the resignation of three executive
officers of the Company. Accordingly, an increase in deferred compensation and
additional paid-in-capital in the amount of $190,666 in total for all officers
to recognize the acceleration was recorded as of the resignation date of each
officer.
The Company's stock option plan activity is summarized as follows:
<TABLE>
<CAPTION>
Number Weighted Average
of Options Exercise Price
---------- --------------
<S> <C> <C>
Outstanding at December 31, 1993 1,915,775 $ 6.91
Granted during 1994 811,300 7.77
Exercised during 1994 (256,564) 1.19
Canceled during 1994 (294,938) 8.97
--------- ------
Outstanding at December 31, 1994 2,175,573 7.63
Granted during 1995 993,500 9.72
Exercised during 1995 ( 92,363) 4.51
Canceled during 1995 (224,238) 10.69
--------- ------
Outstanding at December 31, 1995 2,852,472 8.21
Granted during 1996 596,250 10.07
Exercised during 1996 (287,599) 3.72
Canceled during 1996 (410,900) 8.26
--------- ------
Outstanding at December 31, 1996 2,750,223 $ 9.12
========= ======
</TABLE>
There were 1,342,401, 837,629, and 671,341 options exercisable for the years
ended December 31, 1996, 1995, and 1994, respectively. The weighted average fair
value of the options granted during 1996 and 1995, as calculated using the
Black-Scholes option pricing model, were estimated at $5.47 and $5.35,
respectively.
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- -----------------------------
Weighted-
Average
Range of Remaining Weighted- Weighted-
Exercise Number Contractual Average Number Average
Prices Outstanding Life (years) Exercise Price Exercisable Exercise Price
- ------ ----------- ------------ -------------- ----------- --------------
<C> <C> <C> <C> <C> <C>
$ 0.25-$ 5.00 97,722 2.75 $ 0.87 97,722 $ 0.87
5.01- 10.00 1,752,801 7.87 7.79 785,698 7.79
10.01- 15.00 829,950 8.03 12.07 445,481 12.13
15.01- 20.25 69,750 8.42 19.00 13,500 18.45
--------- ---- --------- --------- ---------
$ 0.25-$20.25 2,750,223 7.75 $ 9.12 1,342,401 $ 8.83
========= ==== ========= ========= =========
</TABLE>
40
<PAGE> 41
I. LICENSE AGREEMENT
In May 1987, the Company entered into an agreement with the Massachusetts
Institute of Technology (MIT) under which the Company was granted a worldwide,
exclusive license under certain patent applications. In connection with the
license grant, the Company issued 185,000 shares of its Common Stock at a price
of $.01 per share and made a payment of $250,000 to MIT. The license agreement,
as amended, calls for royalties to be paid on the sale of products using the
technology covered by the patents and for an additional payment of $750,000,
$125,000 of which was paid in April 1992 and the remainder to be paid in annual
installments of $50,000, beginning in April 1993 and ending in April 2005,
subject to an acceleration provision tied to the allowance of certain pending
patent claims.
J. LEASE COMMITMENTS
In September 1992, the Company entered into an operating lease agreement for a
headquarters and research and development facility in Waltham, Massachusetts.
This lease agreement expires in August 2002 and is renewable at the Company's
option for up to the three additional five-year periods. Under the terms of this
lease, the Company is obligated to pay its prorated share of common operating
expenses and real estate taxes as well as base rent.
With respect to the Company's operating lease for its Palo Alto,
California research facility, which expires in March 1999, the Palo Alto
research facility was sub-leased under two agreements, which cover the Company's
future obligations under this lease.
Rental expense incurred under all of the Company's operating lease
agreements was $1,595,000, $2,310,000 and $2,177,000 in 1996, 1995, and 1994,
respectively.
Future minimum lease payments for the respective years ended December
31 are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
<S> <C>
1997 $ 1,864,868
1998 1,893,348
1999 1,424,817
2000 1,282,876
2001 1,311,351
After 2001 874,232
-----------
Minimum lease payments $ 8,651,492
Sub-leases for the Palo Alto facility (1,544,400)
-----------
Net minimum lease payments $ 7,107,092
-----------
</TABLE>
41
<PAGE> 42
K. EMPLOYEE BENEFITS
The Company has a 401(k) savings plan (the Plan) which is available to all of
its qualified permanent employees. Participants may contribute up to 15 percent
of their annual compensation to the Plan, subject to certain limitations.
Effective January 1, 1995, the employer match to the Plan is in the form of
Company Common Stock and is calculated as the lesser of up to one-half of six
percent of a participant's total compensation or $2,000 annually in value of
Common Stock. Through the plan year ended December 31, 1994, the Company
contributed a matching amount in cash which was calculated as the lesser of up
to one-half of three percent of a participant's total compensation, or $900
annually. The fair market value on the date of issuance of the Common Stock
pursuant to the matching contributions totaled approximately $158,000 and
$144,000 in 1996 and 1995, respectively. The matching cash contribution was
$93,000 in 1994.
L. INCOME TAXES
At December 31, 1996 the Company had available for federal income tax purposes
net operating loss carryforwards of approximately $112,000,000 expiring in the
years 2002 through 2011, which are available to reduce future federal income
taxes. The Company also has available research and experimentation tax credits
of approximately $3,200,000 at December 31, 1996, expiring in the years 2002
through 2011. The net operating loss carryforwards are subject to limitation in
any given year in the event of certain events, including significant changes in
ownership. The Company has established a valuation reserve against the entire
deferred tax asset arising from these carryforwards due to the uncertainty of
earning sufficient taxable income and accordingly, has not given recognition
to these tax benefits in the accompanying financial statements.
M. SUBSEQUENT EVENT
On March 5, 1997, the Company reported a restructuring of its Board of
Directors. Five new members were appointed to the Board of Directors, effective
as of March 5, 1997. The new members are J. Joseph Marr, M.D., Acting President
and Chief Executive Officer of the Company; C. Garrison Fathman M.D., Professor,
Department of Medicine, Stanford University School of Medicine; Carl
Goldfischer, M.D., Chief Financial Officer, Vice President Finance and Strategic
Planning of ImClone Systems, Inc.; Geraldine Henwood, Chief Executive Officer of
IBAH, Inc.; and Richard Pops, Chief Executive Officer of Alkermes, Inc. The
appointments were followed by the resignations of Malcolm Gefter, Ph.D.,
Chairman of the Board and Scientific founder of the Company, Alan Dalby, Howard
Jacobson, Kenneth Melmon, M.D., and Larry Soll, Ph.D.. Samuel Fleming, Chairman
and Chief Executive Officer of Decision Resources, Inc. and Paul Friedman,
M.D., President of DuPont Merck Research Labs, each of whom was appointed to
the Board in September 1996, will continue as Directors.
42
<PAGE> 43
The Company entered into a severance agreement with Dr. Gefter
providing for a payment totaling approximately $1,054,000 which was commensurate
with payments otherwise due under his employment contract with the Company. This
payment was made in full, less all applicable state and federal taxes, on March
5, 1997.
The significant changes in management at the executive and Board level
could result in additional shifts in the strategic direction of the Company,
including changes in priorities of the Company's existing development programs.
43
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ImmuLogic Pharmaceutical Corporation
By: /s/ J. Joseph Marr
---------------------------
J. Joseph Marr
Acting President, Chief Executive Officer
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Date Title
- ------------------------ -------------- ----------------------------------------------
<S> <C> <C>
/s/ J. Joseph Marr March 27, 1997 Acting President, Chief Executive Officer
- ------------------------ (Principal Executive Officer)
J. Joseph Marr
/s/ John E. Morrison March 27, 1997 Treasurer
- ------------------------ (Principal Financial and Accounting Officer)
John E. Morrison
/s/ C. Garrison Fathman March 27, 1997 Director
- ------------------------
C. Garrison Fathman
Director
- ------------------------
Samuel C. Fleming
/s/ Paul A. Friedman March 27, 1997 Director
- ------------------------
Paul A. Friedman
/s/ Carl S. Goldfischer March 27, 1997 Director
- ------------------------
Carl S. Goldfischer
/s/ Geraldine A. Henwood March 27, 1997 Director
- ------------------------
Geraldine A. Henwood
/s/ Richard F. Pops Director
- ------------------------ March 27, 1997
Richard F. Pops
</TABLE>
44
<PAGE> 45
EXHIBIT INDEX
IMMULOGIC PHARMACEUTICAL CORPORATION
ANNUAL REPORT
FORM 10-K - 1996
Exhibit
Number
- ----------
3.01(16) -- Restated Certificate of Incorporation of the Registrant, as
amended.
3.02(1) -- Amended and Restated By-laws of the Registrant.
4.01(1) -- Specimen certificate for shares of the Registrant's Common Stock.
4.02(1) -- Description of capital stock (contained in the Restated
Certificate of Incorporation the Registrant, as amended, filed as
Exhibit 3.01)
+10.01(1) -- License Agreement between the Registrant and Massachusetts
Institute of Technology, dated as of April 3, 1987 (the "MIT
Agreement").
10.02(3) -- Amendment, dated November 1, 1991, to MIT Agreement.
10.03(5) -- Amendment, dated October 1, 1992, to MIT Agreement.
+10.04(7) -- Amendment, dated April 1, 1994, to the MIT Agreement.
10.05(1) -- Research Collaboration and License Agreement between the
Registrant and Merck & Co., Inc., dated September 29, 1989 ( the
"Merck Agreement").
10.06(5) -- Amendment, dated June 29, 1992, to the Merck Agreement.
10.07(1) -- Agreement between the Registrant and the University of North
Carolina, dated July 27, 1989.
+10.08(1) -- License Agreement and Sponsored Research Agreement between the
Registrant and the University of Melbourne, dated December 15,
1989.
10.09(9) -- Agreement to Vary Licensed and Sponsored Research Agreement,
dated December 15, 1992, between the Registrant and The University
of Melbourne.
+10.10(1) -- Agreement between the Registrant and Princess Margaret
Children's Medical Research Foundation (Inc.) ("Princess
Margaret"), dated June 1, 1990.
10.11(1) -- Series C Convertible Preferred Stock Purchase Agreement between
the Registrant and certain Series C Preferred Stock Purchasers,
dated October 4, 1989.
*10.12(1) -- Amended and Restated 1987 Stock Option Plan, as amended.
45
<PAGE> 46
Exhibit
Number
- ----------
*10.13(15) -- 1993 Director's Stock Option Plan.
10.14(1) -- Lease Agreement between the Registrant and 855 Cal Associates
for the lease of premises at 855 California Avenue, Palo Alto,
California, dated December 12, 1988.
10.15(5) -- Lease Agreement, dated March 12, 1992, between the Registrant
and 855 Cal Associates for the lease of premises at 855 California
Avenue, Palo Alto, California.
10.16(3) -- Office Lease, dated November 13, 1991, between the Registrant
and Lincoln Street Trust.
10.17(2) -- Stock Purchase Agreement, dated November 20, 1991, between
Registrant and Marion Merrell Dow, Inc.
10.18(10) -- Amendment effective December 12, 1994 to the Stock Purchase
Agreement, dated November 20, 1991, between the Registrant and
Marion Merrell Dow, Inc.
+10.19(4) -- Research Collaboration Agreement, dated February 14, 1992,
between the Registrant and Marion Merrell Dow, Inc.
+10.20(10) -- Letter Agreement, dated March 2, 1995 between the Registrant and
Marion Merrell Dow, Inc. relating to the joint manufacturing
strategy.
10.21(11) -- Amendment to the Collaboration Agreement between the Registrant
and Marion Merrell Dow, Inc. effective October 3, 1994.
+10.22(5) -- Agreement to Vary License Agreement, dated as of December 18,
1991, among the Registrant, Princess Margaret and Western
Australian Research Institute for Child Health Ltd. ("WARICH").
10.23(9) -- Amendment to License Agreement effective December 18, 1991 among
the Registrant, Princess Margaret and WARICH.
10.24(6) -- Amendment to License Agreement effective December 18, 1991 among
the Registrant, Princess Margaret and WARICH.
10.25(11) -- License and Collaboration Agreement dated as of March 17, 1995
between the Registrant and Schering AG, Germany.
10.26(11) -- Stock Purchase Agreement dated as of March 17, 1995 between the
Registrant and Schering Berlin Venture Corporation.
46
<PAGE> 47
Exhibit
Number
- ---------
10.27(14) -- Rights Agreement dated as of August 1, 1995, between the
Registrant and the First National Bank of Boston.
*10.28(13) -- Severance Plan for Executive Officers adopted July 11, 1995.
*10.29(15) -- Form of Employment Agreement, dated November 16, 1995 between
the Registrant and Executive Officers.
*10.30(16) -- Amendment to Registrant's 1993 Directors' Stock Option Plan
*10.31 -- Severance and Settlement Agreement and Release dated as of
December 4, 1996 between the Registrant and Robert J. Gerety.
*10.32 -- Severance and Settlement Agreement dated as of March 4, 1997
between the Registrant and Malcolm L. Gefter.
10.33 -- Agreement dated October 25, 1996 between the Registrant and
Hoechst Marion Roussel, Inc.
10.34 -- Amendment No. 1 to Rights Agreement dated as of April 3, 1996.
*10.35 -- Consultation Agreement dated as of January 1, 1992 between the
Registrant and C. Garrison Fathman.
*10.36(7) -- Amendment dated April 11, 1994 to the Consultation Agreement
between the Registrant and C. Garrison Fathman.
*10.37(10) -- Amendment dated January 16, 1995 to the Consultation Agreement
between the Registrant and C. Garrison Fathman.
*10.38 -- Letter Agreement dated December 8, 1995 extending the
Consultation Agreement between the Registrant and C. Garrison
Fathman.
21.01(1) -- Subsidiaries of the Registrant.
23.01 -- Consent of Coopers & Lybrand L.L.P.
27.01 -- Financial Data Schedule.
+ Confidential treatment requested as to certain portions.
* management contract or compensatory plan or arrangement filed as an
exhibit to this Form 10-K pursuant to Items 14(a) and 14(c) of Form 10-K
47
<PAGE> 48
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 33-39592).
(2) Incorporated by reference to the Company's Current Report on Form 8-K,
dated December 13, 1991, as amended on Form 8, dated January 16, 1992.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 33-44642).
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-3 (File No. 33-57138).
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1994.
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1994.
(8) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1994.
(9) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993.
(10) Incorporated by reference to the Company's Annual Report of Form 10-K
for the fiscal year ended December 31, 1994.
(11) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1995.
(12) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1995.
(13) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ended September 30, 1995.
(14) Incorporated by reference to the Company's Form 8-K filed on July 27,
1995, as amended by Form 8-K/A on August 2, 1995, with respect to the
adoption of the Rights Agreement.
(15) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
(16) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1996.
48
<PAGE> 1
EXHIBIT 10.31
SEVERANCE AND SETTLEMENT AGREEMENT AND RELEASE
AGREEMENT made as of the 4th day of December, 1996, by and between
ImmuLogic Pharmaceutical Corporation (the "Company") and Robert J. Gerety (the
"Employee").
WHEREAS, the parties wish to resolve amicably the Employee's separation
from the Company and establish the terms of the Employee's severance
arrangement;
NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby acknowledged, the Company and the
Employee agree as follow:
1. Termination Date. The Employee's Termination Date will be December 4,
1996, the date upon which the Employee submitted and the Company accepted, the
Employee's letter of resignation as an officer and employee of the Company. A
copy of the aforementioned letter of resignation is attached hereto as Exhibit
A.
2. Monetary Consideration
2.1 Severance Payments. The Company agrees to continue payment of the
Employee's base salary for a period of up to eight months beginning December 4,
1996 (the period during which such payments continue, as provided in the
following sentence, being referred to as the "Payment Period"). These payments
shall be discontinued at such time as the Employee obtains other comparable
employment, whether working for another company or self-employed. The Employee
shall notify the Company upon obtaining other employment and provide or cause to
be provided such information about his new employment as the Company may
reasonably request.
2.2 Benefits. During the Payment Period, the Company will continue to
provide to the Employee the full benefits package which he was receiving from
the Company at the time he resigned his employment or its equivalent, said
benefits to include payment by the company of a life insurance premium due to be
paid in May, 1997. These benefits shall also be discontinued at such time as the
Employee obtains other comparable employment, whether working for another
company or self-employed.
2.3 Amendment of Stock Option Agreement. The Employee currently holds
the following five stock options: (a) a Stock Option to purchase 120,000 shares
of Common Stock of the company (the "First Option") pursuant to a combined
Incentive
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<PAGE> 2
and Non-Qualified Stock Option Agreement dated 9/27/93 (the "First Option
Agreement"); (b) a Stock Option to purchase 30,000 shares of Common Stock of the
Company (the "Second Option") pursuant to a Non-Qualified Stock Option Agreement
dated 9/27/93 (the "Second Option Agreement"); (c) a Stock Option to purchase
150,000 shares of Common Stock of the Company (the "Third Option") pursuant to a
combined Incentive and Non-Qualified Stock Option Agreement dated 7/14/94 (the
"Fourth Option Agreement"); and (e) a Stock Option to purchase 150,000 shares of
Common Stock of the Company (the "Fifth Option") pursuant to a combined
Incentive and Non-Qualified Stock Option Agreement dated 1/2/95 (the "Fifth
Option Agreement"). The Company and the Employee agree as follows:
(i) Notwithstanding the exercise provisions of the First Option Agreement,
the right of exercise with respect to those shares of Common Stock
subject to the First Option vested as of December 4, 1996, is hereby
extended from March 4, 1997 to August 4, 1997 (provided that those
options not exercised within 90 days of the Termination Date shall not
constitute an Incentive Stock Option). The provisions of this
paragraph 2.3(I) shall constitute a written amendment to the First
Option Agreement in accordance with the provisions of paragraph 14(a)
of said First Option Agreement;
(ii) Notwithstanding the exercise provisions of the Second Option
Agreement, the right of exercise with respect to those shares of
Common Stock subject to the Second Option vested as of December 4,
1996, is hereby extended from March 4, 1997 to August 4, 1997
(provided that those options not exercised within 90 days of the
Termination Date shall not constitute a written amendment to the
Second Option Agreement in accordance with the provisions of paragraph
14(a) of said Second Option Agreement;
(iii) Notwithstanding the exercise provisions of the Third Option Agreement,
the right of exercise with respect to those shares of Common Stock
subject to the Third Option vested as of December 4, 1996, is hereby
extended from March 4, 1997 to August 4, 1997 (provided that those
options not exercised within 90 days of the Termination Date shall not
constitute an Incentive Stock Option). The provisions of this
paragraph 2.3(iii) shall constitute a written amendment to the Third
Option Agreement in accordance with the provisions of paragraph 14(a)
of said Third Option Agreement;
(iv) Notwithstanding the exercise provisions of the Fourth Option
Agreement, the right of exercise with respect to those shares of
Common Stock subject to the Fourth Option vested as of December 4,
1996, is hereby extended from March 4, 1997 to August 4, 1997
(provided that those options not exercised within 90 days of the
Termination Date shall not constitute an Incentive Stock Option). The
provisions of this paragraph 2.3(iv) shall
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<PAGE> 3
constitute a written amendment to the Fourth Option Agreement in
accordance with the provisions of paragraph 14(a) of said Fourth
Option Agreement;
(v) Notwithstanding the exercise provisions of the Fifth Option Agreement,
the right of exercise with respect to those shares of Common Stock
subject to the Fifth Option vested as of December 4, 1996. is hereby
extended from March 4, 1997 to August 4, 1997 (provided that those
options not exercised within 90 days of the Termination Date shall not
constitute an Incentive Stock Option). The provisions of this
paragraph 2.3(v) shall constitute a written amendment to the Fifth
Option Agreement in accordance with the provisions of paragraph 14(a)
of said Fifth Option Agreement;
In addition, the Company and the Employee agree that the total number
of shares of Common Stock that have vested as of December 4, 1996 and are
exercisable pursuant to the Option described above is as set forth on Exhibit B
which is attached hereto.
3. Release.
3.1 Employee's Release. The Employee hereby fully, forever,
irrevocably and unconditionally releases, remises, and discharges the Company,
its officers, directors, stockholders, corporate affiliates, agents and
employees from any and all claims, charges, complaints, demands, actions, causes
of action, suits, rights, debts, sums of money, costs, accounts, reckoning,
covenants, contracts, agreements, promises, doing, omissions, damages,
executions, obligations, liabilities, and expenses (including attorneys' fees
and costs), of every kind and nature which he ever had or now has against the
Company, its officers, directors, stockholders, corporate affiliates, agents and
employees arising out of his employment or the termination of his employment,
including all employment discrimination claims under Title VII of the Civil
Rights Act , the Age Discrimination in Employment Act, 29 U.S.C. Section 200e et
seq., or the Massachusetts Civil Rights Act, the Age Discrimination in
Employment Act, 29 U.S.C. Section 621 et seq., M.G.L. c. 151B, Section 1 et
seq., the Americans With Disabilities Act, 29 U.S.C. Section 706 et seq., and
the National Labor Relations Act 29 U.S.C. Section 151 et seq.,; claims arising
under the Employee Retirement Income Security Act, 29 U.S.C. Section 1001 et
seq., and the Family and Medical Leave Act, 29 U.S.C. Section 2602 et seq.;
wrongful discharge claims, employment-related breach of contract claims and all
other employment-related statutory or common law claims and damages provided,
however, that nothing in this provision or in the Agreement shall be construed
as in any way barring claims for alleged breaches of this Agreement and provided
further that the Employee still retains such right to indemnification as
described in paragraph 10 below.
The Employee acknowledges that he has been given twenty-one (21) days
to consider this Agreement and that the Company advised him to consult with an
attorney of his own choosing prior to signing this Agreement. The Employee may
revoke this
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<PAGE> 4
Agreement for a period of seven (7) days after the execution of this Agreement,
and the Agreement shall not be effective or enforceable until the expiration of
this seven (7) day revocation period.
3.2 The Company's Release. The Company, for itself, its officers,
directors, stockholders, corporate affiliates, agents, employees, legal
representatives, successors and assigns, does hereby fully, forever, irrevocably
and unconditionally release, remise and discharge the Employee and his heirs,
successors and assigns from any and all claims, charges, complaints, demands,
actions, causes of action, suits, rights, debts, sums of money, costs, accounts,
reckonings, covenants, contracts, agreements, promises, doings, omissions,
damages, executions, obligations, liabilities, and expenses (including
attorneys' fees and costs) of every kind and nature whatsoever, at law, in
equity or otherwise, which it or they ever had or now has against the Employee
arising out of his employment or the termination of his employment with the
Company. This Release shall not effect whatever indemnification rights the
Employee may have under the Company's By-laws or Charter or by operation of law.
4. Nature of Agreement. The Company and the Employee each represent and
warrant that this Agreement is a severance and settlement agreement and does not
constitute an admission of liability or wrongdoing on the part of either the
Company or the Employee.
5. Amendment. This Agreement shall be binding upon the parties and may not
be abandoned, supplemented, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties hereto. This Agreement
is binding upon and shall inure to the benefit of the parties and their
respective agents, assigns, heirs, executors, successors and administrators.
6. Validity. Should any provision of this Agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms, or provisions shall not be affected
thereby and said illegal and invalid part, term or provisions shall be deemed
not to be a part of this Agreement.
7. Confidentiality. The Employee and the Company understand and agree that
the terms and contents of this Agreement, the content of the negotiations and
discussions resulting in this Agreement, and the matters related to the
Employee's resignation shall all be maintained as confidential by both parties,
their agents and representatives, and that none of the above shall be disclosed,
except to the extent determined by either of the parties in the sole judgment of
each that such disclosure would be necessary to further a specific and
legitimate business interest of the Company or a specific and legitimate
business or professional interest of the Employee, or as may be required by
federal or state law or as otherwise agreed to in writing by the authorized
agent of each part. Notwithstanding the foregoing, the terms and contents of
this Settlement Agreement may be disclosed to the Employee's immediate family
members,
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<PAGE> 5
attorneys, and tax advisors and accountants. The parties represent and warrant
that, from December 4, 1994, until the date of execution of this Agreement they
(and each of them) have not disclosed the matters set forth herein to anyone
except as permitted above. Nothing in this provision shall be construed as
relieving either the Company or the Employee of their respective obligations
under paragraph 9 below nor as preventing the parties from complying with
compulsory legal process, making such disclosures as are necessary to obtain
legal advice and making disclosures which by law cannot be prohibited.
8. Indemnification. The Company will continue indemnification of the
Employee to the extent that he is entitled to such indemnification as provided
in the Company's By-laws and Charter or under statutory or common law.
9. Non-disparagement. The Employee agrees not to make any disparaging
statements to any other person concerning the Company, its officers, directors,
employees or agents, nor engage in conduct intended to be detrimental to the
interest of the Company, its officers, directors, employees or agents, provided,
however, that the Employee may make such disclosures as set forth in paragraph 7
above. The Company agrees that it will not make any disparaging statements to
any other person concerning the Employee nor engage in conduct intended to be
detrimental to the interests of the Employee, provided, however, that the
Company may make such disclosures as set forth in paragraph 7 above.
10. Entire Agreement. This Agreement and the exhibits hereto contain and
constitute the entire understanding and agreement between the parties hereto
with respect to the severance and settlement and cancels all previous and oral
and written negotiations, agreements, commitments, and writings in connection
therewith.
11. Applicable Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
12. Voluntary Assent. The Employee affirms that no other promises or
agreement of any kind have been made to or with him by any person or entity
whatsoever to cause him to sign this Agreement, and that he fully understands
the meaning and intent of this Agreement. The Employee states and represents
that he has had an opportunity to fully discuss and review the terms of this
Agreement with an attorney. The Employee further states and represents that he
has carefully read this Agreement, understands the contents herein, freely and
voluntarily assets to all of the terms and conditions hereof, and signs his name
of his own free act.
13. Execution. This Settlement Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
and all such counterparts together shall constitute but one and the same
instrument.
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<PAGE> 6
IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.
IMMULOGIC PHARMACEUTICAL CORPORATION
By: _____________________________
/s/ Robert J. Gerety
- -----------------------
Robert J. Gerety
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<PAGE> 7
December 4, 1996
To Board of Directors:
I hereby resign as the President and Chief Operating Officer and as a
Director of ImmuLogic Pharmaceutical Corporation ("ImmuLogic"), and from any
other office with ImmuLogic and/or any of its subsidiaries that I may hold,
effective immediately.
/s/ Robert J. Gerety
---------------------------
Robert J. Gerety
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<PAGE> 1
EXHIBIT 10.32
SEVERANCE AND SETTLEMENT AGREEMENT
----------------------------------
AGREEMENT made as of the 5th day of March, 1997, by and between Immulogic
Pharmaceutical Corporation (the "Company") and Malcolm L. Gefter, Ph.D. ("Dr.
Gefter").
WHEREAS, the parties wish to cancel and terminate the Agreement effective
January 1, 1996 ("Prior Agreement") by and between the Company and Dr. Gefter,
to resolve amicably Dr. Gefter's separation from the Company and to establish
the terms of Dr. Gefter's severance arrangement;
NOW, THEREFORE, in consideration of the foregoing, and the agreements set
forth herein, the sufficiency of which is hereby acknowledged, the Company and
Dr. Gefter agree as follows:
1. TERMINATION DATE. Dr. Gefter's termination date will be March 4, 1997
(the "Termination Date"). Dr. Gefter agrees to submit to the Company
simultaneously with the execution of this Agreement, and the Company agrees to
accept, Dr. Gefter's letter of resignation as an officer and director of the
Company in the form attached hereto as Exhibit A.
2. CANCELLATION OF PRIOR AGREEMENT. The Company and Dr. Gefter agree that,
as of the Termination Date, the Prior Agreement shall terminate and be of no
further force or effect, and neither of the parties shall have any further
obligations or rights thereunder, except that the provisions of Sections 6.1,
6.2, 6.3 and 6.4 of the Prior Agreement shall survive, and the terms of such
Sections are reaffirmed and are incorporated herein by reference and shall
continue in full force and effect as if set forth fully herein, it being
understood and agreed that for purposes of such Sections (as incorporated
herein) the "Agreement Term" shall be deemed to have ended on March 4, 1997. The
parties further agree that Schedule I, referenced in Section 6.3(b) of the Prior
Agreement, shall be and hereby is amended to delete paragraph (a) thereof.
3. Monetary Consideration.
----------------------
3.1 SEVERANCE PAYMENT. Concurrently with the execution of this Agreement,
and in consideration of Dr. Gefter's agreement to terminate the Prior Agreement,
the Company agrees to pay Dr. Gefter $1,054,166.00, less all applicable state
and federal income and employment taxes required to be withheld (for a total net
payment of $680,527.28), as severance pay. The severance pay will be paid to Dr.
Gefter on the business day following with the execution of this Agreement, by
wire transfer of immediately available funds to an account previously designated
by Dr. Gefter to the Company.
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<PAGE> 2
3.2 FRINGE BENEFITS. All fringe benefits previously provided to Dr. Gefter
by the Company as of March 4, 1997 including but not limited to medical, dental,
and disability insurance, will be discontinued as of the Termination Date and
the Company shall have no further obligation to provide to Dr. Gefter fringe
benefits of any kind. The provisions of this paragraph shall not apply to the
Directors and Officers Insurance Coverage provided pursuant to Section 3.4
below.
3.3 Amendment of Stock Option Agreement.
-----------------------------------
(a) OUTSTANDING OPTIONS. Dr. Gefter currently holds the following
five stock options: (a) a Stock Option to purchase 49,200 shares of Common Stock
of the Company (the "First Option") pursuant to an Incentive Stock Option
Agreement dated March 4, 1993 (the "First Option Agreement"); (b) a Stock Option
to purchase 125,800 shares of Common Stock of the Company (the "Second Option")
pursuant to a Non-Qualified Stock Option Agreement dated March 4, 1993 (the
"Second Option Agreement"); (c) a Stock Option to purchase 46,152 shares of
Common Stock of the Company (the "Third Option") pursuant to an Incentive Stock
Option Agreement dated November 10, 1994 (the "Third Option Agreement"); (d) a
Stock Option to purchase 128,848 shares of Common Stock of the Company (the
"Fourth Option") pursuant to a Non-qualified Stock Option Agreement dated
November 10, 1994 (the "Fourth Option Agreement"); and (e) a Stock Option to
purchase 43,750 shares of Common Stock of the company (the "Fifth Option")
pursuant to a Non-Qualified Stock Option Agreement dated January 31, 1996 (the
"Fifth Option Agreement"). The Company and Dr. Gefter agree as follows:
(i) Notwithstanding the exercise provisions of the First Option
Agreement, all outstanding options to purchase Common Stock
provided by the First Option shall on the Termination Date
immediately vest and shall be exercisable in full for a period
of two (2) years following the Termination Date; however, such
outstanding options shall be subject to termination in the
event that it is determined through the procedure described in
Section 3.3(b) of this Agreement, that Dr. Gefter has
materially breached any of the surviving provisions of
Sections 6.1, 6.2, 6.3 or 6.4 of the Prior Agreement. The
provisions of this Section 3.3(i) shall constitute a written
amendment to the First Option Agreement in accordance with the
provisions of paragraph 14(a) of the First Option Agreement.
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<PAGE> 3
(ii) Notwithstanding the exercise provisions of the Second Option
Agreement, all outstanding options to purchase Common Stock
provided by the Second Option shall on the Termination Date
immediately vest and shall be exercisable in full for a period
of two (2) years following the Termination Date; however, such
outstanding options shall be subject to termination in the
event that it is determined through the procedure described in
Section 3.3(b) of this Agreement, that Dr. Gefter materially
breached any of the surviving provisions of Sections 6.1, 6.2,
6.3 or 6.4 of the Prior Agreement. The provisions of this
Section 3.3(ii) shall constitute a written amendment to the
Second Option Agreement in accordance with the provisions of
paragraph 14(a) of the Second Option Agreement.
(iii) Notwithstanding the exercise provisions of the Third Option
Agreement, all outstanding options to purchase Common Stock
subject to the Third Option shall on the Termination Date
immediately vest and shall be exercisable in full for a period
of two (2) years following the Termination Date; however, such
outstanding options shall be subject to termination in the
event that it is determined through the procedure described in
Section 3.3(b) of this Agreement, that Dr. Gefter has
materially breached any of the surviving provisions of
Sections 6.1, 6.2, 6.3 or 6.4 of the Prior Agreement. The
provisions of this Section 3.3(iii) shall constitute a written
amendment to the Third Option Agreement in accordance with the
provisions of paragraph 14(a) of the Third Option Agreement.
(iv) Notwithstanding the exercise provisions of the Fourth Option
Agreement, all outstanding options to purchase Common Stock
subject to the Fourth Option shall on the Termination Date
immediately vest and shall be exercisable in full for a period
of two (2) years following the Termination Date; however, such
outstanding options shall be subject to termination in the
event that it is determined through the procedure described
- 3 -
<PAGE> 4
in Section 3.3(b) of this Agreement, that Dr. Gefter has
materially breached any of the surviving provisions of
Sections 6.1, 6.2, 6.3 or 6.4 of the Prior Agreement. The
provisions of this Section 3.3(iv) shall constitute a written
amendment to the Fourth Option Agreement in accordance with
the provisions of paragraph 14(a) of the Fourth Option
Agreement.
(v) Notwithstanding the exercise provisions of the Fifth Option
Agreement, all outstanding options to purchase Common Stock
subject to the Fifth Option shall on the Termination Date
immediately vest and shall be exercisable for a period of two
(2) years following the Termination Date; however, such
outstanding options shall be subject to termination in the
event that it is determined through the procedure described in
Section 3.3(b) of this Agreement, that Dr. Gefter has
materially breached any of the surviving provisions of
Sections 6.1, 6.2, 6.3 or 6.4 of the Prior Agreement. The
provisions of this Section 3.3(v) shall constitute a written
amendment to the Fifth Option Agreement in accordance with the
provisions of paragraph 14(a) of the Fifth Option Agreement.
Accordingly, the Company and Dr. Gefter agree that the total number of
shares of Common Stock that have vested as of the Termination Date and are
exercisable pursuant to the Option Agreements referred to above, as amended
hereby, is as set forth on EXHIBIT B attached hereto.
(b) PROCEDURE FOR TERMINATION OF OPTIONS. In the event that it is
determined that Dr. Gefter materially breached the provisions of Section 6.1,
6.2, 6.3 or 6.4 of the Prior Agreement by a Requisite Majority of the Board at a
meeting of which Dr. Gefter has received at least seven (7) days prior written
notice (which notice shall include a statement specifying in reasonable detail
the facts relating to such material breach) and has had a reasonable opportunity
to be heard (and to be represented by counsel), Dr. Gefter's right to exercise
all outstanding stock options held by him shall immediately terminate. For
purposes of this Agreement, the term "Requisite Majority" is defined to mean a
majority of the following members of the Board: (i) all members of the Board who
are not employees of the Company; and (ii) the Chief Executive Officer (if he or
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<PAGE> 5
she then serves on the Board). If Dr. Gefter disputes the determination of a
Requisite Majority of the Board, as indicated in a written statement to the
Company specifying in reasonable detail the facts upon which Dr. Gefter relies
(the "Gefter Dispute Statement"), such statement to be provided to the Company
within five (5) days after the applicable meeting of the Board, then the issue
of whether Dr. Gefter materially breached the provisions of Section 6.1, 6.2,
6.3 or 6.4 of the Prior Agreement shall be determined by binding arbitration in
accordance with the procedures set forth below. Any such arbitration shall be
conducted on an expedited basis by a single arbitrator mutually acceptable to
the parties, or, if the parties are unable to agree upon a single arbitrator, by
a panel of three arbitrators, one of whom is selected by each of Dr. Gefter and
the Company and the third to be selected by the other two arbitrators (it being
understood that the arbitrator(s) shall be selected by the parties within ten
(10) days after receipt by the Company of the Gefter Dispute Statement). As a
condition to accepting the position of arbitrator, each arbitrator designated by
he parties shall agree to render a decision within thirty (30) days after
commencement of arbitration proceedings, and to commence such proceedings
promptly. Each party shall submit a written statement to the arbitrator(s)
setting forth his or its position, and the arbitrator(s) may, at his or her
discretion, hold a hearing which will not exceed four (4) hours. The ruling of
the arbitrator(s) shall be final and conclusive. In the event that the
arbitrator(s) rules in favor of Dr. Gefter, the outstanding stock options will
again be exercisable to the extent set forth in Section 3.3(a) above. In the
event the arbitrator(s) rules in favor of the Company, all outstanding options
shall remain terminated as of the date of the Board meeting referred to above.
All arbitration costs and reasonable fees and expenses of counsel for both
parties shall be borne by the Company if the arbitrator(s) rules in favor of Dr.
Gefter, or by Dr. Gefter if the arbitrator(s) rules in favor of the Company.
3.4 DIRECTORS AND OFFICERS INSURANCE COVERAGE. Notwithstanding the
provisions of Section 3.2, the Company agrees to maintain Directors and Officers
Liability Insurance Prior Acts coverage for a period of three (3) years after
the Termination Date on substantially the same terms and conditions presently
maintained by the Company as of the Termination Date.
4. Release.
-------
4.1 RELEASE. Dr. Gefter hereby fully, forever, irrevocably and
unconditionally releases, remises and discharges the Company, its
officers, directors, subsidiaries, agents and employees from any and all
claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money,
- 5 -
<PAGE> 6
costs, accounts, reckonings, covenants, contracts, agreements, promises, doings,
omissions, damages, executions, obligations, liabilities, and expenses
(including attorneys' fees and costs), of every kind and nature which he ever
had or now has against the Company, its officers, directors, subsidiaries,
agents and employees arising out of any event, circumstance, action or inaction
on or prior to the date hereof, including without limitation, Dr. Gefter's
employment with the Company or the termination of such employment, all
employment discrimination claims under Title VII of the Civil Rights Act of
1964, 42 U.S.C. ss.2000e et seq., the Massachusetts Civil Rights Act, the Age
Discrimination in Employment Act, 29 U.S.C. ss.621 et. seq., the Americans With
Disabilities Act, 29 U.S.C. ss.706 et. seq., and the National Labor Relations
Act, 29 U.S.C. ss.151 et seq.; claims arising under Dr. Gefter Retirement Income
Act, 29 U.S.C. ss.1001 et seq., and the Family and Medical Leave Act, 29 U.S.C.
ss.2601 et seq., wrongful discharge claims, employment-related breach of
contract claims and all other employment-related statutory or common law claims
and damages; provided, however, that the foregoing release shall not include,
and nothing in this provision or in this Agreement shall be construed as in any
way barring, any event, circumstance, action or inaction on or prior to the date
hereof, including without limitation, Dr. Gefter's claims based upon the
Company's gross negligence or willful misconduct or claims for alleged breaches
of this Agreement; and provided further that Dr. Gefter shall retain his rights
to indemnification as described in paragraph 9 below.
4.2 THE COMPANY'S RELEASE. The Company, for itself, its officers,
directors, subsidiaries, agents, employees, legal representatives, successors
and assigns, does hereby fully, forever, irrevocably and unconditionally
release, remise and discharge Dr. Gefter and his heirs, successors and assigns
from any and all claims, charges, complaints, demands, actions, causes of
action, suits, rights, debts, sums of money, costs, accounts, reckonings,
covenants, contracts, agreements, promises, doings, omissions, damages,
executions, obligations, liabilities, and expenses (including attorneys' fees
and costs) of every kind and nature whatsoever, at law, in equity or otherwise,
which it or they ever had or now have against Dr. Gefter arising out of any
event, circumstance, action or inaction on or prior to the date hereof, except
to the extent that any such claim is based upon Dr. Gefter's actions or
inactions which do not meet the standard of conduct required for indemnification
as set forth in EXHIBIT C referred to in Section 10 (whether such actions or
inactions were taken or omitted to be taken in his capacity as an employee,
officer or director).
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<PAGE> 7
5. Covenants Not To Sue.
--------------------
5.1 COVENANT NOT TO SUE. Dr. Gefter further represents and warrants
that he has not filed any complaints, charges, or claims for relief against the
Company, its officers, directors, subsidiaries, agents or employees with any
local, state or federal court or administrative agency which currently are
outstanding. If he has done so, he will forthwith dismiss all such complaints,
charges, or claims for relief with prejudice. Dr. Gefter further agrees and
covenants not to bring any complaints, charges or claims against the Company,
its officers, directors, subsidiaries, agents or employees with respect to any
matters within the scope of the release set forth in Section 4.1.
5.2 THE COMPANY'S COVENANT NOT TO SUE. The Company, its officers,
directors, subsidiaries, agents and employees, represent and warrant that they
have not filed any complaints, charges or claims for relief against Dr. Gefter
with any local, state or federal court or administrative agency. If any has done
so he will forthwith dismiss all such complaints, charges or claims for relief
with prejudice. The Company, its officers, directors, subsidiaries, agents and
employees, further agree and covenant not to bring any complaints, charges or
claims against Dr. Gefter with respect to any action taken by Dr. Gefter within
the scope of the release set forth in Section 4.2.
6. NATURE OF AGREEMENT. The Company and Dr. Gefter each represent and
warrant that this Agreement is a severance and settlement agreement and does not
constitute an admission of liability or wrongdoing on the part of either the
Company or Dr. Gefter.
7. AMENDMENT; PARTIES IN INTEREST. This Agreement shall be binding upon
the parties and may not be abandoned, supplemented, changed or modified in any
manner, orally or otherwise, except by an instrument in writing of concurrent or
subsequent date signed by a duly authorized representative of the parties
hereto. This Agreement is binding upon and shall inure to the benefit of the
parties and their respective agents, assigns, heirs, executors, successors and
administrators. In the event of any Change of Control (as defined in the Prior
Agreement), any successor shall succeed to all of the Company's duties,
obligations, rights and benefits hereunder. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise and whether or not after a Change of Control) to all or substantially
all of the business or assets of the Company to assume in writing prior to such
succession and to agree to perform its obligations under this Agreement in the
same manner and to the extent that the
- 7 -
<PAGE> 8
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain an assumption of this Agreement prior to the
effectiveness of succession shall be a material breach of this Agreement. As
used in this Agreement, "Company" shall mean the Company as defined above and
any successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
8. VALIDITY. Should any of the provisions of this Agreement or Sections
6.1, 6.2, 6.3 or 6.4 of the Prior Agreement (to the extent they survive pursuant
to Section 2 of this Agreement) be declared or be determined by any court of
competent jurisdiction to be illegal or invalid, the validity of the remaining
parts, terms, or provisions shall not be affected thereby and said illegal and
invalid part, term or provision shall be deemed not to be a part of this
Agreement.
9. CONFIDENTIALITY. Dr. Gefter and the Company understand and agree that,
except as contemplated by Section 12 hereof, the terms and contents of this
Agreement, and the contents of the negotiations and discussions resulting in
this Agreement, shall be maintained as confidential by both parties, their
agents and representatives, and, as to the Company, its officers, directors and
employees, and that none of the above shall be disclosed, except as contemplated
by Section 12 hereof, as may be required by applicable law or legal process or
as otherwise agreed to in writing by each party.
10. INDEMNIFICATION. The Company will indemnify, and advance expenses to,
Dr. Gefter to the full extent provided in (and without limitation of) Article
Eighth of the Company's Bylaws and Charter, a copy of which Article is attached
hereto as EXHIBIT C. The indemnification and expense advancement provisions set
forth in Article Eighth are incorporated herein by reference and shall be fully
effective as if set forth herein, shall constitute an agreement between the
Company and Dr. Gefter and shall not be subject to amendment or revision except
as agreed to in writing by Dr. Gefter and the Company.
11. NON-DISPARAGEMENT. Dr. Gefter understands and agrees that he shall not
make any false, disparaging or derogatory statements in public or private
regarding the Company or any of its officers, directors, employees, agents or
representatives or the Company's business affairs or financial condition nor
engage in conduct intended to be detrimental to the interests of the Company.
The Company agrees that it will not make any false, disparaging or derogatory
statements in public or private, or engage in conduct intended to be detrimental
to the interests of Dr. Gefter, in connection with or concerning Dr. Gefter's
service
- 8 -
<PAGE> 9
to the Company or his separation therefrom. Notwithstanding the foregoing,
nothing contained in this Section 11 shall prohibit Dr. Gefter or the Company
from making any statement or engaging in conduct to the extent such statement or
conduct is required by applicable law or legal process.
12. PUBLICITY. Dr. Gefter and the Company will issue a mutually agreeable
press release announcing Dr. Gefter's separation from the Company, such press
release to be in the form of Exhibit D to this Agreement.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
and agreement between the parties hereto with respect to the severance and
settlement and cancels all previous oral and written negotiations, agreements,
commitments, and writings between the Company and Dr. Gefter, except for the
Option Agreements referred to in Section 3.3 which shall continue, as amended
hereby, in full force and effect.
14. APPLICABLE LAW. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
15. VOLUNTARY ASSENT. Dr. Gefter affirms that no other promises or
agreements of any kind have been made to or with him by any person or entity
whatsoever to cause him to sign this Agreement, and that he fully understands
the meaning and intent of this Agreement. Dr. Gefter states and represents that
he has had an opportunity to fully discuss and review the terms of this
Agreement with an attorney. Dr. Gefter further states and represents that he has
carefully read this Agreement, understands the contents herein, freely and
voluntarily assents to all of the terms and conditions hereof, and signs his
name of his own free act.
16. REIMBURSEMENT OF LEGAL FEES. The Company agrees to pay the legal fees
and expenses incurred by Dr. Gefter in the review and negotiation of this
Agreement in an amount not to exceed $5,000.
17. EXECUTION. This Settlement Agreement may be executed in counterparts,
each of which when so executed shall be deemed to be an original, and which
together shall constitute but one and the same instrument.
18. DUE AUTHORIZATION, VALID AND BINDING. The Company represents and
warrants that this Agreement has been duly authorized by the Company's Board of
Directors, and is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.
IMMULOGIC PHARMACEUTICAL CORPORATION
By: /s/ J. Joseph Marr Date: 4 Mar 97
---------------------- --------
/s/ Malcolm L. Gefter Date: March 4, 1997
------------------------------ -------------
MALCOLM L. GEFTER
The undersigned, for itself and on behalf of Amerindo Technology Growth Fund and
Amerindo Technology Growth Fund II, hereby releases Dr. Gefter to the same
extent as the Company has released Dr. Gefter pursuant to Section 4.2 of this
Agreement, and agrees to be bound by the provisions of Sections 5.2, 9 and the
last two sentences of Section 11 of this Agreement as if it were the Company.
AMERINDO INVESTMENT ADVISORS INC.,
By: /s/ [illegible]
------------------------------
Name:
Title:
Dr. Gefter hereby releases Amerindo Investment Advisors Inc., Amerindo
Technology Growth Fund and Amerindo Technology Growth Fund II (collectively the
"Amerindo Entities") to the same extent as Dr. Gefter has released the Company
pursuant to Section 4.1 of this Agreement, and agrees to be bound by the
provisions of Sections 5.2, 9 and the first and last sentences of Section 11 of
this Agreement as if the Amerindo Entities were the Company.
/s/ Malcolm L. Gefter
- -----------------------------------
Malcolm L. Gefter
- 10 -
<PAGE> 1
EXHIBIT 10.33
AGREEMENT
This Agreement ("Agreement") is entered into this 25th day of October, 1996, by
and between ImmuLogic Pharmaceutical Corporation (hereinafter "IPC") and Hoechst
Marion Roussel, Inc. ("HMRI"), formerly known as Marion Merrell Dow Inc.
("MMD").
This Agreement is entered into for the reasons and purposes hereinafter set
forth. In consideration of the mutual covenants and agreements set forth herein,
the above parties hereby agree as follows:
1. PARTIES
The parties to this Agreement are HMRI and IPC. For purposes of this
Agreement, HMRI refers to both MMD and its successor corporation HMRI,
including, but not limited to, its parent, subsidiaries, successors,
predecessors and affiliated companies, its employees, agents, assigns, officers,
directors, creditors, trustees, servants, other representatives, underwriters,
attorneys and insurers to both MMD and its successor corporation HMRI. IPC
refers to IPC and any and all entities affiliated with IPC including, but not
limited to, its parent, subsidiaries, successors, predecessors and affiliated
companies, its employees, agents, assigns, officers, directors, creditors,
trustees, servants, other representatives, underwriters, attorneys and insurers.
HMRI and IPC are collectively referred to herein as "the parties."
2. SUBJECT MATTER OF THE AGREEMENT
On February 14, 1992, MMD and IPC entered into a Collaboration
Agreement ("Collaboration Agreement") (attached as Exhibit A) relating to the
joint worldwide development and commercialization of five allergen-specific
therapeutic products for the treatment of allergies in humans caused by cats,
ragweed, Japanese Cedar trees, house dust mites and northern grasses. These
products and any related products are referred to collectively in this Agreement
as "ALLERVAX." The Collaboration Agreement provided that it could be
unilaterally terminated by MMD on six month's prior written notice.
On or about March 7, l995, MMD and IPC signed a letter dated March 2,
1995, ("March 2, 1995 Letter") (attached as Exhibit B), relating to
manufacturing for the ALLERVAX products.
On March 7, 1996, HMRI provided its written notice of termination of
the Collaboration Agreement to IPC.
For purposes of this Agreement "the ALLERVAX Matter" includes any and
all obligations, liabilities, responsibilities, rights, or actions of HMRI or
IPC pursuant to the Collaboration Agreement, the March 2, 1995 Letter, or any
other obligation, liability, responsibility, right, or action relating to HMRI's
or IPC's involvement with ALLERVAX.
<PAGE> 2
3. PURPOSE
The purpose of this Agreement is to settle any and all liability or
potential liability and/or obligations HMRI may have to IPC or to any other
party, or may in a court of law or through arbitration be adjudged to have to
IPC or others, in whatever proportion and in whatever amount, known or unknown,
resulting from the Collaboration Agreement, any other alleged agreements,
including but not limited to, the March 2, 1 995 Letter and any other
obligations that exist now or in the future relating to the ALLERVAX Matter.
4. TERMS
A. HMRI'S OBLIGATIONS
HMRI agrees to provide the following sums to IPC and perform the
following obligations in the following manner:
(1) Payment by HMRI to IPC in the amount of $7,000,000;
(2) Delivery of Mite and Cedar peptide inventions valued at HMRI's
cost; and
Additionally, HMRI agrees to perform the actions specifically proposed
in the following sections of the Comprehensive ALLERVAX Transition Proposal
dated July 22, 1996 ("Transition Proposal") (attached as Exhibit C), including,
but not limited to, the performance of any existing contractual obligations of
HMRI with third parties. Consistent with the terms of the Transition Proposal,
HMRI will perform some of the following actions only in exchange for
compensation as outlined in the Transition Proposal.
Section I. Development
I. Activities HMRI Will Complete and/or Items HMRI will
Provide to IPC
II. Proposed Payment Summary
B. HMRI Will Pay Invoices for
Preclinical/Nonclinical Activities Which
Have Previously Been Agreed Upon (See
attached Exhibit D, containing outstanding
invoices to be paid by HMRI)
<PAGE> 3
Section 4. Miscellaneous
II. Transition Actions
C. Technology Transfer
D. Deliverables
I. Reference of, and Access to, SOPS.
HMRI does hereby release and forever discharge IPC, its subsidiaries,
successors, predecessors and affiliated companies, its employees, agents,
assigns, shareholders, officers, directors, servants, other representatives,
underwriters, attorneys and insurers, from any and all demands, claims, suits,
actions, causes of action, liens, debts, assessments, liabilities, judgments,
settlements, fines, costs, damages, punitive damages and expenses (including all
fees, interests and penalties), of any and every character and nature
whatsoever, known or unknown, arising from the ALLERVAX Matter. Without limiting
the generality of the foregoing in any way, HMRI agrees that this Agreement
expressly and specifically includes any and all claims or causes of action
whatsoever possessed by HMRI against IPC in any way connected with the ALLERVAX
Matter.
B. IPC'S OBLIGATIONS
IPC, for and in consideration of the amounts paid and actions performed
by HMRI in settlement, does hereby release and forever discharge HMRI, its
parent, subsidiaries, successors, predecessors and affiliated companies, its
employees, agents, assigns, shareholders, officers, directors, servants, other
representatives, underwriters, attorneys and insurers, from any and all demands,
claims, suits, actions, causes of action, liens, debts, assessments,
liabilities, judgments, settlements, fines, costs, damages, punitive damages and
expenses (including all fees, interests and penalties), of any and every
character and nature whatsoever, known or unknown, arising from the ALLERVAX
Matter. Without limiting the generality of the foregoing in any way, {PC agrees
that this Agreement expressly and specifically includes any and all claims or
causes of action whatsoever possessed by IPC against HMRI in any way connected
with the ALLERVAX Matter.
Additionally, IPC agrees to pay to HMRI all existing and future
invoices on Stat CDM data management contracts as they become due.
In further consideration, IPC hereby agrees to indemnify, save and hold
harmless HMRI, its parent, subsidiaries, successors, predecessors and affiliated
companies, its employees, agents, assigns, shareholders, officers, directors,
servants, other representatives, underwriters, attorneys and insurers from any
and all liability to any person, firm, corporation, third-party, or other entity
which arises out of or is in any way related to or connected with the ALLERVAX
Matter, specifically including, but not limited to, liability for any and all
demands, claims, liens, debts, actions, causes
<PAGE> 4
of action, cross-claims, third-party claims, assessments, liabilities,
judgments, settlements, fines, costs, damages and punitive damages and will be
responsible for and pay any and all judgments that might be entered therein
against HMRI or the aforementioned parties and will promptly pay and reimburse
any and all attorney's fees, court costs and expenses, including, but not
limited to, expert witness expenses incurred by HMRI and the aforementioned
parties as they become due.
5. ADEQUATE CONSIDERATION
This Agreement is made for and in consideration of the mutual promises
mentioned in this Agreement and is hereby accepted by each party to this
Agreement in full compromise, settlement, and in accord and satisfaction of the
aforesaid obligations, liabilities, actions, claims, demands and suits covered
under this Agreement, or related to the ALLERVAX Matter, including all
consequences therefore which may hereafter develop as well as those already
developed and now apparent. The parties hereby expressly acknowledge that the
consideration recited herein is good, valuable and sufficient consideration for
the agreements made herein.
6. NO ADMISSION OF LIABILITY
This Agreement represents the resolution of the ALLERVAX Matter between
IPC and HMRI and is not an admission of liability or of indebtedness by HMRI.
This Agreement shall not constitute a confession of judgment by HMRI. Nothing in
this Agreement is or shall be construed to be an admission or concession by
HMRI, IPC or any other person of any wrongdoing or liability whatsoever. Neither
this Agreement, nor any term thereof, nor any negotiations may be offered or
received in evidence in any proceeding or utilized in any manner as an admission
or implication of liability or fault on the part of HMRI, IPC or any other
person, other than as may be necessary to enforce the terms of this Agreement.
7. ENFORCEMENT
All remedies at law or in equity shall be available for the enforcement
of this Agreement. This Agreement may be pleaded as a full bar to the
enforcement of any claims by IPC against HMRI arising from the ALLERVAX Matter.
8. APPLICABLE LAW
This Agreement shall be construed pursuant to the laws of the State of
Missouri without giving effect to its choice of law rules.
9. CONFIDENTIALITY
IPC, HMRI and their respective attorneys all agree that the terms of
this Agreement shall remain confidential and private in all respects and agree
that, except as otherwise required by
<PAGE> 5
specific court order, statute or other binding requirement of law, or to enforce
the terms of this Agreement, they shall not make or shall not authorize anyone
else to make any statement, comment, observation or oral or written
communication of any type to anyone, including, but not limited to, any
reference made to the press or media, or agents or representatives of the press
or media, or to other attorneys which discloses, generally or specifically:
facts, opinions, or innuendoes regarding the amount of the settlement, the
nature and substance of settlement negotiations, or any statement about the
settlement or characterization of the settlement, its importance, meaning, value
or comparative value or the negotiations leading to it.
IPC, HMRI, and their respective attorneys al1 agree that, except as
otherwise required by specific court order, statute or other binding requirement
of law, or to enforce the terms of this Agreement, any inquiry by anyone at any
time into any matter made confidential in this Agreement will be met by the
following statement: "On March 7, 1996, HMRI exercised its right to terminate
its ALLERVAX Collaboration Agreement with IPC. HMRI and IPC have resolved their
respective obligations relating to this maker in a manner agreeable to HMRI and
IPC." For purposes of legally required disclosures such as SEC filings and
related earnings releases, and as required by good accounting practices, the
parties agree to the following statement or its substantial equivalent: "On
March 7, 1996, HMRI exercised its right to terminate its ALLERVAX Collaboration
Agreement with IPC. HMRI and IPC have resolved their respective obligations
relating to this matter in a manner agreeable to HMRI and IPC, resulting in HMRI
paying IPC $7,000,000 and transferring certain inventory to be used in future
trials by IPC."
10. COMPLETE AGREEMENT
It is understood and agreed that this Agreement constitutes the entire
agreement between the parties, the terms and provisions of this Agreement are
contractual and not merely recitals and that this Agreement may be modified or
amended only by written agreement signed by the parties hereto.
11. WARRANTY
The parties hereto warrant and represent to each other that they have read and
understand this Agreement and have consulted with respective counsel regarding
its effect and that the undersigned persons have authority and power to bind the
parties to the terms of this Agreement.
12. HEADINGS
The headings in this Agreement are solely for the convenience of the parties
hereto and their respective counsel. The headings shall not be deemed to be a
part of this Agreement and shall not be considered in construing or interpreting
this Agreement.
<PAGE> 6
13. BINDING NATURE OF AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective subsidiaries, affiliates, directors,
officers, employees, heirs, partners, successors and assigns and any corporation
or other entity into or with which any corporate party hereto may merge or
consolidate.
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned
on the dates set forth below.
HOECHST MARION ROUSSEL, INC.
By: /s/ James P. Mitchum
----------------------------------
Name: James P. Mitchum
Title: Vice President, Finance & Administration
STATE OF Missouri )
)SS.
COUNTY OF Jackson )
On the 25th day of October 1996, before me a notary public in and for
said state, personally appeared James P. Mitchum, individually, and as V.P.
Finance & Admin. N.A. of Hoechst Marion Roussel, Inc., to me personally known,
who being duly sworn, acknowleged that he/she has executed the foregoing
instrument for purposes therein mentioned and set forth above.
/s/ Kathleen Pace
-----------------------------
NOTARY PUBLIC
My Commission Expires:
Sept. 15, 1997
<PAGE> 7
IMMULOGIC PHARMACEUTICAL CORPORATION
By: /s/ Richard Small
----------------------------
Name: Richard N. Small
Title: Vice President, Chief Financial
Officer and Treasurer
STATE OF MASSACHUSETTS )
)ss
COUNTY OF MIDDLESEX )
On the 28th day of October, 1996, before me a notary public in and for
said state, personally appeared Richard Small, individually and as Vice
President, CFO of ImmuLogic Pharmaceutical Corporation, to me personally known,
who being duly sworn, acknowledged that he/she has executed the foregoing
instrument for purposes therein mentioned and set forth above.
/s/ Christine J. Schultz
------------------------------
NOTARY PUBLIC
My Commission Expires:
January 4, 2002
<PAGE> 1
EXHIBIT 10.34
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
Amendment, dated as of April 3, 1996 (the "Amendment"), to RIGHTS
AGREEMENT, dated as of July 11, 1995 (the "Agreement"), between ImmuLogic
Pharmaceutical Corporation, a Delaware corporation (the "Company"), and the
First National Bank of Boston, a national banking association, as Rights Agent
(the "Rights Agent").
W I T N E S S E T H
WHEREAS, on April 3, 1996, the Board of Directors of the Company
adopted an amendment to the Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to such terms in the
Agreement.
2. Definition of Acquiring Person. Section 1(a) of the Agreement
shall be amended to read in its entirety as follows:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Common Stock then outstanding,
but shall not include (I) the company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company, or
(iv) any Person organized, appointed or established by the company for or
pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" as the result of any acquisition of Common
Stock by the company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 20% or more of the shares of Common Stock of the company then outstanding;
provided however, that if a Person shall become the Beneficial Owner of any
additional Common Stock of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Stock of the Company, then
such Person shall be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this paragraph (a), has become such
inadvertently, and such Person divests as promptly as practicable a sufficient
number of shares of Common Stock so that such Person would no longer be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed to be an "Acquiring Person"
for any
<PAGE> 2
purposes of this Agreement unless and until such Person shall again become an
"Acquiring Person."
3. Section 11(a) (ii) of the Agreement shall be amended to read
in its entirety as follows:
(a)(ii) Subject to Section 24 of this Agreement, in the event any
Person shall become an Acquiring Person, unless the event causing the 20%
threshold to be crossed is a transaction set forth in Section 13(a) hereof, or
is a Permitted Offer, then, promptly following the first occurrence of such
event, proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a number of one one-thousandths of
a share of Preferred Stock such number of shares of Common Stock of the Company
that equals the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, and (y) dividing that product (which, following such
first occurrence, shall thereafter be referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by 50% of the current market
price (determined pursuant to Section 11(d) hereof) per share of Common Stock on
the date of such first occurrence (such number of shares, the "Adjustment
Shares").
4. Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute one and the
same instrument.
5. In all other respects, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: IMMULOGIC PHARMACEUTICAL CORPORATION
By: /s/ Stacey L. Channing By: /s/ Robert L. Gerety
---------------------- ---------------------------------
Name: Stacey L. Channing Name: Robert L. Gerety, Ph.D.
Title: Vice President, Title: President and Chief Executive
General Counsel Officer
Attest: THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Nancy Rizza By: /s/ Katherine S. Anderson
---------------------- ------------------------------------
Name: Nancy Rizza Name: Katherine S. Anderson
Title: Account Manager Title: Administration Manager
<PAGE> 1
EXHIBIT 10.35
CONSULTATION AGREEMENT
This Consultation Agreement, dated as of January 1, 1992, between
ImmuLogic Pharmaceutical Corporation, a Delaware corporation ("ImmuLogic"), and
C. Garrison Fathman ("Consultant").
W I T N E S S E T H:
WHEREAS, ImmuLogic and the Consultant entered into a Consultation
Agreement, dated as of June 29, 1988, as amended, which is scheduled to
terminate on May 31, 1992 (the "Original Agreement");
WHEREAS, ImmuLogic desires to continue to have the benefit of
Consultant's knowledge and experience, and Consultant desires to continue to
provide consulting services to ImmuLogic, all as hereinafter provided in this
Agreement;
WHEREAS, ImmuLogic and the Consultant wish to amend and restate the
terms of the Original Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, effective as of the date hereof, ImmuLogic and Consultant
hereby agree as follows:
1. Consultation; Termination of Original Agreement.
(a) ImmuLogic shall retain Consultant as a consultant, and
Consultant shall serve ImmuLogic as a consultant, upon the terms and conditions
hereinafter set forth.
(b) This Agreement shall be considered an amendment to and
restatement of the Original Agreement, and upon execution of this Agreement by
ImmuLogic and the Consultant, the Original Agreement shall be of no further
force and effect.
2. Term.
Subject to the terms and conditions hereinafter set forth, the
term of the Consultant's consulting arrangement hereunder (hereinafter referred
to as the "Term") shall commence on the date hereof, and, unless sooner
terminated as provided in this Agreement, shall continue through December 31,
1994, provided, however, that the Term shall be extended for up to two
additional periods of one year beginning on January 1, 1995, and on January 1,
1996, if the parties mutually agree to such an extension at least two years
prior to the expiration of the initial Term or the first extension of the Term;
and
<PAGE> 2
provided further, that the Term shall automatically terminate upon the death of
the Consultant.
3. Consulting Duties.
(a) During the Term, Consultant shall render to ImmuLogic or
to ImmuLogic's designee such consulting services in his fields of
expertise and knowledge related to the business of ImmuLogic and at
such times and places as ImmuLogic may from time to time reasonably
request, including providing advice to existing or potential research
collaborators, research sponsors, or customers of ImmuLogic with
respect to the function of the immune system in humans or animals. The
parties agree and acknowledge that such consulting services shall
primarily be rendered at ImmuLogic's offices in Palo Alto, California
and Cambridge, Massachusetts. Consultant acknowledges that in addition
it will be necessary for Consultant to travel to Cambridge,
Massachusetts and such other locations as ImmuLogic shall reasonably
request. ImmuLogic shall give Consultant reasonable advance notice of
any services required of him hereunder.
(b) All work to be performed by Consultant for ImmuLogic shall
be under the general supervision of ImmuLogic.
(c) The parties acknowledge and agree that the Consultant is
receiving substantial compensation under this Agreement and has also
been granted stock options pursuant to a separate agreement between the
parties. Although the amount of time to be devoted by the Consultant to
ImmuLogic is limited, as provided below, the Consultant recognizes that
he has a special obligation, in light of such compensation and stock
options, to devote his best efforts and ability to the performance of
his duties hereunder, both in terms of the quality of the scientific
input and guidance provided to ImmuLogic and the amount of time devoted
to such responsibilities. The parties agree that an essential element
of the Consultant's responsibility to ImmuLogic is timely interaction
and coordination with ImmuLogic scientists and management. The
Consultant shall perform such duties in a manner consistent with the
business and scientific direction and objectives of ImmuLogic and the
operating policies and practices established by the management of
ImmuLogic. Without limiting the generality of the foregoing, the
Consultant shall devote an amount of time to such duties equal to
approximately one day per week, except as otherwise mutually agreed.
All work performed by the Consultant to ImmuLogic shall be at times
reasonably convenient to ImmuLogic and the Consultant, recognizing that
flexibility in scheduling meetings and visits, and the availability of
the Consultant on a timely basis, is essential to the productive and
efficient conduct of ImmuLogic's research activities. Nothing contained
in this Agreement, however, shall interfere with Consultant's teaching
responsibilities and related research duties, including, but not
limited to, Consultant's responsibilities to Stanford University and
governmental entities making research grants to or through Stanford.
-2-
<PAGE> 3
4. Compensation.
In consideration for the services rendered by Consultant to
ImmuLogic, ImmuLogic shall pay Consultant during the Term compensation (the
"Compensation") at the rate of (a) $88,000 per year for the year ended December
31, 1992, and (b) in each subsequent year, the Consultant's rate of Compensation
for the prior calendar year, plus an Annual Increase (as hereinafter defined).
The "Annual Increase" in each year during the Term shall be an amount equal to
the Consultant's rate of Compensation for the prior calendar year multiplied by
the greater of (i) a percent increase equal to ImmuLogic's target percent
increase for all employees, or (ii) five percent.
Compensation shall be paid monthly in equal installments, on
the last day of each month. The payment of such amounts shall cease upon
Consultant's death or permanent disability or upon termination of this
Agreement. Upon Consultant's death, all of his, his spouse and his heirs' rights
under this Agreement which were to accrue after his death shall terminate. If
Consultant shall die or become permanently disabled prior to the end of the Term
there shall be no refund of any amount theretofore paid.
5. Termination.
(a) Breach. Either of the parties may terminate this Agreement
upon material breach of any provision of this Agreement by the other party, upon
thirty (30) days' written notice to the breaching party specifying the material
breach. The termination becomes effective at the end of the thirty (30) day
period unless the breaching party cures the breach during such thirty (30) day
period. ImmuLogic may also terminate this Agreement as provided in Section 9(a)
hereof by providing written notice as required therein.
(b) Termination for Cause. In addition to termination for
breach set forth in Section 5(a) above, ImmuLogic may terminate this Agreement
for "Cause" (as defined below), immediately upon written notice by ImmuLogic to
the Consultant. As used herein, the term "Cause" shall mean (i) misconduct
constituting dishonesty or fraud in connection with the Consultant's obligations
to ImmuLogic, or (ii) willful failure to perform his contractual obligations to
ImmuLogic. In order for cause to exist under subsection (ii), the following
conditions must be satisfied: (A) ImmuLogic shall have given the Consultant
written notice of such failure with reasonable particulars provided, and (B) the
Consultant shall have failed to cure or rectify such failure within thirty (30)
days after such notice.
6. Reimbursement of Expenses.
ImmuLogic shall reimburse Consultant for his reasonable
out-of-pocket expenses incurred in the performed of his duties hereunder upon
presentation of reasonably detailed receipts and compliance with reasonable
administrative policies established from time to time by ImmuLogic.
-3-
<PAGE> 4
7. Status.
Consultant's relationship to ImmuLogic shall be that of an
independent contractor and neither this Agreement nor the services to be
rendered hereunder shall for any purpose whatsoever or in any way or manner
create any employer-employee relationship between the parties. Consultant shall
not be deemed an agent for any purpose and shall have no authority to bind
ImmuLogic in any way.
8. Proprietary Information.
(a) General. ImmuLogic agrees and acknowledges that Consultant
has existing obligations relating to proprietary information to Stanford
University and certain governmental agencies. Consultant agrees to use best
efforts to segregate work done under this Agreement from his work at Stanford
and for any other such governmental agency in order to minimize any question of
disclosure to such persons or the rights of such persons under any Discoveries
or Proprietary Information, as defined below. The research work which Consultant
performs for Stanford and such other governmental agencies shall be called the
"Stanford Work," and the research work or consulting work which Consultant
performs under this Agreement shall be called the "Consultancy Work."
(b) Inventions.
(i) All discoveries, data, technology, innovations
and improvements (whether or not patentable and whether or not copyrightable)
("Discoveries") which are made; conceived, reduced to practice, created,
written or developed by the Consultant, solely or jointly with others during the
Term (or thereafter if based on Proprietary Information, as defined below), and
which (A) (I) are made, conceived, reduced to practice, created, written or
developed during the Consultancy Work, or (II) relate to the Field (as defined
below), and (B) are not made, conceived, reduced to practice, created, written
or developed during the Stanford Work, shall be the sole property of ImmuLogic.
As used above, the term "Field" means the development of vaccines and diagnostic
and therapeutic products for allergies, autoimmune diseases, and AIDS. The
Consultant hereby assigns to ImmuLogic all Discoveries and any and all related
patents, copyrights, trademarks, trade names, and other industrial and
intellectual property rights and applications therefor, in the United States and
elsewhere and appoints any officer of ImmuLogic as his duly authorized attorney
to execute, file, prosecute and protect the same before any government agency,
court or authority. Upon the request of ImmuLogic and at the expense of
ImmuLogic, the Consultant shall execute such further assignments, documents and
other instruments as may be necessary or desirable to fully and completely
assign all Discoveries to ImmuLogic and to assist ImmuLogic in applying for,
obtaining and enforcing patents or copyrights or other rights in the United
States and in any foreign country with respect to any Discovery.
(ii) The Consultant shall promptly disclose to
ImmuLogic all Discoveries and will maintain adequate and current written records
(in the form of notes,
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<PAGE> 5
records, laboratory or research notebooks and as may be specified by ImmuLogic)
to document the conception and/or first actual reduction to practice of any
Discovery. Such written records shall be available to and remain the sole
property for ImmuLogic at all times.
(c) Proprietary Information.
(i) The Consultant acknowledges that his relationship
with ImmuLogic is one of high trust and confidence and that in the course of his
service to ImmuLogic he will have access to and contact with Proprietary
Information. The Consultant agrees that he will not, during the Term or at any
time thereafter, disclose to others, or use for his benefit or the benefit of
others, any Proprietary Information or Discovery.
(ii) For purposes of this Agreement, Proprietary
Information shall mean, all proprietary and confidential information (whether or
not patentable and whether or not copyrightable) owned, possessed, or used by
ImmuLogic in which ImmuLogic has a protectable interest, including, without
limitation, any Discovery, formula, information, apparatus, equipment, material,
trade secret, process, research, research result, report, paper, technical data,
know-how, technology, marketing or business plan, forecast, unpublished
financial statement, budget and license that is communicated to, learned of,
developed or otherwise acquired by the Consultant from ImmuLogic.
(iii) The Consultant's obligations under this Section
8(c) shall not apply to any information that (A) is or becomes known to the
general public under circumstances involving no breach by the Consultant (or the
other consultants signing comparable consultation agreements of even date
herewith) of the terms of this Section 8(c), (B) is generally disclosed to third
parties by ImmuLogic without restriction on such third parties, or (C) is
approved for release by written authorization of the Board of Directors of
ImmuLogic.
(iv) The Consultant shall keep separate records,
files, memoranda, notes, designs, data, reports, laboratory and research
notebooks and other documents relating to the performance of this obligations
under this Agreement. Upon termination of this Agreement or at any other time
upon request by ImmuLogic, the Consultant shall promptly deliver to ImmuLogic
all such records, files, memoranda, notes, designs, data, reports, laboratory
and research notebooks and other documents (and all copies of reproductions of
such materials) relating to the business of ImmuLogic.
(v) The Consultant represents that his retention as a
consultant with ImmuLogic and his performance under this Agreement does not, and
shall not, breach any agreement that obligates him to keep in confidence any
trade secrets or confidential or proprietary information of his or of any other
party or to refrain from competing, directly or indirectly, with the business of
any other party. The Consultant shall not disclose to ImmuLogic any trade
secrets or confidential or proprietary information of any other party.
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<PAGE> 6
(vi) The Consultant acknowledges that ImmuLogic from
time to time may have agreements with other persons or with the United States
Government, or agencies thereof, that impose obligations or restrictions on
ImmuLogic regarding discoveries made during the course of work under such
agreements or regarding the confidential nature of such work. To the extent that
ImmuLogic discloses such agreements to the Consultant and such agreements do not
conflict with then existing obligations of the Consultant to Stanford or
governmental agencies, the Consultant agrees to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Consultant's
obligations to ImmuLogic relating to such agreements.
9. Non-competition.
(a) Consultant represents and warrants that as of the date
hereof, and except as listed on Schedule A attached hereto, (i) he is not
engaged in any consulting arrangement with any person or entity other than
ImmuLogic, (ii) he is not a party to any agreement or arrangement which would
constitute a conflict of interest with this Agreement or would prevent him from
carrying out his obligations to ImmuLogic under this Agreement, and (iii) he is
not employed by, does not serve as a member of the Board of Directors or
Scientific Advisory Board (or comparable organization of) or act on behalf of
any other enterprise engaged in activities similar to or competitive with
ImmuLogic. Any activity described in the preceding sentence shall be referred to
herein as "Other Activity." During the Term, if Consultant desires to undertake
any Other Activity, he shall first present such proposed Other Activity to Dr.
Hugh O. McDevitt and Dr. Kenneth L. Melmon (collectively, including the
Consultant, the "Consultants"). If, after considering such factors as the time
commitment for, and focus of, the Other Activity, the Consultants unanimously
agree that the proposed Other Activity will not materially affect the
Consultant's ability to perform his obligations hereunder, then the Consultants
shall so state in a written statement to ImmuLogic signed by each of them.
ImmuLogic shall present such written statement to the Board of Directors for its
review. ImmuLogic shall have the right to withhold consent to the Other Activity
if, after considering such factors as the time commitment for, and focus of, the
Other Activity, a majority of the members of the Board of Directors (excluding
the Consultants) determine that such Activity could materially affect the
Consultant's ability to perform his obligations hereunder. ImmuLogic agrees not
to unreasonably withhold or delay its consent to any Other Activity by
Consultant in areas with respect to which ImmuLogic does not intend to develop
business or has not made, and has no plans to make, a commitment of resources at
such time. If Consultant fails to notify ImmuLogic of such activities at least
thirty (30) days prior to the occurrence thereof, ImmuLogic shall have the right
to terminate this Agreement upon written notice to the Consultant. If the
Consultant and the Other Consultants cannot agree that the proposed Other
Activity will not conflict with Consultant's work hereunder, Consultant agrees
not to undertake such Other Activity.
(b) ImmuLogic consents to the activities listed in Schedule A;
however, the parties acknowledge that because the Consultant is currently
engaged in activities for entities other than ImmuLogic, it is conceivable that
a conflict might arise. In the event
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<PAGE> 7
of a potential conflict with respect to any activity identified on Schedule A,
the parties will follow the procedures for Other Activity set forth in
subsection (a) above.
(c) Consultant agrees that, during the Term and for one (1)
year thereafter, Consultant shall not become employed by, render services to,
serve as a member of the board of directors or scientific advisory board (or
comparable organization) of or act on behalf of any other enterprise engaged in
activities similar to or competitive with those of ImmuLogic, without
ImmuLogic's prior written consent. This prohibition shall include, but not be
limited to, all research in the area of the function of the immune system in
humans or animals. The parties recognize that, to the extent that it may be
determined that the laws of the State of California govern the enforceability of
this subsection (c), the provisions imposing restrictions on the Consultant
following the Term may be held to be unenforceable.
10. Employees of ImmuLogic.
Consultant agrees that during the Term and for two (2) years
thereafter, Consultant shall not directly or indirectly (a) retain the services
of any employees of ImmuLogic or assist anyone else doing so; (b) cause any
person or entity rendering services to ImmuLogic to discontinue his or its
relationship with ImmuLogic; or (c) perform services for any employer which has,
within three (3) months before of after termination of Consultant's duties for
ImmuLogic, retained the service of any other person or entity rendering services
for ImmuLogic, unless Consultant's employment by such employer has no
relationship to the employment of such other person or entity and the function
for which Consultant is hired has no relationship to the function for which such
person or entity was hired.
11. Survival of Provisions.
The provisions of Sections 8, 9, and 10 hereof shall survive
the termination or expiration of this Agreement, irrespective of the reason
therefor.
12. Injunctive Relief.
Consultant acknowledges that the services to be rendered by
him hereunder are of a special, unique and extraordinary character, and that a
breach by Consultant of Sections 8, 9, or 10 hereof will cause ImmuLogic
irreparable injury and damage. If any court holds that the whole or any part of
the provisions of Sections 8, 9, or 10 hereof is unenforceable by reason of the
extent or duration thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent or duration, or other
provisions thereof, and in its reduced form the provisions of Sections 8, 9
shall be enforceable in the manner contemplated hereby. Furthermore, in the
event of Consultant's breach of the provisions of Sections 8, 9 or 10 hereof,
ImmuLogic shall be entitled to injunctive relief against Consultant in addition
to such other rights as ImmuLogic may have under this Agreement, at law or in
equity.
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<PAGE> 8
13. Arbitration. Disputes under this Agreement shall be settled by
binding arbitration in the major city in or near the Consultant's principal
residence at the time of the arbitration, pursuant to the rules of the American
Arbitration Association, and judgment upon the award rendered may be entered in
any court of competent jurisdiction.
14. Other Agreements. The Consultant represents and warrants to
ImmuLogic that his execution of this Agreement and the performance hereunder
shall not violate any provisions of any agreement between Consultant and any
third party.
15. Assignability and Binding Effect. This Agreement shall inure
to the benefit of and shall be binding upon ImmuLogic and its successors and
permitted assigns and upon Consultant. However, neither party may assign,
transfer, pledge, encumber, hypopthecate or otherwise dispose of this Agreement
or any of its or his rights thereunder without the prior written consent of the
other party, and any such attempted assignment, transfer, pledge, encumbrance,
hypothecation or other disposition without such consent shall be null and void
and without effect. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, and each other provision of this Agreement shall be severable
and enforceable to the extent permitted by law.
16. Headings. The paragraph headings contained herein are included
solely for convenience of reference and shall not control or affect the meaning
or interpretation of any of the provisions of this Agreement.
17. Notices. Any notices or other communication hereunder by
either party shall be in writing and shall be deemed to have been duly given if
delivered personally to the other party or sent by registered or certified mail,
return receipt requested, to the other party at the following addresses:
If to ImmuLogic:
Building 600
One Kendall Square
Cambridge, MA 02139
Attention: President
If to the Consultant:
C. Garrison Fathman, M.D.
Department of Medicine/Immunology
Stanford University, Room S-115
Stanford, CA 94305
or at such other address as such other party may designate in conformity with
the foregoing.
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<PAGE> 9
18. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Massachusetts applicable to contracts made and to be performed therein, without
giving effect to the principles thereof relating to the conflict of laws.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
IMMULOGIC PHARMACEUTICAL CORPORATION
By: /s/ Janet C. Bush
-----------------------
CONSULTANT
/s/ C. Garrison Fathman
---------------------------
C. Garrison Fathman
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<PAGE> 10
Dr. Fathman
SCHEDULE A
Stanford related consultancies:
1. Syntex Institute of Medicine.
-10-
<PAGE> 1
EXHIBIT 10.38
December 8, 1995
Dr. C. Garrison Fathman
Divison of Immunology & Rheumatology
Room S-021
Stanford University School of Medicine
Stanford, CA 94035-5111
Re: Consultation Agreement between
ImmuLogic Pharmaceutical Corporation and
Dr. C. Garrison Fathman
Dear Garry,
In accordance with your Consultation Agreement with ImmuLogic dated
January 1, 1992, as amended April 11, 1994, December 29, 1994 and January 16,
1995, the parties mutually agree to a one year extension of the term to December
31, 1998.
Please sign both originals of this letter and return them for execution
by ImmuLogic.
Sincerely,
/s/ Robert J. Gerety
Robert J. Gerety, M.D., Ph.D.
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED
/s/ C. Garrison Fathman
--------------------------
C. GARRISON FATHMAN
Date: 12/15/95
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the incorporation by reference in the registration statements of
ImmuLogic Pharmaceutical Corporation on Form S-8 (File Nos. 33-89024,
33-89020, 33-89022, 33-50858, 33-42489, 33-42552, 33-41921, 333-08423 and
333-08425) of our report dated January 30, 1997, except for the information
contained in Note M as to which the date is March 5, 1997 on our audit of the
consolidated financial statements of ImmuLogic Pharmaceutical Corporation as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, and to the inclusion of the report in this Annual Report on
Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Financial Statements filed in 1996 Form 10K; Consolidated Balance Sheet,
Statement of Operations for the year ended 12/31/96 and is qualified in its
entirety by reference to such Form 10K, December 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 23,742
<SECURITIES> 46,305<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 55,248
<PP&E> 19,292
<DEPRECIATION> 10,359
<TOTAL-ASSETS> 79,654
<CURRENT-LIABILITIES> 7,353
<BONDS> 0
0
0
<COMMON> 202
<OTHER-SE> 71,724
<TOTAL-LIABILITY-AND-EQUITY> 79,654
<SALES> 0
<TOTAL-REVENUES> 9,239
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,870)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,870)
<EPS-PRIMARY> (0.93)
<EPS-DILUTED> (0.93)
<FN>
<F1>Marketable securities includes long term investments of $15,424,000.
</FN>
</TABLE>
