<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 MARCH 31, 1997
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 (I.R.S. Employer Identification No.)
of incorporation or 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 - 19,364,468 SHARES (MAY 9, 1997)
<PAGE> 2
MAGAININ PHARMACEUTICALS INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Balance Sheets as of March 31, 1997 and
December 31, 1996..............................................1
Unaudited Statements of Operations for the three months ended
March 31, 1997 and 1996........................................2
Unaudited Statements of Cash Flows for the three months ended
March 31, 1997 and 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 ..................................................12
SIGNATURES....................................................................13
EXHIBIT INDEX.................................................................14
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAGAININ PHARMACEUTICALS INC.
BALANCE SHEETS
(unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,278 $ 2,072
Short-term investments 27,806 31,268
Prepaid expenses and other current assets 588 454
--------- ---------
Total current assets 32,672 33,794
Fixed assets, net 2,725 2,506
Other assets 76 76
--------- ---------
Total assets $ 35,473 $ 36,376
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 4,421 $ 5,145
Note payable - current 375 250
Equipment lease obligations - current 110 123
--------- ---------
Total current liabilities 4,906 5,518
Note payable - long term 625 750
Equipment lease obligations - long term 17 38
Deferred rent 119 127
--------- ---------
Total liabilities 5,667 6,433
--------- ---------
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
- 19,364 and 19,364 39 39
Additional paid-in capital 125,140 125,134
Unrealized gain (loss) on investments (15) 13
Accumulated deficit (95,358) (95,243)
--------- ---------
Total stockholders' equity 29,806 29,943
--------- ---------
Total liabilities and stockholders' equity $ 35,473 $ 36,376
========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
1
<PAGE> 4
MAGAININ PHARMACEUTICALS INC.
STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
-------- --------
<S> <C> <C>
Revenues:
Contract and government grant $ 5,037 $ 37
-------- --------
5,037 37
-------- --------
Costs and expenses:
Research and development 4,707 6,104
General and administrative 865 800
-------- --------
5,572 6,904
--------
Loss from operations (535) (6,867)
Interest income 442 594
Interest expense (22) (5)
-------- --------
Net loss $ (115) $ (6,278)
======== ========
Net loss per share $ (.01) $ (.37)
======== ========
Weighted average
shares outstanding 19,364 17,061
</TABLE>
See accompanying notes to unaudited financial statements.
2
<PAGE> 5
MAGAININ PHARMACEUTICALS INC.
STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (115) $ (6,278)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 214 116
Deferred rent (8) (3)
(Increase) in prepaid expenses and other assets (134) (259)
Increase (decrease) in accounts payable
and accrued expenses (724) 1,004
-------- --------
Net cash used in operating activities (767) (5,420)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (13,562) (8,114)
Proceeds from maturities and sales of investments 16,996 13,563
Capital expenditures (433) (121)
-------- --------
Net cash provided by investing activities 3,001 5,328
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capitalized equipment leases (34) (37)
Proceeds from sale of stock and
exercise of options and warrants 6 26
-------- --------
Net cash used in financing activities (28) (11)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,206 (103)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,072 1,880
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,278 $ 1,777
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 22 $ 5
</TABLE>
See accompanying notes to unaudited financial statements.
3
<PAGE> 6
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, 1996 and for the year
then ended, included in the Company's 1996 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>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Accounts payable $ 228 $ 176
Clinical trial costs 456 720
Manufacturing development costs 2,178 3,426
Preclinical costs 987 269
Professional fees 221 200
Accrued compensation and benefits 206 4
Other 145 350
------ ------
$4,421 $5,145
</TABLE>
C) COLLABORATIVE AGREEMENTS
In February 1997, the Company entered into a development, supply and
distribution
4
<PAGE> 7
agreement (the "Agreement") in North America with SmithKline Beecham Corporation
("SB") for Cytolex(TM). The Agreement provides for an upfront payment by SB to
the Company of $5 million. SB may make additional payments to Magainin of up to
$27.5 million upon the occurrence of certain product milestones. SB will also
fund a percentage of any development expenses for any additional indications for
Cytolex(TM). Upon the commencement of commercial sales by SB, Magainin will be
responsible for the supply of Cytolex(TM) and SB will be responsible for the
marketing and sales of Cytolex(TM). Magainin will receive certain percentages of
SB sales revenues under agreed upon terms. The Agreement also gives SB the right
to negotiate for rights to another Magainin product development candidate, under
certain terms and conditions.
5
<PAGE> 8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 under
Item 1 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 as filed with the Securities and Exchange
Commission.
GENERAL
The Company is a biopharmaceutical company engaged in the development
of breakthrough medicines for serious diseases. The Company's lead product
development compound is Cytolex(TM) (MSI-78), a topical anti-infective intended
for the treatment of infection in diabetic foot ulcers. The Company is also
conducting preclinical research on an aminosterol class of compounds. One such
compound, squalamine, is being evaluated in cancer, and another such compound,
MSI-1436, is being evaluated in viral infection. The Company's newest research
efforts are in the genomics of asthma.
Since commencing operations in 1988, the Company has not generated any
sales revenue, and has received nominal amounts of revenue from contracts and
grants. The Company has funded operations primarily from the proceeds of public
and private placements of securities. The Company has incurred net losses in
each year since its inception, and expects to incur additional losses for the
next several years. The Company expects that losses will fluctuate from quarter
to quarter, and that such fluctuations may be substantial. At March 31, 1997,
the Company's accumulated deficit was approximately $95,358,000.
6
<PAGE> 9
RESULTS OF OPERATIONS
REVENUES
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
Innovation Research ("SBIR") grants. The Company recorded revenue of $5,000,000
in the first quarter of 1997 reflecting the receipt of an upfront payment under
the development, supply and distribution agreement entered into in February 1997
(The "SB Agreement") with SmithKline Beecham Corporation ("SB") for Cytolex(TM).
The Company also recorded revenues of $37,000 in the first quarter of 1997 and
1996 in connection with a collaborative arrangement with Abbott Laboratories
("Abbott") in the nutritional field. The Company anticipates that its revenues
from operations will be limited for the foreseeable future.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses have decreased in the first quarter
of 1997 as compared to the first quarter of 1996 due principally to the
conclusion of clinical testing of Cytolex(TM) in early 1997.
In September 1996, the Company announced results of its initial pivotal
trial of Cytolex(TM) for the treatment of infection in diabetic foot ulcers, and
in March 1997 the Company reported successful results from a second such pivotal
trial. The clinical trials conducted for Cytolex(TM) yielded substantial data.
Such additional data includes information relating to the primary endpoints for
the studies, as well as data relating to patient subgroup analysis, wound
healing, side effects, and secondary endpoints of the study, including
microbiological results. Although the Company believes its two pivotal trials of
Cytolex(TM) yielded successful results, there can be no assurance that the
United States Food and Drug Administration ("FDA") will concur with the
Company's analysis in this regard. Furthermore, 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.
Significant development work is necessary to scale-up the manufacturing
process for the Company's products to those levels necessary for a profitable
commercial product. The Company contracts with third parties for these
development activities, and for the procurement of material for clinical and
preclinical testing, and such expenses, including those for Cytolex(TM),
amounted to $2,142,000 and $1,988,000 for the three months ended March 31, 1997
and 1996, respectively.
The Company is working with Abbott with regard to the manufacture of
bulk Cytolex(TM). The Company's current arrangement with Abbott provides for the
development
7
<PAGE> 10
by Abbott of a chemical process to manufacture bulk Cytolex(TM) on a commercial
scale, for the production of bulk Cytolex(TM), 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 Cytolex(TM). The arrangement with Abbott
provides for cash payments by the Company through early 1998 aggregating
approximately $15,400,000, 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 Cytolex(TM). Through March 31, 1997, the Company has paid Abbott
approximately $10,500,000 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 1995.
Future stock issuances are related to the achievement by Abbott of contractual
performance milestones which could begin to occur during 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 development of Cytolex(TM), and the progress of
other research programs at the Company. Expenses relating to the development of
Cytolex(TM) are expected to continue to be significant in future periods
principally as a result of the Company's ongoing manufacturing development
program, partially offset by the decline in clinical trial costs related to
Cytolex(TM). The Company also expects, in future periods, increased preclinical
and manufacturing development expenses relating to its aminosterol and asthma
programs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses have consisted principally of
personnel costs and professional fees and increased in the first quarter of 1997
as compared to the first quarter of 1996 principally due to an increase in
personnel related costs. The Company expects general and administrative expenses
to increase in future periods as the Company's level of activities increases.
OTHER EXPENSES/INCOME
The decrease in interest income in the three months ended March 31,
1997 as compared to the same period a year ago is principally due to a decreased
investment balance.
Interest expense consists primarily of interest under the Company's
credit facility, and the interest component of capital equipment leases. The
Company borrowed $1,000,000 under its credit facility in late 1996, resulting in
increased interest expense in
8
<PAGE> 11
the three months ended March 31, 1997 as compared to the three months ended
March 31, 1996.
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 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 $32,084,000 at March 31, 1997
as compared to $33,340,000 at December 31, 1996. 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 of common stock completed in October
1993, $32,627,000 raised from a public offering completed in August 1995, and
$11,932,000 raised from a private placement completed in August 1996, as well as
contract and grant revenues, interest income and lease and debt financing.
Capital expenditures increased to $433,000 in the three months ended
March 31, 1997, principally reflecting equipment purchases.
Accounts payable and accrued expenses decreased to $4,421,000 at March
31, 1997 as compared to $5,145,000 at December 31, 1996, due principally to
payments made under certain manufacturing development arrangements. The Company
expects that accounts payable will continue to decrease in future periods as
certain of these liabilities are satisfied.
The Company believes that its existing capital resources will enable it
to meet operating needs into 1998. However, the Company's capital requirements
may change due to numerous factors, including, the progress of the Company's
research and development programs, regulatory approvals, competitive and
technological advances, the commercial viability of the Company's products, the
terms of collaborative arrangements, if any, entered into by the Company, and
other factors, many of which are beyond the Company's control. The Company will
require substantial additional funds to continue its research and development
programs and to commercialize potential products. The Company intends to seek
such funds 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
9
<PAGE> 12
or, if available, will be obtainable on terms favorable to the Company. The
receipt of funding from corporate partners, if any, will depend largely on the
progress of research and development programs. 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
Cytolex(TM), or to enter into collaborations with third parties to commercialize
potential products or technologies that the Company would otherwise seek to
develop itself, or to seek other arrangements.
In February 1997, the Company entered into the SB Agreement in North
America with SB for Cytolex(TM). The Agreement provides for an upfront payment
by SB to the Company of $5 million. SB may make additional payments to Magainin
of up to $27.5 million upon the occurrence of certain product milestones. SB
will also fund a percentage of any development expenses for any additional
indications for Cytolex(TM). Upon the commencement of commercial sales by SB,
Magainin will be responsible for the supply of Cytolex(TM) and SB will be
responsible for the marketing and sales of Cytolex(TM). Magainin will receive
certain percentages of SB sales revenues under agreed upon terms. The Agreement
also gives SB the right to negotiate for rights to another Magainin product
development candidate, under certain terms and conditions.
The Company's capital expenditure requirements will depend upon
numerous factors, including the success of Cytolex(TM) 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. The Company had no significant capital
commitments as of March 31, 1997.
The Company contracts with third parties for the manufacture of
materials. There are a limited number of companies 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 Cytolex(TM), 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
Cytolex(TM). In the event that this agreement is not entered into, or Abbott
does not otherwise continue to manufacture Cytolex(TM), the Company's timeline
to commercialize Cytolex(TM) would be adversely affected, and the Company would
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.
10
<PAGE> 13
The Company also expects to conduct significant manufacturing
development activities for its other products under development. The Company is
currently working with outside contractors for the chemical production of its
aminosterol compounds. The Company expects to expend significant resources in
the chemical synthesis of these compounds, and there can be no assurance that
these efforts will be successful.
The Company's dependence on third parties for manufacturing may
adversely affect operating results as well as the Company's ability to develop
and deliver products on a timely and competitive basis. Significant progress in
scale-up and manufacturing development efforts will be required to enable the
Company to manufacture and sell Cytolex(TM) on a profitable basis. No assurance
can be given that a cost-effective manufacturing process can be developed, or
that any such process would be approved by the FDA, or that the Company, Abbott,
or others will be able to manufacture Cytolex(TM) or any of the Company's other
proposed products on a commercially viable basis.
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, files applications as appropriate
for patents covering potential products and processes. 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.
11
<PAGE> 14
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit has been filed as part of this
Quarterly Report on Form 10-Q.
Exhibit Number
10.30 Second Addendum to Manufacturing Agreement
with Abbott Laboratories, dated May 7,
1997.(1)
(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
February 13, 1997 reporting that the Company had
entered into a development, supply and distribution
agreement in North America with SmithKline Beecham
Corporation for the Company's lead development
candidate, Cytolex(TM) (MSI-78).
- --------
1 Portions of this Exhibit have been omitted and filed separately with
the Securities and Exchange Commission pursuant to the Company's
Application Requesting Confidential Treatment under the Securities
Exchange Act of 1934.
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: MAY 9, 1997 /S/ JAY MOORIN
-------------------------------
JAY MOORIN
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
/S/ MICHAEL R. DOUGHERTY
-------------------------------
MICHAEL R. DOUGHERTY
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
13
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EXHIBIT INDEX
Exhibit Page
Number Document Number
- ------ -------- ------
10.30 Second Addendum to Manufacturing
Agreement with Abbott Laboratories
dated May 7, 1997.
<PAGE> 1
SECOND ADDENDUM
Magainin Pharmaceuticals ("Magainin") and Abbott Laboratories
("Abbott") entered into a Purchase Order Agreement for Phase IV dated October 6,
1995 (the "Purchase Order") wherein Abbott is to perform certain activities
relating to Magainin's Bulk Product, as defined in the Purchase Order.
The Purchase Order was amended on May 8, 1996.
Magainin and Abbott desire to further amend the Purchase Order as
follows:
1. Abbott shall produce three (3) additional 1-kilogram batches
of bulk MSI-78. As previously discussed, the pricing and
payment schedule for each individual 1-kilogram batch will be
as follows:
<TABLE>
<CAPTION>
QUALIFICATION RUNS PRICE PAYMENT
------------------ ----- -------
<S> <C> <C>
First 1-Kilogram Batch $[***********] April-July 1997*
Second 1-Kilogram Batch $[***********] Upon Delivery of
the Second 4.5
Kilogram
Qualification Run
Third 1-Kilogram Batch $[***********] Upon Delivery of
the Third 4.5
Kilogram
Qualification Run
TOTAL $[***********]
*$[***********] per month
</TABLE>
2. Abbott shall provide additional analytical services as described in
Attachment A to this Second Addendum. Magainin shall pay Abbott
$[*******] per month, beginning October 1996 and will continue to be
billed at the $[*******]/month rate through the end of May 1997. See
Attachment A for the activities executed in the Additional Analytical
Services Program.
3. All payments hereunder shall be made by the last day of each calendar
month.
4. Abbott shall make the following qualification runs in lieu of the
qualification runs set forth in the Purchase Order; three (3) one (1)
kilogram qualification runs and three
[Confidential Treatment requested for redacted portions of document]
<PAGE> 2
(3) qualification runs manufactured at a 4.5 kilogram scale, to be
delivered on dates mutually agreed to by Magainin and Abbott.
5. Upon completion of the third 4.5 kilogram qualification run, a final
scale-up qualification run will be executed. This run is projected to
be produced at a 9 to 13.5 kilogram scale. The final decision
regarding the size of this run will be based on a mutual agreement
between Magainin and Abbott after review of the data available from
previous runs. Pricing for this final scale-up qualification run will
be $[***] per gram.
6. Abbott shall use its reasonable best efforts to ensure that the Drug
Master File for Bulk Drug Substance will be ready for submission to
the FDA (some of which qualification runs shall have less than six (6)
months stability data, in the fourth (4) quarter of 1997.
7. All other provisions of the Purchase Order, as amended, are hereby
ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this Second Addendum by
their duly authorized representatives as of the later date set forth below.
MAGAININ PHARMACEUTICALS INC. ABBOTT LABORATORIES
By: /s/ Michael R. Dougherty By: /s/ Chris M. Kolber
---------------------------- -----------------------------
Title: Executive Vice President and Title: Vice President of
---------------------------- --------------------------
Chief Financial Officer Commercial Operations
---------------------------- --------------------------
Date: May 7, 1997 Date: May 12, 1997
----------------------------- ---------------------------
[Confidential Treatment requested for redacted portions of document]
<PAGE> 3
ATTACHMENT A
ADDITIONAL ANALYTICAL ACTIVITIES PROGRAM
PURPOSE: To develop and execute a program, which will characterize impurities
relative to MSI-78. This program has evolved out of the August 1996 request by
the FDA that displays "a reasonable best effort" towards impurity
identification.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEETS AS OF MARCH 31, 1997 AND THE UNAUDITED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10Q PERIOD ENDED MARCH 31, 1997.
</LEGEND>
<CIK> 0000880431
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