<PAGE>
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 PERIOD ENDED JUNE 30, 1998
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-28324
BIOTRANSPLANT INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 04-3119555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CHARLESTOWN NAVY YARD, BUILDING 75 THIRD AVENUE
CHARLESTOWN, MASSACHUSETTS 02129
(Address of principal executive offices)
(617) 241-5200
(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, 1998, there were 8,578,743 shares of the Registrant's Common
Stock outstanding.
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998...............................3
Condensed Consolidated Statement of Operations for the three and six months ended June 30, 1997
and 1998, and for the period from inception (March 20, 1990) to June 30, 1998........................4
Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 1997 and 1998,
and for the period from inception (March 20, 1990) to June 30, 1998..................................5
Notes to Condensed Consolidated Financial Statements..........................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................................................8
PART II. OTHER INFORMATION
ITEM 1. - 6. .........................................................................................................11
SIGNATURES..........................................................................................12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
December 31, 1998
1997 (Unaudited)
------------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,784,229 $ 10,541,253
Short-term investments 19,862,617 12,201,247
Accounts receivable - -
Prepaid expenses and other current assets 1,238,500 988,695
------------------- ----------------
Total current assets 30,885,346 23,731,195
Property and equipment - net 1,003,249 893,199
Long-term investments 1,015,202 -
Other assets 34,727 18,135
=================== ================
TOTAL ASSETS $ 32,938,524 $ 24,642,529
=================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current obligation under capital leases $ 177,667 $11,317
Accounts payable 289,535 309,530
Accrued expenses 2,182,216 1,878,033
Deferred revenue 4,125,000 875,000
------------------- ----------------
Total current liabilities 6,774,418 3,073,880
------------------- ----------------
Long-term obligation under capital leases 10,042 4,170
------------------- ----------------
Stockholders' equity:
Preferred stock, $.01 par value, authorized 2,000,000 shares; issued and
outstanding - no shares - -
Common stock, $.01 par value, authorized 25,000,000 shares; issued and
outstanding 8,575,390 shares at December 31, 1997 and 8,578,743 shares
at June 30, 1998
85,754 85,787
Additional paid-in capital 65,330,483 65,342,146
Accumulated deficit (39,262,173) (43,863,454)
------------------- ----------------
Total stockholders' equity 26,154,064 21,564,479
=================== ================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,938,524 $ 24,642,529
=================== ================
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Cumulative
June 30, June 30, Since
1997 1998 1997 1998 Inception
----------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 3,000,000 $ - $ 3,000,000 $ - $ 14,000,000
Research and development 1,750,000 875,000 3,000,000 3,250,000 24,625,000
Interest income 468,085 342,728 872,802 759,311 4,312,189
----------------- ----------------- ---------------- ----------------- --------------
Total revenues 5,218,085 1,217,728 6,872,802 4,009,311 42,937,189
----------------- ----------------- ---------------- ----------------- --------------
Expenses:
Research and development 3,863,044 3,578,174 7,231,287 7,263,756 69,795,208
General and administrative 933,653 584,240 1,602,237 1,338,657 15,247,280
Interest 16,541 2,654 36,647 8,179 1,758,155
----------------- ----------------- ---------------- ----------------- --------------
Total expenses 4,813,238 4,165,068 8,870,171 8,610,592 86,800,643
----------------- ----------------- ----------------- ----------------- --------------
Net (income) loss $ 404,847 $ (2,947,340) $ (1,997,369) $ (4,601,281) $ (43,863,454)
================= ================= ================ ================= ==============
Basic and diluted net income
(loss) per common share $ 0.05 $ (0.34) $ (0.23) $ (0.54)
================= ================= ================ =================
Weighted average common shares
outstanding 8,569,006 8,578,743 8,565,216 8,578,724
================= ================= ================ =================
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Cumulative
June 30, Since
1997 1998 Inception
----------------- ----------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,997,369) $ (4,601,281) $(43,863,454)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 292,807 219,459 3,345,687
Noncash interest expense - - 465,477
Noncash expenses related to options and warrants 16,594 16,594 1,168,652
Changes in current assets and liabilities:
Accounts receivable (250,000) - -
Deposits and prepaid expenses 379,737 249,805 (988,695)
Accounts payable 30,081 19,995 309,530
Accrued expenses 489,938 (304,184) 1,878,032
Deferred revenue 3,500,000 (3,250,000) 875,000
----------------- ----------------- -------------
Net cash provided by (used in) operating activities 2,461,788 (7,649,612) (36,809,771)
----------------- ----------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (111,497) (109,410) (3,615,691)
Disposal of property and equipment, net - - 28,040
Purchases of investments (9,119,176) (6,356,467) (63,607,185)
Proceeds from investments 13,244,081 15,033,038 51,405,937
----------------- ----------------- -------------
Net cash provided by (used in) investing activities 4,013,408 8,567,161 (15,788,899)
----------------- ----------------- -------------
Cash flows from financing activities:
Proceeds from convertible notes payable to stockholders - - 9,400,000
Payments of obligations under capital leases (209,979) (172,221) (2,178,723)
Proceeds from sale/leaseback of equipment - - 771,968
Net proceeds from equipment leases - - 1,422,240
Net proceeds from sale of redeemable convertible preferred stock - - 25,661,526
Proceeds from sale of common stock 37,981 11,696 28,062,912
----------------- ----------------- -------------
Net cash provided by (used in) financing activities (171,998) (160,525) 63,139,923
----------------- ----------------- -------------
Net increase in cash and cash equivalents 6,303,198 757,024 10,541,253
Cash and cash equivalents, beginning of period 6,563,957 9,784,229 -
----------------- ----------------- -------------
Cash and cash equivalents, end of period $ 12,867,155 $ 10,541,253 $ 10,541,253
----------------- ----------------- -------------
----------------- ----------------- -------------
Supplemental disclosures and noncash transactions:
Increase in equipment under capital leases $ - $ - $ (2,210,270)
----------------- ----------------- -------------
----------------- ----------------- -------------
Conversion of convertible notes payable to stockholders and
accrued interest into redeemable convertible preferred stock $ - $ - $ 9,905,710
----------------- ----------------- -------------
----------------- ----------------- -------------
Issuance of warrants $ - $ - $ 741,737
----------------- ----------------- -------------
----------------- ----------------- -------------
Interest paid during the period $ 15,285 $ 6,036 $ 1,393,407
----------------- ----------------- -------------
----------------- ----------------- -------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Operations and Basis of Presentation
BioTransplant Incorporated (the "Company") was incorporated on March 20, 1990.
The Company is developing proprietary pharmaceuticals and organ transplantation
systems which represent a comprehensive approach to inducing functional
tolerance in humans.
The Company is in the development stage and is devoting substantially all of its
efforts toward product research and development and raising capital. The Company
is subject to a number of risks similar to those of other development stage
companies, including dependence on key individuals, competition from larger
companies, the development of commercially usable products, obtaining regulatory
approval for products under development, the development and marketing of
commercial products, and the need to obtain adequate additional financing
necessary to fund the development of its products.
The interim financial statements herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and include, in the opinion of management, all
adjustments, consisting of normal, recurring adjustments, necessary for a fair
representation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The results for the interim periods
presented are not necessarily indicative of results to be expected for the
fiscal year or any future period. These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, as filed with the Securities and
Exchange Commission.
2. Cash Equivalents and Investments
Cash equivalents include short-term, highly liquid investments with original
maturities of less than three months from the date of purchase. Short-term
investments consist primarily of corporate notes and securities issued by the
United States Treasury or other United States government agencies with original
maturities of greater than three months and remaining maturities of less than
one year. Long-term investments consist primarily of corporate notes with
remaining maturities of greater than one year. In accordance with Financial
Accounting Standards Board Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", the Company's investments are
classified as held-to-maturity and are stated at amortized cost, which
approximates market value.
The Company held the following investments at December 31, 1997 and June 30,
1998:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
--------------- ----------------
<S> <C> <C>
Short-term:
United States Treasury and Agency Securities
(average maturity of 2 months) $ 2,000,000 $ -
Corporate Bonds (average maturity of 4 months) 16,862,948 11,201,340
Commercial Paper (average maturity of 8 and 5 months) 999,669 999,907
=============== ================
$19,862,617 $12,201,247
=============== ================
Long-term:
Corporate Bonds (average maturity of 16 months) $ 1,015,202 $ -
=============== ================
</TABLE>
6
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited)
3. Net Loss Per Common Share
Net loss per common share is based on the weighted average number of common
shares outstanding during the periods presented, in accordance with Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share". Diluted net
loss per common share is the same as basic net loss per common share as the
inclusion of stock issuable pursuant to options and warrants would be
antidilutive.
4. Revenue Recognition
Substantially all of the Company's license and research and development revenues
are derived from two collaborative research arrangements. Annual research and
development payments are recognized on a straight-line basis over the period of
the contract, which approximates when work is performed and costs are incurred.
License fee revenue represents technology transfer fees received for rights to
certain technology of the Company. License fees are recognized as revenue when
earned. Deferred revenue represents amounts received in advance of revenue
recognition for research and development. Research and development expenses in
the accompanying consolidated statements of operations include funded and
unfunded expenses.
5. Term Note
In September 1997, the Company entered into a term note with a bank, whereby the
Company may borrow up to $500,000 for certain equipment and fixtures during a
specified drawdown period, after which time the outstanding balance will become
payable in 36 equal monthly principal installments plus interest. This term note
bears annual floating interest at the Bank's Prime Rate (8.50% at June 30, 1998)
during the drawdown period with an option to convert during the repayment period
to an annual fixed rate at the three month London Interbank Offered Rate
("LIBOR") (5.69% at June 30, 1998) plus 2.25%. This term note is secured by
equipment and fixtures purchased under these borrowings. There were no
borrowings outstanding under this term note at June 30, 1998.
7
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Since commencement of operations in 1990, the Company has been a development
stage company engaged primarily in the research and development of proprietary
pharmaceuticals and organ transplantation systems which represent a
comprehensive approach to inducing functional tolerance in humans. The major
sources of the Company's working capital have been the proceeds from sales of
equity securities, sponsored research funding and license fees and capital lease
financings. The Company has not generated any revenues from the sale of products
to date, and does not expect to receive any product revenues for several years.
The Company will be required to conduct significant research, development,
testing and regulatory compliance activities that, together with general and
administrative expenses, are expected to result in significant and increasing
operating losses for at least the next several years.
In 1993, and as amended and restated in September 1995, the Company and Novartis
entered into a collaboration agreement for the development and commercialization
of xenotransplantation products utilizing gene transduction. Under the
agreement, Novartis committed research funding through March 1998 of $20.0
million and agreed to pay license fees of $10.0 million. All funds were received
as of March 31, 1998. Novartis has also agreed to fund certain development and
premarketing costs of such products, portions of which, under certain
circumstances, may be repayable from the Company's operating profits from sales
of such products.
In October 1997, the Company and Novartis expanded their relationship in
xenotransplantation by entering into a collaboration and license agreement for
the development and commercialization of xenotransplantation products utilizing
the Company's proprietary mixed bone marrow chimerism technology. Under the
agreement, the Company may receive from Novartis research funding, license fees,
and milestone payments of up to $36.0 million. As of June 30, 1998, research
funding of $3.5 million and license fees of $2.0 million had been received. In
addition to research funding, Novartis will also fund certain development and
premarketing costs of such products. Portions of these costs may be repayable
under certain circumstances.
In October 1995, the Company and MedImmune formed a collaborative research
agreement for the development of products to treat and prevent organ rejection.
MedImmune paid the Company a $2.0 million license fee at the time of execution
of the agreement, and agreed to fund and assume responsibility for clinical
testing and commercialization of BTI-322/MEDI-507 and other related products.
MedImmune has agreed to provide research support and make milestone payments
which could total up to an additional $14.0 million, up to $12.0 million of
which is repayable from royalties on such products.
Results of Operations
Three months Ended June 30, 1998 and 1997
Revenues decreased to $1.2 million for the three months ended June 30, 1998 from
$5.2 million for the three months ended June 30, 1997. The anticipated decrease
in revenues was primarily due to $850,000 in sponsored research funding from
Novartis during the three months ended June 30, 1998, compared to a $3.0 million
license fee and $1.5 million in sponsored research funding from Novartis and
$250,000 in sponsored research funding from MedImmune during the three months
ended June 30, 1997. Interest income decreased to $343,000 for the three months
ended June 30, 1998 from $468,000 for the three months ended June 30, 1997. The
decrease was due primarily to lower cash balances available for investment.
Research and development expenses decreased to $3.6 million for the three months
ended June 30, 1998 from $3.9 million for the three months ended June 30, 1997.
This decrease was primarily due to decreases in the purchase of research
supplies and support services in the three months ended June 30, 1998 compared
to the three months ended June 30, 1997.
General and administrative expenses decreased to $584,000 for the three months
ended June 30, 1998 from $934,000 for the three months ended June 30, 1997. This
decrease was primarily due to decreases in outside professional services
rendered in connection with a reduction in market research and business
development in the three months ended June 30, 1998 compared to the three months
ended June 30, 1997.
Interest expense decreased to $3,000 for the three months ended June 30, 1998
from $17,000 for the three months ended June 30, 1997. The decrease was
primarily due to decreasing balances on existing obligations under capital
leases.
As a result of the above factors the Company generated a net loss for the three
months ended June 30, 1998 of $2.9 million, or $0.34 per share, compared to net
income of $405,000, or $0.05 per share for the three months ended June 30, 1997.
8
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
Six months Ended June 30, 1998 and 1997
Revenues decreased to $4.0 million for the six months ended June 30, 1998
from $6.9 million for the six months ended June 30, 1997. The anticipated
decrease in revenues was due to decreased research and development revenues
which primarily consisted of funding from Novartis of $3.3 million for the
six months ended June 30, 1998 compared to $5.5 million for the six months
ended June 30, 1997. The six months ended June 30, 1997 included a $3.0
million license fee for certain gene therapy related technology. Interest
income decreased to $859,000 for the six months ended June 30, 1998 from
$873,000 for the six months ended June 30, 1997. The decrease was due
primarily to lower cash balances available for investment.
Research and development expenses increased to $7.3 million for the six months
ended June 30, 1998 from $7.2 million for the six months ended June 30, 1997.
This increase was primarily due to increases in research and development staff
partially offset by decreases in the purchase of research supplies and support
services.
General and administrative expenses decreased to $1.3 million for the six months
ended June 30, 1998 from $1.6 million for the six months ended June 30, 1997.
This decrease was primarily due to decreases in outside professional services
rendered in connection with a reduction in market research and business
development in the six months ended June 30, 1998 compared to the six months
ended June 30, 1997.
Liquidity and Capital Resources
In May 1996, the Company completed an initial public offering of 3,220,000
shares of common stock at a price of $9.50 per share, and received net proceeds
of approximately $28.0 million. In addition, all outstanding shares of
redeemable convertible preferred stock were automatically converted into
5,202,154 shares of common stock upon the closing of the initial public
offering.
Since its inception and prior to the completion of the Company's initial public
offering, the Company's operations had been funded principally through the net
proceeds of an aggregate of $36.2 million from private placements of equity
securities. The Company has also received $35.5 million from research and
development and collaboration agreements with Novartis, $4.0 million from an
alliance agreement with MedImmune and $2.2 million in equipment lease financing.
The proceeds of the private placements, notes payable and capital leases and
cash generated from the corporate collaborations with Novartis and MedImmune
have been used to fund operating losses of approximately $43.9 million and the
investment of approximately $4.2 million in equipment and leasehold improvements
through June 30, 1998. In September 1997, the Company entered into a term note
with a bank, whereby the Company may borrow up to $500,000 for certain equipment
and fixtures. There were no borrowings outstanding under this term note at June
30, 1998. The Company had no significant commitments as of June 30, 1998 for
capital expenditures.
The Company had cash and cash equivalents and investments of $22.7 million as of
June 30, 1998.
The Company anticipates that its existing funds should be sufficient to fund its
operating and capital requirements as currently planned through at least June
30, 1999. However, the Company's cash requirements may vary materially from
those now planned, due to many factors, including, but not limited to, the
progress of the Company's research and development programs, the scope and
results of preclinical and clinical testing, changes in existing and potential
relationships with corporate collaborators, the time and cost in obtaining
regulatory approvals, the costs involved in obtaining and enforcing patents,
proprietary rights and any necessary licenses, the ability of the Company to
establish development and commercialization capacities or relationships, the
costs of manufacturing and other factors, including those discussions below
under "Factors Affecting Future Operating Results".
The Company expects to incur substantial additional costs, including costs
related to research and development activities, preclinical studies, clinical
trials, obtaining regulatory approvals, manufacturing and the expansion of its
facilities. The Company will need to raise substantial additional funds through
additional financings including public or private equity offerings and
collaborative arrangements with corporate partners. There can be no assurance
that funds will be available on terms acceptable to the Company, if at all. If
adequate funds are not available, the Company may be required to delay, scale
back or eliminate certain of its product development programs or to license to
others the right to commercialize products or technologies that the Company
would otherwise seek to develop and commercialize itself, any of which would
have a material and adverse effect on the Company.
The Company is conducting a software review to identify functions that may need
correction to be "Year 2000" compliant. The Year 2000 problem is the result of
computer programs being written to recognize two digits rather than four to
define the applicable year causing computer programs to interpret a date using
"00" as the year 1900 rather than the year 2000, which could result in software
failures or miscalculations.
9
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
The Company is evaluating its information systems and corporate technologies in
an effort to ensure that the software used to manage its business will continue
to function properly in the year 2000. All evaluation costs will be expensed as
incurred. While the Company believes that the software used to manage its
business will be Year 2000 compliant and does not expect Year 2000 issues to
have a significant impact on the Company's ongoing results of operations, the
Company may experience disruptions in its business operations as a result of
software used by vendors or suppliers that is not year 2000 compliant. There can
be no assurance that Year 2000 problems will not be encountered or that the
costs incurred to resolve such problems will not be material.
FACTORS AFFECTING FUTURE OPERATING RESULTS
This Quarterly Report to Stockholders on Form 10-Q contains forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," "intends," and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the Company's actual results to differ materially from those indicated by
such forward-looking statements. These factors include, without limitation,
those set forth below and elsewhere in this Quarterly Report to Stockholders on
Form 10-Q and in the Section titled "Business - Factors That May Affect Results"
in the Company's Annual Report to Stockholders on Form 10-K for the year ended
December 31, 1997, as filed with the Securities and Exchange Commission, which
Section is incorporated herein by reference.
The Company is in the early development stage and has been engaged, to date,
primarily in organizational and research and development activities. The
Company has not yet completed the development of, or conducted significant
human testing with respect to, any product. In particular, the Company's
AlloMune-TM- and XenoMune-TM- Systems are based upon approaches which are novel
and, to the Company's knowledge, have never been achieved in humans,
including by the Company. There can be no assurance that any of the Company's
products will be successfully developed, prove to be safe and efficacious in
clinical trials, meet applicable regulatory standards, obtain required
regulatory approvals, be capable of being produced in commercial quantities
at reasonable costs or be successfully marketed.
The Company has a substantial accumulated deficit. The Company expects to incur
losses for at least the next several years and that such losses will increase as
the Company expands its research and development activities. The Company will
require substantial additional funds for its research and product development
programs, operating expenses, the pursuit of regulatory approvals and expansion
of its production, sales and marketing capabilities. Adequate funds for these
purposes, whether through equity or debt financings, collaborative or other
arrangements with corporate partners or from other sources, may not be available
when needed or on terms acceptable to the Company. Insufficient funds could
require the Company to delay, scale back or eliminate certain of its research
and product development programs or to license to third parties to commercialize
products or technologies that the Company would otherwise develop or
commercialize itself.
The Company's strategy for development and commercialization of its products
entails entering into arrangements with third parties. There can be no assurance
that the Company will be able to maintain its existing arrangements or establish
additional arrangements that the Company deems necessary or acceptable to
develop and commercialize its potential pharmaceutical products or that such
arrangements will be successful. If any of the Company's strategic partners were
to breach or terminate its agreement with the Company or otherwise fail to
conduct its collaborative activities successfully in a timely manner, such delay
or termination could have a material adverse effect on the Company's business,
financial condition and results of operations.
Proprietary rights relating to the products of BioTransplant will be protected
from unauthorized use by third parties only to the extent that they are covered
by valid and enforceable patents or are maintained in confidence as trade
secrets. There may be pending or issued third-party patents relating to the
products of BioTransplant and BioTransplant may need to acquire licenses to, or
to contest the validity of, any such patents. It is likely that significant
funds would be required to defend any claim that BioTransplant infringes a
third-party patent. There can be no assurance that any license required under
any such patent would be made available.
Other factors that may affect the Company's future operating results include
the inherent risk of product liability claims which may result from the
testing, marketing and sale of human therapeutic products, the Company's
fluctuations in quarterly operating results, the Company's ability to
continue to attract and retain qualified management and scientific staff,
risks associated with the regulatory approval process, and its ability to
anticipate or respond adequately to rapid and significant technological
changes that may develop in the field of human therapeutic products.
10
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Response: None
ITEM 2. CHANGES IN SECURITIES
Response: None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Response: None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on Tuesday, May 19, 1998.
The following represents the results of the voting on proposals submitted to a
vote of stockholders at such meeting:
1. Proposal to elect seven directors for the ensuing year.
<TABLE>
<CAPTION>
Number of Votes
For Abstaining
-------------------- -------------------
<S> <C> <C>
Elliot Lebowitz, Ph.D. 7,285,302 30,250
Donald R. Conklin 7,285,302 30,250
William W. Crouse 7,285,302 30,250
James C. Foster, J.D. 7,285,302 30,250
Daniel O. Hauser, Ph.D. 7,285,302 30,250
Robert A. Vukovich, Ph.D. 7,285,302 30,250
</TABLE>
2. Proposal to ratify the selection by the Board of Directors of Arthur
Andersen LLP as the Company's independent accountants for 1998.
<TABLE>
<CAPTION>
Number of Votes Number of
For Against Abstaining Broker Non-Votes
---------------- ----------------- ---------------------- ---------------------
<S> <C> <C> <C>
7,287,852 0 0 700
</TABLE>
ITEM 5. OTHER INFORMATION
Response: None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
+10.1 Miniswine Transfer and Maintenance Agreement
27 Financial Data Schedule.
b) Reports on Form 8-K
None.
+ Confidential materials omitted and filed seperately with the Securities and
Exchange Commission
11
<PAGE>
BIOTRANSPLANT INCORPORATED AND SUBSIDIARY
(A Development Stage Company)
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.
BioTransplant Incorporated
(Registrant)
Date: August 13, 1998 /s/ Elliot Lebowitz
----------------------------------------------
Elliot Lebowitz
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Richard V. Capasso
----------------------------------------------
Richard V. Capasso
Vice President, Finance and Treasurer
(Principal Financial and Accounting Officer)
12
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
MINI-SWINE TRANSFER AND MAINTENANCE AGREEMENT
THIS MINI-SWINE TRANSFER AND MAINTENANCE AGREEMENT (the "Agreement") is
made as of the 1st day of January, 1998 ("EFFECTIVE DATE"), by and between
Charles River Laboratories, Inc., a Delaware corporation with its principal
offices located at 251 Ballardvale Street, Wilmington, Massachusetts 01887, and
Wilmington Partners, L.P., a Delaware Limited Partnership controlled by Charles
River Laboratories, Inc. (hereinafter individually and collectively referred to
as "CRL"), and BioTransplant Incorporated, a Delaware corporation with its
principal office located at Building 75, 3rd Avenue, Charlestown Navy Yard,
Charlestown, MA 02124 ("BTI").
WHEREAS, CRL has [**] from the [**] and, desires to transfer to BTI
those inbred miniature swine derived from [**] (the "MINI-SWINE"); and
WHEREAS BTI desires to receive such MINI-SWINE and to have the
MINI-SWINE maintained in its current health disease profile by CRL which has
both adequate facilities and personnel with expertise in the care, breeding and
husbandry of swine; and
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
WHEREAS, CRL and BTI desire to enter into an arrangement whereby CRL
will provide for the maintenance of such MINI-SWINE at the CRL facilities and
will exclusively provide BTI with a continuous supply of healthy MINI-SWINE for
use in BTI's transplantation research and commercial activities.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound, CRL and B hereby agree as
follows:
ARTICLE 1 - DEFINITIONS
1.1 "PRODUCT" shall mean MINI-SWINE having organs suitable for
transplantation into humans and/or organs obtained from such MINI-SWINE.
1.2 "SPECIFIC PATHOGEN FREE" shall mean the current condition of the
MINI-SWINE with respect to freedom from swine pathogens and specified [**]
disease-free certifications, as set forth in Exhibit A.
1.3 "SPECIFICATIONS" shall mean the health specifications for PRODUCT
to be set forth in Exhibit B and those required by applicable laws, regulations
and regulatory approvals for PRODUCT.
ARTICLE 2 - TRANSFER AND ASSIGNMENT
2.1 In consideration of the parties entering into this Agreement for
the maintenance of the MINI-SWINE and in view of the fact that [**], CRL hereby
-2-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
transfers, conveys and assigns to BTI and its legal representatives all of its
right, title and interest in and to all MINI-SWINE in its possession on the
EFFECTIVE DATE.
ARTICLE 3 - MAINTENANCE OF MINI-SWINE
3.1 CRL will house, feed, care for and breed on a daily basis the
MINI-SWINE as determined by BTI during the term of this Agreement in a manner
which is most conducive to breeding and maintaining healthy MINI-SWINE. BTI will
give CRL [**] advance notice of the number of MINI-SWINE to be maintained for
the year. The MINI-SWINE will at all times be identified and maintained in
buildings apart from any other CRL animal colonies. CRL will maintain the
MINI-SWINE in accordance with high quality animal husbandry standards and
appropriate government and AAALAC requirements, using techniques and procedures
for maintaining thriving swine colonies. BTI will have the right to reasonably
direct and instruct CRL in the care of the MINI-SWINE when and as deemed
necessary or appropriate by BTI.
3.2 The CRL facilities used to house the MINI-SWINE will be kept
reasonably clean, secure, and adequately protected from the elements. The stalls
and other facilities used to contain the MINI-SWINE herd will be in accordance
with applicable USDA standards and comprised on non-toxic materials. BTI
acknowledges that the MINI-SWINE are currently housed according to USDA
standards for agricultural animals and that the [**]. The MINI-SWINE will be
provided with water
-3-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
and fed at least once each day. The MINI-SWINE's diet will consist of those
items commonly fed to MINI-SWINE as approved by BTI.
3.3 (a) CRL will provide routine medical care for the MINI-SWINE, such
as treatment of minor cuts, abrasions and other minor external traumatic
injuries. The MINI-SWINE will be administered vaccinations and/or antibiotic
preparations and fluid therapy as may be required for individual treatment of
minor illnesses.
(b) CRL will also supply non-routine medical care to the MINI-SWINE
herd such as surgical procedures including but not limited to repair of hernias,
treatment for communicable disease outbreaks and autopsies.
3.4 CRL will use its best efforts to employ any reasonable special
breeding techniques with the MINI-SWINE which BTI may from time to time require.
These techniques, which may be directed by BTI or its designee will be
communicated to CRL on an ongoing basis.
3.5 Each MINI-SWINE will be identified in a manner which will
individually identify the animal while enabling BTI to maintain appropriate
census records. CRL will maintain a current, accurate and reasonably detailed
inventory of the MINI-SWINE equivalent to the inventory currently maintained for
CRL's own swine colonies and which is amenable to data handling by BTI. The
method of keeping inventory may not be changed without prior approval from BTI.
These records will be made available to BTI at its request and will contain
appropriate demographic and census information including births, deaths and
medical treatment history. BTI shall have the continuing right to visit the CRL
facilities upon
-4-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
reasonable advance notice to inspect each facility, the MINI-SWINE and the
applicable records and to meet the CRL staff to insure compliance by CRL with
the terms of this Agreement.
3.6 CRL shall maintain MINI-SWINE under conditions which will insure
that they remain SPECIFIC PATHOGEN FREE and shall insure that once produced
there will be sufficient MINI- SWINE available to maintain and continue the
colonies thereof, and will test the colonies at appropriate times to insure that
such colonies remain SPECIFIC PATHOGEN FREE. Decisions on isolation, cull,
treatment and/or vaccination in the unlikely event of new pathogens will be made
by BTI or its designee on a case-by-case basis.
3.7 Without limiting any other obligation of CRL to BTI, CRL
acknowledges that the MINI-SWINE are being maintained for the benefit of BTI,
and CRL shall take any and all reasonable steps required to maintain the health,
well-being, and genetic integrity of the MINI-SWINE, including but not limited
to those reasonably required by BTI.
3.8 CRL shall provide to BTI or its designee [**] samples per week from
MINI- SWINE designated by BTI, including genetic quality control samples.
3.9 CRL shall send samples to BTI or its designee for appropriate
quality control testing of all offspring and breeders of the MINI-SWINE at or
before weaning, when necessary.
-5-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
3.10 CRL will assign the equivalent of [**] AALAS certified animal
technicians to perform the required daily tasks described in this Section 2.
[**]; however CRL will make [**]. CRL will also assign a qualified veterinarian
to provide both husandry and diagnostic and veterinary medical services as
needed. BTI shall be notified of the appointment of the person primarily
responsible for the MINI SWINE herd and the veterinarian.
3.11 (a) CRL hereby transfers and assigns to BTI all of its right,
title and interest in and to all information, know-how and technology which
arose out of or was derived from the use or analysis by CRL of the MINI-SWINE
herd for [**] and which may arise during the term of this Agreement.
(b) During the term of this Agreement, CRL shall not [**]
MINI-SWINE are maintained.
3.12 CRL shall take all reasonable steps to insure that the
MINI-SWINE are not lost by a catastrophic event, including but not limited to,
[**] and shall maintain portions of the MINI-SWINE [**]. BTI hereby approves
[**]. In addition, CRL shall maintain [**] in order to maintain [**].
3.13 For the services rendered hereunder, on and after the EFFECTIVE
DATE, BTI shall pay CRL quarterly and, upon receipt of an invoice, CRL's Fully
Allocated Costs for performing such services, [**] provided, however, CRL
services
-6-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
shall be limited to [**] payable quarterly in advance for the first twelve (12)
months of this Agreement, with the first and second quarterly payments totalling
[**], and provided further, that there shall be no additional transfer price for
each individual MINI-SWINE supplied. For the purpose of this Agreement, Fully
Allocated Costs shall mean CRL's Direct and Indirect Costs for the services
performed plus a mutually agreed upon charge for overhead (initially [**]), all
in accordance with generally accepted accounting principles consistently applied
by CRL. Direct Costs shall include [**]. Indirect Costs shall include such items
as [**]. Fully Allocated Costs shall also include the [**] approved in advance
by BTI and CRL and directly related to the performance of the services
hereunder. CRL undertakes to make a good-faith effort to improve its efficiency
in-connection with its performance hereunder and otherwise decrease its Fully
Allocated Costs with respect thereto.
3.14 CRL shall keep full and accurate books of account containing
all particulars that may be necessary for the purpose of calculating its Fully
Allocated Costs hereunder. Such books of account shall be kept at their
principal place of business and, with all necessary supporting data, shall, for
the three (3) years next following the end of the calendar year to which each
shall pertain be open for inspection by an independent certified accountant upon
reasonable notice during normal business hours at BTI's expense for the sole
purpose of verifying such costs, but in no event more than once in each calendar
year. In the event such inspection
-7-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
shall indicate that in any calendar year that such costs are at least [**]
lower than those which were actually paid by BTI, then CRL shall pay the cost
of such inspection.
ARTICLE 4 - OTHER CRL OBLIGATIONS
4.1 CRL will use its reasonable efforts to employ any reasonable
breeding techniques with the MINI-SWINE herd which BTI may from time to time
require.
4.2 CRL will conduct such research with respect to MINI-SWINE as may
reasonably be requested by BTI. Any such research shall be conducted at CRL's
Fully Allocated Costs [**].
4.3 CRL shall not conduct research with MINI- SWINE or PRODUCTS for or
on behalf of any person or entity other than BTI nor shall CRL [**].
4.4 Upon termination of this Agreement: CRL agrees (a) to transfer
and assign all right, title and interest in and to information and inventions
resulting from CRL's activities hereunder and related patent rights, (b) not to
use such information, inventions, or MINI-SWINE, for itself or for or on behalf
of any other person or entity, and (c) to provide BTI with reasonable technical
assistance and sufficient information to enable BTI or its designee to maintain
the MINI-SWINE. The obligations of this Section shall survive termination of
this Agreement.
4.5 CRL shall provide, deliver to, and pick-up from BTI or its
designee, at no additional charge to BTI, [**] MINI-SWINE per year. In the event
that BTI
-8-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
requires [**] MINI-SWINE in any year, CRL shall provide such excess MINI-SWINE
to BTI or its designee after good faith discussion by the parties of any
problems raised thereby.
4.6 CRL agrees that all employees, consultants and agents working on
research hereunder shall be obligated to assign all right, title and interest to
information and inventions resulting from such research and related patent
rights to CRL.
ARTICLE 5 - CONFIDENTIALITY
5.1 During the term of this Agreement, it is contemplated that the
parties will disclose to each other proprietary and confidential technology,
inventions, technical information, biological materials and the like which are
owned or controlled by a party or which a party is obligated to maintain in
confidence and which is designated by a party as confidential ("Party
Confidential Information"). The receiving party agrees to retain the disclosing
party's Party Confidential Information in confidence, and except as permitted
herein not to disclose any such Party Confidential Information to a third party
without the prior written consent of the disclosing party and to use such Party
Confidential Information only for the purposes of this Agreement.
5.2 The obligations of confidentiality will not apply to Party
Confidential Information or information which:
-9-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(i) was known or generally known to the public or in the
possession of the receiving party prior to its
disclosure hereunder; or
(ii) subsequently becomes known to the public by some
means other than a breach of this Agreement,
including publication and/or laying open to
inspection of any patent applications or patents; or
(iii) is a subsequently disclosed to the receiving party by
a third party having a lawful right to make such
disclosure; or
(iv) is required to be disclosed by law or for regulatory
approval provided that the disclosing party takes all
reasonable steps to protect the confidentiality
thereof; or
(v) is independently developed by the receiving party.
5.3 The obligations of Paragraph 5.1 notwithstanding BTI may disclose
Confidential Information of CRL relative to MINI-SWINE and PRODUCT as necessary
in the conduct of its business.
ARTICLE 6 - PATENTS
6.1 (a) Each employee or consultant of CRL who during the course of
maintaining the MINI-SWINE shall make an invention solely or jointly, ("CRL
INVENTOR") shall promptly report such invention to CRL. Each CRL INVENTOR shall
assign all of his rights, title and interest in such invention and patent rights
relating thereto to CRL.
-10-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) CRL shall promptly advise BTI in writing of each invention
so disclosed to CRL. CRL shall assign all right, title and interest in and to
inventions and patent rights to BTI related to xenotransplantation activities.
6.2 With respect to such inventions and patent rights, CRL shall
cooperate with BTI in filing, prosecuting and maintaining such patent rights and
shall sign and cause its employees to sign any and all papers necessary to
assign patent rights to BTI and to enable BTI to file, prosecute and maintain
such patent rights to BTI and to enable BTI to file, prosecute and maintain such
patent rights. Neither CRL nor CRL inventors shall pay any costs for the filing,
prosecution and maintenance of such patent rights.
ARTICLE 7 - COMMERCIAL AGREEMENT
7.1 [**] the date on which BTI expects PRODUCT to be approved by the
FDA and/or commercially available, CRL and BTI shall enter into a commercial
agreement whereby CRL will continue to maintain the MINI-SWINE and supply BTI's
requirements for PRODUCT to be sold by BTI at CRL's Fully- Allocated Costs [**].
7.2 In addition, the commercial agreement shall contain the usual and
customary provisions included in such agreements and a provision that if at any
time (i) CRL is unable to deliver PRODUCT in accordance with the SPECIFICATIONS
or (ii) does not have the capacity or is unable to provide the amount of PRODUCT
-11-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
required by BTI or (iii) cannot perform its obligations hereunder at a
competitive price, BTI may, at its option and without prejudice to any other
remedy it may have, following written notice to CRL and the opportunity to cure
within ninety (90) days thereafter, provide or obtain from a third party its
requirements hereunder. In the event of such a failure by CRL, CRL shall provide
BTI and a third party selected by BTI with sufficient information and technical
assistance to enable such third party or BTI to maintain the MINI-SWINE and
provide PRODUCT in accordance with the SPECIFICATIONS, all at no additional cost
to BTI.
7.3 The Supply Agreement shall provide that PRODUCT shall be provided
to BTI exclusively.
ARTICLE 8 - LICENSES
8.1 (a) Subject to the terms and conditions of this Agreement, CRL
hereby grants to BTI an exclusive, worldwide, royalty-free license, including
the right to grant sublicenses, in, under and to BACKGROUND RIGHTS, to make,
have made, use, sell and have sold in the field of xenotransplantation, [**].
Such licenses, if required, shall survive termination of this Agreement, except
that such licenses shall be cancelled if this Agreement is terminated for
failure of BTI to meet its obligations under this Agreement. For purposes of
this Agreement, BACKGROUND RIGHTS shall mean any and all patents and patent
applications anywhere in the world and
-12-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
any and all data, information, formulas and know-how in which CRL has an
ownership or licensable interest, presently or during the term of this
Agreement.
8.2 For the term of this Agreement and subject to the terms and
conditions of this Agreement, BTI grants to CRL an exclusive worldwide
royalty-free right and license to use patent rights and know-how owned by BTI or
in which BTI has a licensable interest for the limited purpose of enabling CRL
to perform CRL's obligations to BTI under the terms and conditions of this
Agreement.
ARTICLE 9 - WARRANTIES
9.1 Each of CRL and BTI warrants and represents to the other that it
has the full right and authority to enter into this Agreement, and that it is
not aware of any impediment which would inhibit its ability to perform the terms
and conditions imposed on it by this Agreement.
ARTICLE 10 - TERMINATION
10.1 The initial term of this Agreement shall be for five (5) years
from the EFFECTIVE DATE hereof. This Agreement may be renewed for an additional
five (5) year period, by mutual agreement of the parties. Accordingly, the
parties shall meet to discuss, in good faith, such extension, at least one (1)
year prior to the end of the initial term hereunder.
10.2 Upon a material breach of any material obligation of this
Agreement by either party to this Agreement, in the event the breach is not
cured within ninety (90) days after written notice to the breaching party by the
other party, in addition to any other remedy it may have, the other party at its
sole option may terminate this
-13-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Agreement. In the event any such breach is not curable in such period and the
breaching party is diligently attempting to cure the breach, for so long as the
diligent attempt continues the above period shall be extended for an additional
ninety (90) days.
10.3 BTI may terminate this Agreement upon ninety (90) days written
notice to CRL in the event (i) BTI determines that it will no longer maintain a
MINI-SWINE herd, or (ii) CRL cannot perform any of its obligations hereunder at
a price which does not increase more than [**] from year to year during the term
of this Agreement. In the case of clause (ii), the [**] shall be adjusted to
reflect any change in scope, procedures or nature of the relationship requiring
CRL to incur incremental costs in providing services hereunder.
10.4 The obligations of Articles 4 and 11 and Paragraphs 12.2(b) and
12.3 shall survive any termination of this Agreement.
ARTICLE 11 - ASSIGNMENT; SUCCESSORS
11.1 This Agreement shall not be assignable by either of the parties
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that either party, without the consent of the
other may assign this Agreement to an Affiliate or to a successor in interest of
all or substantially all of the portion of the business to which this Agreement
relates.
-14-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
11.2 Subject to the limitations on assignment herein, this Agreement
shall be binding upon and inure to the benefit of said successors in interest
and assigns of BTI and CRL. Any such successor or assignee of a party's interest
shall expressly assume in writing the performance of all the terms and
conditions of this Agreement to be performed by said party.
ARTICLE 12 - INDEMNIFICATION
12.1 BTI agrees to defend, indemnify and hold CRL harmless from and
against all liability, demands, damages, expense or losses arising out of any
use or sale or other disposition of PRODUCT by or through BTI (BTI's customers
or patients), except those which arise from the negligence or willful acts of
CRL. CRL shall promptly notify BTI of any claim covered by this indemnity and
BTI shall have the right to control the defense, settlement or compromise of any
such claim.
ARTICLE 13 - GENERAL PROVISIONS
13.1 The relationship between CRL and BTI is that of independent
contractors. CRL and BTI are not joint venturers, partners, principal and agent,
employer or employee, and have no relationship other than as independent
contracting parties. CRL shall have no power to bind or obligate BTI in any
manner, other than as is expressly set forth in this Agreement. Likewise, BTI
shall have no power to bind or obligate CRL in any manner, except as is
expressly set forth in this Agreement.
13.2 (a) This Agreement sets forth the entire agreement and
understanding between the parties as to research and the rights and licenses
granted
-15-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
under this Agreement and supersedes all prior agreements in this respect.
There shall be no amendments or modifications to this Agreement, except by a
written document which is signed by both parties.
(b) Pursuant to Section 11.2(a) the Research and Supply
Agreement between the parties effective March 1, 1991 ("the Research and Supply
Agreement") is hereby terminated; provided that the provisions of the Research
and Supply Agreement which are designated to survive termination shall survive
as set forth therein.
13.3 This Agreement shall be construed and enforced in accordance with
the laws of the Commonwealth of Massachusetts without reference to its choice of
law principles.
13.4 The headings in this Agreement have been inserted for the
convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular article or section.
13.5 Any delay in enforcing a party's rights under this Agreement or
any waiver as to a particular default or other matter shall not constitute a
waiver of a party's right to the future enforcement of its rights under this
Agreement, excepting only as to an expressed written and signed waiver as to a
particular matter for a particular period of time.
13.6 Any notices given pursuant to this Agreement shall be in writing
and shall be deemed delivered upon the earlier of (i) when received at the
address set forth below (including telefax or personal delivery), or (ii) three
(3) business days
-16-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
after mailed by certified or registered mail in the United States mails, postage
prepaid and properly addressed, with return receipt requested. Notices shall be
delivered to the respective parties as indicated:
To BTI: BioTransplant Incorporated
Building 75
3rd Avenue
Charlestown Navy Yard
Charlestown, MA 02124
Attn: President
To CRL: Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Attn: President
13.7 If any provision(s) of this Agreement are or become invalid, are
ruled illegal by any court of competent jurisdiction or are deemed unenforceable
under then current applicable law from time to time in effect during the term
hereof, it is the intention of the parties that the remainder of this Agreement
shall not be affected thereby, provided that a party's rights under this
Agreement are not materially affected. It is further the intention of the
parties that in lieu of each such provision which is invalid, illegal, or
unenforceable, there be substituted or added as part of this Agreement a
provision which shall be as similar as possible in economic and business
objectives as intended by the parties to such invalid, illegal or unenforceable
provision, but shall be valid, legal and enforceable.
-17-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
IN WITNESS WHEREOF, the parties have set their hand and seal on this
1st day of January 1998.
Date: BIOTRANSPLANT INCORPORATED
By: Elliot Lebowitz
-----------------
Office: President and CEO
-----------------
Date: CHARLES RIVER LABORATORIES, INC.
By: James Foster
-----------------
Office: President
-----------------
Date: WILMINGTON PARTNERS, L.P.
By: James Foster
-----------------
Office: President
-----------------
-18-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT A
SPECIFIC PATHOGEN FREE WITH RESPECT TO THE FOLLOWING
SWINE PATHOGENS
-- [**]
-- [**]
CRL will continue its routine health monitoring screen for common
pathogens of swine which includes [**]. CRL will also continue its current
vaccination program (twice yearly) against the above-described pathogens, as
well as for [**] and additional agents as requested by BTI.
Additionally, all animals in the herd will continue to be given [**].
-19-
<PAGE>
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT B
SPECIFICATIONS
To be set forth [**] the date on which BTI expects Product to be
approved by the FDA and/or commercially available.
-20-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET OF JUNE 30, 1998 AND THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,541,253
<SECURITIES> 12,201,247
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,731,195
<PP&E> 4,175,199
<DEPRECIATION> 3,282,000
<TOTAL-ASSETS> 24,642,529
<CURRENT-LIABILITIES> 3,073,880
<BONDS> 0
0
0
<COMMON> 85,787
<OTHER-SE> 65,342,146
<TOTAL-LIABILITY-AND-EQUITY> 24,642,529
<SALES> 0
<TOTAL-REVENUES> 4,009,311
<CGS> 0
<TOTAL-COSTS> 8,610,592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,179
<INCOME-PRETAX> (4,601,281)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,601,281)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (4,601,281)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
