<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number: 0-19311
IDEC PHARMACEUTICALS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0112644
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11011 Torreyana Road, San Diego, CA 92121
--------------------------------------------------
(Address of principal executive offices)(Zip code)
(858) 550-8500
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of July 31, 1999 the Registrant had 20,706,588 shares of its common stock,
$.001 par value, issued and outstanding.
<PAGE> 2
IDEC PHARMACEUTICALS CORPORATION
FORM 10-Q -- QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -- June 30, 1999 and December 31, 1998 ................. 1
Condensed Consolidated Statements of Operations -- Three months ended June 30, 1999
and 1998 and six months ended June 30, 1999 and 1998 ..................................... 2
Condensed Consolidated Statements of Cash Flows -- Six months ended June 30, 1999 and 1998 ... 3
Notes to Condensed Consolidated Financial Statements ......................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................... 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................................. 20
Item 2. Changes in Securities......................................................................... 20
Item 3. Defaults upon Senior Securities............................................................... 20
Item 4. Submission of Matters to a Vote of Stockholders............................................... 20
Item 5. Other Information............................................................................. 20
Item 6. Exhibits and Reports on Form 8-K.............................................................. 20
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 68,505 $ 26,929
Securities available-for-sale 144,684 46,573
Contract revenue receivables, net 1,266 2,345
Due from related party, net 19,778 17,473
Inventories 9,487 5,346
Prepaid expenses and other current assets 4,256 2,361
--------- ---------
Total current assets 247,976 101,027
Property and equipment, net 20,274 20,897
Investment and other assets 7,355 3,349
--------- ---------
$ 275,605 $ 125,273
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable $ 1,493 $ 1,910
Accounts payable 1,587 1,989
Accrued expenses 12,333 10,238
Deferred revenue 346 346
--------- ---------
Total current liabilities 15,759 14,483
Notes payable, less current portion 120,394 2,095
Deferred rent and other long-term liabilities 2,801 2,267
Commitments
Stockholders' equity:
Convertible preferred stock, $.001 par value -- --
Common stock, $.001 par value 20 20
Additional paid-in capital 190,432 184,282
Accumulated other comprehensive income -
net unrealized gains (losses)
on securities available-for-sale (643) 1
Accumulated deficit (53,158) (77,875)
--------- ---------
Total stockholders' equity 136,651 106,428
--------- ---------
$ 275,605 $ 125,273
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE> 4
IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30.
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Revenues from unconsolidated joint business $21,045 $ 9,567 $40,324 $18,756
Contract revenues 1,249 4,496 2,481 7,141
License fees 13,000 10,000 13,000 16,300
------- ------- ------- -------
35,294 24,063 55,805 42,197
Operating costs and expenses:
Manufacturing costs 879 2,855 4,886 6,930
Research and development 9,535 7,141 17,354 14,178
Selling, general and administrative 4,859 4,542 9,253 8,441
------- ------- ------- -------
15,273 14,538 31,493 29,549
------- ------- ------- -------
Income from operations 20,021 9,525 24,312 12,648
Interest income, net 930 737 1,639 1,482
------- ------- ------- -------
Income before taxes 20,951 10,262 25,951 14,130
Income tax provision 1,043 130 1,234 130
------- ------- ------- -------
Net income $19,908 $10,132 $24,717 $14,000
======= ======= ======= =======
Earnings per share:
Basic $ 0.97 $ 0.51 $ 1.21 $ 0.71
Diluted $ 0.80 $ 0.44 $ 1.01 $ 0.60
Shares used in calculation of earnings per share:
Basic 20,517 19,805 20,399 19,722
Diluted 26,894 23,264 24,375 23,513
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 5
IDEC PHARMACEUTICALS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------------
1999 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities $ 24,267 $ 1,299
--------- --------
Cash flows from investing activities:
Purchase of property and equipment (1,532) (631)
Purchase of securities available-for-sale (142,106) (30,877)
Sales and maturities of securities available-for-sale 43,358 26,938
--------- --------
Net cash used in investing activities (100,280) (4,570)
--------- --------
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net 112,792 --
Payments on notes payable (1,080) (1,822)
Proceeds from issuance of common stock 5,877 2,063
--------- --------
Net cash provided by financing activities 117,589 241
--------- --------
Net increase (decrease) in cash and cash equivalents 41,576 (3,030)
Cash and cash equivalents, beginning of period 26,929 34,847
--------- --------
Cash and cash equivalents, end of period $ 68,505 $ 31,817
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 6
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The information at June 30, 1999, and for the
three and six month periods ended June 30, 1999 and 1998, is unaudited. In the
opinion of management, these condensed consolidated financial statements include
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of results for the interim periods presented. Interim results
are not necessarily indicative of results for a full year or for any subsequent
interim period. These condensed consolidated financial statements should be read
in conjunction with IDEC Pharmaceuticals Corporation's (the "Company") Annual
Report on Form 10-K for the year ended December 31, 1998.
Inventories: Inventories are stated at the lower of cost or market. Cost
is determined in a manner that approximates the first-in, first-out (FIFO)
method. Inventories consist of the following (table in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
Raw materials $1,625 $2,273
Work in process 2,112 273
Finished goods 5,750 2,800
------ ------
$9,487 $5,346
====== ======
</TABLE>
Revenues from Unconsolidated Joint Business: Revenues from
unconsolidated joint business consist of the Company's share of the pretax
copromotion profits generated from its joint business arrangement with
Genentech, Inc. ("Genentech"), revenue from bulk Rituxan(R) sales to Genentech,
reimbursement from Genentech of the Company's sales force and development
expenses and royalty income from F. Hoffmann-La Roche Ltd. ("Roche") on sales of
Rituximab outside the United States. Rituxan is the trade name in the United
States for the compound Rituximab. Outside the United States, Rituximab is
marketed as MabThera (Rituximab, Rituxan and MabThera are collectively referred
to herein as Rituxan, except where otherwise indicated). The Company records
its royalty income from Roche with a one-quarter lag. Under the joint
business arrangement, all U.S. sales of Rituxan and associated costs and
expenses will be recognized by Genentech, with the Company recording its share
of the pretax copromotion profits on a quarterly basis, as defined in the
Company's collaborative agreement with Genentech (Note 2). Pretax copromotion
profits under the joint business arrangement are derived by taking U.S. net
sales of Rituxan to third-party customers less cost of sales, third-party
royalty expenses, distribution, selling and marketing expenses and joint
development expenses incurred by the Company and Genentech. Revenue from bulk
Rituxan sales is recognized when bulk Rituxan is accepted by Genentech. The
Company's profit-sharing formula with Genentech has two tiers; the higher tier
applies once a certain copromotion profit level is met. The profit-sharing
formula resets to the lower tier on an annual basis, at the beginning of each
year. During the second quarter, the Company began recording its 1999 profit
share at the higher tier.
Contract Revenues: Contract revenues consist of nonrefundable research
and development funding under collaborative agreements with the Company's
various strategic partners and other funding under contractual arrangements with
other parties. Contract research and development funding generally compensates
the Company for discovery, preclinical and clinical expenses related to the
collaborative development programs for certain products and product candidates
of the Company and is recognized at the time research and development activities
are performed under the terms of the collaborative agreements. Contract revenues
earned in excess of contract payments received are classified as contract
revenue receivables, and contract research and development funding received in
excess of amounts earned are classified as deferred revenue. Contract revenue
receivables at June 30, 1999 and December 31, 1998 are net of an allowance of
$114,000 and $775,000, respectively.
License Fees: License fees consist of nonrefundable fees from product
development milestone payments, the sale of license rights to the Company's
proprietary gene expression technology and nonrefundable fees from the sale of
product rights under collaborative development and license agreements with the
Company's strategic partners. Revenues from product development milestone
payments are recognized when the results or events stipulated in the agreement
have been achieved. License fee payments received in excess of amounts earned
are classified as deferred revenue.
4
<PAGE> 7
Manufacturing Costs: Manufacturing costs consist of manufacturing costs
related to the production of bulk Rituxan sold to Genentech.
Earnings Per Share: Earnings per share are calculated in accordance with
Statement of Financial Accounting Standards No. 128 "Earnings per Share." Basic
earnings per share excludes the dilutive effects of options, warrants and other
convertible securities compared to diluted earnings per share which reflects the
potential dilution of options, warrants and other convertible securities that
could share in the earnings of the Company. Calculations of basic and diluted
earnings per share use the weighted average number of shares outstanding during
the period.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
Net income $19,908 $10,132 $24,717 $14,000
Adjustments for interest, net of income tax effect 1,568 -- -- --
------- ------- ------- -------
Net income, adjusted 21,476 10,132 24,717 14,000
Denominator:
Weighted-average shares outstanding 20,517 19,805 20,399 19,722
Effect of dilutive securities:
Dilutive options 2,563 1,966 2,485 2,281
Convertible preferred 1,491 1,491 1,491 1,508
Warrants -- 2 -- 2
Convertible zero-coupon notes due 2019 2,323 -- -- --
------- ------- ------- -------
Dilutive potential common shares 6,377 3,459 3,976 3,791
------- ------- ------- -------
Weighted-average shares and dilutive potential
common shares 26,894 23,264 24,375 23,513
------- ------- ------- -------
Basic earnings per share $ 0.97 $ 0.51 $ 1.21 $ 0.71
Diluted earnings per share $ 0.80 $ 0.44 $ 1.01 $ 0.60
</TABLE>
Excluded from the calculation of diluted earnings per share for the six months
ended June 30, 1999 was 1,786,000 weighted average shares of common stock from
the assumed conversion of 20-year convertible zero coupon subordinated notes
("Notes") because their effect was anti-dilutive.
Comprehensive Income: Comprehensive income for the six months ended June
30, 1999 and 1998 was $24,104,000 and $14,091,000, respectively.
NOTE 2. RELATED PARTY ARRANGEMENTS
In March 1995, the Company and Genentech entered into a collaborative
agreement for the clinical development and commercialization of the Company's
anti-CD20 monoclonal antibody, Rituxan, for the treatment of relapsed or
refractory, low-grade or follicular, CD20-positive, B-cell non-Hodgkin's
lymphomas ("B-cell non-Hodgkin's lymphomas"). Concurrent with the collaborative
agreement the Company and Genentech also entered into an expression technology
license agreement for a proprietary gene expression technology developed by the
Company and a preferred stock purchase agreement providing for certain equity
investments in the Company by Genentech. Under the terms of these agreements,
the Company has received payments totaling $58,500,000. Additionally, the
Company may be reimbursed by Genentech for certain other development and
regulatory approval expenses under the terms of the collaborative agreement.
Genentech may terminate this agreement for any reason, which would result in a
loss of Genentech's Rituxan product rights.
In addition, the Company and Genentech are copromoting Rituxan in the
United States under a joint business arrangement, with the Company receiving a
share of the pretax copromotion profits. The Company anticipates that it will
transfer all manufacturing activities for bulk Rituxan to Genentech by the end
of the third quarter of 1999. Under the Company's agreement with Genentech, the
sales price of bulk Rituxan sold to Genentech is capped at a price that is
currently less than the Company's cost to manufacture bulk Rituxan.
Included in inventories at June 30, 1999, is $5,750,000 of bulk Rituxan
inventory that is expected to be sold to Genentech.
Under the terms of separate agreements with Genentech, commercialization
of Rituxan outside the United States is the responsibility of Roche, except in
Japan, where Zenyaku Kogyo Co., Ltd. ("Zenyaku") will be responsible for
5
<PAGE> 8
product development, marketing and sales. The Company will receive royalties on
sales outside the United States. Additionally, the Company will receive
royalties on sales of Genentech products manufactured using the Company's
proprietary gene expression system.
NOTE 3. NOTES PAYABLE
In February 1999, the Company raised approximately $112,792,000, net of
underwriting commissions and expenses of $3,766,000, through the private sale of
Notes. Upon maturity, the Notes will have an aggregate principal face value of
$345,000,000. The Notes were priced with a yield to maturity of 5.5 percent
annually. Each $1,000 aggregate principal face value Note is convertible at the
holders' option at any time through maturity into 6.734 shares of the Company's
common stock at an initial conversion price of $50.17. The Company is required
under the terms of the Notes, as of 35 business days after a change in control
occurring on or before February 16, 2004, to purchase any Note at the option of
its holder at a price equal to the issue price plus accrued original issue
discount to the date of purchase. Additionally, the holders of the Notes may
require the Company to purchase the Notes on February 16, 2004, 2009 or 2014 at
a price equal to the issue price plus the accrued original issue discount to the
date of purchase, with the Company having the option to repay the Notes plus the
accrued original issue discount in cash, the Company's common stock or a
combination thereof. The Company has the option to redeem the Notes any time on
or after February 16, 2004.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
IDEC Pharmaceuticals Corporation is primarily engaged in the
commercialization, research and development of targeted therapies for the
treatment of cancer and autoimmune diseases. In November 1997, the Company
received approval from the U.S. Food and Drug Administration ("FDA") to market
its first product, Rituxan, in the United States, and in June 1998, Roche, the
Company's European marketing partner was granted marketing authorization for
Rituximab in all European Union countries. Rituxan is the trade name in the
United States for the compound Rituximab. Outside the United States, Rituximab
is marketed as MabThera (Rituximab, Rituxan and MabThera are collectively
referred to herein as Rituxan, except where otherwise indicated). Rituxan is
being copromoted in the United States under a joint business arrangement with
Genentech, with the Company receiving a share of the pretax copromotion profits.
Under the terms of separate agreements with Genentech, commercialization of
Rituxan outside the United States is the responsibility of Roche, except in
Japan where Zenyaku will be responsible for product development, marketing and
sales. The Company receives royalties on Rituxan sales outside the United
States.
Revenues for the Company include revenues from unconsolidated joint
business, contract revenues and license fees. Until the commercialization of
Rituxan, a substantial portion of the Company's revenues had been derived from
contract revenues and license fees. However, since the commercialization of
Rituxan in November 1997, the Company's revenues have depended primarily upon
the sale of Rituxan.
Revenues from unconsolidated joint business consist of the Company's
share of the pretax copromotion profits generated from its joint business
arrangement with Genentech, revenue from bulk Rituxan sales to Genentech and
reimbursement from Genentech of the Company's sales force and development
expenses. Revenues from unconsolidated joint business also include royalty
income on sales of Rituxan outside the United States. The Company records its
royalty income from Roche with a one-quarter lag. Under the joint business
arrangement, all U.S. sales of Rituxan and associated expenses will be
recognized by Genentech, with the Company recording its share of the pretax
copromotion profits on a quarterly basis, as defined in the Company's
collaborative agreement with Genentech. Pretax copromotion profits under the
joint business arrangement are derived by taking U.S. net sales of Rituxan to
third-party customers less cost of sales, third-party royalty expenses,
distribution, selling and marketing expenses and joint development expenses by
the Company and Genentech. The Company's profit-sharing formula with Genentech
has two tiers; the higher tier applies once a certain copromotion profit level
is met. The profit-sharing formula resets to the lower tier on an annual basis,
at the beginning of each year. During the second quarter, the Company began
recording its 1999 profit share at the higher tier.
Contract revenues include nonrefundable research and development funding
under collaborative agreements with the Company's various strategic partners and
other funding under contractual arrangements with other parties. Contract
research and development funding generally compensates the Company for
discovery, preclinical and clinical expenses related to the collaborative
development programs for certain products of the Company.
License fees include nonrefundable fees from product development
milestone payments, the sale of license rights to the Company's proprietary gene
expression technology and nonrefundable fees from the sale of product rights
under collaborative development and license agreements with the Company's
strategic partners.
Contract revenues and license fees may vary from period to period and
are in part dependent upon achievement of certain research and development
objectives or the consummation of new corporate alliances. The magnitude and
timing of contract revenues and license fees may influence the achievement and
level of profitability for the Company.
The Company anticipates that it will transfer all manufacturing
activities for bulk Rituxan to Genentech by the end of the third quarter of
1999. The cost of bulk Rituxan sold to Genentech is recorded as manufacturing
costs in the Company's condensed consolidated statements of operations. Under
the Company's agreement with Genentech, the sales price of bulk Rituxan sold to
Genentech is capped at a price that is currently less than the Company's cost to
manufacture bulk Rituxan. Following the transfer of all manufacturing activities
for bulk Rituxan to Genentech, the Company anticipates using its available
capacity for production of specification setting lots and commercial inventory
of ZEVALIN(TM) (formally known as IDEC-Y2B8), production of clinical material,
and some third-party contract manufacturing.
7
<PAGE> 10
The Company has incurred increasing annual operating expenses and, with
the commercialization of Rituxan, the Company expects such trends to continue.
The Company had until 1998 incurred annual operating losses since its inception
in 1985 and the sustained profitability of the Company will be dependent upon
the continued commercial success of Rituxan, product development, revenues from
the achievement of product development objectives and licensing transactions. As
of June 30, 1999, the Company had an accumulated deficit of $53.2 million.
RESULTS OF OPERATIONS
Revenues from unconsolidated joint business for the three and six months
ended June 30, 1999 totaled $21.0 million and $40.3 million, respectively,
compared to $9.6 million and $18.8 million for the comparable periods in 1998.
Revenues from unconsolidated joint business for the three and six months ended
June 30, 1999 and 1998 reflect the financial results from the commercialization
of Rituxan through the Company's collaboration with Genentech. Included in these
revenues are the Company's share of pretax copromotion profits, bulk Rituxan
sales to Genentech, reimbursement from Genentech of the Company's Rituxan sales
force and development expenses and royalty income on sales of Rituxan outside
the United States. Under its agreement with Genentech, the Company's pretax
copromotion profit-sharing formula has two tiers. The higher tier applies once a
certain copromotion profit level is met and will reset to the lower tier on an
annual basis, at the beginning of each year. The Company began recording its
annual profits using the higher tier in the second quarter of 1999 and in the
third quarter of 1998.
Rituxan net sales to third-party customers in the United States recorded
by Genentech for the three and six months ended June 30, 1999 amounted to $68.3
million and $120.3 million, respectively, compared to $32.0 million and $67.2
million for the comparable periods in 1998. The Company believes that the growth
in sales is being driven, in part, by increased prescribing for the approved
indication and by the re-treatment of patients who responded to Rituxan therapy
and by increased use outside of the approved indication.
Contract revenues for the three and six months ended June 30, 1999
totaled $1.2 million and $2.5 million, respectively, compared to $4.5 million
and $7.1 million for the comparable periods in 1998. The decrease in contract
research revenues for the three and six months ended June 30, 1999 resulted
primarily from decreased funding under collaborative development agreements with
SmithKline Beecham p.l.c. ("SmithKline Beecham"), Seikagaku Corporation
("Seikagaku") and Eisai Co. Ltd. ("Eisai").
License fees for the three and six months ended June 30, 1999 totaled
$13.0 million compared to $10.0 million and $16.3 million for the comparable
periods in 1998. The increase in license fees for the three months ended June
30, 1999 is due to a $13.0 million upfront licensing fee from Schering AG
("Schering"), for commercialization of ZEVALIN outside the United States.
License fees for the three and six months ended June 1998 are primarily due to a
$10.0 million product development milestone payment from Genentech for European
approval of Rituxan. Contract revenues and license fees may vary from period to
period and are, in part, dependent upon achievement of certain research and
development objectives. The magnitude and timing of contract revenues and
license fees may influence the achievement and level of profitability for the
Company. The Company continues to pursue other collaborative and license
arrangements, however, no assurance can be given that any such arrangements will
be realized.
Manufacturing costs totaled $0.9 million and $4.9 million for the three
and six months ended June 30, 1999, respectively, compared to $2.9 million and
$6.9 million for the comparable periods in 1998. Manufacturing costs for 1999
and 1998 relate to production of bulk Rituxan sold to Genentech. Manufacturing
costs are recognized when Genentech accepts bulk Rituxan inventory. The decrease
in manufacturing costs for the three and six months ended June 30, 1999 is due
to the timing of bulk Rituxan sales to Genentech. The Company anticipates that
it will transfer all manufacturing activities for bulk Rituxan to Genentech by
the end of the third quarter of 1999. The Company expects to continue incurring
substantial manufacturing related costs and expenses as it anticipates using its
available capacity for production of specification setting lots and commercial
inventory of ZEVALIN, production of clinical material and some third-party
contract manufacturing.
Research and development expenses totaled $9.5 million and $17.4 million
for the three and six months ended June 30, 1999, respectively, compared to $7.1
million and $14.2 million for the comparable periods in 1998. The increase in
research and development expenses for the three and six months ended June 30,
1999 is primarily due to increased personnel expenses and clinical trial
expenses for the Company's products under development, offset in part by
decreased contract manufacturing and other outside service expenses.
8
<PAGE> 11
The Company expects to continue incurring substantial additional research and
development expenses in the future, due to expansion or addition of research
and development programs; technology in-licensing and regulatory-related
expenses; preclinical and clinical testing of the Company's various products
under development; and production scale-up and manufacturing of products used
in clinical trials.
Selling, general and administrative expenses totaled $4.9 million and
$9.3 million for the three and six months ended June 30, 1999, respectively,
compared to $4.5 million and $8.4 million for the comparable periods in 1998.
Selling, general and administrative expenses increased in 1999 due to increased
sales and marketing expenses resulting from the commercialization of Rituxan.
Selling, general and administrative expenses necessary to support sales and
administration, expanded manufacturing capacity, expanded clinical trials,
research and development and the potential expansion of the sales and marketing
organization are expected to increase in the foreseeable future.
The Company's income tax provision totaled $1.0 million and $1.2 million
for the three and six months ended June 30, 1999, respectively, and was the
result of an alternative minimum tax system that only allows the utilization of
net operating loss carryforwards to offset 90% of taxable income. At December
31, 1998, the Company had a valuation allowance equal to its deferred tax assets
of $47.6 million since the Company had not established a pattern of profitable
operations for tax purposes. Should the Company continue to have profitable
operations for tax purposes, the Company believes that its deferred tax assets
(comprised primarily of net operating loss carryforwards and research and
experimentation credits) may become recoverable, and therefore, the Company
anticipates that it would record tax benefits relating to its deferred tax
assets in the fourth quarter of 1999. The Company's net operating loss
carryforwards available to offset future taxable income at December 31, 1998
were approximately $72.0 million for federal income tax purposes and begin to
expire in 1999. The future utilization of net operating loss carryforwards may
be limited under the Internal Revenue Code (the "IRC") due to IRC defined
ownership changes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operating and capital expenditures since
inception principally through the sale of equity securities, commercialization
of Rituxan, license fees, contract revenues, lease financing transactions and
debt and interest income. The Company expects to finance its current and planned
operating requirements principally through cash on hand, funds from its joint
business arrangement with Genentech and with funds from existing collaborative
agreements and contracts which the Company believes will be sufficient to meet
its near-term operating requirements. Existing collaborative research agreements
and contracts, however, could be canceled by the contracting parties. In
addition, the Company may, from time to time, seek additional funding through a
combination of new collaborative agreements, strategic alliances and additional
equity and debt financings or from other sources. There can be no assurance that
such additional funds will be obtained through these sources on acceptable
terms, if at all. Should the Company not enter into any such arrangements, the
Company anticipates its cash, cash equivalents and securities
available-for-sale, together with the existing agreements and joint business
arrangement, will be sufficient to finance the Company's currently anticipated
needs for operating and capital expenditures for the foreseeable future. If
adequate funds are not available from the joint business arrangement, operations
or additional sources of financing, the Company's business could be materially
and adversely affected.
The Company's working capital and capital requirements will depend upon
numerous factors, including: the continued commercial success of Rituxan;
progress of the Company's preclinical and clinical testing; fluctuating or
increasing manufacturing requirements and research and development programs;
timing and expense of obtaining regulatory approvals; levels of resources that
the Company devotes to the development of manufacturing, sales and marketing
capabilities; technological advances; status of competitors; and the ability of
the Company to establish collaborative arrangements with other organizations.
Until required for operations, the Company's policy under established
guidelines is to keep its cash reserves in bank deposits, certificates of
deposit, commercial paper, corporate notes, United States government instruments
and other readily marketable debt instruments, all of which are investment-grade
quality.
At June 30, 1999, the Company had $213.2 million in cash, cash
equivalents and securities available-for-sale compared to $73.5 million at
December 31, 1998. Sources of cash, cash equivalents and securities
available-for-sale during the six months ended June 30, 1999, include $112.8
million from the Notes offering discussed below, $24.3
9
<PAGE> 12
million from operations and $5.9 million from the issuance of common stock
issued under employee stock option and purchase plans. Uses of cash, cash
equivalents and securities available-for-sale during the six months ended June
30, 1999, included $1.5 million used to purchase capital equipment and $1.1
million used to pay notes payable.
In February 1999, the Company raised approximately $112.8 million, net
of underwriting commissions and expenses of $3.8 million, through the private
sale of the Notes. The Notes were priced with a yield to maturity of 5.5 percent
annually. Upon maturity, the Notes will have an aggregate principal face value
of $345.0 million. Each $1,000 aggregate principal face value Note is
convertible at the holders' option at any time through maturity into 6.734
shares of the Company's common stock at an initial conversion price of $50.17.
The Company is required under the terms of the Notes, as of 35 business days
after a change in control occurring on or before February 16, 2004, to purchase
any Note at the option of its holder at a price equal to the issue price plus
accrued original issue discount to the date of purchase. Additionally, the
holders of the Notes may require the Company to purchase the Notes on February
16, 2004, 2009 or 2014 at a price equal to the issue price plus accrued original
issue discount to the date of purchase with the Company having the option to
repay the Notes plus accrued original issue discount in cash, the Company's
common stock or a combination thereof. The Company has the right to redeem the
Notes on or after February 16, 2004.
In September 1997, the Company and Cytokine Pharmasciences, Inc.,
formally known as Cytokine Networks, Inc., ("CPI") entered into a development
and license agreement. Under the terms of the development and license agreement
with CPI, the Company may make payments to CPI totaling up to $10.5 million,
subject to attainment of certain product development milestone events, of which
$3.0 million has been paid through June 30, 1999. In August 1999, the Company
announced it terminated its development of 9-aminocamptothecin ("9-AC"),
following a Phase II clinical trial. The Company concluded that 9-AC would not
yield the desired benefits to solid-tumor cancer patients. The Company acquired
9-AC from Pharmacia & Upjohn S.p.A. ("Pharmacia & Upjohn") and would have paid
$6.0 million to Pharmacia and Upjohn had it taken 9-AC into a Phase III clinical
trial and $7.0 million if 9-AC had been approved by the FDA.
YEAR 2000 COMPLIANCE
Many computer systems and software products were designed to accept and
track only two digit year entries in the date field (i.e. "99" for 1999). This
causes an ambiguity when handling dates in and after the year 2000. Some systems
also used specific dates (such as 9/9/99) to indicate special issues such as
deleted data. Some programs also miscalculate the leap year 2000. As a result,
computer systems and/or software used by many companies may need to be upgraded
to properly address such "Year 2000" issues.
The Company has an ongoing Year 2000 Program and has appointed a Year
2000 Program Manager and a Year 2000 Task Force. The Company has completed an
initial inventory and review of all system hardware, operating systems
(including manufacturing and laboratory control systems) and application
software in order to identify potential Year 2000 problems and has begun
implementing planned upgrades and testing in many systems. The Company believes
that it has corrected over 90% of identified noncompliant items. The Company
does not know the precise financial impact of making required system and
software modifications, but the Company currently expects such costs will not
exceed $2.0 million including costs already incurred. The actual financial cost
of correcting Year 2000 problems could, however, exceed this estimate. The
Company's plan also includes sending inquiries to major third party suppliers
and partners seeking assurance that they are Year 2000 compliant. The Company's
business, financial condition and results of operations could be materially
adversely affected if third party suppliers, manufacturers, service providers
and other entities do not adequately address their Year 2000 Issues or if the
Company fails to successfully complete its initiatives.
The Company is currently relying upon Genentech to provide for all Year
2000-related reviews, upgrades and contingency plans relating to the
manufacture, distribution and sale of Rituxan; however, the Company has not
received such contingency plan from Genentech. Genentech initiated contingency
planning in March 1999, and these plans are scheduled for completion in
September 1999. Any failure by Genentech to address issues which could result in
their inability to timely produce, distribute and sell Rituxan would have a
material adverse impact the Company's business.
The Company has begun to put into place contingency plans to deal with
non-Rituxan related failures resulting from Year 2000 issues. The Company
expects to complete its contingency plans during the third quarter of 1999.
10
<PAGE> 13
RISK FACTORS
This Form 10-Q contains forward-looking statements that involve a number
of risks and uncertainties. You should be aware that such statements are
projections or estimates as to future events, which may or may not occur. When
used in this Form 10-Q, the terms "we", "our", and "us" refer to the Company.
In addition to the other information in this Form 10-Q, you should
carefully consider the following risk factors. If any of these risks actually
occur, our business, financial condition and results of operations could be
materially adversely affected. The risks and uncertainties described below are
not the only ones facing our company, and additional risks and uncertainties may
also impair our business operations.
OUR REVENUES RELY SIGNIFICANTLY ON RITUXAN SALES
Our revenues currently depend largely upon continued U.S. sales of a
single commercialized product, Rituxan. We cannot be certain that Rituxan will
continue to be accepted in the United States or in any foreign markets. A number
of factors may affect the rate and level of market acceptance of Rituxan,
including:
o the perception by physicians and other members of the health
care community of its safety and efficacy or that of competing
products, if any;
o the effectiveness of our and Genentech's sales and marketing
efforts in the United States and the effectiveness of Roche's
sales and marketing efforts in Europe;
o unfavorable publicity concerning Rituxan or comparable drugs;
o its price relative to other drugs or competing treatments;
o the availability of third party reimbursement; and
o regulatory developments related to the manufacture or continued
use of Rituxan.
We incurred annual operating losses from our inception in 1985 through
fiscal 1997. Given our current reliance upon Rituxan as the principal source of
our revenue, any material adverse developments with respect to the
commercialization of Rituxan may cause us to incur losses in the future.
OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS
Our quarterly revenues, expenses and operating results have fluctuated
in the past and are likely to fluctuate significantly in the future. Fluctuation
may result from a variety of factors, including:
o our achievement of product development objectives and
milestones;
o demand and pricing for our commercialized product Rituxan;
o our ability to utilize excess manufacturing capacity by
obtaining contract manufacturing relationships;
o timing and nature of contract manufacturing and contract
research and development payments and receipts;
o hospital and pharmacy buying decisions;
o clinical trial enrollment and expenses;
o physician acceptance of our products;
o government or private healthcare reimbursement policies;
o our manufacturing performance and capacity and that of our
partners;
o the amount and timing of sales of Rituxan by Genentech to
customers in the United States and by Roche to customers in
Europe;
o rate and success of product approvals;
o collaboration obligations and copromotion payments we make or
receive;
o foreign currency exchange rates; and
o overall economic conditions.
11
<PAGE> 14
Our operating results during any one quarter do not necessarily suggest
those of future quarters. These results fluctuate periodically because our
revenues are driven by certain events such as achievement of product development
milestone events and the applicable profit sharing allocation between us and
Genentech, based upon our copromotion arrangement.
VOLATILITY OF OUR STOCK PRICE
The market prices for our common stock and for securities of other
companies engaged primarily in biotechnology and pharmaceutical development,
manufacture and distribution are highly volatile. For example, the market price
of our common stock fluctuated between $17 1/4 per share and $103 3/16 per share
during the twelve months ended July 31, 1999. The market price of our common
stock will likely continue to fluctuate due to a variety of factors, including:
o material public announcements;
o the announcement and timing of new product introductions by us
or others;
o technical innovations or product development by us or our
competitors;
o regulatory approvals or regulatory issues;
o developments relating to patents, proprietary rights and orphan
drug status;
o actual or potential clinical results with respect to our
products under development or those of our competitors;
o political developments or proposed legislation in the
pharmaceutical or healthcare industry;
o hedge and/or arbitrage activities by holders of our Notes;
o period to period fluctuations in our financial results; and
o market trends relating to or affecting stock prices throughout
our industry, whether or not related to results or news
regarding us or our competitors.
WE FACE UNCERTAIN RESULTS OF CLINICAL TRIALS OF OUR POTENTIAL PRODUCTS
Our future success depends in large part upon the results of clinical
trials designed to assess the safety and efficacy of our potential products. The
completion rate of these clinical trials depends significantly upon the rate of
patient enrollment. Factors that affect patient enrollment include:
o size of patient population for the targeted disease;
o eligibility criteria;
o proximity of eligible patients to clinical sites;
o clinical trial protocols; and
o the existence of competing protocols (including competitive
financial incentives for patients and clinicians) and existing
approved drugs (including Rituxan).
Our inability to enroll patients on a timely basis could result in
increased expenses and product development delays, which could have a material
adverse effect on our business, results of operations and financial condition.
Even if a trial is fully enrolled, significant uncertainties remain as to
whether it will prove successful. For example, we recently terminated our
development of 9-AC following a Phase II clinical trial. We concluded that 9-AC
would not yield the desired benefit to solid-tumor cancer patients. In addition,
IDEC-151 was first clinically tested in Phase I and Phase I/II clinical trials
for rheumatoid arthritis in collaboration with our partner, SmithKline Beecham.
In February 1999, we announced that SmithKline Beecham was discontinuing
development efforts for IDEC-151 in rheumatoid arthritis. The Company and
SmithKline Beecham are currently re-evaluating the clinical strategies for
IDEC-151, including responsibility for development and whether or not to pursue
studies in psoriasis, rheumatoid arthritis and/or other potential indications.
The FDA regulates clinical trials. Failure to comply with extensive FDA
regulations may result in delay, suspension or cancellation of a trial and/or
the FDA's refusal to accept test results. The FDA may also suspend our clinical
trials at any time if it concludes that the participants are being exposed to
unacceptable risks. Consequently, we cannot ensure that Phase I, Phase II or
Phase III testing will be completed timely or successfully, if at all, with
respect to any of our potential products. Furthermore, we cannot be certain that
patients enrolled in our clinical trials will respond to our product candidates,
that any product candidate will be safe and effective or that data derived from
12
<PAGE> 15
the trials will be suitable for submission to the FDA or satisfactorily support
a biologics licensing application ("BLA") or a new drug application ("NDA").
WE MAY BE UNABLE TO DEVELOP AND COMMERCIALIZE NEW PRODUCTS
Our future results of operations will depend to a large extent upon our
ability to successfully commercialize new products in a timely manner. As a
result, we must continue to develop, test and manufacture new products and then
must meet regulatory standards and obtain regulatory approvals. Our products
currently in development may not receive the regulatory approvals necessary for
marketing in a timely manner, if at all. Additionally, the development and
commercialization process is time-consuming and costly, and we cannot be certain
that any of our products, if and when developed and approved, will be
successfully commercialized. Delays or unanticipated costs in any part of the
process, our inability to obtain regulatory approval for our products or to
maintain manufacturing facilities in compliance with all applicable regulatory
requirements could adversely affect our results of operations.
WE RELY HEAVILY ON CONTRACT MANUFACTURERS
We rely heavily upon third party manufacturers to manufacture
significant portions of our products and product candidates. Our own
manufacturing capacity is limited and we are capable of producing only a limited
quantity of bulk Rituxan and other product candidates. Our manufacturing
experience to date has been limited to the production of preclinical and
clinical quantities of product candidates and to approximately three years of
commercial production of bulk Rituxan. We have no fill/finish experience or
capacity and we do not have experience in the field of chelates or radioisotopes
and therefore, we rely entirely upon third parties for the manufacture of these
products and components. Consequently, we cannot ensure that either our
manufacturing facilities or our ability to sustain ongoing production of our
products will be able to meet our expectations. Nor can we be certain that we
will be able to enter into satisfactory agreements with third party
manufacturers. Our failure to enter into agreements with such manufacturers on
reasonable terms, if at all, or poor manufacturing performance on our part or
that of our third party manufacturers could have a material and adverse effect
on our business, financial condition and results of operations.
We anticipate that we will transfer all manufacturing of bulk Rituxan to
Genentech by the end of the third quarter of 1999. We currently manufacture bulk
Rituxan at a cost in excess of a fixed price, thereby decreasing our margins on
revenue received under our arrangement with Genentech, and we expect this
condition to continue until such time as we transfer all of the manufacturing of
bulk Rituxan to Genentech. We rely upon Genentech to provide a majority of
Rituxan manufacturing in order to meet worldwide requirements and to complete
all fill/finish requirements and we will rely on Genentech for all Rituxan
manufacturing after the transfer is completed. We cannot ensure that Genentech
will manufacture and fill/finish Rituxan in sufficient quantities and on a
timely and cost-effective basis or that Genentech will obtain and maintain all
required manufacturing approvals. Genentech's failure to manufacture and
fill/finish Rituxan or obtain and maintain required manufacturing approvals
could materially and adversely affect our business, results of operations and
financial condition.
We also may rely upon SmithKline Beecham to fulfill all our
manufacturing requirements for IDEC-151. ZEVALIN has multiple components that
require successful coordination among several third party contract
manufacturers. We are currently negotiating with commercial contractors to meet
our long-term manufacturing demands for fill/finish of ZEVALIN bulk product. We
cannot be certain that we will reach agreement on reasonable terms, if at all,
with our contract manufacturers or that the integration of our contract
manufacturers can be successfully coordinated.
Upon the completion in 1999 of our obligation to manufacture bulk
Rituxan, we will undertake conversion of our manufacturing facility to a
multi-product facility, where we will initially manufacture ZEVALIN and
anti-gp39 antibodies. We cannot be certain that this conversion will be
successful, that it will receive all necessary regulatory approvals, or that,
even if it is successful and such approvals are received, it will be completed
within our budgeted time and expense estimations. Our failure to successfully
convert the manufacturing facility in a timely manner could have an adverse
effect on our product development efforts and our ability to timely file our
product license
13
<PAGE> 16
applications and could cause us to incur significant unabsorbed overhead costs.
To the extent we cannot produce our own biologics, we will need to rely on third
party manufacturers, of which there are only a limited number capable of
manufacturing biologics as contract suppliers. We cannot be certain that we
could reach agreement on reasonable terms, if at all, with those manufacturers.
WE RELY HEAVILY ON CERTAIN SUPPLIERS
Some materials used in our products and potential products, including
Rituxan and ZEVALIN, are currently available only from sole or limited number of
suppliers. In addition, the suppliers of some materials for our products must be
approved by the FDA and/or by other governmental agencies. Although we have
initiated a program for identifying alternative suppliers for certain materials,
any interruption or delay in our supply of materials or delays in the applicable
governmental approval of new suppliers or any loss of a sole source supplier
could have a material adverse effect on our business, financial condition and
results of operations.
OUR INDUSTRY IS INTENSELY COMPETITIVE
The biotechnology industry is intensely competitive. We compete with
biotechnology and pharmaceutical companies that have been established longer
than we have, have a greater number of products on the market, have greater
financial and other resources and have other technological or competitive
advantages. We also compete in the development of technologies and processes and
in acquiring personnel and technology from academic institutions, government
agencies, and other private and public research organizations. Consequently, we
cannot be certain that we will be able to produce or acquire rights to new
products with commercial potential. In addition, we cannot be certain that one
or more of our competitors will not receive patent protection that dominates,
blocks or adversely affects our product development or business; will benefit
from significantly greater sales and marketing capabilities; or will not develop
products that are accepted more widely than ours. We are aware that a competitor
recently filed a BLA for a radiolabeled murine antibody product for the
treatment of low-grade non-Hodgkin's lymphomas. We are also aware of other
potentially competitive biologic therapies for non-Hodgkin's lymphomas in
development.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE
We have limited experience with commercial sales and marketing, based
entirely upon our launch and subsequent sales of Rituxan. Outside the United
States, our strategy is to pursue and to rely solely upon collaborations with
established pharmaceutical companies for marketing, distribution and sale of our
products. We currently have no plans to directly market outside the United
States. Since we currently rely upon copromotion partners in the United States
and rely exclusively on third parties outside the United States, we cannot be
certain that our products will be marketed and distributed in accordance with
our expectations or that our market research or sales forecasts will be
accurate. We also cannot be certain that we will ever be able to develop our own
sales and marketing capabilities to an extent that we would not need to rely on
third party efforts, or that we will be able to maintain satisfactory
arrangements with the third parties on whom we rely.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS OR SECURE RIGHTS TO THIRD PARTY PATENTS
Our ability and the abilities of our partners to obtain and maintain
patent and other protection for our products will affect their success. We are
assigned or have rights to or have exclusive access to a number of U.S. and
foreign patents, patents pending and patent applications. However, we cannot be
certain that such patent applications will be approved, or that any of our
patent rights will be upheld in a court of law if challenged. We also cannot be
certain that our patent rights will provide competitive advantages for our
products or will not be challenged, infringed upon or circumvented by our
competitors.
Because of the large number of patent filings in the biopharmaceutical
field, our competitors may have filed applications or been issued patents and
may obtain additional patents and proprietary rights relating to products or
processes competitive with or similar to ours. We cannot be certain that U.S. or
foreign patents do not exist or will
14
<PAGE> 17
not issue that would materially and adversely affect our ability to
commercialize our products and product candidates.
In addition to patents, we rely on trade secrets and proprietary
know-how that we seek to protect, in part, through confidentiality agreements
with our partners, employees and consultants. It is possible that such parties
will breach our agreements or that courts may not enforce the agreements,
leaving us without adequate remedies. We also cannot be certain that our trade
secrets will not become known or be independently developed or patented by our
competitors.
We are aware that an opposition has been recently filed in the European
patent office to a granted European application that has been licensed to us,
which application contains claims relating to the use of anti-gp39 antibodies as
a therapeutic. Also, we are aware of an opposition that was recently filed to a
granted European patent application which names us as the applicant and which
relates to PROVAX and therapeutic use thereof. If either or both of the
oppositions is successful, in whole or in part, it could result in the scope of
some or all of the granted claims being limited, some or all of the granted
claims being lost, and/or the granted patent application(s) not proceeding to a
patent.
We are aware of several third party patents and patent applications (to
the extent they issue as patents) that, if successfully asserted against us, may
materially affect our ability to make, use, offer to sell, sell and import our
products. These third party patents and, patent applications may include,
without limitation:
o U.S. patent and patent applications and foreign counterparts
filed by Bristol-Myers Company that relate to antibodies to a B7
antigen;
o a U.S. patent assigned to Columbia University, which we
believe has been exclusively licensed to Biogen, related to
monoclonal antibodies to the 5C8 antigen found on T cells. We
believe the 5C8 antigen and gp39, the target for our anti-gp39
antibodies and our collaboration with Eisai, are the same
protein expressed on the surface of T cells;
o a number of issued U.S. and foreign patents that relate to
various aspects of radioimmunotherapy of cancer and to methods
of treating patients with anti-CD4 antibodies; and
o three U.S. patents and foreign counterparts, assigned to
Burroughs Wellcome, relating to therapeutic uses of CHO
glycosylated antibodies.
The owners, or licensees of the owners, of these patents and patent
applications (to the extent they issue as patents) may assert that one or more
of our products infringe one or more claims of such patents. Such owners or
licensees of foreign counterparts to these patents and any other foreign patents
may assert that one or more of our products infringe one or more claims of such
patents. Specifically, if legal action is commenced against us or our partners
to enforce any of these patents and patent applications (to the extent they
issue as patents) and the plaintiff in such action prevails, we could be
prevented from practicing the subject matter claimed in such patents or patent
applications.
We are aware that on May 28, 1999, Glaxo Wellcome, Inc. filed a patent
infringement lawsuit against Genentech in the U.S. District Court in Delaware.
According to Genentech's Form 10-Q for the quarter ended June 30, 1999, that
suit asserts that Genentech infringes four U.S. patents owned by Glaxo Wellcome.
Two of the patents relate to the use of specific kinds of monoclonal antibodies
for the treatment of human disease, including cancer. The other two patents
asserted against Genentech relate to preparations of specific kinds of
monoclonal antibodies which are made more stable and the methods by which such
preparations are made. Genentech believes that the suit relates to the
manufacture, use and sales of their Herceptin product and Rixutan. Based upon
the nature of the claims made and the information available to Genentech,
Genentech believes that the outcome of these actions is not likely to have a
material adverse effect on their financial position, results of operations or
cash flow, but that if an unfavorable ruling were to occur in any quarterly
period, there exists the possibility of a material impact on Genentech's net
income of that period. If the suit relates to the manufacture, use and sale of
Rixutan, and depending on the suit's outcome, it could have a material adverse
effect on our business, financial condition and results of operations.
If our intellectual property rights are challenged, we may be required
or may desire to obtain licenses to patents and other intellectual property held
by third parties to develop, manufacture and market our products. However, we
cannot be certain that we will be able to obtain these licenses on commercially
reasonable terms, if at all, or that any licensed patents or intellectual
property will be valid or enforceable. In addition, the scope of intellectual
property protection is subject to scrutiny and change by courts and other
governmental bodies. Litigation and other proceedings concerning patents and
proprietary technologies can be protracted, expensive and distracting to
management and companies may sue competitors as a way of delaying the
introduction of competitors' products. Any litigation, including any
interference proceeding to determine priority of inventions, oppositions to
patents in foreign countries or litigation against our partners, may be costly
and time-consuming and could have a material adverse effect on our business,
financial condition and results of operations.
WE MAY BE UNABLE TO MAINTAIN THIRD PARTY RESEARCH AND DEVELOPMENT RELATIONSHIPS
Funding of research and development efforts depends largely upon various
arrangements with strategic partners and others who provide us with funding and
who perform research and development with respect to our products. Such
strategic partners may generally terminate their arrangement with us at any
time. These parties may develop
15
<PAGE> 18
products that compete with ours, and we cannot be certain that they will perform
their contractual obligations or that any revenues will be derived from such
arrangements. If one or more of our strategic partners fail to achieve certain
product development objectives, such failure could have a material adverse
effect on our ability to fund related programs and develop products.
FAILURE TO OBTAIN PRODUCT APPROVALS OR COMPLY WITH GOVERNMENT REGULATIONS COULD
ADVERSELY AFFECT OUR BUSINESS
As pharmaceutical manufacturers, our partners and we are subject to
extensive, complex, costly and evolving governmental rules, regulations and
restrictions administered by the FDA, by other federal and state agencies, and
by governmental authorities in other countries. In the United States, our
products cannot be marketed until after they are approved by the FDA. Obtaining
an FDA approval involves the submission, among other information, of the results
of preclinical and clinical studies on the product, and requires substantial
time, effort and financial resources. Rituxan is our only product that has
received FDA approval, and we cannot be certain that any of our product
candidates will be approved either in the United States or in other countries in
a timely fashion, if at all. Both before and after approval, we are subject to
numerous other FDA requirements, and to government inspection at all times. Our
failure to meet or comply with any rules, regulations or restrictions of the FDA
or other agencies could result in fines, unanticipated expenditures, product
delays, non-approval or recall, interruption of production and even criminal
prosecution. Although we have instituted internal compliance programs, we cannot
be certain that such programs will meet regulatory agency standards or that any
lack of compliance will not have a material adverse effect on our business,
financial condition or results of operations.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY CLAIMS
Our design, development and manufacture of products involves an inherent
risk of exposure to product liability claims and related adverse publicity.
Insurance coverage is expensive and difficult to obtain, and we may be unable to
obtain coverage in the future on acceptable terms, if at all. Although we
currently maintain product liability insurance for our products in the amounts
we believe to be commercially reasonable, we cannot be certain that the coverage
limits of our insurance policies or those of our strategic partners will be
adequate. If we are unable to obtain sufficient insurance at an acceptable cost
or if a claim is brought against us, whether fully covered by insurance or not,
our business, results of operations and financial condition could be materially
adversely affected.
FAILURE TO ADEQUATELY ADDRESS THE YEAR 2000 ISSUE COULD ADVERSELY AFFECT OUR
BUSINESS
We have assessed and continue to assess the potential impact of the
situation commonly referred to as the Year 2000 Issue. The Year 2000 Issue
concerns the inability of many information systems and computer software
products to properly recognize and process date sensitive information. As a
result information systems and computer software used by many companies may need
to be modified and upgraded.
We have an ongoing Year 2000 Program and have appointed a Year 2000
Program Manager and a Year 2000 Task Force. We have completed an initial
inventory and review of all system hardware, operating systems (including
manufacturing and laboratory control systems) and application software in order
to identify potential Year 2000 problems and we have begun implementing planned
upgrades and testing in many systems. We believe that we have corrected over 90%
of identified noncompliant items. We do not know the precise financial impact of
making the required system and software modifications, but we currently expect
such costs will not exceed $2.0 million including costs already incurred. The
actual financial cost of correcting Year 2000 problems could, however, exceed
this estimate. Our plan also includes sending inquiries to our major third
party suppliers and partners seeking assurance that they are Year 2000
compliant. Our business, financial condition and results of operations could
be materially adversely affected if third party suppliers, manufacturers,
service providers and other entities do not adequately address their Year 2000
Issues or if we fail to successfully complete our initiatives.
We are currently relying upon Genentech to provide for all Year
2000-related reviews, upgrades and contingency plans relating to the
manufacture, distribution and sale of Rituxan; however, we have not received
such contingency plan from Genentech. Genentech initiated contingency planning
in March 1999, and these plans are scheduled for completion in September 1999.
Any failure by Genentech to address
16
<PAGE> 19
issues which could result in their inability to timely produce, distribute and
sell Rituxan would have a material adverse impact on our business.
We have begun to put into place contingency plans to deal with
non-Rituxan related failures resulting from Year 2000 issues. We expect to
complete our contingency plans during the third quarter of 1999.
WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL OR TO REPURCHASE THE ZERO COUPON
SUBORDINATED CONVERTIBLE NOTES
We expend and will likely continue to expend substantial funds to
complete the research, development, manufacturing and marketing of our potential
future products. Consequently, we may seek to raise capital through
collaborative arrangements, strategic alliances, and/or equity and debt
financings or from other sources. We may be unable to raise additional capital
on commercially acceptable terms, if at all, and if we raise capital through
equity financing then existing stockholders may have their ownership interests
diluted. If we are unable to generate adequate funds from operations or from
additional sources, then our business, results of operations and financial
condition may be materially and adversely affected.
If we undergo certain events constituting a change of control prior to
February 16, 2004, we will be obligated to repurchase all outstanding Notes at
the option of the holder. However, it is possible that we will not have
sufficient funds at that time, will not be able to raise sufficient funds, or
that restrictions in our indebtedness will not allow such repurchases. In
addition, certain major corporate events that would increase our indebtedness,
such as leveraged recapitalizations, would not constitute a change of control
under the Indenture entered into in connection with the offering of the Notes.
FUTURE TRANSACTIONS MAY ADVERSELY AFFECT OUR BUSINESS OR THE MARKET PRICE OF
SECURITIES
We regularly review potential transactions related to technologies,
products or product rights and businesses complementary to our business. Such
transactions could include mergers, acquisitions, strategic alliances,
off-balance sheet financings, licensing agreements or copromotion agreements. We
may choose to enter into one or more of such transactions at any time, which may
cause substantial fluctuations to the market price of securities that we have
issued. Moreover, depending upon the nature of any transaction, we may
experience a charge to earnings, which could also have a material adverse impact
upon the market price of securities that we have issued.
WE RELY UPON CERTAIN KEY PERSONNEL
Our success will depend, to a great extent, upon the experience,
abilities and continued services of our executive officers and key scientific
personnel. We do not carry key-man life insurance on any of our officers or
personnel. If we lose the services of any of these officers or key scientific
personnel, we could suffer a material adverse effect on our business, financial
condition and results of operations. Our success also will depend upon our
ability to attract and retain other highly qualified scientific, managerial,
sales and manufacturing personnel and our ability to develop and maintain
relationships with qualified clinical researchers. Competition for such
personnel and relationships is intense and we compete with numerous
pharmaceutical and biotechnology companies as well as with universities and
non-profit research organizations. We cannot be certain that we will be able to
continue to attract and retain qualified personnel or develop and maintain
relationships with clinical researchers.
WE ARE SUBJECT TO UNCERTAINTIES REGARDING HEALTH CARE REIMBURSEMENT AND REFORM
Our ability to commercialize products depends in part on the extent to
which patients are reimbursed by governmental agencies, private health insurers
and other organizations, such as health maintenance organizations, for the cost
of such products and related treatments. Our business, results of operations and
financial condition could be materially adversely affected if health care payers
and providers implement cost-containment measures and governmental agencies
implement healthcare reform.
OUR BUSINESS INVOLVES ENVIRONMENTAL RISKS
Our business and the business of several of our strategic partners,
including Genentech, involves the controlled use of hazardous materials,
chemicals, biologics and radioactive compounds. Biologics manufacture is
extremely
17
<PAGE> 20
susceptible to product loss due to microbial or viral contamination, material
equipment failure, or vendor or operator error. Although we believe that our
safety procedures for handling and disposing of such materials complies with
state and federal standards, there will always be the risk of accidental
contamination or injury. In addition, certain microbial or viral contamination
may cause the closure of the respective manufacturing facility for an extended
period of time. By law, radioactive materials may only be disposed of at state
approved facilities. We currently store our radioactive materials on-site
because the approval of a disposal site in California for all California-based
companies has been delayed indefinitely. If and when a disposal site is
approved, we may incur substantial costs related to the disposal of such
material. If liable for an accident, or if we suffer an extended facility
shutdown, we could incur significant costs, damages and penalties that could
have a material adverse effect on our business, financial condition and results
of operations.
THE ZERO COUPON SUBORDINATED CONVERTIBLE NOTES LEVERAGED US CONSIDERABLY
As a result of issuing the Notes in February 1999, we raised
approximately $112.8 million, net of underwriting commissions and expenses of
$3.8 million by incurring indebtedness of $345.0 million at maturity. As a
result of this indebtedness, our principal and interest obligations increased
substantially. The degree to which we are leveraged could materially adversely
affect our ability to obtain future financing and could make us more vulnerable
to industry downturns and competitive pressures. Our ability to meet our debt
obligations will be dependent upon our future performance, which will be
subject to financial, business and other factors affecting our operations, many
of which are beyond our control. The holders of the Notes may require us to
purchase the Notes on February 16, 2004, 2009, 2014 at a price equal to the
issue price plus accrued original issue discount to the date of purchase. We
have the option to repay the Notes plus accrued original issue discount in cash,
our common stock or a combination thereof. We have the right to redeem the Notes
on or after February 16, 2004.
In addition, in the event of our insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up or upon our default in payment with
respect to any indebtedness or an event of default with respect to such
indebtedness resulting in the acceleration thereof, our assets will be available
to pay the amounts due on the Notes only after all our senior indebtedness has
been paid in full. Moreover, holders of common stock would only receive the
assets remaining after payment of all indebtedness and preferred stock, if any.
WE HAVE ADOPTED SEVERAL ANTITAKEOVER MEASURES AND THE ZERO COUPON SUBORDINATED
CONVERTIBLE NOTES MAY HAVE FURTHER ANTITAKEOVER EFFECT
We have taken a number of actions that could have the effect of
discouraging a takeover attempt that might be beneficial to stockholders who
wish to receive a premium for their shares from a potential bidder. For example,
we reincorporated into Delaware, which subjects us to Section 203 of the
Delaware General Corporation Law, providing that the Company may not enter into
a "business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in the manner
prescribed in the code section. In addition, we have adopted a Stockholder
Rights Plan that would cause substantial dilution to a person who attempts to
acquire our company on terms not approved by our Board of Directors. In
addition, our Board of Directors has the authority to issue, without vote or
action of stockholders, up to 8,000,000 shares of preferred stock and to fix the
price, rights, preferences and privileges of those shares. Any such preferred
stock could contain dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences or other rights superior
to the rights of holders of common stock. The Board of Directors has no present
intention of issuing any additional shares of preferred stock (227,514 shares
of non-voting convertible preferred stock were outstanding as of June 30, 1999)
, but reserves the right to do so in the future. In addition, our copromotion
arrangement with Genentech provides Genentech with the option to buy the rights
to Rituxan in the event that we undergo a change of control, which may limit
our attractiveness to potential acquirors.
We are required by the terms of the Notes, as of 35 business days after
a change in control occurring on or before February 16, 2004, to purchase any
Note at the option of its holder and at a price equal to the issue price plus
accrued original issue discount to the date of repurchase. This feature of the
Notes may have an antitakeover effect.
18
<PAGE> 21
WE HAVE NOT PAID AND DO NOT PLAN TO PAY DIVIDENDS
We have never declared or paid cash dividends on our common stock. We
currently plan to retain any earnings for use in our business and therefore do
not anticipate paying any dividends in the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to a variety of risks, including changes in
interest rates affecting the return on its investments and the cost of its debt.
At June 30, 1999 there have not been any material changes in market risk as
reported by the Company in its Annual Report on Form 10-K for the year ended
December 31, 1998 except as to the market risk associated with the Notes issued
in February 1999.
Due to the fixed rate nature of the Notes, an immediate 10% change in
interest rates would not have a material impact on the Company's financial
condition or the results of its operations.
Underlying market risk exists related to an increase in the Company's
stock price or an increase in interest rates which may make conversion of the
Notes to common stock beneficial to the Notes holder. Conversion of the Notes
would have a dilutive effect on the Company's earnings per share and book value
per common share.
19
<PAGE> 22
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None
ITEM 2. CHANGES IN SECURITIES. None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 20, 1999, the Company held its Annual Meeting of
Stockholders at which the stockholders approved all of the proposals
listed below:
(1) The election of William H. Rastetter, Ph.D., Charles C. Edwards,
M.D., and The Honorable Lynn Schenk to the Board of Directors to
serve for a three-year term ending in the year 2002, or until
their successors shall have been duly elected or appointed or
until their earlier death, resignation or removal.
(2) The amendment to the Company's 1988 Stock Option Plan to
increase the total number of common shares authorized for
issuance thereunder from 6,335,000 shares to a total of
7,135,000 shares.
(3) The amendment to the Company's 1995 Employee Stock Purchase Plan
to increase the total number of common shares authorized for
issuance thereunder from 495,000 shares to a total of 695,000
shares.
(4) The selection of KPMG LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1999.
The following directors received the number of votes set
opposite their respective names:
<TABLE>
<CAPTION>
For Election Withheld
------------ --------
<S> <C> <C>
William H. Rastetter, Ph.D. 18,416,461 179,013
Charles C. Edwards, M.D. 18,423,730 171,744
The Honorable Lynn Schenk 18,414,574 180,900
</TABLE>
The proposal to amend the 1988 Stock Option Plan received
11,694,771 affirmative votes (for the amendment), 6,848,143 negative
votes (against the amendment) and 52,560 votes abstained. The proposal
did not receive any broker nonvotes.
The proposal to amend the 1995 Employee Stock Purchase Plan
received 16,903,120 affirmative votes (for the amendment), 1,642,778
negative votes (against the amendment) and 49,576 votes abstained. This
proposal did not receive any broker nonvotes.
The proposal to select KPMG LLP as the Company's independent
public accountants received 18,542,584 affirmative votes (for the
selection), 27,390 negative votes (against the selection), and 25,500
votes abstained. This proposal did not receive any broker nonvotes.
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
20
<PAGE> 23
The following exhibits are referenced.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.10* Collaboration & License Agreement between the Company
and Schering Aktiengesellschaft dated June 9, 1999.
10.30 IDEC Pharmaceuticals Corporation. Deferred Compensation
Plan, dated January 1, 1999.
10.50 (1) Amended and Restated 1988 Stock Option Plan (Amended and
restated May 20, 1999).
10.51 (1) Amended and Restated 1995 Employee Stock Purchase Plan
(Amended and restated May 20, 1999).
11.1 Reference is made to Note 1 of the Condensed Consolidated
Financial Statements.
27.1 Financial Data Schedule.
</TABLE>
----------
* Confidential treatment requested as to certain portions of this
agreement.
(1) Incorporated by reference to exhibits 99.1 and 99.4,
respectively, to the Company's Registration Statement on Form
S-8, File No. 333-81625.
(b) Reports on Form 8-K. None
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IDEC PHARMACEUTICALS CORPORATION
Date: August 13, 1999 By: /s/ William H. Rastetter
------------------------- -------------------------------------
William H. Rastetter
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1999 By: /s/ Phillip M. Schneider
------------------------- -------------------------------------
Phillip M. Schneider
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
22
<PAGE> 1
EXHIBIT 10.10
COLLABORATION & LICENSE AGREEMENT
SCHERING AKTIENGESELLSCHAFT
AND
IDEC PHARMACEUTICALS CORPORATION
<PAGE> 2
COLLABORATION & LICENSE AGREEMENT
THE COLLABORATION AGREEMENT is made effective as of the 9th day of June,
1999 (the "Effective Date") by and between IDEC PHARMACEUTICALS CORPORATION, a
Delaware corporation, having its principal place of business at 11011 Torreyana
Road, San Diego, California 92121 ("IDEC") and SCHERING AKTIENGESELLSCHAFT, a
German corporation, having its principal place of business at Mullerstrasse 178,
D-13342 Berlin, Germany ("SCHERING"). IDEC and SCHERING are sometimes referred
to herein individually as a "Party" and collectively as the "Parties," and
references to IDEC and SCHERING shall include its Affiliates.
RECITALS
1. IDEC is currently conducting U.S. registration clinical trials
of a radiolabeled monoclonal antibody to the human CD20 antigen designated
IDEC-Y2B8 ("Y2B8") for treatment of B-cell lymphomas. IDEC has established the
infrastructure for development, manufacture, marketing and sales of biological
products. Thus, IDEC intends to seek registration and market Y2B8 in the United
States territory.
2. SCHERING has worldwide expertise in the area of development,
registration, manufacturing, distribution and marketing of pharmaceutical
products.
3. IDEC desires to grant to SCHERING, and SCHERING desires to
obtain, rights to market Y2B8 worldwide with the exception of the United States,
all on the terms and conditions set forth herein.
ARTICLE 1.
DEFINITIONS
"2B8" means the unlabeled monoclonal antibody to CD20 positive B- cells
more particularly described on EXHIBIT B to this Collaboration Agreement.
"AFFILIATE" means an entity which, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with
IDEC or SCHERING, as the case may be. As used in this definition, "control"
means the direct or indirect ownership of fifty percent (50%) or more of the
stock, having the right to vote for directors thereof, or the possession of the
power to direct or cause the direction of the management and policies of an
entity, whether through the ownership of the outstanding voting securities or by
contract or otherwise.
1
<PAGE> 3
"ALLOCABLE OVERHEAD" means costs incurred by a Party or for its account
which are attributable to a Party's supervisory services, occupancy costs, and
its payroll, information systems, human relations and purchasing functions and
which are allocated to company departments based on space occupied or headcount
or other activity-based method, excluding compensation related to a Party's
stock option program or any program that replaces such program. Allocable
Overhead shall not include any costs attributable to general corporate
activities including, by way of example, executive management, investor
relations, business development, legal affairs and finance.
"ANTIBODY CONJUGATE" means 2B8 conjugated with MxDTPA
"ANTIBODY MANUFACTURING COST" means IDEC's direct costs and charges,
including Allocable Overhead, related to the manufacture, packaging and shipment
of 2B8, and shall exclude costs and charges related to or occasioned by unused
manufacturing capacity, the manufacture of other products at IDEC's facilities,
amortization of property, plant or equipment not specifically related to
manufacturing 2B8, and any employee costs associated with equity incentive
plans. EXHIBIT D to this Agreement sets out a breakdown of IDEC's current
Antibody Manufacturing Cost.
"BUSINESS DAY" means a day on which banking institutions are open for
business in California, U.S.A. and Berlin, Germany.
"COLLABORATION AGREEMENT" means this Collaboration & License Agreement
dated the Effective Date between IDEC and SCHERING.
"COMBINATION PRODUCT ADJUSTMENT" means the following: in the event a Kit
is sold in the form of a combination product containing one or more active
ingredients in addition to a Kit , Net Sales for such combination product will
be adjusted by multiplying actual Net Sales of such combination product by the
fraction *_____* where A is the *_____* and B is the *_____*. If, on a
country-by-country basis, the other active component or components in the
combination are not sold separately in said country, Net Sales shall be
calculated by multiplying actual Net Sales of such combination product by the
fraction *_____* where A is *_____* and C *_____*. If, on a country-by-country
basis, neither the Kit nor the other active component or components of the
combination product is sold separately in said country, Net Sales shall be
determined by the Parties in good faith.
"COMMERCIALLY REASONABLE AND DILIGENT" means those efforts consistent
with the exercise of prudent scientific and business judgement, as applied to
other pharmaceutical products of similar potential and market size by the Party
in question.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
2
<PAGE> 4
"CONTROL" or "CONTROLLED" means possession of the ability to grant a
license or sublicense as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party.
"COST OF GOODS SOLD" shall mean the total of: (i) Antibody Manufacturing
Cost; (ii) Non-Antibody Components Supply Cost; and (iii) Manufacturing
Royalties.
"DEVELOPMENT COSTS" means costs, including Allocable Overhead, required
to obtain the marketing authorization and/or ability to manufacture, formulate,
fill, ship and/or sell a Licensed Product in the Field in commercial quantities.
Development Costs shall include but are not limited to the cost of supplies of
antibody, chelate, and isotopes, the cost of studies on the toxicological,
pharmacokinetic, metabolic or clinical aspects of a Licensed Product conducted
internally or by individual investigators, or consultants necessary for the
purpose of obtaining and/or maintaining Regulatory Approval of a Licensed
Product in the Field, and costs for preparing, submitting, reviewing or
developing data or information for the purpose of submission to a governmental
authority to obtain and/or maintain approval of a Licensed Product in the Field.
Development Costs shall include expenses for compensation, benefits and travel
and other employee-related expenses, as well as data management, statistical
designs and studies, document preparation, and other expenses associated with
the clinical testing program and the preparation, filing, and presentation of
Drug Approval Applications to the regulatory authorities for marketing approval
of the Licensed Product.
"DEVELOPMENT PLAN" means the comprehensive plan for the development of
the Licensed Product as set out on EXHIBIT A, designed to generate the
preclinical, process development/manufacturing scale-up, clinical and regulatory
information required to obtain Regulatory Approval in the United States. The
Development Plan shall refer to all activities related to preclinical testing,
toxicology, formulation, selection criteria of contract manufacturers, clinical
and commercial product supply plans, quality assurance/quality control, clinical
studies and regulatory affairs for Licensed Product in connection with obtaining
Regulatory Approvals of such Product in the United States.
"DRUG APPROVAL APPLICATION" means an application that a Party reasonably
believes in good faith is sufficient to obtain Regulatory Approval required for
commercial sale or use of the Licensed Product as a drug in the Initial
Indication in a regulatory jurisdiction, including: (1) in the case of Drug
Approval Applications for Regulatory Approval in the United States, Biologic
License Application(s) and all supplements filed pursuant to the requirements of
the FDA and related to the Initial Indication (including all documents, data and
other information concerning a Licensed Product which are necessary for, or
included in, FDA approval to market the Licensed Product); and, (2) in the case
of Drug Approval Applications for Regulatory Approval in the European Union, the
counterparts to the Drug Approval Applications and supplements described in (1)
above for Regulatory Approval to EMEA.
3
<PAGE> 5
"EFFECTIVE DATE" means June ___, 1999.
"EMEA" means the European Medicines Evaluation Agency.
"*_____*".
"FDA" means the United States Food and Drug Administration.
"FIELD" means the use of Licensed Product for the diagnosis, prevention
and therapy of all diseases, conditions and disorders in humans.
"*_____* DRUG APPROVAL APPLICATION" means the *_____* the Drug Approval
Applications to be submitted to the FDA relating to the treatment of *_____*
further designated as the *_____* in the Development Plan and in Section 4.2 of
the Collaboration Agreement.
"*_____*".
"*_____*".
"IDEC" means IDEC Pharmaceuticals Corporation, a Delaware corporation,
and its Affiliates.
"IDEC KNOW-HOW" means all Information, whether currently existing or
developed or obtained during the course of the Collaboration Agreement, and
whether or not patentable or confidential, that is now Controlled or hereinafter
becomes Controlled by IDEC or its Affiliates and that relates to the research,
development, utilization, manufacture or sale of the Licensed Product.
Notwithstanding anything herein to the contrary, IDEC Know-how shall exclude
IDEC Patents.
"IDEC PATENT" means any Patent owned or Controlled by IDEC or its
Affiliates including its interest in any Patents owned jointly by the Parties as
provided hereunder either at the Effective Date or at any time during the term
of the Collaboration Agreement which covers the research, development,
manufacture, use, importation, sale or offer for sale of the Licensed Product.
"*_____*".
"IN2B8" means that certain *_____* more particularly described on
EXHIBIT B to the Collaboration Agreement.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
4
<PAGE> 6
"INFORMATION" means techniques and data relating to the Licensed
Product, including, but not limited to, biological materials, inventions,
practices, methods, knowledge, know-how, skill, experience, test data (including
pharmacological, toxicological and clinical test data), analytical and quality
control data, marketing, pricing, distribution, cost, sales, manufacturing,
patent data or descriptions.
"Initial Indication" means the treatment of *_____*.
"KIT" means an *_____* that includes: *_____*.
"LICENSED PRODUCT(S)" means either: Antibody Conjugate alone or Antibody
Conjugate plus Non-Antibody Components or Y2B8; or, *_____* (a) developed by
IDEC or (b) the intellectual property rights to which are owned or Controlled,
in whole or in part, by IDEC, in either (a) or (b) as of the Effective Date or
during the term of the Collaboration Agreement.
"LICENSED TERRITORY" means all countries in the world, excluding the
United States.
"MAJOR EUROPEAN COUNTRY" means the *_____*.
"MANUFACTURING ROYALTIES" shall mean the royalties payable by IDEC to
Third Parties for licenses to manufacture or have manufactured 2B8, Antibody
Conjugate, and Non-Antibody Components, for as long as such royalties are
payable. The royalties currently payable by IDEC are listed in EXHIBIT F to this
Agreement.
"NET SALES" means the amount invoiced by SCHERING, its Affiliates or its
sublicensees on account of sales of the Kit to Third Parties in the Licensed
Territory, less reasonable and customary deductions applicable to the Kit for
(i) transportation charges and charges such as insurance relating thereto paid
by the selling party; (ii) sales and excise taxes or customs duties paid by the
selling party and any other governmental charges imposed upon the sale of the
Kit and paid by the selling party; (iii) distributors fees or rebates or
allowances actually granted, allowed or incurred in the ordinary course of
business in connection with the sale of the Kit in an arms length transaction;
(iv) quantity discounts, cash discounts or chargebacks actually granted, allowed
or incurred in the ordinary course of business in connection with the sale of
the Kit; and (v) allowances or credits to customers in the ordinary course of
business in connection with the sale of the Kit, not in excess of the selling
price of such Kit, on account of governmental requirements, rejection,
outdating, recalls or return of the Kit.
For the purpose of calculating Net Sales, the Parties recognize that (a)
a Party's customers may include persons in the *_____* who enter into agreements
with a Party as to *_____* even though *_____* and even though payment for such
Kit is not made *_____* and (b) in such
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
5
<PAGE> 7
cases, *_____* paid by a *_____* can be *_____* in order to calculate Net Sales.
*_____*.
Any deductions listed above which involve a payment by a Party shall be
taken as a deduction against aggregate sales for the period in which the payment
or deduction is made. Sales of the Kit between SCHERING and its Affiliates or
sublicensees shall be excluded from the computation of Net Sales except where
any such Affiliate or sublicensee is an end user of Kit or Licensed Product. Net
Sales shall be accounted for in accordance with International Accounting
Standards consistently applied. The amount obtained by deducting (i) through (v)
from the gross amount invoiced shall then be adjusted by the Combination Product
Adjustment, if applicable.
"NON-ANTIBODY COMPONENTS" shall means all components of the Kit other
than the Antibody Conjugate.
"NON-ANTIBODY COMPONENTS SUPPLY COST" shall mean the invoiced costs and
charges of the suppliers of Non-Antibody Components to IDEC together with the
invoiced costs of the Third Party manufacturer for manufacture of Antibody
Conjugate from 2B8 provided by IDEC, negotiated at an arm's-length basis in
accordance with the terms of this Agreement.
"PARTIES" means IDEC and SCHERING.
"PARTY" means IDEC or SCHERING, as applicable.
"PATENT(S)" means (i) valid and enforceable letters patent, including
any extension, registration, confirmation, reissue, re-examination or renewal
thereof and (ii) pending applications for letters patent, including provisional
applications and any continuation, division or continuation-in-part.
"PATENT COSTS" means the fees and expenses paid to outside legal counsel
and experts, and filing and maintenance expenses, incurred after the Effective
Date in connection with the establishment and maintenance of rights under
Patents covering any Licensed Product, including costs of patent interference,
reexamination, reissue, opposition and revocation proceedings.
"REGULATORY APPROVAL" means any approvals, product and/or establishment
licenses, BLAs, BLA Equivalents, registrations or authorizations of any federal,
state or local regulatory agency, department, bureau or other governmental
entity, necessary for the commercial manufacture, use, storage, import, export,
transport, marketing or sale of a Licensed Product in a regulatory jurisdiction.
"*_____*".
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
6
<PAGE> 8
"SCHERING" means Schering Aktiengesellschaft, a German corporation.
"SCHERING KNOW-HOW" means all Information, whether currently existing or
developed or obtained during the course of the Collaboration Agreement, and
whether or not patentable or confidential, that is now Controlled or hereinafter
becomes Controlled by SCHERING or its Affiliates and that relates to the
research, development, utilization, manufacture or sale of the Licensed Product.
Notwithstanding anything herein to the contrary, SCHERING Know-how shall exclude
SCHERING Patents.
"SCHERING PATENT" means any Patent owned or Controlled by SCHERING or
its Affiliates including its interest in any Patents owned jointly by the
Parties as provided hereunder either at the Effective Date or at any time during
the term of the Collaboration Agreement which covers the research, development,
manufacture, use, importation, sale or offer for sale of the Licensed Product.
"*_____* DRUG APPROVAL APPLICATION" means the *_____* the Drug Approval
Applications to be submitted to the FDA relating to the treatment of *_____* as
further designated as the *_____* in the Development Plan and in Section 4.2 of
the Collaboration Agreement.
"STEERING COMMITTEE" means that committee established pursuant to
Section 3.1 of the Collaboration Agreement.
"SUPPLY AGREEMENT" means the Supply Agreement between SCHERING and IDEC
of even date.
"THIRD PARTY" means any entity other than IDEC or SCHERING.
"THIRD PARTY ROYALTIES" means royalties payable by either Party to a
Third Party in connection with the manufacture, use or sale of Licensed Product
in a particular jurisdiction.
"UNITED STATES" means the United States of America, its territories and
possessions.
"VALID AND ENFORCEABLE PATENT" means an issued/granted unexpired IDEC
Patent that has not been held invalid or unenforceable in an unappealed or
unappealable decision of a court or competent body having jurisdiction thereof;
provided, that such IDEC Patent would, but for the licenses granted under this
Collaboration Agreement, be infringed by the manufacture, use, sale or import of
Kits, Kit Components, or Licensed Product.
"Y2B8" means that certain yttrium-labeled monoclonal antibody to B cells
more particularly described on EXHIBIT B to the Collaboration Agreement.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
7
<PAGE> 9
ARTICLE 2.
SCOPE OF COLLABORATION
2.1 DEVELOPMENT COSTS AND DATA TRANSFER.
(a) IDEC shall carry out, and, at its own expense, shall
bear all Development Costs for carrying out the Development Plan to seek
Regulatory Approval of Licensed Product in the Field in the United States
through the date of Regulatory Approval of Licensed Product in the United
States.
(b) IDEC shall provide SCHERING with a complete copy of all
documents filed with the FDA to support the Drug Approval Applications. Unless
otherwise agreed by the Parties under Section 3.1(c), IDEC's obligation shall
not include any post-Regulatory Approval Drug Approval Applications submitted by
IDEC in the Initial Indication, e.g., any Phase IV studies.
(c) In consideration of IDEC's development efforts, transfer
of the Drug Approval Application(s) registration dossiers and for the licenses
granted in this Collaborative Agreement, SCHERING agrees to fund IDEC for
carrying out the Development Plan to the extent outlined below in this Section
2.1(c). The Development Plan represents a good faith estimate by IDEC, as of the
Effective Date, of IDEC's timeline associated with carrying out the Licensed
Product development in the United States.
Accordingly, SCHERING shall fund IDEC's development efforts with fixed
*_____* payments *_____* as follows, and IDEC will use such funds to support the
development of the Licensed Product:
*_____*
(d) SCHERING shall bear any additional Development Costs
which may be necessary for development of the Licensed Product to obtain
Regulatory Approval to market the Licensed Product in the Field in the Licensed
Territory, subject to the determination of the scientific and commercial
potential of the Licensed Product as further described in Section 5.1.
ARTICLE 3.
MANAGEMENT OF THE DEVELOPMENT ACTIVITIES IN THE
UNITED STATES AND LICENSED TERRITORY
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
8
<PAGE> 10
3.1 STEERING COMMITTEE.
(a) Within *_____* of the Effective Date, the Parties will
establish the Steering Committee. The Steering Committee will be composed of
*_____*. Such representatives will include individuals with expertise and
responsibilities in areas such as preclinical development, clinical development,
process sciences, manufacturing, marketing or regulatory affairs. Either Party
may replace any or all of its representatives at any time upon written notice to
the other Party. The Steering Committee will meet (in person, telephonically, or
via videoconference) at least once each calendar quarter, or more frequently, as
agreed to by the Steering Committee.
(b) The Steering Committee shall: (i) coordinate development
of the Licensed Product in the United States and in the Licensed Territory, in
the Field, as envisaged in the Collaboration Agreement, including the
coordination of activities and exchange of information regarding ongoing and new
clinical studies, regulatory strategy and commercial development (including
pricing and product positioning issues) and the establishment of the relevant
timelines; (ii) coordinate the expedited development of Licensed Product to
obtain *_____* Regulatory Approval in the United States as set forth in Article
4; (iii) discuss the need, desirability of, structure and/or allocation of costs
of any clinical studies or other development efforts relating to the Licensed
Product to be carried out in the United States and/or the Licensed Territory;
(iv) discuss actions planned by either Party in respect of the Licensed Product
where such actions could reasonably be expected to have a material impact on the
Licensed Product in the other Party's territory; and (v) discuss collaboration
in the development of the Licensed Product for indications other than the
Initial Indication.
(c) The general principles relating to clinical studies
(other than those studies required by the FDA for Regulatory Approval in the
United States for the Initial Indication, the results of which will be made
available by IDEC to SCHERING without charge) shall be as follows:
(i) Where the Parties agree, prior to commencement
of such a study, that the results of such study are to be used for regulatory or
commercial purposes in both the United States and the Licensed Territory the
costs of the study shall be shared by the Parties and the cost allocation,
structure, timelines and other details of the study shall be agreed between the
Parties in good faith taking account of the relative importance and value to
each Party of the study in question.
(ii) Where a study is required by a regulatory
authority in the Licensed Territory the costs of such a study shall be borne,
and its organization and structure shall be determined, solely by SCHERING.
Where a study is required by the FDA the costs of such a study shall be borne,
and its organization and structure shall be determined, solely by IDEC. If,
however, any regulatory authority in the Licensed Territory subsequently
requires the results of IDEC's FDA-
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
9
<PAGE> 11
required study or the results of a study with the same characteristics as the
FDA-required study, and/or SCHERING determines that it wishes to provide such
results to the regulatory authority in question, IDEC shall provide the results
of its study to SCHERING on payment of a proportion of the costs of the study,
the proportion to be determined *_____*. The same principles shall apply where
the FDA requires the results of a regulatory authority-required SCHERING study
or the results of a study with the same characteristics.
(d) The Steering Committee shall consider amendments and
modifications to the Development Plan and update it from time-to-time. *_____*
may modify or amend and update the Development Plan provided that: (i) *_____*
(ii) any such updates, modifications or amendments are made *_____*.
(e) While both parties recognize the benefit of a unified
and coordinated Licensed Product positioning due to the global oncology
community, it is IDEC's intention to provide SCHERING maximum latitude with
respect to product marketing and regulatory decisions in the Licensed Territory
so as to enable SCHERING to maximize Licensed Product sales. Therefore, while
IDEC may comment on development in the Licensed Territory and such comments
shall be considered in good faith, SCHERING shall have authority over
development in the Licensed Territory. *_____*.
3.2 COLLABORATION CHAIRPERSON. Within ten (10) days of the Effective
Date, each Party shall designate a Collaboration Chairperson. Such Collaboration
Chairperson shall be part of senior management and shall serve as a member of
the Steering Committee. The Chairpersons shall work together to be responsible
to set the agenda, call, and take minutes of meetings of the Steering Committee.
ARTICLE 4.
DEVELOPMENT AND COMMERCIALIZATION
IN THE UNITED STATES
4.1 DEVELOPMENT EFFORTS. IDEC agrees to use Commercially Reasonable
and Diligent efforts to develop Licensed Product in the Field and to bring
Licensed Product to market in the Field in the United States as soon as
practicable. IDEC further agrees to execute and perform the Development Plan in
all material respects consistent with United States Regulatory Approval.
4.2 DRUG APPROVAL APPLICATIONS. Consistent with the Development Plan
*_____* IDEC currently intends to file *_____* Drug Approval Application *_____*
and shall file, *_____* Drug Approval Application *_____* studies. It is
intended as of the Effective Date that the *_______* Drug Approval Application
will be submitted by IDEC with a package which includes
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
10
<PAGE> 12
the results of clinical studies *__________*. IDEC shall own all regulatory
submissions including all Drug Approval Applications for Licensed Product filed
by it in the United States. SCHERING shall be notified of any meetings between
IDEC and the FDA relating to the Licensed Product; where appropriate based on
IDEC's judgment of its relationship with the FDA, one representative of SCHERING
shall be entitled to attend, as an observer, at SCHERING's expense and on the
dates agreed to by the FDA and IDEC; any such meeting which will deal with
issues which may affect the Licensed Territory.
4.3 DELIVERY OF FDA DRUG APPROVAL APPLICATIONS. Unless otherwise
agreed by the Parties in writing, IDEC shall deliver to SCHERING only the Drug
Approval Applications and other relevant documentation filed on Licensed Product
with the FDA in the *_____* Indication *_____*. In order to enable SCHERING to
begin as early as possible preparatory work for filing Drug Approval
Applications in Europe, IDEC shall provide parts of application documentation
and individual reports relating to the Drug Approval Applications for the
Initial Indication as soon as such become available. After filing Drug Approval
Applications in the United States, IDEC will keep SCHERING informed of all
questions raised by the FDA and will provide copies of all responses by IDEC
thereto. All information to be provided hereunder will be provided in electronic
form if available.
4.4 MARKETING IN THE U.S. IDEC will use Commercially Reasonable and
Diligent Efforts to maintain Regulatory Approval for Licensed Product in the
United States for as long as SCHERING is paying royalties to IDEC on Net Sales
in the Licensed Territory. *_____*.
ARTICLE 5.
DEVELOPMENT AND COMMERCIALIZATION IN LICENSED TERRITORY
5.1 SCHERING'S DEVELOPMENT EFFORTS. SCHERING will use Commercially
Reasonable and Diligent efforts to develop the Licensed Product in the Licensed
Territory, including pursuing preclinical development (if necessary) and
clinical development of Licensed Product and obtaining Regulatory Approvals
therefor in all countries in the Licensed Territory *_____*. SCHERING shall bear
all regulatory costs in the Licensed Territory, including but not limited to
purchasing supplies of Licensed Product as Kits from IDEC, coordinating the
supply of yttrium *_____* for Licensed Product, and conducting and funding all
clinical studies required for Licensed Product approval in the Territory subject
to the principles outlined in Section 3.1(c). It is the Parties' intent to
cooperate on study design and share study costs if the study is determined by
the Parties to be of mutual commercial value, as further described in Section
3.1. During the clinical phase, SCHERING shall purchase Kits from IDEC at
*_____* and during the commercial phase, SCHERING shall purchase Kits from IDEC
at *_____* subject to Section 5.1(b) of Supply Agreement.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
11
<PAGE> 13
Within one hundred and twenty (120) days of the Effective Date, SCHERING
agrees to provide IDEC with a written development plan for Licensed Product in
the Licensed Territory. It is the Parties' understanding and expectation that a
Drug Approval Application will be filed by SCHERING in the European Union in
accordance with the centralized procedure described in Council Regulation (EEC)
No. 2309/93 within *_____* after receipt from IDEC of both the *_____* Drug
Approval Application. IDEC shall be notified of any meetings relating to
Licensed Product between SCHERING and any regulatory authorities in the Licensed
Territory; where appropriate based on SCHERING's judgment of its relationship
with the regulatory agency, one representative of IDEC shall be entitled to
attend, as an observer, at IDEC's expense and on the dates agreed to by the
regulatory authorities and SCHERING; any such meeting which will deal with
issues which may affect the United States.
5.2 MARKETING EFFORTS. SCHERING will use Commercially Reasonable and
Diligent efforts to commercialize Licensed Product in each country in the
Licensed Territory in which Regulatory Approval is granted, *_____*.
5.3 DEVELOPMENT COSTS AND MARKETING COSTS. SCHERING shall bear all
Development Costs and marketing costs related to the development and
commercialization of Licensed Product in the Licensed Territory. SCHERING shall
have the sole responsibility for and right to make all decisions regarding all
development and marketing activities in the Licensed Territory. At SCHERING's
request, IDEC shall provide SCHERING with reasonable support and cooperation in
the form of consulting services directed toward securing and maintaining
Regulatory Approval of Licensed Product in the Licensed Territory. Subject as
hereinafter provided in this Section 5.3, IDEC shall be reimbursed for time and
expenses at the FTE rates set forth in EXHIBIT G. In the *_____* IDEC shall
provide *_____* of such consulting services *_____* and for the next *_____*
thereafter *_____* will be provided *_____*. Travel time associated with
rendering such services shall be included as consulting time (no greater than 8
hours per day). The Parties agree that membership of the Steering Committee is
not deemed to be the provision of consulting services and SCHERING shall not
reimburse any costs related to participation in the Steering Committee.
Furthermore, if SCHERING requires consulting services of *_____* as the case may
be, in any month, it shall not be entitled to carry over the unused hours to
subsequent months. SCHERING shall reimburse IDEC for reasonable out-of-pocket
costs (such as travel, meals and lodging) associated with provision of such
consulting services.
5.4 COOPERATION ON DEVELOPMENT EFFORTS. To facilitate cooperation
between the Parties on the worldwide development and marketing of Licensed
Product, each Party shall keep the other Party fully informed of all substantive
development activities in the Licensed Territory and the United States, as the
case may be. The Parties agree that they will do nothing during Licensed Product
development activities to imperil early Regulatory Approvals in any country in
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
12
<PAGE> 14
the Licensed Territory or in the United States, *_____*. The foregoing
restrictions shall not apply to activities specified in the Development Plan as
of the Effective Date.
ARTICLE 6.
MILESTONES, ROYALTIES AND OTHER PAYMENTS
6.1 PAYMENTS UPON EXECUTION. SCHERING shall pay IDEC via wire
transfer $13 million as a non-refundable, non-creditable license issue fee,
within *_____* of the Effective Date.
6.2 MILESTONE PAYMENTS. SCHERING shall make the following
non-refundable, non-creditable payments to IDEC, upon the first achievement of
each of the corresponding milestones:
MILESTONE PAYMENTS
*_____*
The Parties agree that the foregoing milestone payments are payable only
once.
6.3 ROYALTIES. SCHERING shall pay IDEC a royalty on Net Sales of
Licensed Product in the Licensed Territory as follows:
(a) The royalty rate shall be *_____* of Net Sales in the
Licensed Territory, subject to Sections 6.3(c), 6.3(d), 6.3(e) and 14.5.
(b) Existing Patents/Applications. Prior to the Effective
Date, IDEC has provided SCHERING full review of patent status to the best of
IDEC's knowledge pertaining to Licensed Product in the Licensed Territory (as
well as the United States), including the scope and terms of Patent licenses
secured by IDEC. SCHERING shall evaluate the Patent status of Licensed Product
in the Licensed Territory and determine, in its sole discretion after
consultation with IDEC, if and when any Patent licenses should be secured by
SCHERING in the Licensed Territory. SCHERING shall pay any Third Party royalties
owed based on patents or applications published as of the Effective Date *_____*
on account of import, sale or use of Licensed Product in the Licensed Territory.
*_____*. SCHERING will pay for, or reimburse IDEC for, all consideration paid
under any such licenses required in the Licensed Territory (including fees,
milestones and minimum annual royalties) while such a license is needed in the
Licensed Territory or part of it. In the event both Parties determine that
securing a license to a particular Patent(s) in both the Licensed Territory and
the United States is desirable, IDEC and SCHERING shall discuss in good faith
via the Steering Committee the merits of securing a single license granting
rights to both Parties versus the
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
13
<PAGE> 15
Parties securing individual licenses and sharing costs equitably for such a
single license. Each Party shall immediately notify the other if it becomes
aware of any risk that the sale of the Licensed Product in the United States or
in the Licensed Territory could infringe any Third Party Patents or that any
Third Party has claimed that such infringement could occur.
(c) In the event any Third Party Patents or applications are
published after the Effective Date that SCHERING determines in good faith are
necessary or desirable to license for the commercialization of the Licensed
Product in the Licensed Territory, SCHERING shall notify IDEC in writing of such
Patents and provide the rationale for the licensing decision. *_____*. After
discussion at the Steering Committee, SCHERING may secure any such license(s) as
it deems necessary for commercialization of Licensed Product in the Licensed
Territory and SCHERING shall be responsible for any and all license issue fees,
milestone payments and minimum annual royalties under such Third Party Patent
license(s).
*_____*
6.4 MONTHLY SALES REPORTS AND ROYALTY PAYMENT REPORTS. In order to
assist IDEC in planning, SCHERING shall provide IDEC with written unaudited
monthly sales of License Product in the Territory within ten (10) days of
receipt of such data by SCHERING. Royalty payments under the Collaboration
Agreement shall be made in United States Dollars to IDEC quarterly within thirty
(30) days following the end of each calendar quarter for which royalties are
due. Each royalty payment shall be accompanied by a report summarizing the Net
Sales in units sold during the relevant three-month period.
6.5 TERM OF ROYALTY OBLIGATIONS.
(a) SCHERING shall pay royalties hereunder with respect to
Net Sales in each country in the Licensed Territory through *_____* or *_____*
from the date of first commercial sale of Licensed Product in such country,
whichever is longer.
(b) Upon expiration of the royalty term for Licensed Product
in a country as described above or in Sections 14.5(b) and (c), SCHERING shall
thereafter have an exclusive, fully paid-up, irrevocable license to use,
manufacture or have manufactured, sell, offer for sale, have sold and import the
Licensed Product (including all necessary licenses to IDEC Patents, IDEC
Know-how and IDEC trademarks) in that country.
6.6 TAXES. IDEC shall pay any and all taxes levied on account of, or
measured exclusively by, any royalty payment it receives under the Collaboration
Agreement. If laws or regulations require that taxes be withheld, SCHERING will
(i) deduct those taxes from the remittable royalty, (ii) timely pay the taxes to
the proper taxing authority, and (iii) send proof of payment to IDEC within
sixty (60) days following that payment.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
14
<PAGE> 16
6.7 FOREIGN EXCHANGE. For the purpose of computing Net Sales for
Licensed Product sold in a currency other than United States Dollars, such
currency shall be converted into United States Dollars in accordance with
SCHERING's customary and usual translation procedures consistently applied.
6.8 PAYMENTS TO OR REPORTS BY AFFILIATES. Any payment required under
any provision of the Collaboration Agreement to be made to either Party or any
report required to be made by either Party shall be made to or by an Affiliate
of that Party if designated by that Party as the appropriate recipient or
reporting entity.
6.9 SALES BY SUBLICENSEES. In the event SCHERING grants licenses or
sublicenses to others to make or sell Licensed Product in the Licensed
Territory, such licenses or sublicenses shall include an obligation for the
licensee or sublicensee to account for and report its Net Sales of such Licensed
Product on the same basis as if such sales were Net Sales by SCHERING, and
SCHERING shall pay royalties to IDEC as if the Net Sales of the sublicensee were
Net Sales of SCHERING.
ARTICLE 7.
MANUFACTURE AND SUPPLY
7.1 MANUFACTURE AND SUPPLY OF LICENSED PRODUCT. IDEC shall supply
SCHERING with Licensed Product as Kits pursuant to the terms of the Supply
Agreement.
In the event IDEC is no longer selling Licensed Product in the United
States and *_____* is greater than *_____* SCHERING may *_____*
7.2 TRANSFER OF MATERIALS AND KNOW-HOW. If, in the circumstances
referred to in Section 7.1 above, *_____* IDEC shall *_____*. IDEC shall
*_____*.
ARTICLE 8.
LICENSES
8.1 LICENSES TO SCHERING WITHIN THE FIELD. IDEC grants to SCHERING a
worldwide (except the United States) exclusive (even as to IDEC) license, with a
right to sublicense, under the IDEC Patents, IDEC Know-how and Joint Patents, to
use, develop, manufacture (only under provisions of Section 7.1 of this
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
15
<PAGE> 17
Collaboration Agreement and Section 6 of the Supply Agreement), have
manufactured (only under provisions of Section 7.1 of this Collaboration
Agreement and Section 6 of the Supply Agreement), market, sell, import for sale,
and distribute the Licensed Product for all indications in the Field.
8.2 NONEXCLUSIVE LICENSE TO IDEC. SCHERING grants to IDEC a
royalty-free, non-exclusive, license in the United States to use SCHERING
Know-how and SCHERING Patents in the Field solely for the purposes of
developing, manufacturing, having manufactured, using, selling, offering for
sale and importing Licensed Product in the United States. IDEC covenants and
agrees not to develop, make, have made, use, sell, offer for sale, have sold or
import any product using any of the SCHERING Know-how or SCHERING Patents except
as expressly permitted under this Section 8.2. If SCHERING is sublicensing any
Third Party Patents under this grant, SCHERING will provide IDEC with written
notice thereof, and IDEC shall pay any royalties owed to any such Third Party on
account of the manufacture, use or sale of any Licensed Product by IDEC in the
United States. With respect to manufacture of Licensed Product by IDEC in the
United States for transfer to SCHERING under the Supply Agreement, any such
royalties paid by IDEC under such sublicenses shall be included by IDEC in its
Cost of Goods Sold.
8.3 SUBLICENSING. It is the intention of the Parties and the
expectation of IDEC that SCHERING will deploy its sales force to actively market
and sell Licensed Product in the Licensed Territory. *_____*.
8.4 SHARED INFORMATION. All of the information described in Section
13.1 below shall be deemed IDEC Know-how and SCHERING Know-how for purposes of
this Article 8 and the licenses granted herein. The Parties agree that the
provisions of this Article 8 do not constitute an obligation on either Party to
transfer or permit the use of clinical data or other data relevant to drug
approval applications other than as provided for under Section 3.1(c) above.
8.5 *_____*.
ARTICLE 9.
TRADEMARKS
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
16
<PAGE> 18
9.1 LICENSED PRODUCT TRADEMARKS. All Licensed Product shall be sold
in the United States under trademarks selected by IDEC and owned by IDEC in the
United States. The Steering Committee shall use best efforts to select a
worldwide trademark. IDEC shall control preparation, prosecution and maintenance
of applications related to such trademarks. IDEC shall bear the costs in the
United States and SCHERING shall reimburse IDEC for the costs incurred in the
Licensed Territory. IDEC hereby grants SCHERING an exclusive license to the
trademarks in the Licensed Territory.
9.2 INFRINGEMENT OF TRADEMARKS. Each Party shall notify the other
and the Steering Committee promptly upon learning of any actual, alleged or
threatened infringement of a trademark applicable to a Licensed Product (the
"Trademark") or of any unfair trade practices, trade dress imitation, passing
off of counterfeit goods, or like offenses. Upon learning of such an offense
from a Party regarding a Trademark owned solely by one of the Parties, the
Parties shall confer regarding the defense of such Trademark. The decision
whether and how to defend such a Trademark owned solely by one Party will rest
with such Party. The procedure described in Section 11.5(c) relating to Patents
shall apply; Mutatis mutandis, to the infringement of Trademarks.
ARTICLE 10.
CONFIDENTIALITY
10.1 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly
authorized by the Collaboration Agreement or otherwise agreed in writing, the
Parties agree that, for the term of the Collaboration Agreement and for *_____*
years thereafter, the receiving Party shall keep confidential and shall not
publish or otherwise disclose or use for any purpose other than as provided for
in the Collaboration Agreement any Information and other information and
materials furnished to it by the other Party pursuant to the Collaboration
Agreement (collectively, "Confidential Information"), except to the extent that
it can be established by the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than
under an obligation of confidentiality, at the time of disclosure by the other
Party;
(b) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of the Collaboration Agreement;
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
17
<PAGE> 19
(d) was disclosed to the receiving Party, other than under
an obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others; or
(e) was subsequently developed by the receiving Party
without use of the Confidential Information as demonstrated by competent written
records.
10.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information hereunder to the extent that such disclosure is reasonably necessary
for exercising its rights and carrying out its obligations under the
Collaboration Agreement and in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable governmental
regulations or conducting preclinical or clinical trials, provided that if a
Party is required by law or regulation to make any such disclosure of the other
Party's Confidential Information it will, except where impracticable for
necessary disclosures (for example, in the event of medical emergency), give
reasonable advance notice to the other Party of such disclosure requirement and,
except to the extent inappropriate in the case of patent applications, will use
its reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed. In addition, each Party shall be entitled
to disclose, under a binder of confidentiality containing provisions as
protective as those of this Article 10, Confidential Information to consultants
and other Third Parties only for any purpose provided for in the Collaboration
Agreement. Nothing in this Article 10 shall restrict any Party from using for
any purpose any Information developed by it during the course of the
collaboration hereunder.
10.3 SURVIVAL. This Article 10 shall survive the termination or
expiration of the Collaboration Agreement for a period of *_____* years.
10.4 TERMINATION OF PRIOR AGREEMENT. The Collaboration Agreement
supersedes the Confidentiality Agreement between the Parties dated 21 December
1998. All Information exchanged between the Parties under that Agreement shall
be deemed Confidential Information and shall be subject to the terms of this
Article 10.
10.5 CORPORATE COMMUNICATIONS AND PUBLICATIONS. Each Party shall
provide to the other the opportunity to review any proposed abstracts,
manuscripts or presentations (including information to be presented verbally)
which relate to the Field at least thirty (30) days prior to their intended
submission for publication and such submitting Party agrees, upon written
request from the other Party, not to submit such abstract or manuscript for
publication or to make such presentation until the other Party is given a
reasonable period of time to seek patent protection for any material in such
publication or presentation which it believes is patentable. The Licensed
Product in all such publications shall be referred to as "IDEC-Y2B8" and/or
"IDEC-In2B8" until
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
18
<PAGE> 20
tradenames are selected by the Parties, whereupon the Licensed Product shall be
referred to by both or all tradenames.
ARTICLE 11.
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
11.1 MODIFIED DEFINITIONS. For purposes of this Article 11, IDEC
Patents and SCHERING Patents shall not include Patents owned jointly by the
Parties; such "Joint Patents" shall mean Patents owned jointly by the Parties
which cover the manufacture, use or sale of Licensed Product.
11.2 OWNERSHIP OF INTELLECTUAL PROPERTY. IDEC shall own all
inventions made under the Collaboration Agreement solely by it or its employees.
SCHERING shall own all inventions made under the Collaboration Agreement solely
by it or its employees. All inventions made under the Collaboration Agreement
jointly by at least one employee of IDEC and at least one employee of SCHERING
will be owned jointly by IDEC and SCHERING and each Party shall retain full
ownership under any Patents resulting therefrom, with full ownership rights in
any field, subject to the licenses granted in Article 8, the right to sublicense
without the consent of the other Party and without accounting. The laws of the
United States with respect to joint ownership of inventions (joint and several)
shall apply in all jurisdictions giving force and effect to the Collaboration
Agreement.
11.3 DISCLOSURE OF PATENTABLE INVENTIONS. In addition to the
disclosures required under Article 13, each Party shall provide to the other,
any written invention disclosure submitted to a Party's patent department in the
normal course which discloses an invention made under the Collaboration
Agreement that is useful in the Field. Such invention disclosures shall be
provided to the other Party within thirty (30) days after the Party commences
preparation of a patent application based on such disclosure.
11.4 PROSECUTION OF EXISTING PATENTS. IDEC shall disclose or has
disclosed to SCHERING the complete texts of all IDEC Patents filed by IDEC prior
to the Effective Date which claim the manufacture, use or sale of the Licensed
Product as well as all information received concerning the institution or
possible institution of any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceeding involving an IDEC Patent
anywhere in the United States or the Licensed Territory. SCHERING shall have the
right to review all such IDEC Patents and all proceedings related thereto and
make recommendations to IDEC concerning them and their conduct and IDEC shall
consider in good faith for the United States and take into account for the
Licensed Territory SCHERING's reasonable comments related thereto. IDEC agrees
to keep SCHERING fully informed of the course of patent prosecution or other
proceedings
19
<PAGE> 21
of such IDEC Patents including by providing SCHERING with copies of substantive
communications, search reports and third party observations submitted to or
received from patent offices within the United States or Licensed Territory.
SCHERING shall provide such patent consultation to IDEC related to such IDEC
Patents at no cost to IDEC. IDEC agrees to prosecute and maintain in force in
the United States and the Licensed Territory all existing IDEC Patents described
in the first sentence of this Section 11.4. All reasonable costs that IDEC
incurs after the Effective Date in filing, prosecuting and maintaining IDEC
Patents in the United States shall be borne by IDEC. All such reasonable costs
which IDEC will incur in the Licensed Territory shall be reimbursed by SCHERING
within 30 days of submission of an invoice by IDEC. SCHERING shall hold all
information disclosed to it under this Article 11 as confidential subject to the
provisions of Article 10 of the Collaboration Agreement. SCHERING shall have the
right to assume responsibility in the Licensed Territory for any IDEC Patent or
any part of any such Patent which IDEC intends to abandon or otherwise cause or
allow to be forfeited provided that the claims of such IDEC Patent covers
Licensed Product or formulations, methods of manufacture or methods of use
thereof.
11.5 PROSECUTION OF NEW PATENTS.
(a) SCHERING shall have the first right, using in-house or
outside legal counsel selected at SCHERING's sole discretion, to prepare, file,
prosecute, maintain and obtain extensions of SCHERING Patents in countries of
SCHERING's choice throughout the world. SCHERING shall bear the costs relating
to such activities in the Licensed Territory at all times and in the United
States. SCHERING shall use reasonable efforts to solicit IDEC's advice and
review of the nature and text of SCHERING Patents and material prosecution
matters related thereto in reasonably sufficient time prior to filing thereof,
and SCHERING shall consider in good faith IDEC's reasonable comments related
thereto.
(b) IDEC shall have the first right, using in-house or
outside legal counsel selected at IDEC's sole discretion, to prepare, file,
prosecute, maintain and obtain extensions of IDEC Patents and Joint Patents
filed after the Effective Date throughout the world. IDEC shall use reasonable
efforts to solicit SCHERING's advice and review of the nature and text of such
IDEC Patents and material prosecution matters related thereto in reasonably
sufficient time prior to filing thereof, and IDEC shall (i) in the United States
consider in good faith SCHERING's reasonable comments related thereto and (ii)
in the Licensed Territory take into account SCHERING's reasonable comments
related thereto. All reasonable costs related to preparing, filing, prosecuting,
maintaining and extending IDEC Patents and Joint Patents shall be paid by IDEC
for activities within the United States and reimbursed by SCHERING to IDEC for
activities within the Licensed Territory, provided that such Patents are
necessary to properly commercialize the Licensed Product in the Licensed
Territory. Such reimbursement shall be paid to IDEC within 30 days after receipt
of an invoice therefor by SCHERING.
20
<PAGE> 22
(c) If SCHERING, prior or subsequent to filing any SCHERING
Patents, elects not to file, prosecute or maintain such Patents or certain
claims encompassed by such Patents, SCHERING shall give IDEC notice thereof
within a reasonable period prior to allowing such Patents or certain claims
encompassed by such Patents to lapse or become abandoned or unenforceable, and
IDEC shall thereafter have the right, at its sole expense, to prepare, file,
prosecute and maintain Patents or certain claims encompassed by such Patents
concerning all such inventions and discoveries in countries of its choice
throughout the world. If IDEC, prior or subsequent to filing IDEC Patents,
elects not to file, prosecute or maintain such Patents or certain claims
encompassed by such Patents, IDEC shall give SCHERING notice thereof within a
reasonable period prior to allowing such Patents or certain claims encompassed
by such Patents to lapse or become abandoned or unenforceable, and SCHERING
shall thereafter have the right, at its sole expense, to prepare, file prosecute
and maintain such Patents or certain claims encompassed by such Patents
concerning all such inventions and discoveries in countries of its choice
throughout the world.
(d) The Party filing Joint Patents shall do so in the name
of and on behalf of both SCHERING and IDEC. Each of IDEC and SCHERING shall hold
all information it presently knows or acquires under this Paragraph which is
related to all such Patents as confidential subject to the provisions of Article
10 of the Collaboration Agreement.
11.6 WAIVER.
(a) IDEC on behalf of itself and its directors, employees,
officers, shareholders, agents, successors and assigns hereby waives any and all
actions and causes of action, claims and demands whatsoever, in law or equity of
any kind it or they may have against SCHERING, its officers, directors,
employees, shareholders, agents, successors and assigns, which may arise in any
way except as a result of SCHERING's gross negligence, recklessness, or willful
misconduct in performance of its rights or obligations under Section 11.5 of the
Collaboration Agreement.
(b) SCHERING on behalf of itself and its directors,
employees, officers, shareholders, agents successors and assigns hereby waives
any and all actions and causes of action, claims and demands whatsoever, in law
or equity of any kind it or they may have against IDEC, its officers, directors,
employees, shareholders, agents, successors and assigns, which may arise in any
way except as a result of IDEC's gross negligence, recklessness, or willful
misconduct in performance of its rights or obligations under Section 11.5 of the
Collaboration Agreement.
11.7 FURTHER ASSURANCES. Notwithstanding the provisions of Section
11.5 of the Collaboration Agreement, each Party shall, at its own expense,
provide reasonable assistance to the other Party to facilitate filing of all
Patents covering inventions referred to in Section 11.3 of the Collaboration
Agreement and shall execute all documents deemed necessary or desirable
therefor.
21
<PAGE> 23
11.8 INITIAL FILINGS. The Parties agree to use reasonable efforts to
ensure that any IDEC Patent, SCHERING Patent or Joint Patent filed outside of
the United States prior to a U.S. filing will be in a form sufficient to
establish the date of original filing as a priority date for the purposes of a
subsequent U.S. filing and that the requisite foreign filing license will be
obtained. The Parties agree to use reasonable efforts to ensure that any IDEC
Patent, SCHERING Patent or Joint Patent filed in the United States prior to a
non-U.S. filing will be in a form sufficient to establish the date of original
filing as a priority date for the purposes of a subsequent non-U.S. filing and
that the requisite United States filing license will be obtained.
11.9 PATENT ENFORCEMENT.
(a) In the event that IDEC or SCHERING becomes aware of
actual or threatened infringement of a Patent related to the Licensed Product,
anywhere in the world, that Party shall promptly notify the other Party in
writing. IDEC shall have the first right but not the obligation to bring an
infringement action or file any other appropriate action or claim directly
related to infringement of an IDEC Patent or Joint Patent, wherein such
infringement relates to the Licensed Product, against any Third Party and to use
SCHERING's name in connection therewith. The costs of Patent enforcement and
related recoveries associated with the United States incurred by IDEC shall be
borne by IDEC. Such Patent enforcement costs in the Licensed Territory shall be
borne by IDEC. If IDEC does not commence a particular infringement action in a
country within the Licensed Territory within ninety (90) days after it received
such written notice, SCHERING, after notifying IDEC in writing, shall be
entitled to bring such infringement action or any other appropriate action or
claim at its own expense. The Party conducting such action shall consider in
good faith the other Party's comments on the conduct of such action. Recovery
from any settlement or judgment from such action in the Licensed Territory shall
go first to reimburse the expenses of the Parties and the remainder shall be
shared by the Parties in proportion to their respective economic interests. In
any event, IDEC and SCHERING shall assist one another and reasonably cooperate
in any such litigation at the other's request without expense to the requesting
Party.
(b) SCHERING shall have the first right but not the
obligation to bring an infringement action or file any other appropriate action
or claim directly related to infringement of a SCHERING Patent, wherein such
infringement relates to the Licensed Product, against any Third Party and to use
IDEC's name in connection therewith. The costs of Patent enforcement and related
recoveries associated with the United States incurred by SCHERING shall be borne
by SCHERING. Such Patent enforcement costs in the Licensed Territory shall be
borne by SCHERING. Recovery from any settlement or judgment from such action in
the Licensed Territory shall go first to reimburse the expenses of the Parties
and the remainder shall be shared by the Parties in proportion to their
respective economic interests. In any event, IDEC and SCHERING shall assist one
another and reasonably cooperate in any such litigation at the other's request
without expense to the requesting Party.
22
<PAGE> 24
11.10 INFRINGEMENT DEFENSE. Subject to Section 11.11 below, if a Third
Party asserts that a Patent or other right owned by it is infringed by the
Licensed Product, IDEC will be solely responsible for defending against any such
assertions at its cost and expense but no settlement may be entered into with
regard to Patents in the Licensed Territory or, with regard to Patents in the
United States if such settlement would result in an increase in the amounts
payable by IDEC to SCHERING hereunder, without the written consent of SCHERING,
which shall not be unreasonably withheld. If any Third Party is successful in
such claim, and SCHERING is ordered to make any payments to such Third Party in
connection therewith, any such payments will be dealt with in the manner set out
in Section 6.3 above.
*_____*.
ARTICLE 12.
REPRESENTATIONS AND WARRANTIES
12.1 REPRESENTATIONS AND WARRANTIES.
(a) Each of the Parties hereby represents and warrants as
follows:
(i) The Collaboration Agreement is a legal and valid
obligation binding upon such Party and enforceable in accordance with its terms.
The execution, delivery and performance of the Collaboration Agreement by such
Party does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a Party or by which it is bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.
(ii) Such Party has not, and during the term of the
Collaboration Agreement will not, grant any right to any Third Party relating to
its respective Patents and Know-how in the Field which would conflict with the
rights granted to the other Party hereunder.
(b) IDEC represents, warrants and undertakes that:
(i) It has the right to grant the licenses granted
herein.
(ii) Except as set forth on EXHIBIT D hereto, it is
not obligated under any agreement as of the Effective Date to pay any Third
Party royalties with respect to Licensed Product.
(iii) *_____*.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
23
<PAGE> 25
(iv) It has provided to SCHERING all material
information in its possession or control or of which it is aware as of the
Effective Date, concerning efficacy, side effects, injury, toxicity or
sensitivity reaction and incidents of severity thereof, associated with any
clinical use, studies, investigations or tests with the Licensed Product (animal
or human), whether or not determined to be attributable to the Licensed Product.
(v) It has conducted or has caused its contractors
or consultants to conduct, and will in the future conduct, the preclinical and
clinical studies of the Licensed Product in accordance with applicable United
States law, known or published standards of the FDA and has made good faith
efforts to comply with EMEA standards.
(vi) It has employed and will in the future employ
individuals of appropriate education, knowledge and experience to conduct or
oversee the conduct of IDEC's clinical and preclinical studies of the Licensed
Product.
(vii) It has not employed (and, to the best of its
knowledge, has not used a contractor or consultant that has employed) and in the
future will not employ (or, to the best of its knowledge, use any contractor or
consultant that employs) any individual or entity debarred by the FDA (or
subject to a similar sanction of EMEA) or, to the best knowledge of IDEC, any
individual who or entity which is the subject of an FDA debarment investigation
or proceeding (or similar proceeding of EMEA), in the conduct of preclinical or
clinical studies of the Licensed Product.
(viii) In the course of developing the Licensed
Product, it has not knowingly conducted, and during the course of the
Collaboration Agreement it will not knowingly conduct, any development
activities in violation of applicable GCPs, GLPs or GMPs.
(ix) As of the Effective Date, except as it may have
previously disclosed to SCHERING in writing or directly discussed with SCHERING,
it has not received any notices of infringement or any written communications
relating in any way to a possible infringement with respect to the Licensed
Product, and that it is not aware that the development, manufacture, use,
importation or sale of the Licensed Product infringes any Third Party Patent
rights.
(x) As of the Effective Date, it is not aware of any
prior act or any fact which causes it to conclude that any IDEC Patent is
invalid or unenforceable in whole or in part.
(xi) It has complied in all material respects with
each license listed on EXHIBIT C hereto, and during the term hereof will comply
in all material respects, and use all reasonable efforts to keep in full force
and effect each such license; neither the Collaboration Agreement nor any of the
transactions contemplated hereby will, with the giving of notice or the
24
<PAGE> 26
lapse of time, or both, constitute a default or breach of any such license.
(xii) It has obtained all right, title and interest in
and to all rights to the Licensed Product and the IDEC Patents and IDEC Know-how
free and clear of any liens, encumbrances or rights to repurchase.
(xiii) During the term of the Collaboration Agreement,
it will not grant a lien on the Collaboration Agreement or on any of IDEC's
rights or obligations hereunder or on the IDEC Patents or IDEC Know-how related
to the Licensed Product.
12.2 PERFORMANCE BY AFFILIATES. The Parties recognize that each may
perform some or all of its obligations under the Collaboration Agreement through
Affiliates, provided, however, that each Party shall remain responsible and be
guarantor of the performance by its Affiliates and shall cause its Affiliates to
comply with the provisions of the Collaboration Agreement in connection with
such performance.
ARTICLE 13.
INFORMATION AND REPORTS
13.1 INFORMATION. With respect to the Drug Approval Applications
required for Regulatory Approval for the Initial Indication in the United States
and the corresponding Drug Approval Applications in the Licensed Territory,
SCHERING and IDEC will disclose and make available to each other all
preclinical, clinical, regulatory, commercial and other information, including
without limitation all Information relevant to Licensed Product, developed by
SCHERING or IDEC at any time during the term of the Collaboration Agreement.
Each Party will use Commercially Reasonable and Diligent efforts to disclose to
the other Party all significant Information promptly after it is learned or its
significance is appreciated. Each Party shall own and maintain its own database
of clinical trial data accumulated from all clinical trials of the Licensed
Product for which it was responsible and of adverse drug event information for
the Licensed Product. At the option of the requesting Party, such data shall be
provided in a computer readable format by the providing Party, to the extent
available, which shall also assist in the transfer and validation of such data
to the receiving Party.
13.2 COMPLAINTS. Each Party shall maintain a record of all complaints
it receives with respect to the Licensed Product. Each Party shall notify the
other of any complaint received by it in writing and sufficient detail and
within five (5) Business Days after the event, and in any event in sufficient
time to allow the responsible Party to comply with any and all regulatory
requirements imposed upon it in any country.
25
<PAGE> 27
13.3 ADVERSE DRUG EVENTS. The Parties recognize that the holder of a
Drug Approval Application or Regulatory Approval may be required to submit
information and file reports to various governmental agencies on compounds under
clinical investigation, compounds proposed for marketing, or marketed drugs.
Information must be submitted at the time of initial filing for investigational
use in humans and at the time of a request for market approval of a new drug. In
addition, supplemental information must be provided on compounds at periodic
intervals and adverse drug experiences must be reported at more frequent
intervals depending on the severity of the experience. Consequently, each Party
agrees to:
(a) Provide to the other for initial and/or periodic
submission to government agencies significant information on the Licensed
Product from preclinical laboratory, animal toxicology and pharmacology studies,
as well as adverse drug experience reports from clinical trials and commercial
experiences with the compound;
(b) In connection with investigational drugs, report to the
other within three (3) days of the initial receipt of a report of any unexpected
or serious experience with the Licensed Product, or sooner if required for
either Party to comply with regulatory requirements; and
(c) In connection with marketed Licensed Product, report to
the other within five (5) Business Days of the initial receipt of a report of
any adverse experience with the Licensed Product that is serious and unexpected
or sooner if required for either Party to comply with regulatory requirements.
Serious adverse experiences are defined in the Collaboration Agreement to
correspond with the relevant ICH classification from time to time applicable.
Each Party also agrees that if it contracts with a Third Party for research to
be performed by such Third Party on the Licensed Product, that Party agrees to
require such Third Party to report to the contracting Party the information set
forth in subparagraphs (a), (b) and (c) above.
13.4 PUBLICITY REVIEW. The Parties agree that the public announcement
of the execution of the Collaboration Agreement shall be in the form of a press
release to be agreed upon on or before the Effective Date and thereafter each
Party shall be entitled to make or publish any public statement consistent with
the contents thereof. Thereafter, IDEC and SCHERING will jointly discuss and
agree, based on the principles of this Section 13.4, on any statement to the
public regarding the Collaboration Agreement or any aspect of the Collaboration
Agreement subject in each case to disclosure otherwise required by law or
regulation as determined in good faith by each Party. The principles to be
observed by IDEC and SCHERING in such public disclosures will be: accuracy, the
requirements for confidentiality under Article 10, the advantage a competitor of
IDEC or SCHERING may gain from any public statements under this Section 13.4,
and the standards and customs in the biotechnology and pharmaceutical industries
for such disclosures by companies comparable to IDEC and SCHERING. The terms of
the Collaboration Agreement may also be disclosed to (i) government agencies
where required by law, or (ii) Third Parties with the prior written consent of
the other Party, which consent shall not be unreasonably withheld, so long as
26
<PAGE> 28
such disclosure is made under a binder of confidentiality and so long as highly
sensitive terms and conditions such as financial terms are extracted from the
Collaboration Agreement or not disclosed upon the request of the other Party.
ARTICLE 14.
TERM AND TERMINATION
14.1 TERM. The Collaboration Agreement shall commence as of the
Effective Date. The Parties have specifically provided elsewhere in the
Collaboration Agreement the term during which certain rights and obligations
hereunder shall apply. Unless sooner terminated as provided herein, and except
as provided in Section 14.6 below, the remaining provisions of the Collaboration
Agreement relating to activities in the Licensed Territory shall continue in
effect on a country-by-country basis until the date on which SCHERING is no
longer paying a royalty on Net Sales in the Licensed Territory. Those provisions
shall govern the term of the rights and obligations specifically covered
thereby. Upon the expiration of the term of the Collaboration Agreement or its
termination by SCHERING under Section 14.2 and limited by Sections 14.5 and
14.6, all licenses granted to SCHERING hereunder shall become fully paid up and
irrevocable.
14.2 TERMINATION BY SCHERING.
(a) SCHERING shall have the right to terminate the
Collaboration Agreement (i) if IDEC elects to discontinue funding of the
development of Licensed Product *_____* such termination to be effective after
*_____* written notice to IDEC and *_____* or (ii) *_____* effective *_____*
days from written notice to IDEC.
(b) Upon any termination under this Section 14.2, the
Parties shall have no further rights or obligations under the Collaboration
Agreement except as set forth in Sections 14.5 and 14.6.
14.3 TERMINATION BY IDEC
(a) IDEC shall have the right to terminate the Collaboration
Agreement, in each case on a country-by-country basis (i) *_____* such
termination to be effective after *_____* written notice *_____* and *_____*
(ii) if SCHERING fails to *_____* such termination to be effective *_____* to
SCHERING, provided that (1) *_____* (2) SCHERING *_____* or (3) such failure
*_____* or (iii) if *_____*.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
27
<PAGE> 29
(b) If SCHERING fails to make sales *_____* and provided
that the reason for the failure is not *_____* IDEC shall be entitled to
terminate SCHERING's rights under the Collaboration Agreement *_____*.
(c) Upon any termination under this Section 14.3, the
Parties shall have no further rights or obligations under the Collaboration
Agreement except as set forth in Sections 14.5 and 14.6 and all licenses are
terminated and the rights revert to IDEC.
14.4 TERMINATION FOR BREACH. If either Party materially breaches the
Collaboration Agreement at any time, which breach is not cured within *_____* of
written notice thereof from the non-breaching Party (or if such breach is not
susceptible of cure within such period but provided it is capable of cure, the
breaching Party is not making diligent good faith efforts to cure such breach),
the non-breaching Party shall have the right to terminate the Collaboration
Agreement. Upon such termination, the Parties shall have no further rights or
obligations under the Collaboration Agreement except as set forth in Sections
14.5 and 14.6. The Parties acknowledge and agree that failure to exercise any
right or option with respect to the Licensed Product or to take any action
expressly within the discretion of a Party shall not be deemed to be material
breach hereunder. *_____*.
14.5 RIGHTS AND OBLIGATIONS UPON TERMINATION.
(a) In the event of termination by SCHERING pursuant to
Section 14.2(a)(ii) or by IDEC pursuant to Section 14.3 (a) or by IDEC pursuant
to Section 14.4 due to SCHERING's material breach, SCHERING shall (i) make its
personnel and other resources reasonably available to IDEC as necessary to
effect an orderly transition of development and/or commercialization
responsibilities, with the cost of such personnel and resources to be borne by
IDEC after the effective date of termination; (ii) grant IDEC a non-revocable,
royalty free license under Section 8.2, provided that IDEC reimburse SCHERING
for all royalties it must pay to Third Parties on account of the development,
use, manufacture or sale of Licensed Product in Licensed Territory.
(b) In the event of termination by SCHERING pursuant to
Section 14.2(a)(i), IDEC shall (i) remain responsible for (A) its share of
Development Costs for Licensed Product in the United States and (B) its supply
obligations under the Supply Agreement; until, in the case of both (A) and (B),
IDEC has fully transferred, and enabled SCHERING to perform, all of IDEC's
responsibilities under the Collaboration Agreement and the Supply Agreement,
including, but not limited to, supplying SCHERING's requirements for Licensed
Product for a reasonable period of time to allow SCHERING to find an alternate
source of supply; (ii) make its personnel and other resources reasonably
available to SCHERING as necessary to effect an orderly transition of
development and/or commercialization responsibilities, with the cost of such
personnel and resources to be borne by SCHERING after the effective date of
termination; and (iii) transfer to SCHERING all of IDEC's right, title, and
interest in and to the Licensed Product in the United
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
28
<PAGE> 30
States and the United States shall become part of the Licensed Territory. In
addition, SCHERING shall pay, in lieu of any payments including royalties it
would otherwise owe IDEC pursuant to the terms of the Collaboration Agreement,
*_____*.
(c) In the event of termination by SCHERING pursuant to
Section 14.4 due to IDEC's material breach, IDEC shall (i) remain responsible
for (A) its marketing of Licensed Product in the United States and (B) its
supply obligations under the Supply Agreement; until , in the case of (B), IDEC
has fully transferred, and enabled SCHERING to perform, all of IDEC's
responsibilities under the Supply Agreement, including, but not limited to,
supplying SCHERING's requirements for Licensed Product for a reasonable period
of time to allow SCHERING to find an alternate source of supply; (ii) make its
personnel and other resources reasonably available to SCHERING as necessary to
effect an orderly transition of product supply responsibilities, with the cost
of such personnel and resources to be borne by SCHERING after the effective date
of termination; and (iii) transfer to SCHERING all of IDEC's right, title, and
interest in and to the Licensed Product in the Licensed Territory. *_____*.
(d) In the event of termination by SCHERING pursuant to
Sections 14.2 (a)(i) or 14.4, SCHERING shall not be obliged to make any payments
falling due pursuant to Section 2.1(c) where such payments fall due after the
date of service by SCHERING of notice of termination pursuant to such sections
and if the agreement is terminated pursuant to such notice.
14.6 ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Termination,
relinquishment or expiration of the Collaboration Agreement for any reason shall
be without prejudice to any rights which shall have accrued to the benefit of
either party prior to such termination, relinquishment or expiration, including
paid up irrevocable licenses and including damages arising from any breach
hereunder. Such termination, relinquishment or expiration shall not relieve
either Party from obligations under Articles 10, 11, 14.5, 14.6, 15, 16 and 17
herein, and any other obligations which are expressly indicated to survive
termination or expiration of the Collaboration Agreement.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
29
<PAGE> 31
ARTICLE 15.
INDEMNIFICATION
15.1 INDEMNIFICATION BY SCHERING.
(a) SCHERING hereby agrees to save, defend and hold IDEC and
its agents and employees harmless from and against any and all Third Party
suits, claims, actions, demands, liabilities, expenses and/or loss, including
reasonable legal expense and attorneys' fees ("Losses") resulting directly from
the manufacture, use, handling, storage, sale or other disposition of chemical
agents or Licensed Product sold or used in the Licensed Territory by SCHERING,
its Affiliates, agents, or sublicensees, but only to the extent such Losses
result from the negligence or willful misconduct of SCHERING.
(b) In the event that IDEC is seeking indemnification under
Section 15.1(a), it shall inform SCHERING of a claim as soon as reasonably
practicable after it receives notice of the claim, shall permit SCHERING to
assume direction and control of the defense of the claim (including the right to
settle the claim solely for monetary consideration), and shall cooperate as
requested (at the expense of SCHERING) in the defense of the claim.
15.2 INDEMNIFICATION BY IDEC.
(a) IDEC hereby agrees to save, defend and hold SCHERING and
its agents and employees harmless from and against any and all Losses resulting
directly or indirectly from the manufacture, supply, use, handling, storage,
sale or other disposition of chemical agents or Licensed Product sold or used in
the Licensed Territory or the United States but only to the extent such Losses
do not result from the negligence or willful misconduct of SCHERING or its
employees and agents, as described in Section 15.1(a).
(b) In the event that either Party receives notice of a
claim with respect to a Licensed Product in the United States or in the Licensed
Territory, such Party shall inform the other Party as soon as reasonably
practicable.
30
<PAGE> 32
ARTICLE 16.
DISPUTE RESOLUTION
16.1 DISPUTES. The Parties recognize that disputes as to certain
matters may from time to time arise during the term of the Collaboration
Agreement which relate to either Party's rights and/or obligations hereunder. It
is the objective of the Parties to establish procedures to facilitate the
resolution of disputes arising under the Collaboration Agreement in an expedient
manner by mutual cooperation and without resort to litigation. To accomplish
this objective, the Parties agree to follow the procedures set forth in this
Article 16, if and when a dispute arises under the Collaboration Agreement.
Unless otherwise specifically recited in the Collaboration Agreement,
disputes among members of the Steering Committee will be resolved as recited in
this Article 16. If the Steering Committee is unable to resolve a dispute among
its members, any Party may, by written notice to the other, have such dispute
referred to their respective chief operating officers, for attempted resolution
by good faith negotiations within *_____* after such notice is received. In the
event the designated operating officers are not able to resolve such dispute,
either Party may at anytime after the *_____* invoke the provisions of Section
16.2.
16.2 MEDIATION AND ARBITRATION. The parties agree that any dispute,
controversy or claim (except as to any issue relating to intellectual property
owned in whole or in part by IDEC or SCHERING) arising out of or relating to the
Collaboration Agreement, or the breach, termination, or invalidity thereof,
shall be resolved through negotiation, mediation and/or binding arbitration. If
a dispute arises between the parties, and if said dispute cannot be resolved
pursuant to Section 16.1, the Parties agree to first try in good faith to
resolve such dispute by mediation administered by the American Arbitration
Association in accordance with its Commercial Mediation Rules. If efforts at
mediation are unsuccessful within *_____* any unresolved controversy or claim
between the parties shall be resolved by binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, except
as modified herein. IDEC and SCHERING shall each select one arbitrator and the
two arbitrators so selected shall choose a third arbitrator to resolve the
dispute. The arbitration decision shall be rendered within six months of
conclusion of mediation and shall be binding and not be appealable to any court
in any jurisdiction. The prevailing Party may enter such decision in any court
having competent jurisdiction. The mediation or arbitration proceeding shall be
conducted at the location of the Party not originally requesting the resolution
of the dispute and interlocutory relief may be granted by the arbitrator. The
parties agree that they shall share equally the cost of the
mediation/arbitration filing and hearing fees, and the cost of the
mediator/arbitrator. Each Party must bear its own attorney's fees and associated
costs and expenses.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
31
<PAGE> 33
16.3 JURISDICTION. For the purposes of this Article 16, the Parties
agree to accept the jurisdiction of the federal courts located in the *_____*
for the purposes of enforcing awards entered pursuant to this Article and for
enforcing the agreements reflected in this Article.
16.4 DETERMINATION OF PATENTS AND OTHER INTELLECTUAL PROPERTY. Any
dispute relating to the determination of validity of a Party's Patents or other
issues relating solely to a Party's intellectual property shall be submitted
exclusively to the federal court (or equivalent) located in the location of the
defendant, and the Parties hereby consent to the jurisdiction and venue of such
court.
ARTICLE 17.
MISCELLANEOUS
17.1 ASSIGNMENT.
(a) Either Party may assign any of its rights under the
Collaboration Agreement in any country to any Affiliates and, with the prior
written consent of the other Party, may delegate its obligations under the
Collaboration Agreement in any country to any Affiliates; provided, however,
that such assignment shall not relieve the assigning Party of its
responsibilities for performance of its obligations under the Collaboration
Agreement.
(b) Either Party may assign, without consent of the other
Party, all of its rights and obligations under the Collaboration Agreement in
connection with a merger or similar reorganization or the sale of all or
substantially all of its assets, or otherwise with the prior written consent of
the other Party. The Collaboration Agreement shall survive any such merger or
reorganization of either Party with or into, or such sale of assets to, another
party and no consent for such merger, reorganization or sale shall be required
hereunder.
(c) The Collaboration Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the Parties. Any
assignment not in accordance with the Collaboration Agreement shall be void.
17.2 NON-SOLICITATION. The Parties recognize that each Party has a
substantial interest in preserving and maintaining confidential its Confidential
Information hereunder. Each Party recognizes that certain of the other Party's
employees, including those engaged in development, marketing and sale of any
Licensed Product, may have access to such Confidential Information of the other
Party. The Parties therefore agree not to solicit or otherwise induce or attempt
to induce for purposes of employment, any employees from the other Party
involved in the development, marketing or sales of any Licensed Product during
the period in which any Party is developing or commercializing a Licensed
Product hereunder and for a period of two years thereafter.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
32
<PAGE> 34
17.3 HEADINGS. The headings used in the Collaboration Agreement are
for convenience only and shall not affect or be used in the interpretation of
the Sections or Articles.
17.4 RETAINED RIGHTS. Nothing in the Collaboration Agreement shall
limit in any respect the right of either Party to conduct research and
development with respect to and market products outside the Field using such
Party's technology.
17.5 FORCE MAJEURE. Neither Party shall lose any rights hereunder or
be liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, earthquake, explosion, flood, viral, bacterial, or mycoplasm
contamination of Licensed Product with no assignable cause for any such
contamination after FDA mandated inspection by IDEC, strike, lockout, embargo,
act of God, or any other cause beyond the control of the defaulting Party,
whether or not of the kind listed in the foregoing examples, provided that the
Party claiming force majeure has exerted all reasonable efforts to avoid or
remedy such force majeure; provided, however, that in no event shall a Party be
required to settle any labor dispute or disturbance.
17.6 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of the
Collaboration Agreement.
17.7 NO RIGHT TO USE NAMES. Except as otherwise provided herein, no
right, express or implied, is granted by the Agreement to use in any manner the
name "IDEC," "SCHERING" or any other trade name or trademark of the other Party
or its Affiliates in connection with the performance of the Agreement.
33
<PAGE> 35
17.8 NOTICES. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, to the Parties
at the following addresses (or at such other address for a party as shall be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof).
IF TO IDEC,
ADDRESSED TO: IDEC PHARMACEUTICALS CORPORATION
11011 Torreyana Road
San Diego, CA 92121
USA
Attention: Corporate Secretary
Telephone: 001 (858) 550-8500
Fax: 001 (858) 550-8750
IF TO SCHERING,
ADDRESSED TO: SCHERING A.G.
13342 Berlin, Germany
Attention: Legal Department
Telephone: 011 49 30 4681 2291
Fax: 011 49 30 4681 4086
17.9 WAIVER. Except as specifically provided for herein, the waiver
from time to time by either of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of same or of any other of such Party's rights or remedies provided in
the Collaboration Agreement.
17.10 SEVERABILITY. If any term, covenant or condition of the
Collaboration Agreement or the application thereof to any Party or circumstance
shall, to any extent, be held to be invalid or unenforceable, then (i) the
remainder of the Collaboration Agreement, or the application of such term,
covenant or condition to Parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of the Collaboration Agreement shall be valid and be
enforced to the fullest extent permitted by law; and (ii) the Parties hereto
covenant and agree to renegotiate any such term, covenant or application thereof
in good faith in order to provide a reasonably acceptable alternative to the
term, covenant or condition of the Collaboration Agreement or the application
thereof that is invalid or unenforceable, it being the intent of the Parties
that the basic purposes of the Collaboration Agreement are to be effectuated.
17.11 GOVERNING LAW. The Collaboration Agreement shall be governed by
and construed in accordance with the laws of the *_____* without giving effect
to principles of conflict of laws.
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
34
<PAGE> 36
17.12 AMBIGUITIES. Ambiguities, if any, in the Collaboration Agreement
shall not be construed against any Party, irrespective of which Party may be
deemed to have authored the ambiguous provision.
17.13 COUNTERPARTS. The Collaboration Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
17.14 ENTIRE AGREEMENT. The Collaboration Agreement, including all
Exhibits attached hereto which are hereby incorporated herein by reference and
the Supply Agreement, set forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto and supersede and terminate all prior agreements and understandings
between the Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to the Collaboration Agreement shall
be binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.
35
<PAGE> 37
IN WITNESS WHEREOF, the Parties have executed the Collaboration
Agreement in duplicate originals by their proper officers as of the date and
year first above written.
<TABLE>
<S> <C>
IDEC PHARMACEUTICALS SCHERING AKTIENGESELLSCHAFT
CORPORATION
By: /s/ William R. Rohn By: /s/ Hubertus Erlen
------------------------------------- -------------------------------------
William R. Rohn Hubertus Erlen
Chief Operating Officer and Senior Member of Board
Title: Vice President, Commercial Operations Title: of Executive Directors
------------------------------------- -------------------------------------
Date: June 9, 1999 Date: June 9, 1999
------------------------------------- -------------------------------------
By: /s/ Joachim-Friedrich Kapp
-------------------------------------
Head of Strategic Business
Title: Unit Therapeutics
-------------------------------------
Joachim-Friedrich Kapp
Date: June 9, 1999
-------------------------------------
</TABLE>
36
<PAGE> 38
EXHIBITS
EXHIBIT A: DEVELOPMENT PLAN
EXHIBIT B: Y2B8/IN2B8 KIT SPECIFICATIONS
EXHIBIT C: LIST OF LICENSES
EXHIBIT D: ANTIBODY MANUFACTURING COSTS
EXHIBIT E: *_____*
EXHIBIT F: ROYALTIES PAYABLE UPON MANUFACTURING IN U.S.
EXHIBIT G: FTE RATES
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
37
<PAGE> 39
EXHIBIT A
DEVELOPMENT PLAN
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
38
<PAGE> 40
EXHIBIT B
Y2B8/IN2B8 KIT SPECIFICATIONS
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
39
<PAGE> 41
EXHIBIT C
LIST OF LICENSES
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
40
<PAGE> 42
EXHIBIT D
ANTIBODY MANUFACTURING COSTS
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
41
<PAGE> 43
EXHIBIT E
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
42
<PAGE> 44
EXHIBIT F
ROYALTIES PAYABLE UPON MANUFACTURING IN U.S.
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
43
<PAGE> 45
EXHIBIT G
FTE RATES
*_____*
- ----------
*_____* Indicates that material has been omitted and confidential treatment has
been requested therefor. All such omitted material has been filed separately
with Secretary of the Commission in the Company's Application Requesting
Confidential Treatment pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
44
<PAGE> 1
EXHIBIT 10.30
IDEC PHARMACEUTICALS CORPORATION
DEFERRED COMPENSATION PLAN
THIS DEFERRED COMPENSATION PLAN is adopted by IDEC Pharmaceuticals Corporation a
Delaware corporation (the "Company"), effective as of January 1 1999, with
reference to the following:
A. The Company is establishing this plan to provide key employees
and non-employee Board members a tax deferred, capital
accumulation, retention program.
B. This Plan is intended to provide benefits to a select group of
management or highly compensated personnel in order to attract
and retain the highest quality executives. This Plan is not
intended to be a qualified plan within the meaning of sections
401(a) and 501(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Plan is intended to be an unfunded plan for purposes of the
Employee Retirement Income Security act of 1975, as amended
("ERISA").
NOW, THEREFORE, the Company hereby adopts the IDEC Pharmaceuticals Corporation
Deferred Compensation Plan on the following terms and conditions:
1.0 Definitions. Whenever used in this Plan, the following words and
phrases shall have the same meaning set forth below, unless a
different meaning is expressly provided or plainly required by
the context in which the words or phrases are used:
1.1 Beneficiary means a person designated by a Participant to
receive Plan benefits in the event of the Participant's death.
1.2 Board means the Board of Directors of the Company and its
successors.
1.3 CFO means the Chief Financial Officer of the Company and their
successors.
1.4 Change in Control of Company means:
(A) a change in ownership, or power to vote such that 35% or
more of the voting stock of the Company is concentrated
in the hands of any one person, entity or group of
related persons or entities or group of persons or
entities acting in concert;
(B) a change in the composition of the Board as a result of
which individuals serving on the Board immediately prior
to such change cease to constitute at least a majority
thereof;
(C) the stockholders of the Company approved any plan or
proposal for the liquidation or dissolution of the
Company;
<PAGE> 2
(D) substantially all of the assets of the Company are sold
or otherwise transferred to parties that are not within
the "controlled group or corporations" (as defined in
section 1563 of the Internal Revenue Code of 1986) in
which the Company is a member.
1.5 Company means IDEC Pharmaceuticals Corporation a Delaware
corporation
1.6 Disability means:
(A) "disability" as defined in any group long-term
disability policy or program sponsored by the Company
and in effect at the time a Participant who has suffered
a physical or mental impairment makes application under
this Plan for a disability distribution, or
(B) if no such policy or program is in force at such time,
"disability" as defined in section 1392c(a)(3) of volume
42 of the United States Code and regulations promulgated
thereunder, provided, however, that the disability
(whether under the definition in (a) or in (b)) must be
of a duration of at least six (6) consecutive months
from the date the Participant suffers the disability
notwithstanding any different requirements of duration
under either definition in the actual policy or program
or in the United States Code, respectively.
A Participant who has suffered a Disability shall be
disabled within the meaning of this Section 1.6.
The determination of whether a Participant is disabled
within the meaning of this Section 1.6 shall be made by
the CFO. A Participant who believes they have suffered a
disability within the meaning of this Section 1.6 shall
make application to the CFO, on a form prescribed by the
CFO, for a determination of whether they are disabled
under the terms of this Section 1.6. The Participant
shall make such written application to the CFO on or
after the date which is at least five (5) consecutive
months following the date they first suffered the
impairment under consideration. Any determination by the
CFO that a disability exists under the provisions of
this Section 1.6 shall be effective only after the date
the disability has existed for six (6) consecutive
months. All determinations made by the CFO shall be
final, and no Participant shall be considered disabled
for any purpose whatsoever under the provisions of this
Plan if determined not to be disabled by the CFO under
the procedures set forth in this Section 1.6.
The CFO shall notify each Participant who has made
application under this Section 1.6, in writing, for
their determination within three (3) months of the date
the CFO receives the Participant's application
hereunder. The Participant shall cooperate in providing
any information to the CFO which it requires in making
its determination, including, but not limited to, access
to the Participant's medical records, direct contact
with their physician and physical examination by a
physician selected by the Company. Any Participant who
does not fully cooperate shall be deemed not disabled by
the CFO and so notified.
<PAGE> 3
1.7 Key Employee means an employee of the Company, selected
by the CFO, who is a member of a select group of
management or highly compensated employees within the
meaning of Section 2520.104-23 of the Department of
Labor ERISA Regulations.
1.8 Normal Retirement Age means the later of age 60 or five
years of participation in this Plan.
1.9 Participant means:
(A) a key employee designated by the CFO, in
writing, to participate in the benefits under
the Plan who timely files a written election
pursuant to Section 2.4, below, and
(B) a former Employee who, at the time of their
termination from employment, retirement, death
or occurrence of disability, retains, or whose
beneficiary retains, benefits earned under the
Plan in accordance with its terms. A Participant
is considered an active participant in the Plan
until the earliest of the following:
(i) the Participant retires, dies or becomes
disabled under the terms of this Plan;
or
(ii) the Participant is determined or
believed by the CFO to no longer qualify
as a member of a "select group of highly
compensated or management employees" and
such Participant has received
distribution of their entire benefit
hereunder; or
(iii) the participant terminates employment
with the Company.
1.10 Plan means the IDEC Pharmaceuticals Corporation Deferred
Compensation Plan established by this document.
1.11 Plan Year means the period which is the same as the calendar
year.
1.12 Plan Year Compensation means the total income paid to an active
Participant by the Company during any Plan Year, or portion
thereof in which they are a Participant in this Plan, as
reflected on the Participant's form W-2. For purposes of the
elections under Section 2.4 of this Plan, Plan Year Compensation
shall consist of one or more of the following types of income:
annual base salary or annual bonus.
2.0 Participation.
2.1 Eligibility. A Key Employee of the company is eligible to
participate in this Plan on the entry date first following the
date as of which both of the following events have occurred:
(A) the CFO has designated an individual in writing as a
Participant in the Plan, and
<PAGE> 4
(B) the Key Employee has made a written election in
accordance with the terms of Section 2.4 below.
2.2 Entry Date. Any Key Employee who has met the eligibility
requirements specified in Section 2.1 as of the effective date
of this Plan shall become a Participant in the Plan as of the
first day of the Plan Year following their hire date. Any Key
Employee of the Company who meets the eligibility requirements
specified in Section 2.1 after the effective date of this Plan
shall become a Participant in the Plan immediately upon the date
on which they have met the eligibility requirements.
2.3 Designation. The CFO shall designate for each Plan Year, in
writing, the name of each Key Employee who shall be entitled to
participate in the Plan for the Plan Year. Such designation by
the CFO shall occur on a date such that each designated Key
Employee shall have sufficient time to make their written
election as required by Section 2.4 below.
2.4 Written Election by Participant. Each Key Employee designated by
the CFO as a Participant for a Plan Year shall submit a written
election prior to the first day of the Plan Year in which they
will be a Participant.
(A) Such written election shall be made on the form
presented to the Key Employee by the Plan Committee and
shall set forth:
(i) their election to participate in this Plan under
the terms hereof;
(ii) the amount of Plan Year Compensation the Key
Employee has determined to defer under the Plan
for the Plan Year, pursuant to Section 3.1
below;
(iii) the date on which their benefit is to be
distributed which is the earlier of (a) the date
specified for an In-Service Withdrawal or (b)
the later of (i) a specific date or (ii) when
they terminate employment with the Company due
to termination of service, retirement,
disability or death;
(iv) the form in which their benefit is to be
distributed upon termination of service or
retirement.
(B) A Participant's most recently submitted written election
shall remain in effect for subsequent Plan Years until
the Participant changes it in accordance with the
following:
(i) A Participant may change the amount of Plan Year
Compensation they will defer under the Plan for
future Plan Years by submitting a new written
election to the Company. Such new election must
be submitted to the Company on or before the
seventh (7th) day immediately proceeding the
Plan Year for which the new election is to be
effective. Any election of the amount of Plan
Year Compensation to defer for a given Plan Year
shall be irrevocable on and after the first day
of the Plan Year for which the election was
made.
(ii) A Participant may change the date or form of
distribution by submitting a new written
election to the Company, provided that such
change is submitted at least sixty (60) days
prior to the
<PAGE> 5
original date of distribution, the new date of
distribution is subsequent to the original date
of distribution, and only one change may be made
after the original election.
2.5 Duration of Participant. Any Key Employee who has become a
Participant at any time shall remain a Participant, even though
they are no longer an active Participant, until their entire
benefit under the terms of the Plan has been paid to them (or to
their Beneficiary in the event of their death), at which time
they cease to be a Participant.
2.6 Maintenance of Records. The annual Designation of Participants
by the CFO shall be maintained in the corporate minute book. The
written elections by Participants shall be maintained in the
corporate records with all other files pertaining to this Plan
by the CFO.
3.0 Contributions and Allocations.
3.1 Participant Contributions. A Participant may elect to defer each
Plan Year a portion, up to 80%, of their Plan Year Compensation,
provided that a Participant may not defer an amount less than
the minimum established from year to year by the CFO. For the
initial Plan Year, such minimum shall be $5,000. Such election
shall designate the amount of income deferred during the Plan
Year, in actual dollar amounts or percentages. Once a
Participant's contributions for a Plan Year reach their elected
dollar amount or percentages, such Participant shall not be
allowed to defer additional portions of their Plan Year
Compensation for the remainder of the Plan Year. Any deferred
amounts in excess of their elected dollar amount shall be
refunded to the Participant as soon as practicable.
3.2 Allocation of Contributions. All amounts which a Participant
elects to defer under the terms of this Plan shall be allocated
to their Account. Each such Participant Account shall be
credited with earnings as provided in Section 3.3 below.
3.3 Credited Earnings. The account of each Participant shall be
credited with interest. During the first five years of
participation in the Plan by a Participant the account will be
credited with interest at a rate of 7% per annum compounded
quarterly. Upon completion of five years of participation in the
plan by the Participant the Participant's account will be
credited 9% per annum compounded annually. Additionally the
interest rate of 9% will be applied retroactively to all
contributions made during the first five years of participation.
3.4 Forfeitures. If any amount of Participants contributions are
forfeited in any year, such forfeited amounts shall be returned
to the Company.
3.5 Funding. The assets of the Plan shall be held by the Company. As
such, the Plan is intended to be an unfunded plan for purposes
of the requirements of ERISA and the Code.
Notwithstanding the provisions under the terms of the Plan the
amounts contributed to this Plan, plus earnings thereon, shall
be allocated to separate accounts of Participants, all such
amounts credited to such individual accounts
<PAGE> 6
shall remain the general assets of the Employer, and as such
shall remain subject to the claims of the general creditors of
the Company. This Plan does not create, nor does any Employee,
Participant or Beneficiary have, any right with respect to any
specific assets of the Company or the Plan.
4.0 Vest of Accounts. The Account of each Participant shall be 100%
vested in such Participant at all times, provided that a portion
of such accounts shall be forfeited in accordance with Unplanned
In-Service Distribution of Section 6.3.
5.0 Types of Benefits.
5.1 Retirement Benefit. A Participant's Retirement Benefit is the
unpaid balance of their Account which equals the total of all
contributions made by the Participant and allocated to their
account and all earnings credited to their account in accordance
with the terms of the Plan less any distributions already paid.
5.2 Termination of Service Benefit. If a Participant elects to
receive their retirement benefit upon termination of their
employment with the Company, or if a Participant's employment
with the Company terminates prior to distribution of their
In-Service Benefit, the Company will pay retirement benefit,
calculated under Section 5.1, under the applicable form elected
by the Participant in their written election.
5.3 Disability Benefit. If a Participant becomes disabled as defined
in Section 1.5 above, the Company will pay their retirement
benefit, calculated under Section 5.1, under the applicable form
elected by the Participant in their written election.
5.4 Death Benefit.
(A) If a Participant dies after a distribution has commenced
or if the Company has not purchased a life insurance
contract in connection with the Participant's Retirement
Benefit, the Company will continue the payments of such
distribution otherwise due to the Participant to their
designation Beneficiary, under the applicable form
elected by the participant in their written election.
(B) If a Participant dies while still employed by the
Company and the Company has purchased a life insurance
contact in connection with such Participant's Retirement
Benefit, the Company will pay the Participant's
designated Beneficiary the greater of their Retirement
Benefit as determined under Section 5.1 above or their
projected retirement benefit (as defined below), under
the applicable form elected by the Participant in their
written election. "Projected Retirement Benefit" means
the amount determined by projecting the Participant's
contribution for the Participant's first year of
participation hereunder at an assumed earnings rate of
9% to retirement at normal retirement age.
5.5 In-Service Withdrawal. A Participant may designate a date in the
future for receipt of an in-Service Withdrawal with respect to
the Participant's contribution for a given Plan Year. Such
withdrawal may be paid while the Participant remains employed
with the Company, but shall be paid without credited earnings
<PAGE> 7
attributable to such Participant Contribution (which credited
earnings shall be distributed upon termination of employment or
retirement) in four (4) equal yearly installments commencing on
January 15 of the fourth Plan Year following the Plan Year of
deferral (the "In-Service Commencement Year"); provided,
however, that a Participant may elect to defer commencement of
an In-Service Withdrawal for an additional three years by
delivery to the Company of a written election not later than the
last day of the Plan year prior to the Plan Year immediately
preceding the In-Service Commencement Year.
5.6 Unplanned In-Service Benefit. A Participant may elect to receive
their Retirement Benefit as an Unplanned In-Service Benefit at
any time by providing the Plan Committee with a written election
to do so. In consideration for receiving an Unplanned in-Service
Benefit, such Participant shall permanently forfeit an amount
equal to ten percent (10%) of their retirement benefit and forgo
all future participation in the Plan.
5.7 Financial Hardship Benefit. A Participant may request a portion
of their retirement benefit as a financial hardship benefit at
any time by providing the Plan Committee, to its satisfaction,
with a written election to do so, proof of an unforeseeable
financial hardship, and proof that all other financial resources
have been explored and utilized. The amount of a financial
hardship benefit shall be limited to the lesser of the amount
needed for the financial hardship or such Participant's
retirement benefit. In consideration for receiving a financial
hardship benefit, the Participant will not be permitted to make
further contributions to the Plan for the remainder of the Plan
Year and the following Plan Year.
6.0 Distributions.
6.1 Forms of Benefits. The Company shall pay benefits in the form
associated with type of benefit elected by the Participant, and,
to the extent a type of benefit may be distributed in various
forms, the Company shall pay benefits in the form elected by the
Participant. The forms of benefits associated with the types of
benefits are the following:
(A) Retirement Benefit, Termination of Service Benefit,
Disability Benefit, and Death Benefit shall be paid in
(i) one lump sum;
(ii) 5 yearly installments;
(iii) 10 yearly installments; or
(iv) 15 yearly installments;
(B) In-Service Withdrawal shall be paid as provided in
Section 5.5 above;
(C) Unplanned In-Service Benefit shall be paid in one lump
sum; and
(D) Financial Hardship Benefit shall be paid in one lump
sum.
6.2 Commencement of Payments. The Company will pay, or begin to pay,
the Types of Benefits under this Plan to the Participant in
accordance with the following:
<PAGE> 8
(A) Retirement Benefit, Termination of Service Benefit,
Disability Benefit and Death Benefit payments shall
commence on the later of
(i) The date specified in the Participant's initial
election form or
(ii) January 15th of the Plan Year immediately
following the date on which the Participant
retires, terminates service, becomes disabled,
or dies;
(B) In-Service Withdrawal payments shall commence on the
date designated by the Participant on their written
election pursuant to Section 2.4, provided that such
payments are from Participant contributions that have
been in such Participant's account for at least three
years;
(C) Unplanned In-Service Benefit payments shall commence no
later than sixty-five (65) days after a written request
for an Unplanned In-Service Benefit is received by the
Committee;
(D) Financial Hardship Benefit payments shall commence no
later than sixty-five (65) days after a request for a
Financial Hardship Benefit is approved by the Plan
Committee.
7.0 Amendments, Termination of Plan, Change of Control.
7.1 Amendments. The Company reserves the right to amend the Plan at
any time by resolution of the CFO. The CFO will determine the
effective date of any such amendment. The amendment may not
deprive any Participant or Beneficiary of any portion of a
benefit under the terms of this Plan at the time of the
amendment.
7.2 Termination of Plan. The Company reserves the right to terminate
the Plan at any time by resolution of the CFO. In the event of
Plan termination, the Company will calculate the Retirement
Benefit of each Participant and distribute such amounts to the
Participant or Beneficiary in a lump sum within thirty (30) days
of the Plan's termination.
7.3 Change in Control. In the event of a Change in Control, the Plan
shall terminate and the provisions in Section 7.2 shall control.
8.0 Benefits not Funded. Participants and Beneficiaries have the
status of unsecured creditors of the Company, and the Plan
constitutes a mere promise by the Company to make benefit
payments in the future. A Participant's or Beneficiary's
interest in the Plan is an unsecured claim against the general
assets of the Company, and neither the Participant nor a
Beneficiary has any right against the account until the Plan has
distributed the benefit. All amounts credited to an account are
the general assets of the Company and may be disposed of or used
by the Company in such manner as it determines.
It is the intention of the parties that this Plan shall
constitute an unfunded arrangement maintained for the purpose of
providing deferred compensation for a select group of management
or highly compensated employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974.
<PAGE> 9
9.0 Miscellaneous.
9.1 Designation of Beneficiary. Each Participant shall designate, in
writing, prior to the date they first become a Participant in
the Plan, one or more beneficiaries to receive their benefits
under the provisions of Section 5.4. The Participant shall file
the written designation with the Plan Committee. The Participant
may revoke a previous beneficiary designation by filing a new
written beneficiary designation with the Plan Committee.
In any event, if a Participant or Beneficiary who has designated
another beneficiary is divorced, all beneficiary designation
executed prior to the effective date of the dissolution of
marriage (or other decree or order entered under applicable
state law) are automatically revoked under the term of this
Section 9.1. In such event, the Participant or Beneficiary may
designate one or more Beneficiaries in accordance with the terms
of this Section 9.1. If none is made following the effective
date of the dissolution of the marriage, the individual's
benefits shall pass under the laws of interstate succession and
the terms of the next following paragraph.
If a Participant fails to file a valid designation of
beneficiary with the Plan Committee under the provisions of this
Section 9.1, or if a designated beneficiary fails to survive or
receive any or all payments due hereunder, then the death
benefit payable under this Plan shall be payable to the
Participant's (or the Beneficiary's) spouse; if no spouse
survives, then the Participant's (or Beneficiary's) children,
with equal shares among living children and with the living
descendants of a deceased child receiving equal portions of the
deceased child's share; in the absence of spouse or descendants,
to the Participant's (or Beneficiary's) parents; and in the
absence of spouse, descendants or parents, to the Participant's
(Beneficiary's) brothers and sisters, with the living
descendants of a deceased brother and those of a deceased sister
receiving equal portions of the deceased brother's or sister's
share; in the absence of any of the persons name herein, to the
Participant's (or beneficiary's) estate.
For purposes of this Section 9.1, the term "descendant" means
all persons who are descended from the person referred to either
by birth or to legal adoption by such person, and "child" or
"children" includes adopted children.
9.2 Benefits Not Assignable. The rights of each Participant are not
subject in any manner or anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of the Participant nor any Beneficiary.
Neither the Participant nor Beneficiary may assign, transfer or
pledge the benefits under this Plan. Any attempt to assign,
transfer or pledge a Participant's benefits under this Plan is
void.
9.3 Benefit. This Plan constitutes an agreement between the Company
and each of the Participants which is binding upon and inures to
the Company, its successors and assigns and upon the Participant
and their heirs and legal representatives
<PAGE> 10
9.4 Headings. The headings of the Articles and Sections of this Plan
are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its
provisions.
9.5 Notices. All notices requests, demands, and other communication
under this Plan shall be in writing and shall be deemed to have
been duly given on the date of service if served personally on
the party to whom notice is to be given, or on the third day
after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified (return
receipt requested), postage prepaid, and properly addressed to
the last known address to each party as set forth on the first
page thereof. Any party may change its address for purposes of
this Section by giving the other parties written notice of the
new address in the manner set forth above.
9.6 No Loans. The Plan does not permit any loans to be made to any
Participant or Beneficiary.
9.7 Gender Usage. The use of the masculine gender includes the
feminine gender for all purposes of this Plan.
9.8 Expenses. Costs of administration of the Plan shall be paid by
the Company.
IN WITNESS WHEREOF, the Company has adopted the Plan on
_________________, 19__, effective January 1, 1999.
IDEC PHARMACEUTICALS CORPORATION
By: /s/ Phillip M. Schneider
---------------------------------
Phillip M. Schneider
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 68,505
<SECURITIES> 144,684
<RECEIVABLES> 1,266
<ALLOWANCES> 114
<INVENTORY> 9,487
<CURRENT-ASSETS> 247,976
<PP&E> 38,949
<DEPRECIATION> 18,675
<TOTAL-ASSETS> 275,605
<CURRENT-LIABILITIES> 15,759
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 136,631
<TOTAL-LIABILITY-AND-EQUITY> 136,651
<SALES> 0
<TOTAL-REVENUES> 55,805
<CGS> 0
<TOTAL-COSTS> 22,240
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,629
<INCOME-PRETAX> 25,951
<INCOME-TAX> 1,234
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,717
<EPS-BASIC> 1.21
<EPS-DILUTED> 1.01
</TABLE>
