<PAGE>
CONFORMED COPY
--------------
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 QUARTER ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-12574
TEXAS BIOTECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3532643
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7000 Fannin, Suite 1920, Houston, Texas 77030
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
(713) 796-8822
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(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.
Class Outstanding at April 30, 1996
----- -----------------------------
Common Stock, $0.005 par value 24,008,788
<PAGE>
TEXAS BIOTECHNOLOGY CORPORATION
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 1
Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1995, and the period from August 2, 1989
(date of incorporation) through March 31, 1996 2
Consolidated Statements of Cash Flows the three months ended
March 31, 1996 and 1995, and the period from August 2, 1989
(date of incorporation) through March 31, 1996 3
Notes to Consolidated Financial Statements 4
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 16
ITEM 2: CHANGES IN SECURITIES 16
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17
ITEM 5: OTHER INFORMATION 17
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
INDEX TO EXHIBITS 19
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1996 1995
------ ----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,521,430 5,724,264
Short term investments 13,568,320 8,195,307
Short term note receivable 122,500 122,500
Prepaids 602,115 554,208
Other current assets 430,396 547,391
------------ ------------
Total current assets 23,244,761 15,143,670
Equipment, furniture and fixtures, and
leasehold improvements 7,565,092 7,529,415
Less: Accumulated depreciation and amortization (3,931,622) (3,746,586)
------------ ------------
Net property 3,633,470 3,782,829
------------ ------------
Total assets $ 26,878,231 18,926,499
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 2,735,607 2,566,264
Deferred revenue 250,000 650,110
------------ ------------
Total current liabilities 2,985,607 3,216,374
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, par value $.005 per share.
At March 31, 1996 and December 31, 1995
5,000,000 shares authorized; none
outstanding. -- --
Common stock, par value $.005 per share.
At March 31, 1996, 40,000,000 shares
authorized; 24,001,143 shares issued and
outstanding. At December 31, 1995,
40,000,000 shares authorized; 17,439,365
shares issued and outstanding 120,009 87,198
Additional paid-in capital 72,519,615 59,540,730
Deferred compensation expense (24,291) (46,177)
Deficit accumulated during the development
stage (48,722,709) (43,871,626)
------------ ------------
Total Stockholders' equity 23,892,624 15,710,125
------------ ------------
Total liabilities and stockholders' equity $ 26,878,231 18,926,499
============ ============
</TABLE>
FORM 10-Q See accompanying notes to consolidated financial statements Page 1
<PAGE>
TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 2, 1989
(DATE OF
INCORPORATION)
THREE MONTHS ENDED TO
MARCH 31, MARCH 31,
1996 1995 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Research agreements $ 1,915,110 1,150,110 12,953,796
Products and services 1,439 70,308 398,080
Grant revenue 753 113,289 667,977
----------- ---------- ----------
Total revenues 1,917,302 1,333,707 14,019,853
----------- ---------- ----------
Expenses incurred in the
development stage:
Research and development 5,480,616 2,842,395 39,068,271
Charge for purchase of
in-process research and
development -- -- 9,465,610
General and administrative 1,112,492 1,223,844 16,517,126
Restructuring and impairment
of intangible assets 421,165 -- 1,064,915
----------- ---------- ----------
Total expenses 7,014,273 4,066,239 66,115,922
----------- ---------- ----------
Operating loss 5,096,971 2,732,532 52,096,069
----------- ---------- ----------
Other income (expense):
Interest income 245,888 351,895 3,465,007
Interest expense -- -- (91,647)
----------- ---------- ----------
Net loss $ 4,851,083 2,380,637 48,722,709
=========== ========== ==========
Net loss per share $ 0.24 0.15 5.43
=========== ========== ==========
Weighted average common shares
used to compute net loss per
share 20,617,041 16,039,448 8,976,688
=========== ========== ==========
</TABLE>
FORM 10-Q See accompanying notes to consolidated financial statements Page 2
<PAGE>
TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 2, 1989
(DATE OF
THREE MONTHS ENDED INCORPORATION)
MARCH 31, TO
MARCH 31,
1996 1995 1996
-------------- ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (4,851,083) (2,380,637) (48,722,709)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Write-off of deferred
offering costs related to
delayed offering -- -- 324,938
Depreciation and amortization 185,035 201,369 4,037,874
Interest expense converted on
notes payable to stockholders -- -- 87,755
Expenses paid with stock -- -- 24,500
Non cash acquisition costs
expensed -- -- 9,465,610
Deferred compensation expense 21,886 23,929 262,867
Impairment of intangible
assets -- -- 643,750
Change in operating assets and
liabilities, net of effect of
acquisition:
(Increase) in prepaids (47,906) -- (424,546)
(Increase) decrease in
receivables 21,099 12,296 (69,187)
(Increase) decrease in other
current assets 95,896 (199,203) (559,387)
Decrease in inventories -- -- 61,245
Increase (decrease) in current
liabilities 169,343 (169,068) 2,669,491
(Decrease) in deferred revenue (400,110) (418,684) (1,422,122)
-------------- ----------- -----------
Net cash used in operating
activities (4,805,840) (2,929,998) (33,619,831)
-------------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of equipment and
leasehold improvements (35,677) (70,990) (7,256,632)
Purchase of short term
investments (13,568,320) (15,301,878) (65,489,540)
Redemption of short term
investments 8,195,307 12,327,402 51,921,220
Acquisition of subsidiary, net
of cash acquired -- -- (167,331)
-------------- ----------- -----------
Net cash used in investing
activities (5,408,690) (3,045,466) (20,992,283)
-------------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from notes payable to
stockholders and related trusts -- -- 1,852,500
Proceeds from sale of common
stock and warrants, net 13,011,696 -- 61,609,732
Repurchase of common stock -- -- (3,750)
Cost of delayed offering -- -- (324,938)
-------------- ----------- -----------
Net cash provided by financing
activities 13,011,696 -- 63,133,544
-------------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 2,797,166 (5,975,464) 8,521,430
Cash and cash equivalents at
beginning of period 5,724,264 7,199,942 --
-------------- ----------- -----------
Cash and cash equivalents at end
of period $ 8,521,430 1,224,478 8,521,430
============== =========== ===========
Supplemental schedule of noncash
financing activities $ -- -- 1,940,255
============== =========== ===========
</TABLE>
FORM 10-Q See accompanying notes to consolidated financial statements Page 3
<PAGE>
TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
Texas Biotechnology Corporation (the "Company" or "TBC"), a
biopharmaceutical company, applies innovative drug discovery techniques
and its specialized knowledge of the role of vascular cell biology in
cardiovascular disease to the design and development of novel
pharmaceutical compounds. The Company was incorporated in the state of
Delaware in 1989.
During the period from August 2, 1989, (date of incorporation) through
March 1990, the Company was largely inactive. Since that time, the
Company has been engaged principally in research and drug discovery
programs and clinical development of a drug compound. On July 25, 1994,
the Company acquired all of the outstanding common stock of
ImmunoPharmaceutics, Inc. ("IPI"), a San Diego, California based company,
in exchange for common stock of the Company. TBC decided to consolidate
the IPI operation into TBC in the first half of 1996. (See note 10)
The Company is presently working on a number of long-term development
projects which involve experimental and unproven technology, which may
require many years and substantial expenditures to complete, and which
may be unsuccessful. To date, other than monoclonal antibody compounds
and services produced and sold by IPI, the Company has not developed or
sold any products, and no assurance can be given that the Company will be
able to develop, manufacture or market any products in the future. In
addition, no assurance exists that future revenues will be significant,
that any sales will be profitable, or that the Company will have
sufficient funds available to complete its research and development
programs or market any products which it may develop. Accordingly, the
Company is considered to be in the development stage as it has not to
date derived significant revenues from its planned principle operations.
(b) Basis of Consolidation
The Company's consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, IPI. All material
intercompany transactions have been eliminated. The Company's
consolidated financial statements include the activity related to IPI
since August 1, 1994.
(c) Cash, Cash Equivalents and Short Term Investments
Cash equivalents are considered to be those securities or instruments
with original maturities, when purchased, of three months or less. At
March 31, 1996, approximately $7,954,000 was invested in Corporate
Commercial Paper and the remainder was in demand and money market
accounts. Short term investments are those investments which have an
original maturity of less than one year and greater than three months.
At March 31, 1996, the Company's short term investments consisted of
approximately $1,997,000 in Government Agency Discount Notes and
$11,571,000 in Corporate Commercial Paper. Cash equivalents and short
term investments are stated at cost, which approximates market value.
Interest income is accrued as earned.
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 (Statement 115), Accounting for Certain Investments in
Debt and Equity Securities. Statement 115
FORM 10-Q Page 4
<PAGE>
provides for the use of the amortized cost method for investments in debt
securities when management has the positive intent and ability to hold
such securities to maturity. In connection with the adoption of Statement
115, the Company classified all short term investments as held to
maturity.
(d) Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost less accumulated
depreciation and amortization. Depreciation of furniture and equipment is
provided on the straight-line method over the estimated useful lives of
the respective assets (3 to 10 years). Amortization of leasehold
improvements is provided on the straight-line method over the remaining
minimum lease term.
(e) Intangible Assets
Intangible assets are amortized on a straight line basis over ten years.
(f) Research and Development Costs
All research and development costs are expensed as incurred and include
salaries of research and development employees. For the three months
ended March 31, 1996 and 1995, salaries and benefits totaled
approximately $1,928,000 and $1,686,000, respectively, of which
approximately $1,463,000 and $1,269,000, respectively, was charged to
research and development. Payments related to the acquisition of in-
process research and development are expensed.
(g) Net Loss Per Share
Net loss per share is calculated using the weighted average shares of
common stock outstanding during the period. For the three months ended
March 31, 1996 and 1995, and the period from August 2, 1989 (date of
incorporation) through March 31, 1996, the weighted average common shares
used to compute net loss per share totaled 20,617,041, 16,039,448 and
8,976,688 respectively. Stock options and stock warrants are considered
common stock equivalents, however are not included in the loss per share
computations as their effect is anti-dilutive. Shares held in escrow
through June 30, 1995, pending satisfaction of certain future conditions,
and shares related to contingent stock issue rights related to the IPI
acquisition have been excluded from the net loss per share calculation
until such shares were released or issued.
(h) Reclassifications
Certain reclassifications have been made to prior period financial
statements to conform with the March 31, 1996 presentation with no effect
on net loss reported.
(i) Revenue Recognition
Revenue from grants is recognized as earned under the terms of the
related grant agreements. Revenue from service contracts is recognized
as the services are performed and/or as milestones are achieved. Revenue
from products and services is recognized when the products are shipped or
the services are performed. Amounts received in advance of services to
be performed under contracts are recorded as deferred revenue.
(j) Patent Application Costs
Costs incurred in filing for patents are expensed as incurred.
FORM 10-Q Page 5
<PAGE>
(k) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from these estimates.
(l) Interim Financial Information
The Consolidated Balance Sheet as of March 31, 1996, and the related
Consolidated Statements of Operations for the three month periods ended
March 31, 1996 and 1995, and the period from August 2, 1989 (date of
incorporation) through March 31, 1996, and Consolidated Statements of
Cash Flows for the three month periods ended March 31, 1996 and 1995, and
the period from August 2, 1989 (date of incorporation) through March 31,
1996, are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. Such adjustments consisted of normal recurring items. Interim
results are not necessarily indicative of results for a full year. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the
Company's Annual Consolidated Financial Statements and Notes which should
be read in conjunction with these consolidated financial statements and
notes.
(m) Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation" (Statement
123). Statement 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans using a fair value
based methodology as an alternative to intrinsic value based methodology.
In addition, Statement 123 establishes the fair value as the measurement
basis for transactions in which an entity issues its equity instruments
to acquire goods or services from non-employees. The accounting and
reporting requirements of Statement 123 are effective beginning January
1, 1996. The Company intends to continue using the intrinsic value
method.
(2) CAPITAL STOCK
In February, 1996, the Company completed a private placement of common
stock. The Company issued 6,550,990 shares of Common Stock at $2 1/8 per
share with proceeds of approximately $13.0 million, net of selling
commissions and expenses of approximately $900,000. The Company agreed
that on or before May 13, 1996, it will cause to be filed, pursuant to Rule
415 of the Securities Act, a Shelf Registration Statement as to the shares
of Common Stock sold to the purchasers in the private placement. In
connection with the private placement, the co-exclusive agent, Harris, Webb
& Garrison received a $634,630 selling commission, 49,775 warrants with an
exercise price of $3.05 per share and no registration rights, and 497,749
warrants with an exercise price of $3.66 per share with the underlying
common stock being registered, under certain circumstances, on a "piggyback"
basis in the event of a public offering of common stock by the Company. The
co-exclusive agent, Aurora Capital Corp., received a $124,653 selling
commission, 25,587 warrants with an exercise price of $3.36 per share, and
157,350 warrants with an exercise price of $4.58 per share. The common
stock underlying Aurora's warrants will be registered with the Common Stock
issued in the private placement. The co-exclusive agents assigned some of
these warrants to others.
(3) STOCK OPTIONS
The Company has in effect the following stock option plans:
FORM 10-Q Page 6
<PAGE>
The Amended and Restated 1990 Incentive Stock Option Plan ("1990 Plan")
allows for the issuance of incentive and non-qualified options to employees,
directors, officers, non-employee independent contractors and non-employee
directors, pursuant to which 280,952 shares of common stock are reserved for
issuance out of authorized but unissued shares of the Company.
The Amended and Restated 1992 Incentive Stock Option Plan ("1992 Plan")
allows for the issuance of incentive and non-qualified options to employees,
directors, officers, non-employee independent contractors and non-employee
directors, pursuant to which 1,693,498 shares of common stock are reserved
for issuance out of authorized but unissued shares of the Company.
The Stock Option Plan for Non-Employee Directors ("Director Plan") allows
for the issuance of non-qualified options to non-employee directors,
pursuant to which 71,429 shares of common stock are reserved for issuance
out of authorized but unissued shares of the Company to be issued to non-
employee members of the Board of Directors of the Company based on a
formula.
The 1995 Stock Option Plan ("1995 Plan") allows for the issuance of
incentive and non-qualified options, shares of restricted stock and stock
bonuses to employees, officers, and non-employee independent contractors,
pursuant to which 1,000,000 shares of common stock are reserved for issuance
out of authorized but unissued shares of the Company.
The 1995 Non-Employee Director Stock Option Plan ("1995 Director Plan")
allows for the issuance of non-qualified options to non-employee directors,
pursuant to which 200,000 shares of common stock are reserved for issuance
out of authorized but unissued shares of the Company to be issued to non-
employee members of the Board of Directors of the Company based on a
formula.
A summary of stock options as of March 31, 1996, follows:
<TABLE>
<CAPTION>
Exercise Price Available
Stock Option Plans Per Share Outstanding Exercised Exercisable for Grant
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1990 Plan $ 3.50 217,160 4,763 202,515 63,792
1992 Plan $ 1.41 - $5.36 1,605,746 6,502 698,013 87,752
Director Plan $ 2.40 - $4.54 42,576 --- 20,862 28,853
1995 Plan $ 1.31 - $4.53 564,500 --- --- 435,500
1995 Director Plan $ 1.38 65,454 --- 21,822 134,546
---------- ------ ------- -------
TOTAL 2,495,436 11,265 943,212 750,443
========== ====== ======= =======
</TABLE>
The Company has recorded deferred compensation for the difference between the
grant price and the deemed fair value for financial statement presentation
purposes related to certain options granted in the period subsequent to May
27, 1993 and prior to the initial public offering. Such amount totaled
$287,158, of which $21,886 has been charged to expense in 1996. The
unamortized deferred compensation expense of $24,291 at March 31, 1996 will
be amortized over the remaining vesting periods of the options.
(4) INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" effective January 1, 1993. As of March 31,
1996, the Company had a net deferred tax asset of
FORM 10-Q Page 7
<PAGE>
approximately $17,053,000, primarily composed of the tax benefit associated
with net operating loss carry forwards, start-up and other capitalized costs.
A valuation allowance for the full amount of the deferred tax asset has been
established as realization of the benefit is uncertain.
<TABLE>
<CAPTION>
<S> <C>
(5) COMMON STOCK RESERVED
</TABLE>
The Company has reserved common stock for issuance as of March 31, 1996
as follows :
<TABLE>
<CAPTION>
<S> <C>
Stock option plans 3,245,879
Agreement with Genentech, Inc. 285,715
Warrants issuable under the Genentech Agreement 142,858
Warrants outstanding 5,441,669
Underwriters purchase options and related warrants 710,000
IPI acquisition (contingent shares) 1,000,000
----------
Total shares reserved 10,826,121
==========
</TABLE>
(6) CLINICAL RESEARCH AGREEMENTS
On February 10, 1995, the Company entered into an agreement with Coromed,
Inc., a contract research organization, to coordinate the clinical evaluation
of NOVASTAN(R) as an adjunct to Streptokinase in acute myocardial infarction.
Coromed is responsible for managing all aspects of the clinical trial and
making all financial remuneration to testing sites. The term of the
agreement is 19 months, subject to extension upon the mutual written
agreement of both parties. The parties have agreed to a total budget of
approximately $3,196,000. Of this amount, $106,000 was paid upon execution
of a letter of intent and approximately $450,000 was paid upon execution of
the agreement. Subsequent payments will be made monthly on a per patient
basis, to a maximum total of approximately $2,490,000. Three additional
payments of $50,000 each will be made upon completion of specified tasks by
Coromed. If the clinical trial is completed in less than 19 months, the
Company will pay Coromed a bonus calculated as a percentage of personnel
costs as set forth in the budget, to a maximum bonus amount of approximately
$327,000. In addition, the Company has engaged Coromed to provide various
services related to other ongoing NOVASTAN(R) trials being conducted by the
Company.
On May 1, 1996, the Company amended the above agreement with Coromed, Inc.
The term of the contract was extended to 24 months with an additional cost
of $1,200,000. The bonus payment, if any, is now based on the completion in
less than 24 months.
(7) RESEARCH AGREEMENTS
On October 11, 1994, the Company signed a collaborative agreement with
Synthelabo, a French pharmaceutical group, to develop and market compounds
for vascular proliferation disease derived from the Company's FGF and
antisense programs. Upon consummation of the transaction, Synthelabo
purchased 1,428,571 shares of common stock for $3.50 per share for a total of
$5 million and paid a non-refundable licensing fee of $3 million. In
addition, Synthelabo has committed to pay $3 million annually in research
payments (payable in quarterly installments of $750,000) for three years.
Synthelabo has agreed, upon the achievement of certain milestones, to further
payments of up to $3 million per year for up to $18 million in total.
Synthelabo has the right to terminate the agreement any time on or after
October 15, 1996, for any reason and either party has the right to terminate
the contract for breach of any material obligation. If Synthelabo exercises
this termination right, the license granted to Synthelabo shall terminate and
TBC will pay Synthelabo a royalty on net sales of any products sold in a
certain territory for a period of time. In addition, Synthelabo may, at its
option, require that the technology be transferred to and the development
program be conducted by a joint venture owned by TBC and Synthelabo should
"net worth" as defined in the agreement be less than $5 million as of the end
of any calendar quarter during the term of the agreement. The first
quarterly research payment of $750,000 was received on October 31, 1994, of
which $500,000 was recognized in 1994. As of March 31, 1996, $250,000 is
included in current deferred
FORM 10-Q Page 8
<PAGE>
revenue. Synthelabo will pay royalties to TBC, based on the net sales, in
those geographic areas covered in the agreement. In exchange for the above
consideration, Synthelabo will receive an exclusive license to manufacture,
use, and sell any products generated from the research, in Europe, the Middle
East, Africa and the countries of the former Soviet Union. One of the
programs, which involves antisense, is being jointly reviewed and may result
in a redirection of the research into another area
During 1995, the Company and Synthelabo mutually agreed to exchange certain
clinical data. In January 1996, the Company signed an agreement with
Synthelabo with respect to the supply of information related to certain
clinical studies regarding NOVASTAN(R). Synthelabo paid TBC $500,000 upon
execution of the agreement. In addition, over the term of the agreement as
certain milestones are met, Synthelabo has committed to pay TBC additional
payments that total $2,000,000. These payments are dependent on rate of
enrollment in certain clinical studies, the completion of certain clinical
studies and date of completion of certain clinical studies. Synthelabo is
the licensee for NOVASTAN(R) in certain territories other than those which
were sublicensed to TBC.
(8) LICENSE AGREEMENT
In May 1993, TBC entered into an agreement with Genentech to sublicense
Genentech's rights and technology relating to NOVASTAN(R) (argatroban)
originally licensed to Genentech by Mitsubishi Chemical Corporation
("Mitsubishi"), and to license Genentech's own proprietary technology
developed with respect to NOVASTAN(R) (the "Genentech Agreement"). Under the
license and sublicense, the Company has an exclusive license to use and sell
NOVASTAN(R) in the United States and Canada for specified human
cardiovascular indications, not including cerebral thromboembolism (stroke).
The Company is required to pay Genentech and Mitsubishi specified royalties
on net sales of NOVASTAN(R) by the Company and its sublicensees after its
commercial introduction in the United States and Canada. Genentech has the
right to terminate the agreement or to cause the license to become non-
exclusive if the Company fails to exercise due diligence in performing its
obligations under the agreement for a period of 60 days after receiving
written notice from Genentech or fails to maintain a minimum consolidated
tangible net worth of $5.0 million. This due diligence obligation requires
the Company, among other things, to file a new drug application for
NOVASTAN(R) with the United States Food and Drug Administration ("FDA") no
later than June 30, 1997, subject to certain goals being reached in
accordance with a supplemental agreement entered into by the Company,
Genentech, and Mitsubishi effective June 30, 1995. These goals are, in
general, (i) enrollment and treatment with study drugs for a specified
minimum number of subjects for certain human clinical trials by December 31,
1995, (ii) a specified number of study centers being under contract and
performing the trials by December 31, 1995, (iii) commencement of specified
planned studies and the pilot phase of certain human clinical trials by
December 31, 1995, (iv) completion of enrollment and treatment with study
drugs of subjects for certain human clinical trials by June 30, 1996, and (v)
completion of milestones related to animal and human clinical trials and
schedules for NOVASTAN(R) by various dates in 1996 and 1997 (the latest date
being June 30, 1997). Additionally, the supplemental agreement provides for
a limited sixty (60) day period to cure an inability to perform enrollment
and treatment goals by December 31, 1995, June 30, 1996, or December 31,
1996, as set forth in the supplemental agreement. The Company received a
variance to the supplemental agreement through March 31, 1996. With respect
to the trials underway, enrollment did not meet the goals outlined in the
supplemental agreement by the March 31, 1996 deadline received in the
variance agreement. The Company is currently negotiating with Genentech and
Mitsubishi for an extension or revision of the agreement. Either party may
terminate the Genentech Agreement on 60 days notice if the other party
defaults in its material obligations under the agreement, declares bankruptcy
or is insolvent, or if a substantial portion of its property is subject to
attachment. The Genentech Agreement is also subject to the continuation of
Genentech's license agreement with Mitsubishi, which is only terminable if
Genentech defaults in its material obligations under the agreement, declares
bankruptcy or is insolvent, or if a substantial portion of its property is
subject to attachment. Unless terminated sooner pursuant to the above
described termination provisions, the Genentech Agreement is expected to
expire in June 2007. Under the Genentech Agreement, TBC has access to an
improved formulation patent granted in 1993 which expires in 2010 and a use
patent which expires in 2009.
FORM 10-Q Page 9
<PAGE>
Mitsubishi further agreed to supply the Company with its requirements of
NOVASTAN(R) throughout the term of the Genentech Agreement for TBC's
clinical testing and commercial sales of NOVASTAN(R) in the United States
and Canada. In the event Mitsubishi should discontinue the manufacture of
NOVASTAN(R), Mitsubishi, Genentech and TBC have agreed to discuss in good
faith the means by which, and the party to whom, NOVASTAN(R) production
technology will be transferred. The transferee may be a person or entity
other than Genentech or TBC. At present, Mitsubishi is the only
manufacturer of NOVASTAN(R). Should Mitsubishi terminate or default in its
supply commitment, there can be no assurance that alternate sources of bulk
NOVASTAN(R) will be available to the Company at reasonable cost, if at all.
If such alternate sources of supply are unavailable or uneconomic, the
Company's results of operations would be materially and adversely affected.
In exchange for the license to Genentech's NOVASTAN(R) technology, TBC
issued Genentech 285,714 shares of Common Stock and agreed to issue (i) an
additional 214,286 shares of Common Stock to Genentech within 10 days after
the filing of the first New Drug Application ("NDA") with the FDA for
NOVASTAN(R), and (ii) an additional 71,429 shares of Common Stock to
Genentech within 10 days after the FDA's first approval of an NDA for
NOVASTAN(R). The Company has also agreed to grant Genentech a warrant to
purchase an additional 142,858 shares of Common Stock at an exercise price
of $14.00 per share, subject to adjustment, within ten days of the filing of
the first NDA for NOVASTAN(R) with the FDA. If the Company is unable to
issue any of the additional shares of Common Stock or the warrant to
Genentech due to circumstances beyond the Company's control, the Company has
agreed to pay Genentech, in lieu thereof, an amount equal to the value of
the securities plus interest from May 27, 1993 at the prime rate plus one
percent, compounded annually. The value of the Common Stock is deemed to be
$7.00 per share, which represents the cash consideration the Company will be
obligated to pay to Genentech as liquidated damages, and the value of the
warrants is to be determined by appraisal, based on the warrants' market
value. The Company will not be required to make any cash payment if both of
the filing and approval of the NDA do not occur. TBC has also granted
Genentech demand and piggyback registration rights with regard to shares of
Common Stock issued to Genentech.
Due to the additional research and development required to commercialize the
technologies associated with the Sublicense and License Agreement, the
Company expensed the value associated with the 285,714 shares issued to
Genentech, charging $1,000,000 to purchase of in-process research and
development expense in the year ended December 31, 1993.
In connection with the Genentech Agreement, a consultant involved in
negotiations related to the Agreement will receive a royalty on net sales of
licensed products.
(10) CONSOLIDATION OF IMMUNOPHARMACEUTICS, INC.
The Company has decided to consolidate the IPI operation into TBC's in the
first half of 1996. The overall financial impact on the Company's
performance will be positive in 1996 due to expected reduction in general
and administrative expenses and the elimination of some research and
development positions associated with IPI. The Company believes the
goodwill associated with IPI, $643,750, is impaired due to the decision to
cease operations at IPI and the sale of the QED business unit and has
charged it to expense in the year ended December 31, 1995. The
restructuring costs associated with the consolidation of the IPI operation
were approximately $421,000 and have been expensed in the three months ended
March 31, 1996. This cost included waste disposal, future lease
commitments, severance pay and related taxes.
FORM 10-Q Page 10
<PAGE>
(11) COMMITMENTS AND CONTINGENCIES
a) Employment Agreements
Since inception, the Company has entered into employment agreements with
certain officers and key employees. One of the officers, Dr. Maggio,
resigned his position as CEO of IPI effective March 31, 1996. As of
March 31, 1996, remaining commitments total approximately $274,000 in
1996. These amounts include payments due to three former employees
pursuant to their severance agreements. The employment agreements of
various officers and key employees provide for salary continuation for up
to twelve months from date of termination upon dismissal by the Company,
which would approximate $691,000 currently. In addition to salary, the
Company has agreed to reimburse certain officers and other employees for
costs of relocation and temporary travel and living expenses.
In addition, the Company has signed agreements with five of its officers
to provide certain benefits in the event of a "change of control" as
defined in the agreement and the occurrence of certain other events. The
agreements provide for a lump-sum payment in cash equal to eighteen (18)
months to three (3) years of annual base salary and annual bonus if any.
The base salary portion of the agreements would aggregate approximately
$1.9 million at current rate of compensation. In addition, the agreements
provide for gross-up for certain taxes on the lump-sum payment,
continuation of certain insurance and other benefits for periods of
eighteen (18) months to three (3) years and reimbursement of certain
legal expenses in conjunction with the agreements. These provisions are
intended to replace compensation continuation provisions of any other
agreement in effect for an officer if the specified event occurs.
b) Legal Proceedings
On November 21, 1994, a class action shareholders' suit was filed in the
United States District Court for the Southern District of Texas, Houston
Division seeking damages in the amount of $16 million. Plaintiffs are
two individuals who purchased shares in the Company on December 16, 1993
following the Company's initial public offering. In their complaint,
plaintiffs have sued the Company and certain members of the board of
directors and certain officers alleging violations of Sections 11, 12 and
15 of the Securities Act of 1933. Plaintiffs have also named David
Blech, D. Blech & Co., Incorporated and Isaac Blech as defendants. On
January 23, 1995, the Company and the members of the board of directors
filed a motion to dismiss the plaintiffs' complaint pursuant to Rule 9(b)
and Rule 12b(6) of the Federal Rules of Civil Procedure. In addition,
defendant John Pietruski filed a motion to dismiss the plaintiffs'
complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil
Procedure. On February 7, 1995, the plaintiffs filed a motion for class
certification. The Court denied the motion by the Company and by John
Pietruski.
On March 28, 1995, a class action shareholders' suit was filed in the
United States District Court for the Southern District of New York
seeking unspecified damages. Plaintiffs are eight individuals who
purchased shares in various companies for which D. Blech & Co. acted as
an underwriter (or co-underwriter) or marketmaker. Only one of those
plaintiffs purchased stock in the Company. In their complaint, the
plaintiffs have sued the Company alleging violations of Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder
by the Securities and Exchange Commission. Plaintiffs have named a
number of defendants, including David Blech and D. Blech & Co., four
individuals, two brokerage firms, one investment management company and
ten other companies for which D. Blech & Co. acted as underwriter or
marketmaker.
On August 14, 1995, the Judicial Panel on The Multi-District Litigation
ordered that the action filed in the United States District Court for the
Southern District of Texas, Houston Division be transferred to the United
States District Court for the Southern District of New York for
coordinated or consolidated pretrial proceedings with the action pending
there. In light of the transfer and consolidation of the
FORM 10-Q Page 11
<PAGE>
Texas case with similar cases against other companies for which Blech
acted as underwriter, the Company requested that the Court in New York
reconsider the Texas Court's denial of its Motion to Dismiss as a part of
the Court's consideration of similar Motions to Dismiss filed by those
companies. All of these Motions were presented to the Court on February
6, 1996, but no ruling has yet been made. Given the early stage of this
case, the Company is unable to evaluate the potential outcome at this
time. The Company disputes these claims and intends to contest them
vigorously.
On June 7, 1995, a class action shareholders' suit was filed in the
United States District Court for the Southern District of New York
seeking unspecified damages. The plaintiff is an individual who
purchased shares in the Company on December 15, 1993 following the
Company's initial public offering. In his complaint, the plaintiff has
sued the Company and certain members of the board of directors and
certain officers alleging violations of Sections 11, 12 and 15 of the
Securities Act of 1933, Sections 10(b) and 20 of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities and
Exchange Commission. Plaintiffs have also named David Blech, D. Blech &
Co., and a certain broker-dealer as defendants. On September 15, 1995,
the Company and the members of the board of directors filed a motion to
dismiss the Complaint pursuant to Rule 12(b)(6) and Rule 9(b) of the
Federal Rules of Civil Procedure Act. On November 8, 1995 the plaintiff
filed a stipulation for voluntary dismissal. An order of dismissal was
entered by the judge on February 5, 1996.
FORM 10-Q Page 12
<PAGE>
ITEM 2.
-------
TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
OVERVIEW
--------
Since its inception in 1989, the Company has primarily devoted its resources
to fund research, drug discovery and development. The Company has been
unprofitable to date and expects to incur substantial losses for the next
several years as the Company invests in product research and development,
preclinical and clinical testing and regulatory compliance. The Company has
sustained net losses of approximately $48.7 million from inception to March
31, 1996. The Company has primarily financed its operations to date through
private placements of common stock and debt, which have raised an aggregate
of $21.3 million in net proceeds, an initial public offering ("IPO") of a
Unit security which raised an aggregate of $24.2 million in net proceeds
including the over-allotment sold in January 1994 and a private placement of
common stock on February 13, 1996, which raised $13.0 million in net
proceeds. on July 25, 1994, the company acquired all of the outstanding
stock of ImmunoPharmaceutics, inc. (IPI) in exchange for common stock of the
Company. IPI's results of operations have been included in the consolidated
results of operations beginning August 1, 1994. The Company signed a
collaborative agreement with Synthelabo, a French pharmaceutical group on
October 11, 1994. Upon consummation of the transaction, Synthelabo purchased
1,428,571 shares of common stock for a total of $5 million and paid a
licensing fee of $3 million. In addition, Synthelabo has committed to pay $3
million annually in research payments (payable in quarterly installments) for
three years. Subsequent to December 31, 1995, TBC signed an agreement with
Synthelabo to provide to them copies of certain clinical data. TBC received
$500,000 at the execution of the agreement. Over the life of the agreement
TBC may receive as much as $2.5 million, including the $500,000 received,
from Synthelabo. The Company's operating results have fluctuated
significantly during each quarter, and the company anticipates that such
fluctuations, largely attributable to varying research and development
commitments and expenditures, will continue for the next several years.
RESULTS OF OPERATIONS
---------------------
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995
Revenues increased from $1,333,707 in the three month period ended March 31,
1995 to $1,917,302 in the same period of 1996, an increase of 44%. Revenues
were composed of earned revenues under research agreements, sales of products
and services, and grant income. revenue from research agreements increased
due to a payment from Synthelabo of $500,000 which was related to the signing
of an agreement to supply them with certain clinical data.
Total operating expenses increased 73% from $4,066,239 in the three month
period ended March 31, 1995 to $7,014,273 in the same period of 1996.
Research and development expenses increased 93% from $2,842,395 in the three
month period ended March 31, 1995 to $5,480,616 in the same period of 1996.
This increase was primarily attributable to the inclusion of IPI costs
beginning august 1994 and continued increases in research and development
activity related to the clinical trials on the compound NOVASTAN(R)
(argatroban). General and administrative expenses decreased 9% from
$1,223,844 in the three month
FORM 10-Q Page 13
<PAGE>
period ended March 31, 1995 to $1,112,492 in the same period of 1996. The
decrease was primarily attributable to the elimination of the QED operation
in October 1995. The Company had 97 employees at March 31, 1995, including 34
employees at IPI, and 80 employees at March 31, 1996, including 2 employees
at IPI.
Other income and expenses was composed entirely of investment income on
invested funds and interest expense. Investment income decreased from
$351,895 in the three month period ended March 31, 1995 to $245,888 in the
same period of 1996, a decrease of 30%. The decrease is due to lower
interest rates from 1995 to 1996 and a lower investment balance throughout
1996.
The Company incurred a net loss of $2,380,637 for the three month period
ended March 31, 1995, compared with a net loss of $4,851,083 for the same
period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has financed its research and development activities to date
principally through (i) private sales of common stock and an initial public
offering of a unit security, (ii) issuance of common stock in conjunction
with assumption of liabilities and assets to acquire IPI and the NOVASTAN(R)
license , (iii) revenues from research agreements and sales of products and
services and (iv) investment income, net of interest expense.
The Company expects to incur substantial research and development
expenditures as it designs and develops biopharmaceutical products for the
prevention and treatment of cardiovascular diseases. The Company anticipates
that operating expenses will continue to increase during 1996 and subsequent
years. The Company began to incur costs to develop NOVASTAN(R) during the
third quarter of 1993. These costs will continue to increase during 1996 due
to the continuation of clinical trials and will continue to be significant
through the FDA approval process. These costs will include, among other
things, hiring personnel to direct and carry out all operations related to
the clinical trials, paying for hospital and procedural costs, services of a
contract research organization, and purchasing and formulating large
quantities of the compound to be used in such trials. In addition, the
Company anticipates that the administrative costs associated with this effort
will be significant. The amounts and timing of expenditures will depend on
the progress of ongoing research and clinical development and product launch
costs.
At March 31, 1996 and March 31, 1995, the Company had cash, cash equivalents
and short-term investments of approximately $22 million and $22 million,
respectively. The Company anticipates that its existing capital resources
should be sufficient to fund its cash requirements into the third quarter of
1997. However, the Company's existing capital resources will not be
sufficient to fund the Company's operations through commercialization of its
first product. Moreover, the Genentech and Synthelabo Agreements require the
Company to maintain a tangible net worth of at least $5.0 million during the
term of the agreements. If the Company fails to maintain the prescribed net
worth or fails to exercise due diligence in performing its obligations under
the Genentech Agreement, Genentech may, at its option, terminate the
Genentech Agreement or cause the license to become non-exclusive. For
failure to maintain at least $5.0 million of net worth, Synthelabo may
require that the technology be transferred to, and the development program be
conducted by, a joint venture owned by TBC and Synthelabo.
The Company will need to raise substantial funds for future operations and is
actively seeking such funding through collaborative arrangements, public or
private financing, including equity financing, and other arrangements. The
Company expects that additional expenditures will be required if additional
product candidates enter clinical trials which may require additional
expenditures for laboratory space, scientific and administrative personnel,
and services of contract research organizations. There can be no assurance
that the Company will be able to obtain additional financing on acceptable
terms or in time to fund any necessary or desirable expenditures. In the
event such financing are not obtained, the Company's development and research
projects will be delayed or scaled back.
FORM 10-Q Page 14
<PAGE>
PENDING LITIGATION
As of March 31, 1996, three class action shareholder lawsuits have been filed
against the Company, two of which include certain directors and officers as
defendants. The Company disputes all claims set forth in these lawsuits and
intends to contest them vigorously. However, the Company is unable to
evaluate the potential outcome at this time.
HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS
The Company's research and development activities involve the controlled use
of hazardous and radioactive materials. The Company is subject to federal,
state, and local laws and regulations governing the use, manufacture,
storage, handling and disposal of such materials and certain waste products.
Management believes that the Company is in compliance with all such laws,
regulations and standards currently in effect and that the cost of compliance
with such laws, regulation, and standards will not have a material adverse
effect on the Company. The Company does not expect to incur any capital
expenditures for environmental control in the foreseeable future.
IMPACT OF INFLATION AND CHANGING PRICES
The pharmaceutical research industry is labor intensive, and wages and
related expenses increase in inflationary periods. The lease of space and
related building services for the Houston facility contains a clause that
escalates rent and related services each year based on the increase in
building operating costs and the increase in the Houston Consumer Price
Index, respectively. To date, inflation has not had a significant impact on
operations.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Report includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in this Report are forward looking
statements. Such forward looking statements include, without limitation,
statements under (a) "Organization and Significant Accounting Policies --
Organization" regarding TBC's expectations for future drug discovery and
development and related expenditures and (b) "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" - regarding TBC's estimate of sufficiency of existing
capital resources and ability to raise additional capital to fund cash
requirements for future operations. Although TBC believes that the
expectations reflected in such forward looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward
looking statements will prove to have been correct. The ability to achieve
TBC's expectations is contingent upon a number of factors which include (i)
ongoing cost of research and development activities, (ii) cost of clinical
development of product candidates, (iii) attainment of research and clinical
goals of product candidates, (iv) timely approval of TBC's product candidates
by appropriate governmental and regulatory agencies, (v) effect of any
current or future competitive products, (vi) ability to manufacture and
market products commercially, (vii) retention of key personnel and (viii)
obtaining and timing of sufficient financing through capital raising or
collaborative agreements to fund operations.
FORM 10-Q Page 15
<PAGE>
PART II OTHER INFORMATION
- -------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
On November 21, 1994, a class action shareholders' suit was filed in the
United States District Court for the Southern District Of Texas, Houston
Division seeking damages in the amount of $16 million. Plaintiffs are two
individuals who purchased shares in the Company on December 16, 1993
following the Company's initial public offering. In their complaint,
plaintiffs have sued the company and certain members of the board of
directors and certain officers alleging violations of sections 11, 12 and 15
of the Securities Act of 1933. Plaintiffs have also named David Blech, D.
Blech & Co., Incorporated and Isaac Blech as defendants. on January 23, 1995,
the Company and the members of the board of directors filed a motion to
dismiss the plaintiffs' complaint pursuant to Rule 9(b) and Rule 12b(6) of
the Federal Rules of Civil Procedure. In addition, defendant John Pietruski
filed a motion to dismiss the plaintiffs' complaint pursuant to rule 12(b)(2)
of the Federal Rules of Civil Procedure. On February 7, 1995, the plaintiffs
filed a motion for class certification. The Court denied the motion by the
Company and by John Pietruski.
On March 28, 1995, a class action shareholders' suit was filed in the United
States District Court for the Southern District of New York seeking
unspecified damages. Plaintiffs are eight individuals who purchased shares
in various companies for which D. Blech & Co. acted as an underwriter (or co-
underwriter) or marketmaker. Only one of those plaintiffs purchased stock in
the Company. In their complaint, the plaintiffs have sued the Company
alleging violations of section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder by the Securities and Exchange
Commission. Plaintiffs have named a number of defendants, including David
Blech and D. Blech & Co., four individuals, two brokerage firms, one
investment management company and ten other companies for which D. Blech &
Co. acted as underwriter or marketmaker.
On August 14, 1995, the Judicial Panel on The Multi-District Litigation
ordered that the action filed in the United States District Court for the
Southern District of Texas, Houston Division be transferred to the United
States District Court for the Southern District of New York for coordinated
or consolidated pretrial proceedings with the action pending there. In
light of the transfer and consolidation of the Texas case with similar cases
against other companies for which Blech acted as underwriter, the Company
requested that the Court in New York reconsider the Texas Court's denial of
its Motion to Dismiss as a part of the Court's consideration of similar
Motions to Dismiss filed by those companies. All of these Motions were
presented to the Court on February 6, 1996, but no ruling has yet been made.
Given the early stage of this case, the Company is unable to evaluate the
potential outcome at this time. The Company disputes these claims and intends
to contest them vigorously.
On June 7, 1995, a class action shareholders' suit was filed in the United
States District Court for the Southern District of New York seeking
unspecified damages. The plaintiff is an individual who purchased shares in
the Company on December 15, 1993 following the Company's initial public
offering. In his complaint, the plaintiff has sued the Company and certain
members of the board of directors and certain officers alleging violations of
sections 11, 12 and 15 of the Securities Act of 1933, Sections 10(b) and 20
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder
by the Securities and Exchange Commission. Plaintiffs have also named David
Blech, D. Blech & Co., and a certain broker-dealer as defendants. On
September 15, 1995, the Company and the members of the board of directors
filed a motion to dismiss the Complaint pursuant to Rule 12(b)(6) and Rule
9(b) of the Federal Rules of Civil Procedure Act. On November 8, 1995 the
plaintiff filed a stipulation for voluntary dismissal. An order of dismissal
was entered by the judge on February 5, 1996.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None
FORM 10-Q Page 16
<PAGE>
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- --------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
EXHIBIT NO. DESCRIPTION
----------- -----------
10.51 * Letter Agreement regarding Argatroban Studies Information
dated December 14, 1995, between the Company and Synthelabo
Recherche
10.52 Amendment B to Clinical Trial Research Agreement dated
February 10, 1995 between Texas Biotechnology Corporation
and Coromed Inc.
27.1 Financial Data Schedule
- ------------
* The Company has omitted certain portions of this agreement in reliance on
Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.
REPORTS ON FORM 8-K
--------------------
One report on Form 8-k was filed during the quarter ended March 31, 1996.
The report was dated February 13, 1996 and filed February 22, 1996, and
announced the Company's private placement of common stock. The report is
incorporated herein by reference.
FORM 10-Q Page 17
<PAGE>
TEXAS BIOTECHNOLOGY CORPORATION
MARCH 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 10th day of May, 1996.
TEXAS BIOTECHNOLOGY CORPORATION
By: /S/ DAVID B. McWILLIAMS
------------------------
David B. McWilliams
President and Chief Executive Officer
By: /S/ STEPHEN L. MUELLER
-----------------------
Stephen L. Mueller
Vice President of Administration
Secretary and Treasurer
(Principal Financial and Accounting
Officer)
FORM 10-Q Page 18
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
----------- ---------------------- --------
10.51 * Letter Agreement regarding Argatroban Studies Information
dated December 14, 1995, between the Company and Synthelabo
Recherche
10.52 Amendment B to Clinical Trial Research Agreement dated
February 10, 1995 between Texas Biotechnology Corporation
and Coromed Inc.
27.1 Financial Data Schedule
- -----------
* The Company has omitted certain portions of this agreement in reliance on
Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.
FORM 10-Q Page 19
<PAGE>
EXHIBIT 10.51
[LETTERHEAD OF SYNTHELABO RECHERHE APPEARS HERE]
Le Plessis-Robinson,
December 14, 1995
TEXAS BIOTECHNOLOGY CORPORATION
7000 Fannin
Suite 1920
Houston, Texas 77030
(U.S.A.)
Re: Supply of Information regarding Argatroban Studies
Dear Sirs,
This letter will set forth our mutual agreement with respect to future supply of
information to Synthelabo relating to certain clinical studies on Argatroban
being conducted by Texas Biotechnology Corporation (TBC) on request of
Synthelabo Recherche (S.R.), a wholly owned subsidiary of Synthelabo, to whom
was entrusted the development of Argatroban by Synthelabo's licensees, i.e.
Synthelabo Groupe and Laboratories Synthelabo:
1. CLINICAL TRIAL DATA. Subject to the terms hereof, TBC agrees to provide
copies of S.R. of clinical trial data defined as data base plus interim and
final reports, relating to TBC's clinical trials known as ARG-911, ARG-107 and
ARG-106 (the "TBC Clinical Data"). Specifically, on or before September 30,
1996, TBC will use its commercially reasonable best efforts to provide to S.R.
the TBC Clinical Data with respect to ARG-911 on a maximum of three hundred
(300) patients enrolled in TBC's clinical trials being conducted in the United
States. This data will be delivered to S.R. in an initial group of thirty-two
(32) patients to be delivered on or before January 31, 1996 along with a report
on interim safety data, and thereafter, will be provided in twenty-five (25)
patients lots. In addition, TBC will use its commercially reasonable best
efforts to provide to S.R. the TBC Clinical Data relating to its ARG-107 and
ARG-106 trials on or before December 31, 1996. The parties agree that TBC cannot
at this time specify the amount of data or the number of patient to be included
in the TBC Clinical Data. The TBC Clinical Data supplied to S.R. hereunder shall
be delivered in a format which will be acceptable for registration with European
regulatory authorities by S.R. pursuant to a format which will be agreed upon by
the parties before the delivery of any such TBC Clinical Data. TBC undertakes to
have carried out or to authorize S.R. to have carried out audits of the
invstigators premises. Reports of such audits shall be transmitted to S.R. and
TBC undertakes to take all appropriate eventual corrective actions as proposed
in the audit reports.
1
<PAGE>
2. PAYMENT. S.R. will pay to TBC (i) USD five hundred thousand ($500,000) on the
execution of this Agreement; USD * upon the delivery of the
TBC Clinical Data relating to both ARG-107 and ARG-106 referenced above;
(iii) * per patient for each patient study delivered by TBC
to S.R. relating to TBC's ARG-911 trial, and (iv) USD * for
the final report of ARG-911 plus USD * for each patient
included in the final report, and provided further that S.R. will not be
obligated to pay more than USD two million and five hundred thousand
($2,500,000) in the aggregate to TBC pursuant to the terms of this Agreement.
Payments for patient data under subparagraph (iii) above will be made within
(5) business days of delivery of such data; and such data will be delivered
in blocks of at least twenty-five (25) patients.
3. USE OF DATA. S.R. agrees that such data shall be the exclusive property of
TBC. S.R. shall keep all such data confidential and not disclose such
data to third parties, without the prior consent of TBC, which consent will
not be unreasonably withheld or delayed. However, S.R. may disclose, to
the extent reasonably required, any such information to their respective
subsidiaries and affiliates, and to Mitsubishi Chemical Corporation
("Mitsubishi"), outside testing organizations and governmental authorities
to the extent reasonably necessary to obtain governmental registration and
marketing approval.
In addition, each party agrees that the data shall only be used by such party
and/or their respective subsidiaries and affiliates in their respective
licensed territory (meaning those territories covered by the license
received by Synthelabo from Mitsubishi and the sublicense received by TBC
from Genentech).
4. PUBLICATION AND PRESENTATIONS. The TBC Clinical Data shall remain the
property of TBC. Publications of any data provided hereunder is permissible
provided that S.R. will give TBC notice of any such publications and a right
to comment on such publication as may be reasonably appropriate. Authorship
may be determined by mutual agreement. S.R. shall not use TBC's name without
the prior written permission of TBC before the use of such name in connection
with any of the data or information supplied hereunder.
5. WARRANTIES. TBC does not make any representations and warranties to S.R. with
respect to the validity, safety, efficacy, or other properties of Argatroban
or the results of the clinical trials delivered hereby. However, TBC warrants
that the TBC clinical trials will be conducted and that the clinical record
forms "CFR" will be collected according to United States Good Clinical
Practice. TBC is delivering said data free of any representations, warranties
or other covenants related thereto except as set forth herein.
- ----------------
* This information has been omitted in reliance on Rule 24b-2 under the
Securities Exchange Act of 1934 and has been filed separately with the
Securities and Exchange Commission.
2
<PAGE>
6. MISCELLANEOUS. This Agreement shall be interpreted, construed and enforced
under the laws of the state of Delaware. This Agreement supersedes all prior
or contemporaneous written or oral agreements relating to the subject matter
hereof, and may be amended only by written instrument executed by the parties
hereto.
If the above reflects your understanding, please execute a duplicate original
and return one to the undersigned.
SYNTHELABO RECHERCHE
/s/ Mr. H. Guerin
------------------------------
By: Mr. H. Guerin
Title: President
Mr. P. Dupin
/s/ P. Dupin
----------------------
Corporate Controller
ACCEPTED AND AGREED TO BY:
TEXAS BIOTECHNOLOGY CORPORATION
By: /s/ Joseph M. Welch /s/ DBM
---------------------------------------
Title: Vice President, Business Development
3
<PAGE>
Exhibit 10.52
Texas Biotechnology Corporation/Coromed, Inc.
A Randomized, Double-Blind, Study of 2 Doses of Novastan
vs. Placebo as Adjunctive Therapy to Streptokinase in
Acute M.I. (Protocol ARG-230)
Contract No. TBCCL-02105
AMENDMENT B
This Amendment B to existing Contract No. TBCCL-02105 between Texas
Biotechnology Corporation (TBC) and Coromed, Inc. (COROMED) provides for
increasing the number of patients in the study by 330 to a total of 1080 (900
clinical outcome patients and 180 angiography patients). Additional costs are
as put forth in Section I, of this Amendment B. The changes to the existing
contract will be as follows:
A. The term for completion of the study will increase by 5 months from 19
months as stated in the current Contract to 24 months under this Amendment
B.
B. One-half of Investigator incentive payments will be paid by Coromed from
any bonus payments earned by Coromed. If such payments are not earned by
Coromed, TBC assumes full responsibility for investigator incentive
payments.
C. The additional 330 patients (patients 751-1080) will be invoiced monthly
in the amount of $3,636.86 per patient to a maximum total aggregate of
1080 patients and $1,200,164 regardless of the actual number of patients
required to produce an additional 330 evaluable (intention to treat)
patients. TBC will be billed monthly for the number of patients enrolled
in that month.
D. The term for completion of the Trial will be 24 months. For each month
(to a maximum of 6 months) under the 24 month term that COROMED reduces
the term of the Trial by decreasing the amount of time required to
initiate the study, enroll the 1080 patients required or close out and
report the study, TBC will provide COROMED a bonus equal to $54,501 to a
maximum amount of $327,008. The bonus will be due and payable upon receipt
by TBC of the draft clinical/statistical report which incorporates data
from all patients enrolled in the study.
1
<PAGE>
Texas Biotechnology Corporation/Coromed, Inc.
A Randomized, Double-Blind, Study of 2 Doses of Novastan
vs. Placebo as Adjunctive Therapy to Streptokinase in
Acute M.I. (Protocol ARG-230)
Contract No. TBCCL-02105
AMENDMENT B, CONT'D.
All other tenets of Contract No. TBCCL-02105 remain in full force and effect.
FOR COROMED, INC.:
BY: /s/ THOMAS J. MASSEY
------------------------------
(Thomas J. Massey)
TITLE: SENIOR VICE PRESIDENT,
----------------------
DRUG DEVELOPMENT
----------------------
DATE: APRIL 25, 1996
----------------------
FOR TEXAS BIOTECHNOLOGY CORPORATION:
BY: /s/ R.P. SCHWARZ JR. BY: /s/ STEPHEN L. MUELLER
-------------------------------- --------------------------
( ) (Stephen L. Mueller)
TITLE: VP, CLIP AND REG AFFAIRS TITLE: V.P., ADMINISTRATION
----------------------------- -------------------------
SECRETARY AND TREASURER
----------------------------- -------------------------
DATE: 4/26/96 DATE: MAY 1, 1996
----------------------------- -----------------------
By: /s/ DAVID B. MCWILLIAMS
-----------------------
(David B. McWilliams)
Title: President and CEO
-----------------------
Date: May 1, 1996
-----------------------
2
<PAGE>
TEXAS BIOTECHNOLOGY CORPORATION/COROMED,INC.
NOVASTAN ACUTE MYOCARDIAL INFARCTION STUDY
PROTOCOL NO. ARG-230
CONTRACT NO. TBCCL-02105
PAGE B-2
AMENDMENT B, CONT'D.
<TABLE>
<S> <C> <C> <C>
I. COST ESTIMATES
ADDITIONAL COSTS
CURRENT BUDGET
760 PATIENTS 1080 PATIENTS
(650 NON-ANGIO) (900 CLINICAL OUTCOME) TOTALS
(90 ANGIO) (180 ANGIOGRAPHY)
A. PERSONNEL
Project Management $123,500 $33,000 $156,500
Monitoring $940,500 $250,000 $1,190,500
Clerical/Administrative Support $56,750 $16,125 $72,875
Medical Support $93,750 $40,000 $133,750
Data Management $514,550 $214,819 $729,369
B. TRAVEL $336,000 $120,000 $456,000
C. INVESTIGATOR MEETING $157,900 $0 $157,900
D. CLINICAL GRANTS $885,000 $507,000 $1,392,000
E. STATISTICAL SERVICES $56,235 $13,860 $70,095
F. MEDICAL WRITING SERVICES $14,550 $0 $14,550
G. OTHER COSTS
Grants Administration $16,875 $5,360 $22,235
TOTALS $3,195,610 $1,200,164 $4,395,774
</TABLE>
NOTE: Incentive payments will be invoiced as a direct pass through cost to TBC.
An administrative fee for processing of payments will be included as a line
item on each invoice sent to TBC for payments.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,521,430
<SECURITIES> 13,568,320
<RECEIVABLES> 122,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,244,261
<PP&E> 7,565,092
<DEPRECIATION> 3,931,622
<TOTAL-ASSETS> 26,878,231
<CURRENT-LIABILITIES> 2,985,607
<BONDS> 0
0
0
<COMMON> 120,009
<OTHER-SE> 23,772,615
<TOTAL-LIABILITY-AND-EQUITY> 26,878,231
<SALES> 0
<TOTAL-REVENUES> 1,917,302
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,901,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,851,083)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,851,083)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,851,083)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> 0
</TABLE>
