<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 SEPTEMBER 30, 1996
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: 0-19651
MAGAININ PHARMACEUTICALS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3445668
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
5110 CAMPUS DRIVE, PLYMOUTH MEETING, PENNSYLVANIA, 19462
(Address of principal executive offices and Zip Code)
(610)-941-4020
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $.002 PAR VALUE - 19,357,479 SHARES (NOVEMBER 11, 1996)
<PAGE> 2
MAGAININ PHARMACEUTICALS INC.
(a development stage company)
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Unaudited Statements of Operations for the three and nine months
ended September 30, 1996 and 1995 and for the period June 29,
1987 (Inception) to September 30, 1996.................................... 1
Unaudited Balance Sheets as of September 30, 1996 and December 31,
1995...................................................................... 2
Unaudited Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 and for the period June 29, 1987
(Inception) to September 30, 1996......................................... 3
Notes to Unaudited Financial Statements................................... 4
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 6
PART II - OTHER INFORMATION........................................................... 11
SIGNATURES............................................................................ 13
EXHIBIT INDEX......................................................................... 14
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAGAININ PHARMACEUTICALS INC.
(a development stage company)
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended June 29, 1987
September 30, September 30, (Inception) to
1996 1995 1996 1995 September 30, 1996
-------- -------- -------- --------- ------------------
Revenues:
<S> <C> <C> <C> <C> <C>
Related party contract ...... $ -- $ 70 $ -- $ 208 $ 1,527
Contract and government
grant...................... 37 788 112 871 2,945
-------- -------- -------- --------- ---------
37 858 112 1,079 4,472
-------- -------- -------- --------- ---------
Costs and expenses:
Research and development .... 5,788 4,589 17,870 11,508 74,225
General and administrative .. 789 720 2,378 2,150 19,402
Charge for stock issuance
relating to royalty
buy out.................... 7,080 -- 7,080 -- 7,080
-------- -------- -------- --------- ---------
13,657 5,309 27,328 13,658 100,707
-------- -------- -------- --------- ---------
Loss from operations ........... (13,620) (4,451) (27,216) (12,579) (96,235)
Interest income ................ 546 465 1,648 1,089 6,686
Interest expense ............... (8) (7) (18) (26) (660)
-------- -------- -------- --------- ---------
Net loss ....................... $(13,082) $ (3,993) $(25,586) $ (11,516) $ (90,209)
======== ======== ======== ========= =========
Net loss per share ............. $ (.72) $ (.26) $ (1.47) $ (.83)
======== ======== ======== =========
Weighted average
shares outstanding ........... 18,209 15,081 17,459 13,913
</TABLE>
See accompanying notes to unaudited financial statements.
1
<PAGE> 4
MAGAININ PHARMACEUTICALS INC.
(a development stage company)
BALANCE SHEETS
(unaudited)
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------- ---------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents ........................ $ 1,366 $ 1,880
Short-term investments ........................... 38,627 32,270
Prepaid expenses and other current assets ........ 475 509
--------- ---------
Total current assets ....................... 40,468 34,659
Fixed assets, net ................................... 2,301 1,476
Long-term investments ............................... -- 9,516
Other assets ........................................ 76 76
--------- ---------
Total assets ............................... $ 42,845 $ 45,727
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............ $ 7,021 $ 4,080
Equipment lease obligations - current ............ 130 150
--------- ---------
Total current liabilities .................. 7,151 4,230
Note payable ........................................ 500 --
Equipment lease obligations - long term ............. 66 161
Deferred rent ....................................... 131 143
--------- ---------
Total liabilities .......................... 7,848 4,534
--------- ---------
Commitments, contingencies and other matters
Stockholders' equity:
Preferred stock -- $.001 par value; shares
authorized.........................................
- -- 9,211, none issued ............................... -- --
Common stock -- $.002 par value; shares authorized
- - 45,000; shares issued and outstanding
- - 19,357 and 17,052 ................................. 39 34
Additional paid-in capital .......................... 125,156 105,662
Deficit accumulated during the development stage .... (90,209) (64,623)
Unrealized gain on investments ...................... 11 120
--------- ---------
Total stockholders' equity ................. 34,997 41,193
Total liabilities and stockholders' equity.. $ 42,845 $ 45,727
========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
2
<PAGE> 5
MAGAININ PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, June 29, 1987
------------------------ (Inception) to
1996 1995 September 30, 1996
-------- -------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss ..................................................... $(25,586) $(11,516) $ (90,209)
Adjustments to reconcile net loss to
net cash used in operating activities:
Fair value of stock, options and warrants
issued ............................................ 7,080 -- 8,829
Depreciation and amortization .......................... 428 333 3,612
Deferred rent .......................................... (12) (3) 131
(Increase) decrease in prepaid expenses and other assets 34 (88) (666)
Increase in accounts payable
and accrued expenses .................................. 2,941 836 7,021
-------- -------- ---------
Net cash used in operating activities .............. (15,115) (10,438) (71,282)
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments ..................................... (24,883) (47,332) (179,716)
Proceeds from maturities and sales of investments ............ 27,933 26,354 141,098
Capital expenditures ......................................... (1,253) (136) (3,794)
-------- -------- ---------
Net cash provided by (used in) investing
activities ...................................... 1,797 (21,114) (42,412)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable .................................. 500 -- 500
Payments on capitalized equipment leases ..................... (115) (150) (1,805)
Proceeds from sale of stock and
exercise of options and warrants ........................... 12,419 32,943 116,365
-------- -------- ---------
Net cash provided by
financing activities ............................ 12,804 32,793 115,060
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............ (514) (1,241) 1,366
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................ 1,880 2,550 --
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 1,366 $ 3,791 $ 1,366
======== ======== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ..................... $ 18 $ 26 $ 409
</TABLE>
See accompanying notes to unaudited financial statements.
3
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MAGAININ PHARMACEUTICALS INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
A) BASIS OF PRESENTATION
The accompanying condensed financial statements do not include all of
the information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles, but in the opinion of management, contain all adjustments
(which consist of only normal recurring adjustments) necessary for a fair
presentation of such financial information. Results of operations for
interim periods are not necessarily indicative of those to be achieved for
full fiscal years.
The condensed financial statements should be read in conjunction with
the audited financial statements as of December 31, 1995 and for the year
then ended, included in the Company's 1995 Annual Report on Form 10-K,
filed with the Securities and Exchange Commission.
B) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following
(in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Accounts payable $ 216 $ 290
Clinical trial costs 1,404 1,333
Manufacturing development costs 3,963 1,865
Preclinical costs 485 -
Professional fees 173 334
Deferred contract income 125 87
Accrued compensation and benefits 411 87
Other 244 84
------- -------
$ 7,021 $ 4,080
</TABLE>
C) NOTE PAYABLE
The Company has entered into a credit arrangement with a commercial
bank under which up to $1,000,000 may be borrowed to finance the
acquisition of equipment and the
4
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costs of improvements to the Company's leased facilities. Borrowings under this
credit facility bear interest at a rate of 8.5% for the three year term of the
loan. The loan provides for monthly interest payments, with principal payments
made in quarterly installments in the second and third year after borrowings.
Under this credit arrangement, any amounts outstanding shall become immediately
due and payable under certain circumstances, including the failure of the
Company to maintain certain minimum cash and investments balance, and financial
ratios.
As of September 30, 1996, the Company had borrowed $500,000 under this
facility.
D) STOCKHOLDERS' EQUITY
Private Placement
In August 1996, the Company completed a private placement of 1,556,763
shares of Common Stock, together with warrants to purchase an aggregate of
1,011,896 shares of Common Stock. Net proceeds to the Company were $11,950,000.
The warrants are exercisable at $8.48 per share, and contain
provisions to decrease the exercise price, and increase the issuable shares,
under certain circumstances. Such circumstances include the issuance of shares
of Common Stock by the Company for a consideration per share less than the
exercise price of the warrants and the issuance by the Company of securities
convertible into shares of Common Stock for which the exercise or conversion
price is less than the exercise price of the warrants. The warrant holders
also have a one-time right, in the event the average price of the Company's
Common Stock in any month prior to August 1999 falls below a certain level, to
reduce the exercise price of the warrants to 110% of such average price.
Royalty Buy Out
In September 1996, the Company issued 550,000 shares of Common Stock
in the buy out of royalties the Company would otherwise have owed on any sales
of MSI-78. Pursuant to this buy out, the Company's license for MSI-78 became
fully-paid and royalty free. The Company recorded a non-cash charge to earnings
of $7.1 million in the third quarter of 1996, relating to the value of such
issued shares.
5
<PAGE> 8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company commenced operations in 1988, and is engaged in the
development of breakthrough medicines for serious diseases. The Company isolates
and develops compounds from the host-defense systems of animals, and uses
molecular techniques such as gene identification to understand the pathogenesis
of disease. The Company's development efforts are focused on anti-infectives,
oncology and, pulmonary and allergic disorders. The Company has not generated
any sales revenue, and has received nominal amounts of revenue from contracts
and grants. The Company has incurred net losses in each year since its inception
and expects to incur substantial additional losses for the next several years.
At September 30, 1996, the Company's accumulated deficit was approximately
$90,209,000.
RESULTS OF OPERATIONS
To date, the Company has received no revenue from product sales.
Revenues recorded to date have consisted principally of revenues recognized
under collaborations with corporate partners, and pursuant to Small Business
Innovative Research grants. Revenues in the 1996 periods have decreased as
compared to the 1995 periods due to the expiration of certain contractual
arrangements. The Company anticipates that its revenues from operations will be
limited for the foreseeable future.
Research and development expenses consist principally of clinical and
preclinical testing expenses, manufacturing development expenses, personnel
costs and laboratory supplies. The Company's clinical and manufacturing
development expenses have increased in the 1996 periods as compared to the 1995
periods due principally to increasing costs associated with the Company's lead
product candidate, MSI-78. Preclinical expenses have also increased in the 1996
periods compared to the 1995 periods due to increasing activities associated
with the Company's other development programs, principally including its
aminosterol program and asthma program.
In September 1996, the Company announced results of its initial
pivotal trial of MSI- 78 for the treatment of infection in diabetic foot
ulcers. Although the Company believes this trial yielded successful results,
there can be no assurance that the U. S. Food and Drug Administration ("FDA")
will concur with the Company's analysis in this regard. Additionally, the
Company's analysis of data from the study is continuing, particularly as it
relates to secondary endpoints for the study. The Company is currently
conducting a second required pivotal trial of MSI-78 for the treatment of
infection in diabetic foot ulcers. There can be no assurance that this trial
will be successful. Success in both pivotal trials will be required for the
submission of MSI-78 for review and approval by the FDA. Failure of MSI-78 to
show efficacy in human clinical
6
<PAGE> 9
trials will have a material adverse effect on the Company. Furthermore, even if
such clinical testing is successful, the submission to FDA of any application
for product approval, and the review by FDA of such application, will require
additional time to complete manufacturing activities and stability studies,
which additional time may be significant.
The Company contracts with third parties for the manufacture of
materials, and is working with Abbott Laboratories ("Abbott") with regard to the
manufacture of bulk MSI-78. The Company's arrangement with Abbott provides for
the development by Abbott of a chemical process to manufacture bulk MSI-78 on a
commercial scale, for the production of bulk MSI-78, and for Abbott to perform
those activities necessary to submit a Drug Master File to the FDA in support of
any filing for marketing approval of MSI-78. The arrangement with Abbott
provides for cash payments by the Company through early 1998 aggregating
approximately $12,900,000, as well as the issuance by the Company to Abbott of
up to 500,000 shares of its Common Stock and the obligation to pay a royalty on
future sales of MSI-78. Through September 30, 1996, the Company has paid Abbott
approximately $6,500,000 under this arrangement. Stock issuances by the Company
to Abbott will result in a charge to earnings, representing the fair value of
the shares when issued. The Company issued 125,000 shares of Common Stock to
Abbott in October 1995, resulting in a charge to earnings of $1,250,000 in the
three months ended December 31, 1995. Future stock issuances are related to the
achievement by Abbott of contractual performance milestones which could begin to
occur in 1997. Substantial additional funds will also be required to continue
manufacturing development efforts beyond the term of this current arrangement.
The level of research and development expenses in future periods will
depend upon the success of the MSI-78 clinical program, and the progress of
other research programs at the Company. Expenses relating to the development of
MSI-78 are expected to continue to be significant in future periods principally
as a result of the Company's on-going manufacturing development program with
Abbott, and the carrying on of the second clinical trial, as described above.
The Company also expects increased research and development expenses relating to
its aminosterol and asthma programs.
General and administrative expenses consist principally of personnel
costs and professional fees, and increased in the 1996 periods as compared to
the 1995 periods due principally to increases in personnel related costs. The
Company expects general and administrative expenses to increase in future
periods to the extent that the Company's level of activities increases.
The Company recorded in the third quarter of 1996 a non-cash charge to
earnings of $7.1 million, representing the fair value of 550,000 shares of
Common Stock issued by the Company in a buy out of royalties which the Company
would otherwise have owed on any sales of MSI-78.
7
<PAGE> 10
The increase in interest income in the three and nine month periods
ended September 30, 1996 as compared to the 1995 periods is due to an increase
in investment balances, and higher realized rate of returns.
The Company expects to conduct, over the next several years,
significant research, preclinical development, clinical testing and
manufacturing development activities which, together with projected general and
administrative expenses, are expected to result in continued and increasing
losses, particularly due to the extended time period before the Company expects
to commercialize any products.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and investments were approximately $39,993,000 at September 30,
1996 as compared to $43,666,000 at December 31, 1995. The primary use of cash
was to finance the Company's operations. Since inception, the Company has funded
its operations primarily from the proceeds of public and private placements of
securities, including $17,080,000 raised from its initial public offering in
December 1991, $21,469,000 raised from a public offering completed in February
1993, $18,023,000 raised from a private placement completed in October 1993,
$32,627,000 raised from a public offering completed in August 1995, and
$11,950,000 raised from a private placement completed in August 1996, as well as
contract and grant revenues, interest income and lease and debt financing.
The increase in fixed assets at September 30, 1996 principally reflects
an expansion of the Company's leased facility.
Accounts payable and accrued expenses increased to approximately
$7,021,000 at September 30, 1996 as compared to approximately $4,080,000 at
December 31, 1995, due principally to expenses incurred for manufacturing
development efforts and clinical testing of MSI-78. The Company expects a
decrease in accounts payable and accrued expenses in future periods as certain
of these liabilities are satisfied.
In the third quarter of 1996, the Company borrowed $500,000 under a
credit facility.
The Company will require substantial additional funds to continue its
research and development programs and to commercialize any potential products.
The Company intends to seek funds for the further development of MSI-78, and for
other projects, through a combination of future offerings of securities and
collaborative arrangements with third parties, and regularly explores
alternatives in this regard. There can be no assurance that future funding will
be available to the Company. The receipt of funding from corporate partners, if
any, will depend largely on the progress of research and development programs.
8
<PAGE> 11
If the Company does not enter into appropriate collaborations, or is
not able to raise sufficient funds from the periodic sale of securities, the
Company will be required to delay or eliminate expenditures for certain of its
potential products, including MSI-78, or to license third parties to
commercialize potential products or technologies that the Company would
otherwise seek to develop itself, or to seek other arrangements.
Prior to marketing, any drug developed by the Company must undergo
rigorous preclinical and clinical testing and an extensive regulatory approval
process mandated by the FDA and similar foreign authorities. These processes can
take years to complete and require the expenditure of substantial resources. The
time required for completing such testing and obtaining such approvals is
uncertain, and ultimately, approval may not be obtained. Even if a product were
to receive marketing approval, there can be no assurance that the Company will
be able to successfully and profitably manufacture, market and distribute the
product. To attempt to limit risks in this process, the Company seeks to broaden
its technology base through internal basic research, collaborations and
strategic relationships.
The Company believes that patent and other proprietary rights are
important to its business, and in this regard intends to file applications as
appropriate for patents covering both its potential products, and processes that
have been licensed or developed by the Company. The Company may be required to
expend substantial funds to protect any such patents against infringement or to
determine the priority of inventions in interference proceedings. If patents are
issued to other parties that contain claims that are interpreted to cover any of
the Company's proposed products, there can be no assurance that the Company
would be able to obtain licenses to such patents at a reasonable cost, if at
all, or be able to develop or obtain alternative technology. Failure by the
Company to obtain a patent on, or license to use, any technology required to
commercialize its proposed products would have a material adverse impact on the
Company.
Under license agreements, the Company will owe royalties on sales of
certain of its proposed products. Additionally, certain of these agreements also
provide that if the Company elects not to pursue the commercial development of
any licensed technology, or does not adhere to an acceptable schedule of
commercialization, then the Company's exclusive rights to such technology would
terminate.
The Company's capital expenditure requirements will depend upon
numerous factors, including the success of MSI-78 and the progress of the
Company's other research and development programs, the time and cost required to
obtain regulatory approvals, the ability of the Company to enter into additional
collaborative arrangements, the demand for products based on the Company's
technology, if and when such products are approved, and possible acquisitions of
products, technologies and companies.
9
<PAGE> 12
There can be no assurance that the Company's products can be
manufactured at a cost which is commercially viable. The Company contracts with
third parties for the manufacture of materials. There are a limited number of
companies which are currently able to produce materials on the scale which the
Company expects to require to commercialize its compounds. There can be no
assurance that qualified outside contractors will be available to manufacture
materials for the Company, or do so at costs which are affordable by the
Company. The Company is currently dependent upon Abbott for the production of
bulk MSI-78, and, as described above, Abbott is currently conducting certain
manufacturing development activities. The Company and Abbott have agreed that,
upon completion of such activities, they will negotiate in good faith a supply
agreement for the Company's worldwide supply needs of MSI-78. In the event that
this agreement is not entered into, or Abbott does not otherwise continue to
manufacture MSI-78, the Company's timeline to commercialize MSI-78 would be
adversely affected, and the Company may need to spend substantial funds on
securing other manufacturing arrangements or building a manufacturing
infrastructure, and licensing applicable manufacturing related technology from
such contract manufacturer.
------------------
This report contains, in addition to historical information, statements
by the Company with regard to its expectations as to financial results and
other aspects of its business that involve risks and uncertainties and may
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements reflect management's
current views and are based on certain assumptions. Actual results could
differ materially from those currently anticipated as a result of a number of
factors, including, but not limited to, the risks and uncertainties discussed
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained herein and the following sections of Item 1 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 as filed with the Securities and Exchange Commission: "Synthesis
Technology; Manufacturing;" "Product Development and Research Programs;"
"Government Regulation;" "Additional Regulatory Issues;" "Patents and
Proprietary Rights; Licensed Technology;" "Competition" and "Product Liability
and Insurance."
10
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is a list of exhibits filed as part of
this Quarterly Report on Form 10-Q. Where so
indicated by footnote, exhibits which were previously
filed are incorporating by reference. For exhibits
incorporated by reference, the location of the
exhibit in the previous filing is indicated
parenthetically, together with a reference to the
filing indicated by footnote.
Exhibit Number
10.26 Form of Purchase Agreement, dated as of
August 6, 1996, between the Company and the
purchasers thereto, relating to the issuance
by the Company of units consisting of shares
of the Company's Common Stock and Warrants
to purchase shares of the Company's Common
Stock. (Exhibit 10.1)(1)
10.27 Form of Warrant, dated as of August 6, 1996,
to purchase shares of the Company's Common
Stock. (Exhibit 10.2)(1)
10.28 Stock Issuance Agreement, dated as of
October 1, 1996, between the Company and
Houghten Pharmaceuticals, Inc. (Exhibit
10.1)(2)
10.29 Stock Issuance Agreement, dated as of
October 1, 1996, between the Company and The
Scripps Research Institute. (Exhibit
10.2)(2)
10.30 Second Amendment to License Agreement
effective as of October 1, 1996, by and
between Multiple Peptide Systems, Inc. and
the Company.
- --------------------------------------------------
(1) Filed as an Exhibit to Registration Statement No. 333-09927 on Form S-3
filed with the Securities and Exchange Commission on August 9, 1996.
(2) Filed as an Exhibit to Registration Statement No. 333-14555 on Form S-3
filed with the Securities and Exchange Commission on October 21, 1996.
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<PAGE> 14
(b) Reports on Form 8-K
A report on Form 8-K (Item 5 - Other Events)
was filed with the Securities and Exchange
Commission on September 25, 1996, reporting
the results of the Company's initial,
pivotal Phase III clinical trial of MSI-78.
A report on Form 8-K (Item 5 - Other Events)
was filed with the Securities and Exchange
Commission on September 26, 1996, reporting
that the Company had reached agreement with
Multiple Peptide Systems, Inc., a subsidiary
of Houghten Pharmaceuticals, Inc., and The
Scripps Research Institute, relating to the
buy out of royalties which the Company would
otherwise have owed on any sales of MSI-78.
12
<PAGE> 15
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.
MAGAININ PHARMACEUTICALS INC.
(REGISTRANT)
DATE: NOVEMBER 11, 1996 /S/ JAY MOORIN
----------------------------
JAY MOORIN
CHAIRMAN, PRESIDENT &
CHIEF EXECUTIVE OFFICER
/S/ MICHAEL R. DOUGHERTY
----------------------------
MICHAEL R. DOUGHERTY
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
13
<PAGE> 16
EXHIBIT INDEX
Exhibit Page
Number Document Number
- ------ ------------------------------------------ ------
10.30 Second Amendment to License Agreement,
effective as of October 1, 1996, by and
between Multiple Peptide Systems, Inc. and
the Company.
14
<PAGE> 1
EXHIBIT 10.30
SECOND AMENDMENT TO LICENSE AGREEMENT
THIS SECOND AMENDMENT ("Amendment") is entered into, effective as of
October 1, 1996, on this 24th day of September, 1996 by and between MULTIPLE
PEPTIDE SYSTEMS, INC., a California corporation ("MPS"), and MAGAININ
PHARMACEUTICALS INC., a Delaware corporation formerly known as Magainin Sciences
Inc. ("Magainin").
BACKGROUND
A. MPS and Magainin entered into an Agreement, dated as of November
4, 1988 (the "Original Agreement"), pursuant to which, among other things, MPS
granted to Magainin certain license rights, as more fully described in the
Original Agreement. MPS and Magainin entered into a First Amendment to
Agreement, dated as of February 1, 1990 (the "First Amendment"), pursuant to
which the parties amended and restated Section 5.1 of the Original Agreement.
The Original Agreement, as amended by the First Amendment, is referred to herein
as the "Agreement."
B. Pursuant to a certain Stock Issuance Agreement, dated as of even
dated herewith (the "Stock Issuance Agreement"), between Magainin and Houghten
Pharmaceuticals Inc. ("Houghten"), Magainin has agreed to issue to Houghten
275,000 shares of Magainin's common stock, par value $.002 per share, in
consideration for MPS's agreement to make certain amendments to the Agreement,
as implemented pursuant to this Amendment.
C. Capitalized terms used but not defined herein shall have the
respective meanings assigned to such terms in the Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises contained in the Stock Issuance Agreement and in this
Amendment, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows, effective as of the date of this Amendment:
1. Magainin's license rights under Section 2.1 of the Agreement,
insofar as they relate to the Licensed Product that is Magainin's topical
anti-infective product known as MSI-78, for which a trademark application has
been filed for the name "Cytolex(TM)" ("MSI-78"), are and shall be fully-paid
and royalty-free. Accordingly, with respect to the Licensed Product that is
MSI-78, (a) the provisions of Article III of the Agreement shall not be
applicable, (b) neither Magainin nor any of its sublicensees shall owe any
royalty or other payment obligation to MPS, The Scripps Research Institute, a
successor to Scripps Clinic and Research Foundation ("Scripps"), or any of their
respective successors or assigns under Sections 2.2 or 5.1 of the Agreement, and
(c) neither Magainin nor any of its sublicensees shall have any reporting
obligation to MPS, Scripps or any of
1
<PAGE> 2
their respective successors or assigns under Sections 2.2 or 5.1 of the
Agreement. The foregoing shall not be deemed to relieve Magainin of any of its
payment obligations under Sections 4.2, 4.3, 4.4, 12.2 and 12.9 and Article VIII
of the Agreement.
2. Notwithstanding the provisions of Section 5.1 or any other provision
of the Agreement to the contrary, Magainin shall have the right to grant
sublicenses to any party with respect to any of its rights under the Agreement
relating to the Licensed Product that is MSI-78 without having to notify or
obtain the prior consent of MPS, Scripps or any of their respective successors
or assigns.
3. The words "as amended" are hereby added at the end of Section 1.10
of the Agreement.
4. MPS and Magainin acknowledge and agree that Magainin has fulfilled
its commercial development obligations under Section 4.1 of the Agreement
insofar as they relate to MSI-78. However, MPS and Magainin each acknowledge
MPS's interest in being kept advised of Magainin's continuing efforts with
respect to Licensed Products. Accordingly, Section 4.1 of the Agreement is
hereby amended and restated to read in its entirety as follows:
"4.1 Annual Reporting Obligation. Magainin shall keep MPS generally
informed as to Magainin's development efforts relating to Licensed
Products, including its efforts, if any, to sublicense the Scripps
Patent Rights, by delivery to MPS of an annual written report."
5. Notwithstanding any provision of the Agreement to the contrary, no
exercise by Magainin or any of its sublicensees of any of the license rights set
forth in the Agreement, or in any permitted sublicense thereof, shall be deemed
to be a breach of the provisions of Article IX of the Agreement.
6. Section 10.1 of the Agreement is hereby amended by adding the
following two sentences to the the end of such Section:
"Notwithstanding the fact that Magainin's license rights under
Section 2.1 hereof, insofar as they relate to the Licensed Product
that is MSI-78, are fully-paid and royalty-free, Magainin
acknowledges that it continues to have royalty obligations hereunder
with respect to Licensed Products other than MSI-78. Therefore, the
term of the license granted hereunder and of this Agreement shall
continue until they expire pursuant to this Section 10.1 or are
terminated sooner pursuant to the provisions of this Agreement,
notwithstanding such fully-paid and royalty-free license rights of
Magainin with respect to MSI-78."
2
<PAGE> 3
7. Magainin's address for notices under the Agreement, as set forth in
Section 12.10 of the Agreement, is hereby amended and restated as follows:
"Magainin Pharmaceuticals Inc.
5110 Campus Drive
Plymouth Meeting, PA 19462
Attention: President"
and MPS's address for notices under the Agreement, as set forth in Section 12.10
of the Agreement, is hereby amended and restated as follows:
"Multiple Peptide Systems, Inc.
3550 General Atomics Court
San Diego, CA 92121
Attention: President
with a copy to:
Houghten Pharmaceuticals, Inc.
3550 General Atomics Court
San Diego, CA 92121
Attention: President"
8. MPS shall give to Magainin, in the manner specified in Section
12.10 of the Agreement, a copy of each notice given or received by MPS under the
Scripps Agreement. MPS shall give each such notice to Magainin promptly after
MPS's giving or receipt of such notice.
9. MPS hereby represents and warrants to Magainin as of the date
hereof that:
(a) MPS has no knowledge of any default or breach by Scripps or MPS
under the Scripps Agreement, or of any event, fact or circumstance which, with
the giving of notice or the passage of time, or both, would constitute such a
default or breach; and
(b) The execution, delivery and performance by MPS of this
Amendment, the execution, delivery and performance by Houghten of the Stock
Issuance Agreement, and the execution, delivery and performance by Scripps of
the Second Amendment to License Agreement, dated as of even date herewith,
between Scripps and MPS, which amends the Scripps Agreement, as amended (the
"Second Amendment to Scripps Agreement"), do not and will not (i) conflict with,
or constitute a breach or default under, or require the consent of any third
party under, MPS' charter documents or any material license, loan or other
agreement, contract, commitment or instrument to which MPS is a party or any of
its assets are bound, (ii) violate any provision of law, statute, rule or
regulation or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body, or (iii) require the
consent, approval or authorization of, or
3
<PAGE> 4
notice, declaration, filing or registration with, any third party or any
governmental or regulatory authority. This Amendment and the Second Amendment to
Scripps Agreement have been duly authorized, executed and delivered by MPS and
each represents the valid and binding obligation of MPS.
The foregoing representations and warranties shall survive the
execution and delivery of this Amendment, the Second Amendment to Scripps
Agreement and the Stock Issuance Agreement and the consummation of the
transactions contemplated by the Stock Issuance Agreement.
10. From and after the date of the Second Amendment to Scripps
Agreement, MPS and Scripps will not further modify or amend the Scripps
Agreement without the prior written consent of Magainin in each instance.
11. Except as specifically modified by this Amendment, all of the
provisions of the Agreement are hereby confirmed to be in full force and effect.
12. This Amendment shall be binding upon, and shall inure to the
benefit of MPS and Magainin and their respective successors and permitted
assigns.
13. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, but all of which together shall constitute but one and the same
instrument, and shall become binding when any one or more counterparts hereof,
individually or taken together, shall bear the signatures of MPS and Magainin.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their authorized representatives as of the date first written above.
MULTIPLE PEPTIDE SYSTEMS, INC.
By: /s/ Robert S. Whitehead
-------------------------------------
Name: Robert S. Whitehead
Title: President
MAGAININ PHARMACEUTICALS INC.
By: /s/ Michael R. Dougherty
-------------------------------------
Name: Michael R. Dougherty
Title: Executive Vice President and
Chief Financial Officer
JOINDER
Houghten Pharmaceuticals Inc. ("Houghten"), as the holder of all
of the issued and outstanding shares of capital stock of MPS, hereby joins in
the execution and delivery of this Amendment solely for the purpose of agreeing
to be jointly and severally liable with MPS for any breach of any of the
representations and warranties of MPS in Section 7 of this Amendment.
HOUGHTEN PHARMACEUTICALS INC.
By: /s/ Robert S. Whitehead
-------------------------------------
Name: Robert S. Whitehead
Title: President
Date: September 24, 1996
5
<PAGE> 6
CONSENT AND AGREEMENT
The Scripps Research Institute, a successor to Scripps Clinic
and Research Foundation ("Scripps"), hereby consents and agrees to the terms,
conditions and provisions of this Amendment and further agrees, represents and
warrants that:
(i) If the Scripps Agreement is terminated for any reason
whatsoever and if at the time of such termination Magainin is not in material
default of the Agreement, as amended by this Amendment, then the Agreement, as
amended by this Amendment, shall become a direct license agreement between
Scripps and Magainin;
(ii) From and after the date of the Second Amendment to
Scripps Agreement, MPS and Scripps will not further modify or amend the Scripps
Agreement without the prior written consent of Magainin in each instance.
(iii) Scripps has no knowledge of any default or breach by
Scripps or MPS under the Scripps Agreement, or of any event, fact or
circumstance which, with the giving of notice or the passage of time, or both,
would constitute such a default or breach;
(iv) As of the date hereof, to Scripps' knowledge, each of
the Scripps Patent Rights is valid and enforceable in accordance with its terms
and there are no pending or any threatened suits, claims, or actions of any type
whatsoever with respect to any of the Scripps Agreement, the Scripps Patent
Rights, the Scripps Technology or the Scripps Invention; and
(v) The execution, delivery and performance by Scripps of
this Consent and Agreement and the execution, delivery and performance by
Scripps of the Second Amendment to Scripps Agreement do not and will not (A)
conflict with, or constitute a breach or default under, or require the consent
of any third party under, Scripps' charter documents or any material license,
loan or other agreement, contract, commitment or instrument to which Scripps is
a party or any of its assets are bound, (B) violate any provision of law,
statute, rule or regulation or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body, or (C)
require the consent, approval or authorization of, or notice, declaration,
filing or registration with, any third party or any governmental or regulatory
authority. This Consent and Agreement and the Second Amendment to Scripps
Agreement have been duly authorized, executed and delivered by Scripps and each
represents the valid and binding obligation of Scripps.
6
<PAGE> 7
(vi) The foregoing representations and warranties shall
survive the execution and delivery of this Consent and Agreement and the Second
Amendment to Scripps Agreement.
THE SCRIPPS RESEARCH INSTITUTE
By: /s/ Arnold LaGuardia
---------------------------------------
Name: Arnold LaGuardia
Title: Senior Vice President, Treasurer
Date: September 24, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
UNAUDITED BALANCE SHEETS AS OF SEPTEMBER 30, 1996, AND THE UNAUDITED STATEMENTS
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10Q PERIOD END SEPTEMBER 30, 1996.
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