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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-27914
RIBOZYME PHARMACEUTICALS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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DELAWARE 34-1697351
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(State of incorporation) (I.R.S. Employer Identification No.)
2950 WILDERNESS PLACE
BOULDER, COLORADO 80301
(Address of principal executive offices)
Company's telephone number: (303) 449-6500
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT::
NONE
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
Check whether the issuer (1) filed all reports required to be filed by
Section 15 or 15(d) of the Exchange Act during the past 12 months (or for such
period that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
Issuer's revenues for fiscal year ending December 31, 1996 were $1,709,500.
The aggregate market value of the voting stock held by non-affiliates of the
Company, as of March 24, 1997, was approximately $23,790,200.
The number of shares of the Company's common stock, par value $.01 per share,
outstanding as of March 24, 1997, was 6,960,130
DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENT PART(S) INTO WHICH INCORPORATED
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Proxy Statement to be used in connection with Part III
the Annual meeting of Part III of Stockholders
to be held May 22, 1997 (the "Proxy Statement"),
to be filed with the Commission prior to April
30, 1997, pursuant to Regulation 144 of the
General Rules and Regulations of the Commission
is incorporated by reference herein.
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PART I
ITEM 1. BUSINESS
GENERAL
Ribozyme Pharmaceuticals, Inc. ("RPI" or the "Company") was founded to
capitalize on the broad potential of ribozymes for use in the development of
human therapeutics and functional genomics, that is the identification of gene
function and target validation. The Company's technology is based on Professor
Thomas R. Cech's discovery of "ribozymes," for which he shared a Nobel Prize in
1989. Ribozymes are a form of ribonucleic acid ("RNA") that have the ability
to selectively inhibit protein production. Because many disease states are the
result of abnormal protein production, ribozymes are potentially applicable to
a wide range of human diseases. RPI believes that its ribozyme technology may
provide a new paradigm for drug design and disease treatment and may be a
significant tool for the identification of gene function. The Company has
entered into collaborations with Chiron Corporation ("Chiron") and Parke-Davis
Division of Warner-Lambert Company ("Parke-Davis") to develop ribozyme products
for specific therapeutic targets in human health, a second collaboration with
Chiron in the functional genomics area, with ALZA Corporation ("ALZA") for drug
delivery technology, with IntelliGene, Ltd. ("IntelliGene") for development of
diagnostics using ribozymes, with Pharmacia Biotech, AB ("Pharmacia Biotech")
on the production-scale synthesis of RNA and chimeric oligonucleotides, with
Protogene Laboratories ("Protogene") for certain chemistry applications and
development of automated array synthesis of oligonucleotides, and with
DowElanco Corporation ("DowElanco") for certain agricultural applications.
The Company believes that its proprietary ribozyme technology platform
has the potential to address many of the issues associated with traditional
drug discovery and development. Ribozymes perform functions that are different
from those performed by ordinary RNA, in that after binding selectively to
their specific messenger RNA ("mRNA") target, ribozymes act catalytically to
cut, or cleave, the target mRNA molecule whereupon the mRNA is destroyed. Once
the mRNA target is destroyed, the particular protein for which the mRNA
molecule carries information will not be produced, indicating that ribozymes
may be broadly applicable to the control of protein production or gene
expression. In general, the vast majority of diseases involve over expression
of proteins or RNA viruses. In addition, ribozymes can be designed to select
for a single specific target genetic sequence. The Company believes this
highly selective mechanism of action has the potential to minimize the side
effects of its therapeutic products. Also, because ribozymes are not consumed
in the act of cleaving the target mRNA, a single ribozyme may cleave multiple
targets, thus potentially leading to lower ribozyme dosing requirements.
In addition to using ribozymes to develop therapeutic products, RPI
believes that its ribozyme technology is a platform for functional genomics and
thus may be used as a drug discovery tool to characterize the function of
potential targets. Since ribozymes can be designed to select a single target
genetic sequence, ribozymes may be used to identify the function of that
sequence. For example, if several target genetic sequences are identified as
potential causes of a disease, then the Company believes that its ribozyme
technology can be used to determine which one or combination of genes is
causative. By synthesizing ribozymes against each of the target genetic
sequences and testing the effect of those ribozymes in vitro or in animals, the
highly selective action of ribozymes can identify whether the target genetic
sequence is causative or not. In addition, this process may also solve another
major drug discovery problem in that the ribozyme which inhibits the gene may
become the lead therapeutic agent for further refinement and development.
Combinations of ribozymes may also be used to test whether multiple genes are
required to cause disease. Alternatively, a genetic sequence of unknown
function may be characterized using ribozyme inhibition in a collection of cell
culture assays that represent a broad range of biological functions. As a
result, links between gene dysfunction and disease can be validated. During
1996 the Company entered into a collaboration with Chiron to use the Company's
ribozyme technology to determine the function of selected genes and gene
sequences.
Furthermore, the unique features of ribozymes may be able to create
diagnostic tests with high specificity and sensitivity characteristic of
amplified gene probe tests, simplified sample preparation and short turnaround
time. In March 1997, the Company granted IntelliGene a worldwide exclusive
license to develop and sell diagnostics for several target diseases using
ribozymes in amplified nucleic acid formats.
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RPI's business strategy is to develop human therapeutics and to
exploit its ribozyme technology as a platform tool for functional genomics, as
well as to license its technology to capitalize on opportunities in
diagnostics, agriculture and animal health. The Company plans to develop
therapeutic products through both internal programs and collaborations with
corporate partners. The Company is working with Chiron on the development of
human therapeutic products based on ribozyme targeting of five specific targets
having potential therapeutic application to HIV, ocular disease, oncology,
tumor angiogenesis and restenosis. In addition, RPI is working with
Parke-Davis on a product for the treatment of osteoarthritis. The Company
completed an initial regulatory submission for a physician-sponsored Phase
I/IIa clinical trial for HIV during 1996, and announced initiation of the
trials in March 1997.
RPI believes that its patents and proprietary technology provide a
significant competitive advantage in the field of ribozymes. At the core of
RPI's technology are inventions and patents of Dr. Cech and various of his
associates. RPI believes that licenses to these patents and other patents
owned by RPI grant the Company the exclusive right to control the manufacture,
use and sale of ribozymes and any products that incorporate ribozymes.
BACKGROUND
Many disease states are characterized by abnormal production of gene
products such as proteins. The abnormality may be due to a defective gene or
to over-production of a protein by a "normal" gene. Such abnormal or excessive
production of protein may have direct effects on cells within the body or may
initiate a cascade of events involving other proteins within the body, thereby
producing disease.
Production of proteins from genes, called protein "expression,"
involves two steps. First, the information from the DNA of the gene is
"transcribed" to mRNA. The second step involves "translation" of the mRNA and
its information into a protein. This process by which genetic information is
"expressed" in the form of a protein is highly selective; production of a
particular protein requires its own specific DNA and mRNA molecules.
DRUG DISCOVERY
Traditional drug discovery and development is difficult, time
consuming and extremely costly. Historically, diseases have been treated using
therapeutic agents, or drugs, based on clinical observation of symptoms which
were correlated with abnormal physiological processes and, where possible,
biochemical changes. Most drugs are chemicals designed to inhibit or induce
the function of the target molecule with as few unwanted side effects as
possible. These drugs generally have been discovered through a complex,
lengthy and expensive process of elimination. The process begins by selecting
a possible target (usually a protein), developing a screening assay, chemically
synthesizing large numbers of different molecules which are tested in cell
cultures and in animal models for their effect on the target, using those
results to narrow the number of molecules down to a few possible lead
molecules, and then refining the lead molecules through additional chemical
synthesis and testing, including testing in humans. Unfortunately, drugs
produced from this process are typically molecules whose desired effect on the
target is accompanied by undesirable side effects on non-targeted molecules,
also referred to as a "toxicity" or "lack of selectivity," which can limit
effective use of the drug.
Pharmaceutical companies are under intense pressure to find
alternatives to traditional drug discovery and development in an effort to
identify and commercialize novel drugs more quickly and cost effectively and
with fewer side effects. The Company also believes that pricing pressures from
managed care organizations, governmental agencies and third party payers,
coupled with the proliferation of technologies that offer revolutionary
approaches to drug design and development, are causing major shifts in the
paradigms of drug discovery and development.
ADVANTAGES OF RIBOZYMES
The Company believes that ribozymes may offer certain advantages over
other therapeutic approaches for the treatment of diseases.
Potential Broad Applicability. Some genes and their corresponding RNA
or proteins have already been identified as having causative roles in human
disease pathology, animal health, and agriculture. In addition,
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identification of new genes is rapidly increasing in both the public and
private sector, and it is expected that all of the genes which comprise the
human genome will be identified within the current decade. Once a gene has
been sequenced, ribozymes can be designed to inhibit the production of a
protein from the associated mRNA. Therefore, all diseases for which a
causative protein or gene target can be identified present a potential
application for the Company's ribozyme technology. The Company believes that
its ribozyme technology is an important bridge between the growing body of
knowledge of the human genome and the development of human therapeutics.
High Selectivity. The mechanism by which traditional drugs act on a
target gene or protein often is not well understood. Consequently, side effect
profiles of such drugs are difficult to predict and characterize. Other
therapeutic approaches may result in interactions with non-targeted molecules
that cause unintended side effects. The Company believes these side effects
may be reduced or avoided with ribozymes because of their selectivity in
binding and cleaving the target mRNA. The Company believes that ribozymes may
be constructed with a nucleotide binding sequence that will match only one
corresponding target mRNA, and the target mRNA sequence is expected to appear,
on a statistical basis, only once in the entire human genome.
Catalytic Action. Since ribozymes act catalytically, they are not
consumed in the act of cleaving the target mRNA. Therefore, a single ribozyme
may cleave multiple target mRNA molecules. The Company believes that dosage
requirements for ribozymes may be lower than traditional pharmaceuticals due to
their catalytic activity.
Target is Destroyed. Instead of temporarily preventing expression of
a target gene, ribozymes cut the target mRNA into fragments, which are
subsequently degraded by cellular nucleases. Since the target mRNA is
destroyed in the process, expression of the disease-causing protein can be
controlled. By contrast, most other therapeutics do not destroy their target
molecule.
RPI'S BUSINESS STRATEGY
RPI's objectives are to develop human therapeutics, animal health
products and agricultural products and to exploit its ribozyme technology
platform as a functional genomic tool for target validation and gene function
identification. The Company's strategy for achieving these objectives includes
the following elements:
Develop Human Therapeutic Products. RPI plans to exploit its ribozyme
technology to develop a broad range of human therapeutic products, through both
internal product development programs and alliances with corporate partners
directed at target-specific products. The Company has already established
collaborations with several corporate partners to pursue the development of
ribozyme based products which are targeted at specific mRNA molecules, and is
also conducting an internal drug development program.
Establish Ribozymes as a Functional Genomics Drug Discovery Platform.
RPI plans to make its ribozyme technology available as a drug discovery tool
for pharmaceutical and biotechnology companies. The Company believes that
application of its ribozyme technology can accelerate identification of gene
function and validate gene "targets" leading to highly selective therapeutic
compounds. The Company has recently entered into an agreement with Chiron for
a collaboration to determine the function of selected genes and gene sequences.
The Company will continue to pursue additional partners in the pharmaceutical
and biotechnology industries for the purpose of further exploiting this
commercial opportunity with its ribozyme technology.
License Non-Human Health Applications. RPI plans to exploit
opportunities in diagnostics, agriculture and animal health by licensing the
ribozyme technology to partners. The Company has completed a feasibility study
for certain agricultural applications with DowElanco.
Maintain and Expand Patent Portfolio and Proprietary Technology. RPI
has sought and will continue to seek to strengthen its proprietary position for
its ribozyme technology by aggressively pursuing patent protection and
defending its patents and proprietary technology.
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RPI'S RIBOZYME TECHNOLOGY
The RPI approach to drug discovery and development begins by
identifying a target gene. Ribozymes are designed by analyzing the nucleotide
sequences of the target gene and creating complementary ribozyme nucleotide
sequences. The next step is to synthesize ribozymes that are targeted
specifically to sites in the target gene. Next, the ribozymes are delivered to
the target cell either as a synthesized chemical or by encoding the ribozymes
into a DNA sequence for delivery by a "vector."
Upon delivery, the cell or animal is analyzed to determine whether
ribozyme inhibition of the potential target gene has affected the progression
of the disease (i.e., expression of the disease-causing gene or protein has
been inhibited). If the action of the ribozyme stops progression of the
disease, then not only has the causative role of the gene been validated, but a
drug candidate has also been identified. If not, the potential target gene may
be eliminated as a target for therapeutic intervention.
Once a target gene and ribozyme lead are identified, the delivery
method and the delivery vehicle are chosen. In addition, the ribozyme is
optimized by techniques such as variation of binding arm length and additional
serum stabilization. These techniques can be used to discover lead
therapeutics in as little as a few months. The use of these techniques can
bring the drug discovery process into a time frame which is months instead of
years.
The Company's successful commercialization of ribozyme technology for
therapeutic applications will require that a number of technical issues be
satisfactorily addressed, including ribozyme design, stability, selectivity,
synthesis and scale-up, drug delivery and cell uptake, safety and efficacy. To
date, RPI has achieved a number of significant milestones related to the
development of ribozymes, including the following:
Stability. In order to be useful as a therapeutic, a ribozyme must
remain stable in human serum long enough to have the desired effect. While
unmodified RNA is stable in human serum for only a few seconds, the Company has
successfully produced chemically-modified ribozymes that are stable in human
serum for more than 10 days and fully active in vitro. The Company believes
that this level of stability may be sufficient to achieve therapeutic effects.
Design. The Company has developed a proprietary computer program that
can design ribozymes against sites in a target mRNA sequence. This gives the
Company the ability to accelerate the identification of both lead ribozymes and
multiple back-ups.
Selectivity. Based on third party studies and internal work performed
by RPI, the Company believes that a ribozyme with a binding region of
approximately 15 nucleotides will be optimal. A binding region of this length
is expected to match, on a statistical basis, only one corresponding target
mRNA nucleotide sequence in the entire human genome. Since the ribozyme should
only interact with the target mRNA, it should not impact non-targeted
molecules. The high degree of selectivity of ribozymes has been demonstrated
through the use of inactive ribozyme controls in both cell culture and animal
studies.
Synthesis and Scale-Up. To meet the Company's needs for pre-clinical
and clinical trials and the eventual commercialization of ribozymes, the
Company needs large scale ribozyme synthesis capabilities. The Company has
developed proprietary technology that allows it to routinely synthesize several
hundred stabilized ribozymes on a monthly basis in milligram quantities,
permitting RPI to perform direct cell-based screening of multiple potential
target sites in several weeks. The Company also has the capability of
synthesizing gram quantities of ribozymes, as it has done for in vivo studies.
In that regard, RPI has designed and constructed its facilities to meet "cGMP"
standards (current Good Manufacturing Practices, which are regulations enforced
by the FDA through its facilities inspection program). RPI has implemented
quality assurance and quality control procedures that are used for large scale
synthesis. RPI synthesizes ribozymes using commercially available
synthesizers. In addition, the Company has established a collaboration with
Pharmacia Biotech to develop technology for reducing the cost of synthesizing
the modified amidites that are used to manufacture chemically synthesized
ribozymes, and with Protogene for parallel, automated synthesis of large
numbers of different ribozymes.
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Drug Delivery and Cellular Uptake. Successful development of any
therapeutic requires that it be delivered to the desired site in the body and
remain active long enough to have a therapeutic effect. The Company is
exploring local and systemic delivery of chemically synthesized ribozymes as
well as vector delivery. For example, the Company has shown that local
delivery of a chemically stabilized ribozyme to a rat cornea can significantly
inhibit angiogenesis. In addition, the Company is exploring the use of lipids
and other carriers to enhance cellular uptake and for systemic delivery. The
Company has identified several different formulations of carriers which, when
complexed to chemically synthesized ribozymes, have shown significant increases
in the delivery of ribozymes (relative to ribozymes without a carrier) to a
variety of different cell types. The Company also is working on chemically
modifying ribozymes to be preferentially taken up by certain tissues and/or by
specific intracellular compartments. The Company believes that these
approaches may allow chemically synthesized ribozymes to be delivered using a
variety of systemic (e.g., intravenous or intramuscular) or topical methods.
The Company has also developed proprietary retroviral vector
constructs containing ribozymes that produce high ribozyme accumulation in
cells compared to standard vector constructs. The expression of fully-active
ribozymes utilizing these constructs has been demonstrated in vitro for periods
greater than 90 days. The Company has also demonstrated transduction of
multiple cell types (e.g., T-cells, CD34+ cells and others). RPI is pursuing
ribozyme vector development internally and manufacturing through its
collaboration with Chiron. The Company believes that vector delivery of
ribozymes may have several potential therapeutic advantages, including high
target specificity, lack of activity against other genes, long term, high
expression levels of ribozymes, and infrequent dosing. Vector delivery of
ribozymes may be particularly useful for the chronic treatment of diseases,
where the therapy is needed over long periods of time and frequent dosing is
not desirable or feasible.
Efficacy and Ribozyme Mechanism. In collaboration with its strategic
partners, the Company has demonstrated that its ribozymes can inhibit gene
expression and affect cellular function in vitro and in vivo. Ribozymes
targeting several specific mRNAs have demonstrated specific reduction of the
levels of their corresponding mRNAs. This inhibition of gene expression
requires target binding and ribozyme catalysis: inactive and irrelevant
ribozyme controls have no specific effect. Ribozyme-mediated reductions in
mRNA correlate with reductions in protein expression and changes in cellular
function. In addition, the Company has shown efficacy of a ribozyme in an
animal model of angiogenesis, while inactive ribozymes showed essentially no
effect. Similar studies have been performed by the Company and others that
have demonstrated inhibition of gene expression in vitro and in vivo by
ribozymes expressed from vectors.
Safety. The Company has completed an initial animal safety study to
test the toxicity of chemically stabilized ribozymes. This study was a
five-day, intravenous single dose, acute toxicology study in rats and monkeys.
The Company's study included extensive follow up procedures, including body
weight, ECG/BP, haemolysis, complement activation, clinical chemistry and
urinalysis. In the study, while there was significant systemic exposure of
serum and tissues to the ribozyme, no drug-related toxicities were found at any
dose. In particular, there were no deaths, no blood clotting abnormalities, no
activation of complement and no evidence of hypotension.
Continuing Technology Development. The Company is continuing to
improve its ribozyme technology for its potential products, including increased
stability and catalytic activity, synthesis and scale-up, drug delivery and
cellular uptake. For systemic applications, the Company may need to refine the
ribozyme technology to improve the delivery of ribozymes to specific tissues
and improve cellular uptake. See "Risk Factors--Technological Uncertainty."
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PRODUCT DEVELOPMENT PROGRAMS
The Company is developing products through a combination of
collaborative research and development relationships and a Company-sponsored
program. The current product development programs for human therapeutic
applications apply chemically synthesized and vector delivered ribozymes to
both acute and chronic diseases in areas of significant medical need and market
opportunity. The following table summarizes the current status of the
Company's human therapeutic and agricultural product development programs.
PRODUCTS UNDER DEVELOPMENT (AS OF MARCH 1997)
<TABLE>
<CAPTION>
RPI-PARTNER PRODUCT AREA DEVELOPMENT STATUS(1)
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Chiron HIV Phase I/IIa clinical trials
Retinopathy Pre-clinical development
Corneal transplant rejection Research
Tumor angiogenesis Research
Oncogenes Research
Parke-Davis Osteoarthritis Research
DowElanco Corn feasibility study Successfully completed
</TABLE>
(1) "Pre-clinical development" includes pharmacology and toxicology
testing in animal and in vitro models, product formulation, dosage
studies and manufacturing scale-up for submission of the necessary
data to comply with applicable regulations prior to commencement of
human testing. "Research" includes the identification of target
proteins, synthesis of an appropriate ribozyme to block expression of
such protein, and testing the activity of such ribozyme in a specific
cell population.
CHIRON
The Company is working with Chiron on the development of a number of
products targeted at ocular and viral diseases, restenosis and cancer. Chiron
is a public biotechnology company located in Emeryville, California, that
develops and commercializes products for human diagnostic, prophylactic and
therapeutic use. Under their collaboration, the Company and Chiron are
pursuing research and development of drugs for the following indications:
Retinopathy. Diabetic retinopathy is a degenerative ocular disease
resulting in blindness and, according to The New England Journal of Medicine,
is the most common cause of blindness in adults aged 25 to 74 in the United
States. Proliferative diabetic retinopathy is characterized by the
proliferation of blood vessels, known as angiogenesis, in the retina resulting
in blindness. According to the Incidence and Prevalence Database (the "IPD"),
as of 1994, this disorder affected approximately one million people in the
United States. According to The American Academy of Ophthalmology, there are
65,000 new cases of proliferative diabetic retinopathy every year in the United
States. Current proliferative diabetic retinopathy treatments, including
surgery and laser photocoagulation, are not believed to be optimum long-term
solutions.
In studies performed in collaboration with Chiron, lead ribozymes
demonstrated dose-dependent cell culture efficacy in the inhibition of human
endothelial cell proliferation, while inactive and irrelevant ribozyme controls
showed essentially no effect. In addition, the Company's animal efficacy
studies in a rat corneal model of angiogenesis demonstrated significant
inhibition of Vascular Endothelial Growth Factor (VEGF)-induced angiogenesis
when free ribozymes were delivered, while inactive ribozyme controls showed
essentially no effect. The Company is conducting pre- clinical studies in
collaboration with Chiron.
Human Immunodeficiency Virus (HIV). The Company believes that
ribozymes may provide a new approach to the treatment and prevention of HIV
infection and replication. The Company has sought to identify target sites
that are present throughout the replication life cycle of HIV and are conserved
in known clinical strains of HIV. The
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Company is directing ribozymes at several sites in HIV that are being
incorporated into a single vector, so that the ribozyme therapy may avoid
emergence of resistance due to viral mutations.
In collaboration with Chiron, the City of Hope and Childrens Hospital
(Los Angeles), the Company initiated a physician-sponsored Phase I/IIa clinical
trial for HIV in March 1997. This study uses a retroviral vector containing
two ribozymes, one against a site in the tat region and the other against a
site in the tat/rev region of the HIV virus. This construct has demonstrated
protection against HIV challenge in monocyte cells derived from "stem cells"
(CD34+ cells) transduced with the retroviral construct. This demonstrates a
number of important results, including successful retroviral transduction of
CD34+ cells, transmission of the ribozyme into cell progeny derived from CD34+
cells (i.e., monocytes), and protection of the monocytes against HIV challenge.
This physician-sponsored clinical trial includes five HIV-infected subjects and
will test the safety and ability of transduced cells to engraft and survive
after re- infusion into the patients. The Company made an initial regulatory
submission that was approved by the Recombinant DNA Advisory Committee of the
NIH and filed an IND with the FDA during 1996. The Company is utilizing Chiron
for master cell bank production of the ribozyme construct to be used in this
clinical trial.
Corneal Transplant Rejection. According to the IPD, as of 1994
approximately 45,000 corneal transplants are performed each year in the United
States. The largest cause for corneal transplant failures is vascularization
of the cornea and the resulting immune response leading to graft rejection.
Approximately 13% of corneal transplants fail by year five due to graft
rejection. The Companies believe that inhibition of corneal angiogenesis could
reduce the incidence of corneal transplant rejection and research is underway
to test ribozymes in this regard.
Tumor Angiogenesis and Oncogenes. Angiogenesis and the abnormal
production of oncogenes have been linked to the formation, growth and
maintenance of cancerous tumors. The Company has initiated several research
programs in collaboration with Chiron in both oncogene and angiogenesis
inhibition. In its tumor angiogenesis studies, the Company plans to use
ribozymes against the VEGF receptor for the treatment of solid and other highly
vascularized tumors (e.g., metastatic cancers such as colon and rectal
cancers). Cell culture and animal studies are currently underway to test the
effectiveness of the ribozymes in both the oncogene and angiogenesis
applications. Additional animal studies are being carried out to test the
efficacy of ribozymes for the treatment of restenosis.
PARKE-DAVIS
The Company has entered into a collaboration with Parke-Davis, under
which RPI is using its ribozyme technology to analyze the function of several
potential targets which are thought to be responsible for osteoarthritis and to
develop effective ribozyme therapeutics for these targets. Parke-Davis
Division of the Warner-Lambert Company is a pharmaceutical company which has
expertise in the development, commercialization, distribution, marketing and
sale of pharmaceutical products world-wide.
Osteoarthritis. According to the IPD, as of 1994, osteoarthritis
affected approximately 16 million people in the United States. Clinical
indications associated with cartilage degradation include locally elevated
levels of metalloproteinases that are known to degrade proteoglycans contained
in cartilage. The Company believes that local delivery to the diseased joint
of a synthesized, long acting ribozyme or a vector encoding the ribozyme
against one or more metalloproteinases may reduce the production of
metalloproteinases and the progression of osteoarthritis.
In collaboration with Parke-Davis, lead and back-up chemically
stabilized ribozymes have shown potency in dose- response cell culture studies
against a specific metalloproteinase. In addition, local delivery of lead
ribozymes to the rabbit knee synovium has shown significant reduction in the
target mRNA. Under the collaboration, the Company is currently testing
ribozymes against a specific metalloproteinase and another target in cell
culture and animals.
There can be no assurance that the Company will be permitted to
undertake human clinical testing of the Company's potential products or, if
permitted, that such products will be demonstrated to be safe and efficacious
or will be determined to be marketable. See "Risk Factors--Uncertainty of
Product Development."
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DOWELANCO
Through its collaboration with DowElanco, an agrichemical and
biotechnology company that is a joint venture between Dow Chemical and Eli
Lilly, RPI expects to exploit some of the broad potential applications for its
ribozyme technology in agriculture. Ribozymes may be used, for example, in the
modification of crops and other plants to provide resistance to viral, fungal
and bacterial diseases, to modify lipid content and to control growth
characteristics. A feasibility study has been initiated to demonstrate the
modification of corn oil using ribozyme technology. RPI and DowElanco have
identified sites on two target genes, and have created lead ribozymes which
have been placed into transgenic corn constructs. Several hundred
ribozyme-containing plants were grown in greenhouse trials at DowElanco. The
feasibility study was successfully completed and the Companies are currently
discussing terms for a license to allow the commercialization by DowElanco of
certain agricultural applications of ribozymes.
COLLABORATIVE RELATIONSHIPS AND LICENSE AGREEMENTS
An element of the Company's strategy is to enter into collaborative
research and development agreements, joint ventures, licensing agreements or
other arrangements to exploit its technology as broadly as possible. The
Company seeks partners whose interests, development and marketing capabilities
are complementary to those of the Company or partners who wish to pursue areas
which otherwise would not be developed by the Company. See "Risk
Factors--Dependence on Collaborative Relationships."
The Company's current collaborations are described below.
CHIRON
In July 1994, RPI entered into a collaborative agreement with Chiron
under which RPI and Chiron have agreed to collaborate in the research,
development and marketing of ribozyme products directed toward certain genetic
targets. In connection with the collaboration, the Company and Chiron will each
contribute intellectual property and other resources to the development of the
targeted ribozyme products. As of the date of this filing, the designated
genetic targets and their associated clinical indications are VEGF receptors
(retinopathy/corneal transplant rejection/cancer), HIV, ras and c-myb
(proliferative diseases) and another viral disease. The field of the agreement
includes diagnostic, prophylactic and therapeutic applications of ribozymes
directed toward these genetic targets. The parties are concentrating their
initial collaborative research efforts on the VEGF receptor for diseases
associated with angiogenesis and HIV targets. The term of the research program
is five years, renewable with the consent of both parties. RPI and Chiron have
agreed to exclusively collaborate on up to five specific targets and to reserve
up to four other potential targets at any one time during the term of the
agreement. Chiron may reject any new targets suggested by RPI; however, RPI
may reject new targets suggested by Chiron only in certain circumstances.
The agreement provides that each party must pay its own pre-clinical
research costs. The parties generally will share equally in the development
costs and net profits of any jointly developed products. However, either RPI
or Chiron may elect not to participate in the clinical development of any
particular product. If both parties elect not to continue development, then a
third party may be sought to develop the product under license to both parties.
In the event either RPI or Chiron elects to continue funding clinical
development alone, then the non-developing party would not share in the profits
derived from the sale of that product but would receive a royalty based on net
sales. However, the non-developing party may elect to retain its interest in
the profits of a particular product in which it has shared funding through
Phase I clinical trials, but has declined to fund Phase II or Phase III
clinical trials, at either the commencement of Phase III testing or the filing
of a New Drug Application ("NDA") or Product License Application ("PLA"). Upon
such an election, the non-developing party must pay its share of the
development costs to date, plus a predetermined risk premium. Under certain
circumstances, RPI may pay up to 50% of such payment in shares of its Common
Stock. See "Risk Factors--Future Capital Needs; Uncertainty of Additional
Funding."
If either party declines to fund clinical development for a product
which subsequently fails to receive regulatory approval or is otherwise
abandoned, then the developing party may offset its development costs for one
such failed product with the profits otherwise allocable to the other party
from successful products.
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RPI retains the right to manufacture chemically synthesized ribozyme
products resulting from the collaboration, whether jointly developed, or
developed by Chiron or RPI individually. For the manufacture of retroviral
vector applications (gene therapy), the parties have agreed to collaborate with
Chiron Viagene, Inc. which was acquired by Chiron in 1995.
Chiron holds exclusive marketing rights for all jointly developed
products, subject to a co-promotion agreement for sales in North America and
Europe. In the Far East, Chiron has exclusive marketing rights with the right
to sublicense, although RPI retains the right to share in 50% of the profits.
The collaborative term for jointly developed products is 30 years. The license
for solely developed products is 15 years after first commercial sale or the
duration of patent protection, whichever is longer.
As part of the collaboration, Chiron made an equity investment of $4.56
million in the Company. In addition, Chiron purchased from the Company 377,202
shares of Common Stock with an aggregate purchase price of $3.64 million in 1996
at the time of the Company's initial public offering. Also at the time of the
Company's initial public offering, the Company issued Chiron a warrant to
purchase 444,444 shares of the Company's common stock which is exercisable at a
price of $22.50 per share, for an aggregate price of $4.50 per warrant share. In
1994, Chiron paid the Company $0.45 per warrant share, or $200,000. The Balance
of the warrant purchase price, $1.8 million or $4.05 per warrant share, was paid
to the Company upon completion of its initial public offering.
In February 1996, the Company entered into a functional genomics
collaboration with Chiron for the use of ribozymes to characterize gene
function. The collaboration gives Chiron the right to develop and
commercialize products that result from the collaboration, and would entitle
RPI to receive product development milestone payments and royalties on sales of
any such commercial products. Chiron and RPI each pay a portion of the
research and development expenses of the collaboration, and the Company has
provided Chiron $1.8 million for research funding related to the collaboration.
PARKE-DAVIS
In April 1993, RPI entered into a collaborative research and
development agreement with Parke-Davis that has been extended through March 31,
1997. The initial goal of the collaboration is to develop a ribozyme therapy
for the treatment of osteoarthritis. Parke-Davis provided payments for research
and development to RPI through March 31, 1996. In addition, RPI may earn up to
$9.0 million in milestone payments for any product approved for sale in a major
country.
If Parke-Davis elects to pursue the commercial candidate then the
parties have agreed to cooperate in the development of the product.
Parke-Davis will fund all development costs of the product and RPI will
manufacture the products on a cost-plus supply arrangement. In addition, RPI
will receive a royalty on any products sold. RPI will have the right to
co-promote products in North America under certain circumstances. If
Parke-Davis elects not to pursue the commercial development of a compound, RPI
may develop it alone or with a third party. Upon termination of the
collaboration, RPI will be restricted from commercializing ribozymes which have
the same target as any compound commercialized by Parke-Davis as a result of
the collaboration. As part of the collaboration Parke-Davis made an equity
investment of $5.5 million in the Company.
DOWELANCO
In September 1993, RPI entered into a two-year collaborative research
feasibility study with DowElanco. The parties extended the study through April
1, 1996. The goal of the feasibility study was to demonstrate the ability of
ribozymes to alter corn. Under the agreement, DowElanco has provided support of
research for the feasibility study conducted at RPI and has made an equity
investment of $1.5 million in the Company. The feasibility study has been
successfully completed, and the Company is currently negotiating with DowElanco
regarding terms for commercialization of certain ribozyme applications in
agriculture.
PHARMACIA BIOTECH
In November 1995, the Company and Pharmacia Biotech agreed to
collaborate on the development of better synthesis and purification methods for
the preparation of modified amidites and chimeric oligonucleotides. The goal
of
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<PAGE> 11
the collaboration is to reduce the cost of manufacturing ribozymes and other
oligonucleotide products that use amidites. Pharmacia Biotech, which is a
subsidiary of The Pharmacia & Upjohn, Inc., has expertise in the manufacture of
oligonucleotide synthesis and purification instrumentation and software. Under
the terms of the collaboration, Pharmacia Biotech is providing RPI with
synthesis instrumentation and software, research funding and milestone
payments, a portion of which may be set-off against future royalties payable to
RPI.
PROTOGENE
In December 1996, the Company entered into an agreement with
Protogene, a private biotechnology company, to develop an instrument which
allows high throughput synthesis of non-DNA oligonucleotides. Under the terms
of the collaboration, RPI is supporting research and development and has made
an equity investment in Protogene and will have the option to buy the
instrument.
INTELLIGENE
In March 1997, the Company granted a worldwide exclusive license to
IntelliGene to develop and sell diagnostics for several target diseases using
ribozymes in amplified nucleic acid formats. IntelliGene is a private,
venture-backed biotechnology company located primarily in Jerusalem, Israel
with an office in Sudbury, Massachusetts. IntelliGene is developing diagnostic
products using novel ribozymes created using a process called in vitro
evolution. The agreement provides for IntelliGene to develop diagnostic tests
initially against six infectious diseases in their laboratories in Jerusalem
and elsewhere, and to develop, make and sell diagnostic products based on these
tests, either alone or through sublicenses. Initial products are expected
during the year 2000. RPI received a license fee and will receive royalties on
product sales as part of this agreement, and may assist in the research and
development efforts.
MANUFACTURING AND MARKETING STRATEGY
In order to support its pre-clinical and clinical trial manufacturing
requirements, the Company has constructed manufacturing facilities that it
believes comply with applicable regulatory requirements and has established
operational Quality Assurance and Quality Control procedures. The Company
believes that its existing facilities will be satisfactory for production of
ribozymes needed through Phase II clinical trials for the Company's current
product portfolio.
The Company currently does not have the facilities or means to
manufacture on a commercial scale, market, distribute or sell any of its
potential products, including its drug development candidates. RPI will need
to develop its own facilities or contract with third parties for the
manufacture of products for Phase III clinical trials and commercial quantities
for any products that it may develop for its own account or in connection with
collaborative arrangements in which it has retained manufacturing rights.
The Company has expanded its quality control and quality assurance
program internally, including a set of standard operating procedures designed
to assure that the Company's products manufactured by or for it are conducted
in accordance with cGMP and other applicable domestic and foreign regulations.
See "Risk Factors--Uncertainty of Governmental Regulation" and "--Lack of
Manufacturing Experience; Reliance on Contract Manufacturers."
The Company has entered into strategic partnerships with Chiron and
Parke-Davis that include the right for RPI to manufacture chemically
synthesized ribozyme products.
The Company expects to market and sell certain of its products, if
successfully developed, directly and through co-promotion or other licensing
arrangements with third parties, including its collaborative partners. In
certain markets, the Company may enter into distribution or partnership
agreements with pharmaceutical or biotechnology companies that have large,
established sales organizations. See "Risk Factors--Lack of Sales and
Marketing Experience; Dependence on Third Parties."
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COMPETITION
RPI is engaged in the rapidly developing field of gene modulation.
Competition among entities attempting to develop gene modulation products for
the treatment of diseases is intense and is expected to increase. The Company
faces specific competition from other companies engaged in the research,
development and commercialization of ribozyme- based technology as well as
competition from companies attempting other methods of gene expression control,
such as antisense and triplex. In addition, the Company competes with large
pharmaceutical companies and established biotechnology firms, many of whom are
developing new products for the treatment of the same diseases targeted by the
Company. In some cases, those companies have already commenced clinical trials
for their products. Many of these companies have significantly greater
financial resources and expertise in research and development, manufacturing,
pre- clinical studies and clinical trials, obtaining regulatory approvals and
marketing than the Company. The Company's collaborative partners may be
conducting research and development programs directed at the same diseases that
the Company is targeting. In particular, the Company is aware that Chiron is
conducting product development programs that may be competitive with certain of
the RPI/Chiron collaborative programs. Smaller companies may also prove to be
significant competitors, particularly through collaborative arrangements with
large pharmaceutical and biotechnology companies. In addition, companies that
complete clinical trials, obtain required regulatory approvals and commence
commercial sales of their products before their competitors may achieve a
significant competitive advantage. Academic institutions, governmental
agencies and other public and private research organizations also conduct
research, seek patent protection and establish collaborative arrangements for
products and clinical development and marketing. These companies and
institutions compete with the Company in recruiting and retaining highly
qualified scientific and management personnel. In addition to the above
factors, RPI faces competition based on product efficacy, safety, the timing
and scope of regulatory approvals, availability of supply, marketing and sales
capability, reimbursement coverage, price and patent position. See "Risk
Factors--Dependence on Collaborative Relationships" and "--Intense Competition;
Rapid Technological Change."
PATENTS AND PROPRIETARY TECHNOLOGY
RPI believes that patents and other proprietary rights are crucial to
the development of its business. In addition to patents, the Company relies
upon trade secrets, know-how and continuing technological innovations in the
design, synthesis, and purification of ribozymes and in nucleic acid chemistry.
The Company also relies on licensing opportunities to develop and maintain its
competitive position. It is the Company's policy to file patent applications
when appropriate to protect technology, inventions, and improvements that are
considered important in the development of its business.
At the core of RPI's technology are inventions and patents of
University of Colorado ("CU") professor Dr. Thomas R. Cech and various
associates of Dr. Cech. Pursuant to the policies of CU, these inventions and
the patents issued thereon (the "Cech Technology") became the property of CU.
The Cech Technology was assigned to CU's affiliate, University Research
Corporation ("URC"), which in turn assigned the rights to license certain of
the Cech Technology to Competitive Technologies, Inc. ("CTI"), formerly known
as University Patents, Inc. United States Biochemical Corporation ("USB")
licensed the Cech Technology pursuant to two sublicenses. One of these
sublicenses was for the Cech Technology held by CTI. In November 1996 USB
assigned to RPI its rights under the sublicense from CTI and RPI entered into
an amended and restated license with CTI. RPI also has obtained a sublicense
with USB for the Cech Technology held by URC.
The CTI license and USB sublicense together grant RPI the exclusive
(except for non-commercial academic research) worldwide right, among other
things, to make, use and sell RNA enzymes covered by licensed patents and
products incorporating them. The USB sublicense if fully paid. The CTI license
provides for the payment of a royalty on sales of products incorporating RNA
enzymes, covered by licensed patents, and for certain minimum annual royalties.
RPI may grant sublicenses to the licensed technology subject to the payment to
CTI of a share of royalty income from such sublicenses or a royalty on sales
from sublicensed products, methods or services, depending on the particular
licensed patents involved. In addition, RPI must pay CTI a share of any option
fee, license fee, prepaid royalty or other "front-end" fee other than research
and development funding paid in connection with such sublicense.
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In September 1993, RPI was granted a right of first refusal to license
any new inventions, improvements and patents related to ribozyme technology
developed by Dr. Cech or others at CU, in exchange for certain payments. In
order to maintain this right, RPI has agreed to fund research at CU through an
unrestricted grant of $750,000 payable in various installments over a five year
period commencing in September 1993. As of December 31, 1996, $375,000 of the
unrestricted grant is still payable. In addition, RPI has agreed to pay CU a
fee for each invention disclosure accepted by RPI under the license.
As part of the Company's overall intellectual property strategy, it
enters selectively into agreements with academic institutions either to license
pre-existing technology or to support the development of new technologies and
gain the commercial rights to such new technologies. The Company has a number
of these agreements in place with institutions such as Duke University,
Stanford University, Massachusetts Institute of Technology, Garsching
Institute, University of Toronto, Yale University, and the University of
Vermont.
In January 1996, the Company entered into a License Agreement with the
City of Hope for an HIV therapeutic based upon ribozyme technology. Under the
agreement, the Company has the exclusive right to, among other things, develop
and commercialize a particular combination of ribozymes using a retroviral
vector for an HIV/AIDS therapeutic. The Company must pay certain minimum
royalties prior to commercialization, and other royalties upon sales of
product.
As a result of these licenses and sublicenses, and RPI's own internal
research, RPI has exclusive worldwide rights to at least sixteen issued patents
in the United States, three patents granted in Europe, one patent granted in
Japan and three issued patents in Australia. In addition, Notices of Allowance
have been received for twenty-one patents from the United States Patent and
Trademark Office, for a total of forty-four patents issued or allowed in the
United States and abroad. Six of the sixteen United States issued patents, one
European patent and the Japanese patent cover the use of an enzymatic RNA to
cleave a single stranded RNA (the "Cech Patents"). The Company believes that
the Cech Patents grant the right to exclude others from practicing ribozyme
technology as it is currently known to the Company in the United States, Europe
and Japan irrespective of the application, the method of production, the method
of purification, or the ribozyme motif used. Unless extended, the Ribozyme
Patents will expire in December 2008 in the United States and December 2007 in
Europe and in Japan. The additional issued patents cover both ribozyme
technology (e.g., ribozyme design, synthesis, chemical modifications, delivery,
ribozyme motifs, vector production, target site selection) as well as
application to specific therapeutic targets.
In addition, RPI has filed or holds exclusive licenses to more than
100 pending applications in the United States and their related foreign
applications. The Company's patent portfolio includes approximately 35 United
States applications for various areas of interest in human therapeutics and
diagnostics and certain agricultural uses. The portfolio also includes
approximately 30 United States applications related to the chemistry, design,
optimization, manufacture, and delivery of ribozyme products.
It is the Company's policy to require its employees, consultants,
members of its Scientific Advisory Board and parties to collaborative
agreements to execute confidentiality agreements upon the commencement of
employment or consulting relationships or a collaboration with the Company.
These agreements provide that all confidential information developed or made
known during the course of the relationship with the Company is to be kept
confidential and not disclosed to third parties except in specific
circumstances. In the case of employees, the agreements provide that all
inventions resulting from work performed for the Company, utilizing property of
the Company or relating to the Company's business and conceived or completed by
the individual during employment shall be the exclusive property of the Company
to the extent permitted by applicable law. There can be no assurance, however,
that these agreements will provide meaningful protection of the Company's trade
secrets or adequate remedies in the event of unauthorized use or disclosure of
such information.
GOVERNMENT REGULATION
The production and marketing of the Company's products and its
research and development activities are subject to regulation for safety,
efficacy and quality by numerous government authorities in the United States
and other countries. In the United States, drugs are subject to rigorous FDA
regulation. The Federal Food, Drug and Cosmetic
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<PAGE> 14
Act, as amended and the regulations promulgated thereunder, and other federal
and state statutes and regulations, govern, among other things the testing,
manufacture, safety, efficacy, labeling, storage, record keeping, approval,
advertising and promotion of the Company's human therapeutic products. Product
development and approval within this regulatory framework takes a number of
years and involves the expenditure of substantial resources.
The steps required before a pharmaceutical agent may be marketed in
the United States include (i) pre-clinical laboratory tests, in vivo
pre-clinical trials and formulation studies, (ii) the submission to the FDA of
an IND, which must become effective before human clinical trials commence,
(iii) adequate and well-controlled human clinical trials to establish the
safety and efficacy of the drug, (iv) the submission of an NDA to the FDA and
(v) FDA approval of the NDA prior to any commercial sale or shipment of the
drug. In addition to obtaining FDA approval for each product, each drug
manufacturing establishment must be registered with, and approved by, the FDA.
Domestic manufacturing establishments are subject to biennial inspections by
the FDA and must comply with cGMP for both drugs and devices. To supply
products for use in the US, foreign manufacturing establishments must comply
with cGMP and are subject to periodic inspection by the FDA or by regulatory
authorities in such countries under reciprocal agreements with the FDA.
In addition to FDA requirements, the National Institutes of Health
("NIH") has established guidelines for research involving recombinant DNA
molecules, which are utilized by the Company and certain of its collaborators
in their research. These guidelines apply to all recombinant DNA research
within the United States or its territories which is conducted at or supported
by the NIH. Under current guidelines, proposals to conduct clinical research
involving gene therapy which is supported by the NIH must be reviewed by the
NIH Recombinant DNA Advisory Committee. The Company's vector delivery of
ribozymes will need to be reviewed by this Committee.
The FDA has also initiated procedures designed to provide broader
access to certain investigational drugs prior to marketing approval. In 1987,
the FDA adopted regulations authorizing "treatment INDs" for investigational
drugs designed to treat serious and life-threatening diseases where no
satisfactory alternate therapies exist. The sponsor of a treatment IND is
required to comply with the regular IND requirements, including institutional
review board approval and patient informed consent. In addition, the sponsor
must be actively pursuing marketing approval for the investigational drug, and
may not promote the drug prior to marketing approval.
Pre-clinical tests include laboratory evaluation of product chemistry
and formulation, as well as animal studies to assess the potential safety and
efficacy of the product. Compounds must be formulated according to cGMP and
pre-clinical safety tests must be conducted by laboratories that comply with
FDA regulations regarding Good Laboratory Practices ("GLP"). The results of
the pre-clinical tests are submitted to the FDA as part of an IND and are
reviewed by the FDA prior to the commencement of human clinical trials.
Additional pharmacology and toxicology studies are generally conducted
concurrently with human clinical trials.
Clinical trials involve the administration of the investigational new
drug to healthy volunteers or to patients, under the supervision of qualified
principal investigators. Initial clinical trials are conducted in accordance
with Good Clinical Practices under protocols that detail the objectives of the
study, the parameters to be used to monitor safety and the efficacy criteria to
be evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical study must be conducted under the auspices of an
independent Institutional Review Board ("IRB") at the institution at which the
study will be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects and the possible liability of the
institution.
Clinical trials are typically conducted in three sequential phases,
but the phases may overlap. In Phase I, the initial introduction of the drug
into healthy human subjects, the drug is tested for safety (adverse effects),
dosage tolerance, metabolism, distribution, excretion and pharmacokinetics
(clinical pharmacokinetics and pharmacology). Phase II involves studies in a
limited patient population to (i) determine the efficacy of the drug for
specific, targeted indications, (ii) determine optimal dosage and (iii)
identify possible adverse effects and safety risks. When a compound appears to
be effective and to have an acceptable safety profile in Phase II clinical
trials, Phase III clinical trials are undertaken to further evaluate and
confirm clinical efficacy and to further test for safety within an expanded
patient population at geographically dispersed clinical study sites. There can
be no assurance that Phase I, Phase II or Phase III clinical trials will be
completed successfully within any specified time period, if at all, with
respect to any of the
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Company's products subject to such testing. Furthermore, the Company or the
FDA may delay or suspend clinical trials at any time if it is felt that the
subjects or patients are being exposed to an unacceptable health risk.
The results of the pharmaceutical development, pre-clinical trials and
clinical trials are submitted to the FDA in the form of an NDA for approval of
the marketing and commercial shipment of the drug. The testing and approval
process is likely to require substantial time and effort and there can be no
assurance that any approval will be granted on a timely basis, if at all. The
FDA may deny an NDA if applicable regulatory criteria are not satisfied,
require additional testing or information, or require extensive post marketing
testing and surveillance to monitor the safety or efficacy of the Company's
products if they do not view the NDA as containing adequate evidence of the
safety and efficacy of the drug. Notwithstanding the submission of such data,
the FDA may ultimately decide that the application does not satisfy its
regulatory criteria for approval. Moreover, if regulatory approval of a drug
is granted, such approval may entail limitations on the indicated uses for
which it may be marketed. Finally, product approvals may be withdrawn if
compliance with regulatory standards is not maintained or if problems occur
following initial marketing.
Among the conditions for NDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to cGMP, which must be followed at all times. In complying with standards set
forth in these regulations, manufacturers (including a drug sponsor's third
party contract manufacturers) must continue to expend time, money and effort in
the area of production and quality control to ensure full technical compliance.
In addition to regulations enforced by the FDA, the Company also is
subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other present and potential future federal,
state or local regulations. The Company's research and development involves
the controlled use of hazardous materials, chemicals, viruses and various
radioactive compounds. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result and any such liability could exceed the resources of the
Company.
For marketing outside the United States, the Company will be subject
to foreign regulatory requirements governing human clinical trials and
marketing approval for drugs and devices. The requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary
widely from country to country. The Company does not currently have any
facilities or personnel outside the United States. See "Risk
Factors--Uncertainty of Governmental Regulation" and "--Hazardous Materials."
EMPLOYEES
As of December 31, 1996, the Company had 72 full-time employees,
including a technical scientific staff of 56. There can be no assurance that
the Company will be able to continue to attract and retain qualified personnel
in sufficient numbers to meet its needs. None of the Company's employees is
covered by collective bargaining arrangements and management considers
relations with its employees to be good.
ITEM 2. PROPERTIES
RPI currently leases approximately 30,000 square feet of laboratory
and office space at 2950 Wilderness Place, Boulder, Colorado. The Company
leases this space under an operating lease that lasts through June 1997, which
was extended for an additional five years in March 1997. The Company believes
that the existing facility will be sufficient to meet its needs through 1997.
ITEM 3. LEGAL PROCEEDINGS
Currently, there are no pending or threatened litigation involving the
Company with the exception of: (1) an ongoing opposition to a European Patent,
and (2) interference proceedings which have been declared by the United
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States Patent and Trademark Office concerning a patent and a patent application
licensed to the Company. The Company believes that its patents and
applications are soundly based, but the extent of protection may vary in
different countries and no assurance can be given that any patent will provide
commercially significant protection or will not be challenged, invalidated, or
circumvented. However, litigation could be necessary to protect the Company's
patent position, which would result in substantial cost to, and diversion of
efforts by, the Company.
Competitors or other patent holders could bring legal actions against
the Company involving the Company's patents, patent applications or rights to
use proprietary technology. If any actions are successful, in addition to any
potential liability for damages, the Company could be enjoined from selling the
affected product, or be required to obtain a license in order to continue to
manufacture or market the product. There can be no assurance that the Company
would prevail in any such action or that any license required under any such
patent would be made available on acceptable terms, if at all. There has been,
and the Company believes that there will continue to be, significant litigation
in the pharmaceutical industry regarding patent and other intellectual property
rights. Any additional litigation could consume a substantial portion of the
Company's resources regardless of the outcome.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: general economic and business conditions;
competition; technological advances; ability to obtain rights to technology;
ability to obtain and enforce patents; ability to commercialize and manufacture
products; results of clinical studies; results of research and development
activities; business abilities and judgment of personnel; availability of
qualified personnel; changes in, or failure to comply with, governmental
regulations; ability to obtain adequate financing in the future; and other
factors referenced in this Report. See "Risk Factors".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote by the Company's security
holders during the fourth quarter of the Company's fiscal year.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the NASDAQ National Market
(Symbol: RZYM). The following table sets forth, for the periods indicated,
the high and low closing sales prices per share of the Company's common stock
as reported on the NASDAQ National Market. Ribozyme Pharmaceuticals, Inc.
conducted its initial public offering on April 11, 1996 and all prices for the
common stock are subsequent to such date.
<TABLE>
<CAPTION>
1996: High Low
---- ---
<S> <C> <C>
Second Quarter....................... $21.25 $10.00
Third Quarter........................ 14.75 8.81
Fourth Quarter....................... 13.13 8.38
</TABLE>
As of March 24, 1997, there were approximately 166 stockholders of
record of the Company.
The Company has never declared or paid cash dividends and currently
intends to retain any future earnings to finance the growth and development of
its business.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
RPI was incorporated in January 1992 and has devoted substantially all
of its resources since that time to develop ribozyme technology and products in
human therapeutics, agricultural, animal health and diagnostic applications.
The Company has incurred losses since inception and, as of December 31, 1996,
had an accumulated deficit of $47.4 million. The Company anticipates incurring
additional losses over at least the next several years as it expands its
research and development programs, including pre-clinical studies and clinical
trials. Such expansion will result in increases in both research and
development and general and administrative expenses.
The Company completed an initial public offering in April 1996
resulting in net proceeds of approximately $20.6 million. Concurrent with the
closing of the offering, Chiron purchased common stock at an aggregate purchase
price of $3.6 million and paid the Company an additional $1.8 million to
complete the purchase of a warrant issued to Chiron upon the closing.
The Company does not anticipate revenues from product sales in the
foreseeable future. The Company's sources of funds for the next several years
will be payments from strategic collaborations and licensing arrangements, if
any, sale of equity and interest income. Certain payments under strategic
collaborations are contingent upon the Company meeting certain milestones.
Payments under strategic collaborations and licensing arrangements will be
subject to significant fluctuation in both timing and amount and therefore the
Company's results of operations for any period may not be comparable to the
results of operations for any other period.
RESULTS OF OPERATIONS
Years Ended December 31, 1996 and December 31, 1995
Revenues from collaborative agreements and grants decreased $527,000
to $773,000 for the year ended December 31, 1996, compared to $1.3 million for
the year ended December 31, 1995. Collaborative revenues for 1996 include a
one- time payment in the first quarter from Pharmacia Biotech related to an
agreement on the development of improved synthesis and purification methods for
the preparation of modified amidites and chimeric oligonucleotides. Certain
collaborative agreements and their corresponding contract revenues expired in
1996. Collaborative agreements and contract revenue fluctuations are generally
the result of changes in the number of funded research projects as well as the
timing and completion of contract milestones.
Interest income for the year ended December 31, 1996 increased
$541,000 to $936,000 from $395,000 for the year ended December 31, 1995, due to
increased average invested cash balances resulting from the investment of the
proceeds from the Company's initial public offering completed in April 1996.
Interest income generally fluctuates as a result of cash available for
investment and prevailing interest rates.
Research and development expenses for the year ended December 31, 1996
increased $2.0 million to $14.2 million from $12.2 million for the year ended
December 31, 1995. The increase was primarily due to a one-time $1.8 million
payment to Chiron pursuant to a collaborative agreement. In addition, a
$540,000 charge was recognized in 1996 for the issuance of 45,000 shares of the
Company's common stock to the University of Colorado, in exchange for the
elimination of future commercial product royalty payments. Research and
development expenses consist primarily of salaries and benefits for scientific,
regulatory, quality control and pilot manufacturing personnel, consultants,
supplies, occupancy costs and depreciation for laboratory equipment and
facilities. The Company expects research and development expenses to continue
to increase as personnel and research and development facilities are expanded.
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General and administrative expenses increased $500,000 to $1.9 million
for the year ended December 31, 1996 compared to $1.4 million for the year
ended December 31, 1995. The increase in general and administrative expenses is
primarily due to one time cash and stock bonus payments made to the Company's
executive officers in connection with the public offering, as well as the
hiring of additional management and administrative personnel and the increased
legal and other professional fees in connection with the overall scale-up of
the Company's operations and business development efforts following the initial
public offering.
Interest expense increased $291,000 to $845,000 for the year ended
December 31, 1996 compared to $554,000 for the year ended December 31, 1995.
The increase is primarily attributable to increased borrowings on long-term
debt during late 1995 which were used to fund the Company's expansion of its
laboratory and office space.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and securities
available-for-sale of $17.6 million at December 31, 1996 compared with $6.4
million at December 31, 1995. The $11.2 million increase in cash, cash
equivalents and securities available-for-sale was primarily the result of the
following:
Net cash used by operating activities $(12,618,000)
Investment in property, plant and equipment (1,541,000)
Additions to deferred patent costs (559,000)
Borrowings under loan facilities 1,162,000
Payments under loan facilities and capital
lease obligations (2,084,000)
Net proceeds from sale of stock and warrants 26,271,000
Other, net 569,000
Total $11,200,000
Total additions for property, plant and equipment during 1996 was $1.5
million, which included $1.2 million of additions financed through the
Company's existing equipment loan agreements. These additions represented
primarily research and development-related equipment and leasehold improvements
for expansion of the Company's laboratory and research facility. As of
December 31, 1996, the Company had approximately $838,000 available for
additional equipment through a loan agreement with a commercial bank. The loan
commitment terminates on June 30, 1997.
The Company estimates that its existing capital resources, which
include the aggregate net proceeds of the public offering completed in April
1996 and the concurrent sale of common stock and a warrant to Chiron and
interest thereon, together with facility and equipment financing and expected
revenues from its collaborative agreements, will be sufficient to fund its
current and planned operations at least through the end of 1997. There can be
no assurance, however, that changes in the Company's research and development
plans or other changes affecting the Company's operating expenses will not
result in the expenditure of such resources before such time and, in any event,
the Company will need to raise substantial additional capital to fund its
operations in future periods. Such additional capital may be raised through
public or private financing, as well as collaborative relationships, borrowing
and other available sources. See "Risk Factors--Future Capital Needs;
Uncertainty of Additional Funding".
At December 31, 1996, the Company had available net operating loss
carryforwards, research and development credit carryforwards and state
investment credit carryforwards of $47 million, $922,000 and $31,000,
respectively, for income tax purposes. The Company's ability to utilize its
net operating loss carryforwards is subject to an annual limitation in future
periods pursuant to the "change in ownership" rules under Section 382 of the
Internal Revenue Code of 1986 (the "Code"). See Note 10 of Notes to Financial
Statements.
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ITEM 7. FINANCIAL STATEMENTS
Submitted as part of Item 13(a) in this Form 10-KSB and incorporated
herein by reference.
RISK FACTORS
The following risk factors should be read in conjunction with
information appearing elsewhere in this Report.
EARLY STAGE OF DEVELOPMENT
RPI is at a very early stage of development and must be evaluated in
light of the uncertainties and complications present in an early stage
biotechnology company. Since the Company's inception in 1992, substantially
all of the Company's resources have been dedicated to the research and
development of potential products based on ribozyme technology, and no revenues
have been generated from product sales. Products, if any, resulting from the
Company's research and development programs are not expected to be commercially
available for a substantial number of years. There can be no assurance that
any products will be successfully developed and proven to be safe and
effective. The development of new products is highly uncertain and subject to
a number of significant risks. There can be no assurance that any of the
Company's product development efforts or those of its collaborative partners
will be successfully completed, that regulatory approvals will be obtained or
will be as broad as sought, that any of the Company's potential products will
be capable of being produced in commercial quantities at reasonable cost or
that any products, if introduced, will achieve market acceptance.
TECHNOLOGICAL UNCERTAINTY
Drug discovery and development methods based upon ribozymes are
relatively new, and there can be no assurance that these methods will lead to
the discovery or development of commercial pharmaceutical products, that the
Company will be able to employ these methods of drug development successfully,
or that ribozyme products will be deliverable, safe or efficacious in humans.
While the Company has demonstrated the utility of ribozyme technology in model
systems in vitro and in animals, and has identified a number of ribozymes
worthy of additional testing, none of these potential products nor, to the
Company's knowledge, any other ribozyme-based compound has been tested in
humans. No potential products based on the Company's technology have been
approved for clinical testing, and there can be no assurance that any of the
Company's potential products will enter clinical trials. A significant amount
of additional research and development, requiring many years and substantial
resources, will be required to determine the potential of the Company's
ribozyme technology for therapeutic products. The Company's technology may,
during the course of further research, prove to be ineffective in the treatment
of human disease or in other areas. The Company must conduct significant
additional research and development on determining safe and effective methods
of delivering ribozymes into the human body for each indication for the
Company's potential therapeutic products, and must overcome a number of other
technological challenges, such as enhancing the activity and stability of
ribozymes and manufacturing ribozyme-based therapeutic products on a commercial
scale. In particular, a significant amount of additional research and
development is required to determine whether ribozymes can be delivered
systemically, including research and development directed toward improving the
delivery of ribozymes to specific tissues and improving cellular uptake. There
can be no assurance that effective systemic delivery of ribozyme-based products
can be achieved. In addition, the Company's use of vector delivery of
ribozymes will require that the Company overcome concerns relating to potential
serious side effects associated with vector delivery, such as mutagenicity
(permanent DNA alteration). Many of these technological and developmental
challenges may be significantly greater than those typically associated with
traditional drug development, and may never be overcome. The use of ribozymes
in animal health, agricultural applications and gene function identification is
subject to similar developmental and technological uncertain ties which may
never be overcome. There can be no assurance that even if the Company's
potential products are found to be safe and effective, or otherwise have
utility, that the Company will be able to manufacture them on a large
commercial scale or market them in an economical way. Further, it is possible
that the proprietary rights of third parties will preclude the Company or its
collaborative partners from marketing products or that third parties will
market
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superior or equivalent products. As a result, there can be no assurance that
the Company's research and development activities will result in any
commercially viable products.
UNCERTAINTY OF PRODUCT DEVELOPMENT
Before obtaining regulatory approval for the commercial sale of any of
its potential products the Company must demonstrate, through pre-clinical
studies and clinical trials or corresponding animal health or agricultural
studies, that a potential product is safe and efficacious for use in each
target indication. None of the Company's potential products have been approved
for testing nor has the Company commenced testing of any products for safety or
efficacy in humans. There can be no assurance that results generated by
pre-clinical animal testing will be indicative of results of clinical testing
in humans when, and if, those tests are conducted. There can be no assurance
that the Company will be permitted to undertake human clinical testing of any
of the Company's potential products, or, if permitted, that such potential
products will be demonstrated to be safe and efficacious or will receive
necessary regulatory approvals. The Company may also experience delays from
its anticipated commencement dates for human clinical trials due to a variety
of factors including pre-clinical study results, delays or difficulties in
patient enrollment, delays in regulatory approvals and other factors. The
Company's potential products may prove to have undesirable and unintended side
effects or other characteristics that may prevent or limit their commercial
use. In addition, there can be no assurance that any of the Company's
potential products will ultimately obtain United States Food and Drug
Administration ("FDA"), other regulatory or foreign marketing approval for any
indication, that an approved product will be capable of being produced in
commercial quantities at reasonable cost, or that any approved product will
achieve market acceptance.
HISTORY OF OPERATING LOSSES
RPI has experienced significant operating losses since its inception
in 1992. As of December 31, 1996, the Company had an accumulated deficit of
approximately $47.4 million. The Company expects to incur additional operating
losses over the next several years and expects cumulative losses to increase
substantially as the Company's research and development efforts and
pre-clinical and clinical testing expand. The Company's revenues to date have
been derived primarily from payments under collaborative arrangements and
interest income. The Company's ability to achieve profitability is dependent
on its ability, alone or with others, successfully to complete the development
of its proposed products, conduct clinical trials, obtain the required
regulatory approvals and manufacture and market its proposed products. There
can be no assurance if or when the Company will achieve profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
RPI's success will depend in part on its ability to obtain patents,
maintain trade secrets and operate without infringing on the proprietary rights
of others, both in the United States and other countries. Patent matters in
biotechnology are highly uncertain and involve complex legal and factual
questions. Accordingly, the breadth of claims allowed in biotechnology and
pharmaceutical patents cannot be predicted. As of March 18, 1997, RPI held
exclusive rights to at least sixteen issued United States patents and seven
issued foreign patents, as well as notice of allowance for 21 United States
patents. In addition, as of March 18, 1997 RPI had filed approximately 100
patent applications and related foreign applications. There can be no assurance
that the Company will develop products or processes that are patentable, that
patents will issue from any of these applications or that claims allowed on
issued patents will be sufficient to protect the Company's technology. There
can be no assurance that the Company's issued patents or patent applications,
if issued, are enabled, will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide proprietary protection or
competitive advantages to the Company. Competitors have filed applications,
have been issued patents and may obtain additional patents and proprietary
rights relating to products or processes competitive with those of the Company
or which could affect the Company's issued patents or efforts to obtain issued
patents. Although the Company has filed patent applications covering, among
other things, a number of improvements and modifications to ribozymes, the
basic patents exclusively licensed to the Company that cover the use of an
enzymatic RNA to cleave a single stranded RNA unless extended expire in 2008 in
the United States and in 2007 in Europe and Japan. There can be no assurance
that any product developed by the Company or its collaborative partners will be
commercially available by the expiration date of such patents. Furthermore,
recent
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<PAGE> 21
changes in United States patent laws resulted from the General Agreement on
Tariffs and Trade (the "GATT Agreement"). Most notably, the GATT Agreement
resulted in United States law being amended to change the term of patent
protection, for certain patent applications filed after June 7, 1995, from 17
years from patent issuance to 20 years from the earliest effective filing date
of the application. Because the time from filing to issuance of biotechnology
applications is often more than three years, a 20-year patent term from the
date of filing may result in a substantially shortened term of patent
protection, which may adversely affect the Company's patent position.
A number of pharmaceutical companies, biotechnology companies,
universities and research institutions have filed patent applications or
received issued patents relating to ribozymes. The commercial success of the
Company will depend in part on RPI not infringing patents issued to competitors
and not breaching the technology licenses upon which any potential products are
based. It is uncertain whether the issuance of any third-party patents would
require the Company to alter its products or processes, obtain licenses or
cease certain activities. Some of these applications or patents may conflict
with the Company's issued patents or pending applications. Further, RPI is
aware that other companies have filed patent applications and have been granted
patents in the United States and other countries claiming subject matter that
may be useful to the Company for some of its potential products. Such conflict
could result in a significant reduction of the coverage of the Company's issued
or licensed patents. In addition, if patents exist or are issued to other
companies which contain competitive or conflicting claims and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to these patents or to develop or obtain alternative technology. If
any licenses are required, there can be no assurance that the Company will be
able to obtain any such license on commercially favorable terms, if at all. If
such licenses are not obtained, the Company might be prevented from pursuing
the development of certain of its potential products. The Company's breach of
an existing license or failure to obtain a license to any technology that it
may require to commercialize its products may have a material adverse impact on
the Company. Litigation, interference proceedings in the United States Patent
and Trademark Office, oppositions in non-United States countries or
reexaminations, which could result in substantial costs to and diversion of
efforts by the Company, may also be necessary to enforce or defend any patents
issued or licensed to the Company or to determine the scope and validity of
third-party proprietary rights. If competitors of the Company prepare and file
patent applications in the United States that claim technology also claimed by
the Company, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office to determine priority
of invention, which could result in substantial cost to the Company, even if
the eventual outcome is favorable to the Company. The Company has filed an
opposition against a patent granted to a competitor. Opposition proceedings
against certain of its European basic patent has been initiated by several of
the Company's competitors. Additionally, interference proceedings against a
patent and a patent application licensed to the Company have also been declared
by the United States Patent and Trademark Office. There can be no assurance
that the Company's issued or licensed patents would be held valid by a court of
competent jurisdiction. An adverse outcome could subject the Company to
significant liabilities to third parties, require disputed rights to be
licensed from third parties or require the Company to cease using such
technology.
RPI relies on trade secrets to protect its technology in addition to
patent protection, especially where patent protection is not believed to be
appropriate or obtainable. RPI attempts to protect its proprietary technology
and processes in part by confidentiality agreements and assignment of invention
agreements with its employees and confidentiality agreements with its
consultants and collaborators. There can be no assurance that these agreements
will provide meaningful protection, that these agreements will not be breached,
that the Company would have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known or be independently
discovered by competitors. To the extent that the Company or its consultants
or collaborators use intellectual property owned by others in their work for
the Company, disputes may also arise as to the rights in related or resulting
know-how and inventions.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company's strategy for the development, clinical testing,
manufacturing and commercialization of its potential products includes
collaborating with corporate partners, licensors, licensees and others, and is
dependent upon the performance of responsibilities by these outside parties.
To date, the Company has entered into corporate collaborations with Chiron,
Parke-Davis, DowElanco, Protogene, ALZA and Pharmacia Biotech. Although the
Company believes that these corporate partners and any future corporate
partners have or will have a motivation to
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perform their contractual responsibilities, the amount and timing of resources
to be devoted to collaborative activities by the Company's partners are not
within the control of the Company. There can be no assurance that such
partners will perform their obligations as expected or that the Company will
derive any additional revenue or other benefits from such arrangements. There
can be no assurance that the Company's current or future collaborators will not
pursue existing or alternative technologies in preference to those being
developed in collaboration with the Company. In particular, the Company is
aware that Chiron is conducting product development programs that may be
competitive with certain of the RPI/Chiron collaborative programs. In
addition, there can be no assurance that the Company's collaborators will pay
any additional option or license fees to the Company or that they will develop
and market any products under the agreements. The Company's collaboration with
Chiron provides that the parties will share equally in the development costs
and profits of any jointly developed product. The Company will be required to
provide substantial funds to pay for its share of any such development costs,
and to the extent the Company is unwilling or unable to fund its share and
Chiron chooses to fund the entire development costs, the Company will forfeit
its interest in such product except for the right to receive a predetermined
royalty. There can be no assurance that Chiron will commit to fund product
development costs if the Company declines to participate. Furthermore, there
can be no assurance that the Company will be able to negotiate additional
collaborative arrangements in the future on acceptable terms, if at all, or
that such collaborative arrangements will be successful. To the extent that
the Company chooses not to or is unable to establish such arrangements, it
would require substantially greater capital to undertake research, development
and marketing of its proposed products at its own expense. In addition, the
Company may encounter significant delays in introducing its proposed products
into certain markets or find that the development, manufacture or sale of its
proposed products in such markets is adversely affected by the absence of such
collaborative agreements.
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
RPI is engaged in a rapidly changing, highly competitive field. Other
products and therapies that may compete directly with the products that the
Company is seeking to develop and market currently exist or are being
developed. Many other companies are actively seeking to develop products,
including ribozymes and other products designed to modulate gene expression,
such as antisense oligonucleotides, that have disease targets similar to those
being pursued by the Company. Some of these competitive products are in
clinical trials. There can be no assurance that the Company's competitors will
not succeed in developing products based on ribozyme or other technologies,
existing or new, that are more effective than any that are being developed by
the Company, or that would render the Company's ribozyme technologies obsolete
and noncompetitive. Moreover, there currently are commercially available
products for the treatment of certain disease targets being pursued by the
Company.
Competition from fully integrated pharmaceutical and biotechnology
companies and more established biotechnology companies is intense and is
expected to increase. Most of these companies have significantly greater
financial resources and expertise in research and development, manufacturing,
pre-clinical studies and clinical trials, obtaining regulatory approvals, and
marketing than the Company. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large
pharmaceutical and biotechnology companies. Many of these competitors have
products that have been approved or are in development and operate large, well
funded research and development programs. Academic institutions, governmental
agencies and other public and private research organizations also conduct
research, seek patent protection and establish collaborative arrangements for
products and clinical development and marketing. These companies and
institutions compete with the Company in recruiting and retaining highly
qualified scientific and management personnel. In addition to the above
factors, RPI faces competition based on product efficacy, safety, the timing
and scope of regulatory approvals, availability of supply, marketing and sales
capability, reimbursement coverage, price and patent position. There can be no
assurance that the Company's competitors will not develop more effective or
more affordable products, or achieve earlier patent protection or product
commercialization than the Company.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
Development of the Company's products will require a commitment of
substantial additional funds to conduct the costly and time consuming research,
pre-clinical and clinical testing necessary to bring its potential products to
market and to establish manufacturing and marketing capabilities. The
Company's future capital requirements will depend on many factors, including,
among others, the progress of the Company's research, development and drug
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discovery efforts, the ability of the Company to establish collaborative
arrangements for clinical testing, progress with pre-clinical studies and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in preparing, filing, prosecuting, maintaining, defending
and enforcing patent claims, competing technological and market developments,
changes in the Company's existing research relationships, evaluation of the
commercial viability of the potential products, effective commercialization
activities and arrangements, and the cost and availability of third-party
financing for capital expenditures. Based on current projections, the Company
estimates that its existing capital resources together with facility and
equipment financing and expected revenues from its collaborations, will be
sufficient to fund the Company's requirements at least through the end of 1997
(assuming that the Company exercises its option to defer paying the costs of
any Phase II or subsequent clinical trials conducted under its collaboration
with Chiron until after such date). There can be no assurance that the
underlying assumed levels of revenue and expense will prove to be accurate.
Whether or not these assumptions prove to be accurate, the Company will need to
raise substantial additional capital to fund its operations. The Company
intends to seek such additional funding through collaborative arrangements,
public or private equity or debt financing, capital lease transactions or other
financing sources that may be available. However, there can be no assurance
that additional financing will be available on acceptable terms or at all. If
additional funds are raised through the sale of equity or convertible debt
securities, substantial dilution to existing stockholders may result. In the
event that additional funds are obtained through arrangements with
collaborative partners, such arrangements may require the Company to relinquish
rights to certain of its technologies, product candidates or products that the
Company would otherwise seek to develop or commercialize itself. If adequate
funds are not available, the Company may be required to delay, reduce the scope
of, or eliminate one or more of its research or development programs.
UNCERTAINTY OF GOVERNMENTAL REGULATION
The FDA and comparable agencies in federal, state and local
jurisdictions and in foreign countries impose substantial requirements upon the
manufacturing and marketing of products such as those proposed to be developed
by the Company or its corporate partners. The process of obtaining FDA and
other required regulatory approvals is lengthy and expensive. The time
required for FDA and other regulatory approvals is uncertain and typically
takes a number of years, depending on the type, complexity and novelty of the
product. The Company or its corporate partners may encounter significant
delays or excessive costs in their efforts to secure necessary approvals or
licenses. Because certain of the products that may result from the Company's
research and development programs involve the application of new technologies
and will be based on a new therapeutic approach, such products may be subject
to substantial additional review by various governmental regulatory authorities
and as a result, regulatory approvals may be obtained more slowly than for
products using more conventional technologies. There can be no assurance that
FDA and other regulatory approvals will be obtained in a timely manner, if at
all. Any delay in obtaining, or the failure to obtain, such approvals would
adversely affect the Company's ability to generate product or royalty revenues.
Even if FDA and other regulatory approvals are obtained, the marketing and
manufacturing of products are subject to continuing FDA and other regulatory
review, and later discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on the product or
manufacturer, including withdrawal of the product from the market. Additional
governmental regulations may be promulgated that could delay regulatory
approval of the Company's or a corporate partner's potential products. The
Company cannot predict the impact of adverse governmental regulation which
might arise from future legislative or administrative action.
NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS
The Company is highly dependent on its corporate officers and other
principal members of its scientific and management staff, the loss of any of
whose services might significantly delay or prevent the achievement of the
Company's research, development or business objectives. In addition, the
Company relies on consultants and advisors, including the members of its
Scientific Advisory Board, to assist the Company in formulating its research
and development strategy. Retaining and attracting qualified personnel,
consultants and advisors is critical to the Company's success. To pursue its
product development and marketing plans, the Company may be required to hire
additional qualified scientific personnel to perform research and development,
as well as personnel with expertise in clinical testing, government regulation,
manufacturing, and marketing. These requirements are also expected to demand
the addition of management personnel and the development of additional
expertise by existing management personnel. The Company faces competition for
qualified individuals from numerous pharmaceutical and biotechnology
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companies, universities and other research institutions. There can be no
assurance that the Company will be able to attract and retain such individuals
on acceptable terms, if at all, and the failure to do so could have a material
adverse effect on the Company, including its ability to conclude collaborations
with additional corporate partners.
LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON CONTRACT MANUFACTURERS
The Company currently has manufacturing facilities to produce limited
quantities of some of its compounds for research and development and
pre-clinical purposes. The potential pharmaceutical products under development
by the Company and its collaborative partners have never been manufactured on a
commercial scale and there can be no assurance that such products can be
manufactured at a cost or in quantities necessary to make them commercially
viable. If the Company or its collaborative partners is unable to manufacture
or contract for a sufficient supply of its potential products on acceptable
terms, or if it or they should encounter delays or difficulties in its
relationships with manufacturers, the Company's and its collaborative partners'
pre-clinical and human clinical testing schedule would be delayed, resulting in
a delay in the submission of products for regulatory approval or the market
introduction and subsequent sales of such products, which would have a material
adverse effect on the Company. Moreover, if a vector delivery approach is
required, a viral or non-viral vector that contains the ribozyme must be
obtained. There can be no assurance that the Company or its collaborative
partners will be able to obtain licenses to, or the appropriate manufacturing
of, such a vector with sufficient quality and quantity, and such potential
difficulty would have a material adverse effect on the Company. Furthermore,
RPI or contract manufacturers must adhere to current Good Laboratory Practices
and cGMP regulations enforced by the FDA through its facilities inspection
program. If these facilities cannot pass a pre-approval plant inspection, the
FDA pre-market approval of the products will not be granted.
LACK OF SALES AND MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
The Company currently has no sales, marketing or distribution
capability. The Company intends to rely on relationships with pharmaceutical
and biotechnology companies with established distribution systems and direct
sales forces to market certain of its products and may decide to market other
products directly. To market any of its products directly, the Company must
develop a marketing and sales force with technical expertise and with
supporting distribution capability. There can be no assurance that the Company
will be able to establish in-house sales, marketing and distribution
capabilities or relationships with third parties, or that it will be successful
in gaining market acceptance for its products. To the extent that the Company
enters into co-promotion or other licensing arrangements, any revenues received
by the Company will depend upon the efforts of third parties, and there can be
no assurance that such efforts will be successful.
UNCERTAINTY OF PHARMACEUTICAL PRICING, THIRD-PARTY REIMBURSEMENT AND HEALTH
CARE REFORM MEASURES
The business and financial condition of pharmaceutical and
biotechnology companies will continue to be affected by the efforts of
governmental and third party payers to contain or reduce the costs of health
care. In the United States and in certain foreign jurisdictions there have
been, and the Company expects that there will continue to be, a number of
legislative and regulatory proposals aimed at changing the health care system.
While the Company cannot predict whether any such legislative or regulatory
proposals will be adopted or the effect that such proposals may have on its
business, the pendency or approval of such proposals could have a material
adverse effect on the Company's ability to raise capital or to obtain
additional collaborative partners, and the adoption of such proposals could
have a material adverse effect on the Company.
In both domestic and foreign markets, sales of the Company's potential
products will depend in part on the availability of reimbursement from
third-party payors such as government health administration authorities,
private health insurers and other organizations. Third-party payors are
increasingly challenging the price and cost- effectiveness of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products. Future legislation and regulations
affecting the pricing of pharmaceuticals could further limit reimbursement for
medical products and services. There can be no assurance that any of the
Company's potential products will be considered cost effective or that adequate
third-party reimbursement would be available to enable RPI to maintain price
levels sufficient to realize an appropriate return on its investment in product
development. In addition, the trend toward managed health care in the United
States and the concurrent growth of organizations, such as
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health maintenance organizations, which could control or significantly
influence the purchase of health care services and products, as well as
legislative proposals to reduce government insurance programs, may all result
in pricing pressure for any products that might be developed by the Company.
RISK OF PRODUCT LIABILITY; POSSIBLE INABILITY TO OBTAIN INSURANCE
The Company's business will expose it to potential product liability
risks that are inherent in the testing, manufacturing and marketing of human
therapeutic products. The Company currently has no clinical trial liability
insurance and there can be no assurance that it will be able to obtain and
maintain such insurance for any of its clinical trials. In addition, there can
be no assurance that the Company will be able to obtain or maintain product
liability insurance in the future on acceptable terms or with adequate coverage
against potential liabilities. An inability to obtain sufficient insurance
coverage at an acceptable cost or otherwise protect against potential product
liability claims could prevent or inhibit the commercialization of
pharmaceutical products developed by the Company or its corporate partners.
Further, the Company's collaborative agreement with Chiron requires that it
obtain certain insurance coverage. Failure to obtain such coverage could
result in a breach by the Company of such agreement, which could give rise to
rights of termination on the part of Chiron. A product liability claim or
recall would have a material adverse effect on the business and financial
condition of the Company.
HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident,
the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company. The Company may incur
substantial costs to comply with environmental regulations if the Company
develops manufacturing capacity.
LIKELY VOLATILITY OF STOCK PRICE; NO DIVIDENDS
The market price of the shares of Company's common stock, like that of
the common stock of many other early- stage biopharmaceutical companies, is
likely to be highly volatile. Factors such as announcements of technological
innovations or new commercial products by the Company or its competitors,
progress with clinical trials, governmental regulation, changes in
reimbursement policies, developments in patent or other proprietary rights of
the Company or its competitors, including litigation, developments in the
Company's relationships with current or future collaborative partners, if any,
public concern as to the safety and efficacy of drugs developed by the Company
and its competitors, changes in estimates of the Company's performance by
securities analysts, fluctuations in the Company's operating results and
general market conditions may have a significant effect on the market price of
the Common Stock. The Company has never paid any cash dividends and does not
anticipate paying cash dividends in the foreseeable future.
ANTI-TAKEOVER CONSIDERATIONS
The Board of Directors has authority to issue up to 5,000,000 shares of
preferred stock and to fix the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, may have the effect of delaying,
deferring or preventing a change in control of the Company, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock and
may adversely affect the market price of and the voting and other rights of the
holders of the Common Stock. The Company has no present plans to issue shares
of preferred stock. In addition, certain provisions of the Company's Bylaws and
of Delaware law applicable to the Company could have the effect of discouraging
certain
24
<PAGE> 26
attempts to acquire the Company which could deprive the Company's stockholders
of the opportunities to sell their shares of Common Stock at prices higher than
prevailing market prices.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company as of December 31,
1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Executive Officers
Ralph E. Christoffersen, Ph.D.(1) 59 Chief Executive Officer, President and Director
Lawrence E. Bullock 41 Vice President, Administration and Finance, Chief Financial
Officer and Secretary
Nassim Usman, Ph.D. 37 Vice President of Research
Directors
David T. Morgenthaler (1),(3) 77 Chairman of the Board
Jeremy L. Curnock Cook (2) 47 Director
Anthony B. Evnin, Ph.D. (1),(2) 56 Director
Charles M. Hartman (3) 55 Director
Anders P. Wiklund (2),(3) 56 Director
Lewis T. Williams, M.D., Ph.D. 47 Director
</TABLE>
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
RALPH E. CHRISTOFFERSEN, PH.D. has served as Chief Executive Officer,
President and Director of RPI since June 1992. Prior to joining the Company,
Dr. Christoffersen was Senior Vice President and Director of U.S. Research at
SmithKline Beecham Pharmaceuticals from 1989 to June 1992, and prior to that,
held senior management positions in research at The Upjohn Company from 1983 to
1989. Prior to joining The Upjohn Company, Dr. Christoffersen served as a
Professor of Chemistry and Vice Chancellor for Academic Affairs at the
University of Kansas, and as President of Colorado State University. He
received his Ph.D. in physical chemistry from Indiana University.
LAWRENCE E. BULLOCK has served as Vice President of Administration and
Finance, Chief Financial Officer and Secretary since January 1996. Prior to
joining RPI, Mr. Bullock was Chief Financial Officer, Director of Finance and
Administration and Secretary of La Jolla Pharmaceutical Company, a
biopharmaceutical company, from December 1990 to January 1996. Mr. Bullock
received his M.B.A. from the University of Utah in 1980.
25
<PAGE> 27
NASSIM USMAN, PH.D. has served as Vice President of Research of RPI
since May 1996. From April 1994 until May 1996 Dr. Usman served as Director of
Chemistry and Biochemistry Research at the Company and from September 1992
until April 1994 Dr. Usman served as Senior Scientist in Chemistry and
Biochemistry of RPI. Prior to joining RPI, Dr. Usman was a Postdoctoral
Fellow and Scientist in the Departments of Biology and Chemistry at the
Massachusetts Institute of Technology from January 1987 to September 1992. Dr.
Usman received his Ph.D. in chemistry from McGill University.
DAVID T. MORGENTHALER has served as a director of RPI since February
1992 and was elected Chairman of the Board in December 1995. Mr. Morgenthaler
was a founder of, and has been Managing Partner of, Morgenthaler Ventures, a
private venture capital firm, since 1968. He has been a director of a
substantial number of public and private companies. Mr. Morgenthaler received
his M.S. degree from the Massachusetts Institute of Technology.
JEREMY L. CURNOCK COOK has served as a Director of RPI since July
1995. Mr. Cook is a Director of Rothschild Asset Management and has been
responsible for the Rothschild Bioscience Unit since 1987. Mr. Cook founded
the International Biochemicals Group in 1975 which he subsequently sold to
Royal Dutch Shell in 1985, remaining as Managing Director until 1987. He is
also a director of Creative BioMolecules Inc., Targeted Genetics Inc., Cantab
Pharmaceuticals plc, and Biocompatibles International plc. Mr. Cook holds an
M.A. in Natural Sciences from Trinity College Dublin.
ANTHONY B. EVNIN, PH.D. has served as a Director of RPI since
February 1992. Dr. Evnin has been a General Partner of Venrock Associates, a
venture capital partnership, since 1975. He is also a director of Arris
Pharmaceutical Corporation, Centocor, Inc., SUGEN, Inc., Opta Food Ingredients,
Inc., Kopin Corporation and Triangle Pharmaceuticals, Incorporated. Dr. Evnin
received his Ph.D. from the Massachusetts Institute of Technology.
CHARLES M. HARTMAN has served as a Director of RPI since February
1992. He has been a General Partner of CW Group, a venture capital
partnership, since 1983. From 1965 to 1983 Mr. Hartman held a number of
positions with Johnson & Johnson. He is a director of SUGEN, Inc.
ANDERS P. WIKLUND has served as a Director of RPI since August 1994.
Mr. Wiklund has been with Biacore Inc. since January 1997, where he is
President. Previously, from 1967 through 1996, Mr. Wiklund served in numerous
executive positions for the Kabi and Pharmacia group of companies, including
President and CEO of Kabi Vitrum Inc. and Kabi Pharmacia, Incorporated. Mr.
Wilkund is also a director of PharmaGenics, Inc., InSite Vision, Inc., and
Vascular Therapeutics, Incorporated. Mr. Wiklund graduated from the
Pharmaceutical Institute in Stockholm, where he received a Master of Pharmacy
degree.
LEWIS T. WILLIAMS, M.D., PH.D. has served as a Director of RPI since
February 1996. He has been a Senior Vice President of Research and Development
at Chiron Corporation and President of Chiron Technologies since August 1994.
Dr. Williams has also been a professor of medicine at the University of
California, San Francisco since 1988, and served as an Investigator, Howard
Hughes Medical Institute from 1985 to 1993.
Additional information regarding these persons and compliance with
Section 16(a) of the Exchange Act is incorporated herein by reference to the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on May 22, 1997, to be filed with the Commission pursuant to Regulation
14A.
ITEM 10. EXECUTIVE COMPENSATION
The information with respect to executive compensation is incorporated
herein by reference to the Company's definitive proxy statement for the Annual
Meeting of Stockholders to be held on May 22, 1997, to be filed with the
Commission pursuant to Regulation 14A.
26
<PAGE> 28
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to security ownership of certain
beneficial owners and management is incorporated herein by reference to the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on May 22, 1997, to be filed with the Commission pursuant to Regulation
14A.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to certain relationships and related
transactions is incorporated herein by reference to the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on May 22,
1997, to be filed with the Commission pursuant to Regulation 14A.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(A) 1. INDEX TO FINANCIAL STATEMENTS PAGE
Report of Independent Auditors F-1
Balance Sheets F-2
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-7
Notes to Financial Statements F-8
27
<PAGE> 29
2. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
3.1 * -- Amended and Restated Certificate of Incorporation dated April 17, 1996.
3.2 * -- By-laws of the Company, as amended.
4.1 * -- Reference is made to Exhibits 3.1 and 3.2.
4.2 * -- Specimen Stock Certificate.
10.1 * -- Form of Indemnity Agreement entered into between the Company and its directors and officers,
with related schedule.
10.2 * -- Company's Incentive Stock Option Plan (the "ISO Plan"), including form of Incentive Stock
Option Agreement under the ISO Plan.
10.3 * -- Company's Non-Qualified Stock Option Plan (the "NQSO Plan"), including form of Non-Qualified
Stock Option under the NQSO Plan.
10.4 * -- Company's 1996 Stock Option Plan (the "Option Plan"), including forms of Incentive Stock Option
and Nonstatutory Stock Option under the Option Plan.
10.5 * -- Company's 1996 Employee Stock Purchase Plan.
10.6 * -- Employment Agreement, dated May 1, 1992 between the Company and Ralph Christoffersen, Addendum
to Employment Agreement dated as of August 30, 1993, Second Addendum dated January 31, 1994 and
Third Addendum dated January 1, 1995.
10.7 * -- Incentive Stock Option Agreement between the Company and Ralph E. Christoffersen, dated as of
December 23, 1992.
10.8 * -- Incentive Stock Option Agreement between the Company and Ralph E. Christoffersen, dated as of
September 23, 1994.
10.9 * -- Warrant Purchase Agreement, dated as of March 15, 1995 between the Company and Hambrecht &
Quist Guaranty Finance, L.P.
10.10 * -- Warrant to Purchase Common Stock, dated as of March 15, 1995 issued to Hambrecht & Quist
Guaranty Finance, L.P.
10.11 * -- Warrant to Purchase Common Stock, dated as of February 22, 1993 issued to LINC Scientific
Leasing.
10.12 * -- Warrant to Purchase Common Stock, dated as of July 30, 1993 issued to Douglas E. Olson.
10.13 * -- Warrant to Purchase Common Stock, dated as of July 30, 1993 issued to Richard J. Warburg and
Ruth P. Warburg.
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
10.14 * -- Warrant to Purchase Common Stock, dated as of December 28, 1994 issued to Competitive
Technologies, Inc.
10.15 * -- Warrant to Purchase Common Stock, dated as of December 29, 1995 issued to Silicon Valley Bank.
10.16 * -- Warrant to Purchase Common Stock, dated July 26, 1996 issued to Silicon Valley Bank.
10.17 * -- Warrant to Purchase Common Stock, dated April 17, 1996, issued to Chiron Corporation.
10.18 * -- Collaborative Research, Development and Commercialization Agreement, dated July 15, 1994
between the Company and Chiron Corporation.
10.19 * -- Research Collaboration and Licensing Agreement, dated as of November 1, 1995 between the
Company and Pharmacia Biotech, AB
10.20 * -- Research and Development Collaboration Agreement, dated as of April 19, 1993 between the
Company and Parke-Davis Division of Warner-Lambert Company.
10.21 * -- First Amendment to the Research and Development Collaboration Agreement, dated April 19, 1993,
dated as of April 17, 1995 between the Company and Parke-Davis Division of Warner-Lambert
Company.
10.22 * -- Second Amendment to the Research and Development Collaboration Agreement, dated April 19, 1993,
dated as of February 8, 1996 between the Company and Parke-Davis Division of Warner-Lambert
Company.
10.23 * -- Financing Agreement, dated March 16, 1995 among Wilderness Place Holdings L.L.C., Hambrecht &
Quist Guaranty Finance, L.P. and the Company.
10.24 * -- Negotiable Promissory Note, dated October 7, 1992 between the Company and Ralph Christoffersen
and Addendum dated June 25, 1993.
10.25 * -- Employment Agreement, dated January 8, 1996 between the Company and Lawrence E. Bullock.
10.26 * -- Promissory Note, dated February 8, 1996 between the Company and Lawrence E. Bullock.
10.27 * -- Lease for Real Property, dated May 20, 1992 between Aero-Tech Investments and the Company.
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
10.28 * -- Non-Disturbance and Attornment Agreement, dated March 31, 1995 among General American Life
Insurance Company, Aero-Tech Investments, Wilderness Place Holdings L.L.C. and the Company.
10.29 * -- Master Lease Agreement, dated September 2, 1992 between the Company and LINC Scientific
Leasing.
10.30 * -- Loan and Security Agreement, dated February 28, 1994 between the Company and Silicon Valley
Bank.
10.31 * -- Loan Modification Agreement, dated December 21, 1994 between the Company and Silicon Valley
Bank.
10.32 * -- Loan and Security Agreement, dated December 29, 1995 between the Company and Silicon Valley
Bank and MMC/GATX Partnership No. 1.
10.33 * -- Warrant to Purchase Common Stock, dated as of December 29, 1995 issued to MMC/GATX Partnership
No. 1
10.34 * -- Agreement, dated February 29, 1996 between the Company and Chiron Corporation relating to
research and development funding.
10.35 -- Amendments to original Employment Agreements between the Company and Ralph E. Christoffersen,
Lawrence E. Bullock and Nassim Usman, pursuant to letters dated November 14, 1996, November 22,
1996 and December 15, 1996.
10.36 -- Promissory Note, dated June 4, 1996 between the Company and Nassim Usman.
10.37 -- Amendment to Lease for Real Property, dated March 13, 1997 between Aero-Tech Investments and
the Company.
10.38 ** -- Employment Agreement, dated May 2, 1996 between the Company and Nassim Usman.
10.39 ** -- Collaboration Agreement Regarding Use of Ribozymes to Determine Gene Function, dated
May 13, 1996 between the Company and Chiron Corporation.
10.40 *** -- Amended and Restated License Agreement, dated November 20, 1996, between the Company, University
Research Corporation, University of Colorado and United States Biochemical Corporation.
10.41 *** -- Amended and Restated Sublicense Agreement, dated November 20, 1996, between the Company and United
States Biochemical Corporation.
10.42 *** -- Amended and Restated License Agreement, dated November 20, 1996, between the Company and
Competitive Technologies, Incorporated.
10.43 *** -- Memorandum of Understanding, dated March 1, 1996 between the Company and DowElanco.
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
10.44 *** -- Stock Subscription Agreement, dated September 1996, between the Company and University of
Research Corporation.
10.45 *** -- Stock Subscription Agreement, dated November 20, 1996, between the Company and United States
Biochemical Corporation.
10.46 *** -- Assignment of License and Restated License Agreement, dated November 20, 1996 among the Company,
United States Biochemical Corporation and Competitive Technologies.
10.47 *** -- Letter Agreement dated May 22, 1996, between the Company and ALZA Corporation.
10.48 *** -- Research and Development Collaboration Agreement dated December 2, 1996, between the Company
and Protogene Laboratories.
10.49 *** -- License Agreement dated February 14, 1997, between the Company and IntelliGene, Ltd.
10.50 * -- Subscription Agreement, dated as of April 17, 1995, between the Company and Park-Davis
Division of Warner-Lambert Company.
10.51 * -- Stock Purchase Agreement, dated as of June 28, 1995, among the Company and certain investors.
10.52 * -- Agreement dated march 1, 1996, between the Company and DowElanco Corporation relating to the
conversion of preferred stock.
10.53 * -- Stock subscription Agreement dated as of October 30, 1995, between the Company and Gewestelijke
Investeringsmaatschappij voor Vlaanderon n.v.
11.1 -- Statement regarding calculation of net loss per share.
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
27.1 -- Financial Data Schedule.
</TABLE>
* Incorporated by reference to the Company's Form S-B2 Registration
Statement, File No. 333-1908-D.
** Incorporated by reference to the Company's Form 10-QSB for the quarter
ended June 30, 1996.
*** To be filed by Amendment. The Company is applying for confidential
treatment with respect to portions of these exhibits.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1996.
31
<PAGE> 33
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RIBOZYME PHARMACEUTICALS, INC.
By:/s/ RALPH E. CHRISTOFFERSEN
-------------------------------
Ralph E. Christoffersen, Ph.D.
Chief Executive Officer and President
Date: March 27, 1997
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Company and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ RALPH E. CHRISTOFFERSEN Chief Executive Officer and President (Principal March 27, 1997
- --------------------------------------- Executive Officer)
Ralph E. Christoffersen, Ph.D.
/s/ LAWRENCE E. BULLOCK Vice President, Administration and March 27, 1997
- --------------------------------------- Finance, Chief Financial Officer and Secretary
Lawrence E. Bullock (Principal Financial and Accounting Officer)
/s/ DAVID T. MORGENTHALER Chairman of the Board of Directors March 27, 1997
- ---------------------------------------
David T. Morgenthaler
/s/ JEREMY C. COOK Director March 27, 1997
- ---------------------------------------
Jeremy C. Cook
/s/ ANTHONY B. EVNIN Director March 27, 1997
- ---------------------------------------
Anthony B. Evnin, Ph.D.
/s/ CHARLES M. HARTMAN Director March 27, 1997
- ---------------------------------------
Charles M. Hartman
/s/ ANDERS WIKLUND Director March 27, 1997
- ---------------------------------------
Anders Wiklund
/s/ LEWIS T. WILLIAMS Director March 27, 1997
- ---------------------------------------
Lewis T. Williams
</TABLE>
32
<PAGE> 34
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Ribozyme Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Ribozyme Pharmaceuticals,
Inc. as of December 31, 1996 and 1995, and the related statements of
operations, stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ribozyme Pharmaceuticals, Inc.
at December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Denver, Colorado
February 6, 1997
F-1
<PAGE> 35
Ribozyme Pharmaceuticals, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $13,050,678 $ 2,913,008
Securities available-for-sale 4,543,470 3,507,234
Restricted cash 242,733 530,034
Accounts receivable 74,022 18,060
Notes receivable--related parties 157,341 55,000
Prepaid expenses and other 213,717 157,835
-----------------------------
Total current assets 18,281,961 7,181,171
Property, plant, and equipment:
Machinery and equipment 3,652,794 3,294,157
Leasehold improvements 3,539,437 3,353,886
Office furniture and equipment 857,920 817,183
-----------------------------
8,050,151 7,465,226
Accumulated depreciation (3,639,779) (2,947,831)
-----------------------------
4,410,372 4,517,395
Restricted cash 52,669 679,896
Notes receivable--related parties 122,398 217,330
Deferred patent costs, net of accumulated
amortization (1996--$105,916;
1995--$65,169) 2,008,804 1,490,656
Other assets 415,366 136,106
-----------------------------
Total assets $25,291,570 $14,222,554
=============================
</TABLE>
See accompanying notes.
F-2
<PAGE> 36
Ribozyme Pharmaceuticals, Inc.
Balance Sheets (continued)
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade $ 552,904 $ 549,038
Accrued liabilities 216,616 86,390
Current portion of long-term debt 1,572,189 1,129,854
Current portion of capital lease obligations 152,093 768,014
------------------------------
Total current liabilities 2,493,802 2,533,296
Long-term debt 2,430,432 3,026,552
Capital lease obligations - 152,093
Deferred gain 5,515 32,645
Commitments
Stockholders' equity:
Voting convertible preferred stock, $.01 par
value; 5,000,000 shares authorized;
0 and 2,231,960 shares issued and
outstanding in 1996 and 1995,
respectively - 22,321
Common stock, $.01 par value; 20,000,000
shares authorized; 6,948,304 and
982,501 shares issued and outstanding in
1996 and 1995, respectively 69,483 9,825
Additional paid-in capital 67,873,284 40,725,061
Accumulated deficit (47,382,830) (32,115,250)
Unrealized loss on securities available-
for-sale (9,214) -
Deferred compensation (188,902) (163,989)
------------------------------
Total stockholders' equity 20,361,821 8,477,968
------------------------------
Total liabilities and stockholders' equity $ 25,291,570 $14,222,554
==============================
</TABLE>
See accompanying notes.
F-3
<PAGE> 37
Ribozyme Pharmaceuticals, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
------------------------------
<S> <C> <C>
Revenues:
Collaborative agreements $ 759,122 $ 1,178,248
Grant and other income 13,981 101,976
Interest income 936,397 394,656
-------------------------------
Total revenues 1,709,500 1,674,880
Expenses:
Research and development 14,188,836 12,204,232
General and administrative 1,943,583 1,396,635
Interest expense 844,661 554,160
-------------------------------
Total expenses 16,977,080 14,155,027
-------------------------------
Net loss $(15,267,580) $(12,480,147)
===============================
Net loss per share $ (2.61) $ (3.86)
Shares used in computing net loss per share 5,844,987 3,230,341
</TABLE>
See accompanying notes.
F-4
<PAGE> 38
Ribozyme Pharmaceuticals, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON STOCK PREFERRED STOCK PREFERRED STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 981,177 $ 9,812 666,664 $6,667 761,897 $7,619
Issuance of common stock for cash 1,324 13 -- -- -- --
Payment on warrants -- -- -- -- -- --
Issuance of Series F preferred
stock for cash, net of issuance
costs of $5,909 -- -- -- -- -- --
Issuance of Series G preferred
stock for cash, net of issuance
costs of $103,139 -- -- -- -- -- --
Net loss -- -- -- -- -- --
Compensation for issuance of
common stock and options -- -- -- -- -- --
Unrealized gain on securities
available-for-sale -- -- -- -- -- --
-------------------------------------------------------------------------------
Balance at December 31, 1995 982,501 9,825 666,664 6,667 761,897 7,619
Conversion of preferred stock in
connection with initial public
offering 2,231,960 22,321 (666,664) (6,667) (761,897) (7,619)
Issuance of common stock relating
to certain antidilution rights in
connection with initial public
offering 841,279 8,412 -- -- -- --
Issuance of common stock for cash
-- initial public offering, net of
issuance costs of $816,990 2,300,000 23,000 -- -- -- --
Issuance of common stock for cash
-- other 510,829 5,108 -- -- -- --
Payment on warrants -- -- -- -- --
Issuance of common stock for
employee bonus 18,810 188 -- -- -- --
Issuance of common stock under
employee stock purchase plan 15,842 158 -- -- -- --
Compensation for issuance of
common stock and options -- -- -- -- -- --
Issuance of common stock
for services 2,083 21 -- -- -- --
Issuance of common stock relating
to certain royalty agreements 45,000 450 -- -- -- --
Net loss -- -- -- -- -- --
Unrealized loss on securities
available-for-sale -- -- -- -- -- --
-------------------------------------------------------------------------------
Balance at December 31, 1996 6,948,304 $69,483 -- $ -- -- $ --
===============================================================================
<CAPTION>
SERIES C SERIES D
PREFERRED STOCK PREFERRED STOCK
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 127,877 $1,279 41,666 $417
Issuance of common stock for cash -- -- -- --
Payment on warrants -- -- -- --
Issuance of Series F preferred
stock for cash, net of issuance
costs of $5,909 -- -- -- --
Issuance of Series G preferred
stock for cash, net of issuance
costs of $103,139 -- -- -- --
Net loss -- -- -- --
Compensation for issuance of
common stock and options -- -- -- --
Unrealized gain on securities
available-for-sale -- -- -- --
---------------------------------------------------------
Balance at December 31, 1995 127,877 1,279 41,666 417
Conversion of preferred stock in
connection with initial public
offering (127,877) (1,279) (41,666) (417)
Issuance of common stock relating
to certain antidilution rights in
connection with initial public
offering -- -- -- --
Issuance of common stock for cash
-- initial public offering, net of
issuance costs of $816,990 -- -- -- --
Issuance of common stock for cash
-- other -- -- -- --
Payment on warrants -- -- -- --
Issuance of common stock for
employee bonus -- -- -- --
Issuance of common stock under
employee stock purchase plan -- -- -- --
Compensation for issuance of
common stock and options -- -- -- --
Issuance of common stock
for services -- -- -- --
Issuance of common stock relating
to certain royalty agreements -- -- -- --
Net loss -- -- -- --
Unrealized loss on securities
available-for-sale -- -- -- --
---------------------------------------------------------
Balance at December 31, 1996 -- $ -- -- $ --
=========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 39
Ribozyme Pharmaceuticals, Inc.
Statements of Stockholders' Equity (continued)
<TABLE>
<CAPTION>
SERIES E SERIES F SERIES G ADDITIONAL
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 107,095 $1,071 -- $ -- -- $ -- $27,926,345
Issuance of common stock for cash -- -- -- -- -- -- 1,005
Payment on warrants -- -- -- -- -- -- 1,600
Issuance of Series F preferred
stock for cash, net of issuance
costs of $5,909 -- -- 40,160 402 -- -- 1,493,689
Issuance of Series G preferred
stock for cash, net of issuance
costs of $103,139 -- -- -- -- 486,601 4,866 10,840,724
Net loss -- -- -- -- -- -- --
Compensation for issuance of
common stock and options -- -- -- -- -- -- 461,698
Unrealized gain on securities
available-for-sale -- -- -- -- -- -- --
-------------------------------------------------------------------------------------
Balance at December 31, 1995 107,095 1,071 40,160 402 486,601 4,866 40,725,061
Conversion of preferred stock in
connection with initial public
offering (107,095) (1,071) (40,160) (402) (486,601) (4,866) --
Issuance of common stock relating
to certain antidilution rights in
connection with initial public
offering -- -- -- -- -- -- (8,412)
Issuance of common stock for cash
--initial public offering, net of
issuance costs of $816,990 -- -- -- -- -- -- 20,550,010
Issuance of common stock for cash
-- other -- -- -- -- -- -- 3,762,048
Payment on warrants -- -- -- -- -- -- 1,800,000
Issuance of common stock for
employee bonus -- -- -- -- -- -- 187,912
Issuance of common stock under
employee stock purchase plan -- -- -- -- -- -- 131,172
Compensation for issuance of
common stock and options -- -- -- -- -- -- 162,530
Issuance of common stock
for services -- -- -- -- -- -- 23,413
Issuance of common stock relating
to certain royalty agreements -- -- -- -- -- -- 539,550
Net loss -- -- -- -- -- -- --
Unrealized loss on securities
available-for-sale -- -- -- -- -- -- --
-------------------------------------------------------------------------------------
Balance at December 31, 1996 -- $ -- -- $ -- -- $ -- $67,873,284
=====================================================================================
<CAPTION>
UNREALIZED
ACCUMULATED LOSS ON DEFERRED
DEFICIT SECURITIES COMPENSATION TOTAL
-------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $(19,635,103) $(70,755) $ -- $ 8,247,352
Issuance of common stock for cash -- -- -- 1,018
Payment on warrants -- -- -- 1,600
Issuance of Series F preferred
stock for cash, net of issuance
costs of $5,909 -- -- -- 1,494,091
Issuance of Series G preferred
stock for cash, net of issuance
costs of $103,139 -- -- -- 10,845,590
Net loss (12,480,147) -- -- (12,480,147)
Compensation for issuance of
common stock and options -- -- (163,989) 297,709
Unrealized gain on securities
available-for-sale -- 70,755 -- 70,755
---------------------------------------------------------
Balance at December 31, 1995 (32,115,250) -- (163,989) 8,477,968
Conversion of preferred stock in
connection with initial public
offering -- -- -- --
Issuance of common stock relating
to certain antidilution rights in
connection with initial public
offering -- -- -- --
Issuance of common stock for cash
--initial public offering, net of
issuance costs of $816,990 -- -- -- 20,573,010
Issuance of common stock for cash
-- other -- -- -- 3,767,156
Payment on warrants -- -- -- 1,800,000
Issuance of common stock for
employee bonus -- -- -- 188,100
Issuance of common stock under
employee stock purchase plan -- -- -- 131,330
Compensation for issuance of
common stock and options -- -- (24,913) 137,617
Issuance of common stock
for services -- -- -- 23,434
Issuance of common stock relating
to certain royalty agreements -- -- -- 540,000
Net loss (15,267,580) -- -- (15,267,580)
Unrealized loss on securities
available-for-sale -- (9,214) -- (9,214)
---------------------------------------------------------
Balance at December 31, 1996 $(47,382,830) $ (9,214) $(188,902) $20,361,821
=========================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 40
Ribozyme Pharmaceuticals, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995
--------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(15,267,580) $(12,480,147)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation 1,648,435 1,245,024
Amortization 40,747 66,300
Write-off of deferred patent costs - 357,782
Compensation related to common stock and options 889,151 297,709
Compensation for forgiveness of notes
receivable--related parties 92,466 50,000
Loss on sale of securities available-for-sale 13,140 1,693
Loss on sale of equipment - 16,215
Changes in operating assets and liabilities:
Accounts receivable (55,962) 62,954
Prepaid expenses and other (55,882) (110,764)
Other assets (29,260) (111,258)
Accounts payable--trade 3,866 183,799
Accrued liabilities 130,226 (274,538)
Deferred contract revenue - (117,743)
Deferred gain (27,130) (36,824)
--------------------------------
Net cash used by operating activities (12,617,783) (10,849,798)
INVESTING ACTIVITIES
Additions to property, plant, and equipment (1,541,412) (3,342,954)
Additions to deferred patent costs (558,895) (616,092)
Investment in corporate partner (250,000) -
Proceeds from sale of equipment - 2,800
Net purchases of securities available-for-sale (1,058,590) (1,430,996)
Transfer of restricted cash 914,528 (709,930)
Loan repayments--related parties 56,625 -
Loan advances--related parties (156,500) (55,000)
--------------------------------
Net cash used by investing activities (2,594,244) (6,152,172)
FINANCING ACTIVITIES
Net proceeds from sale of shares of preferred and common stock
and of warrants 26,271,496 12,342,299
Payments under loan facilities (1,316,027) (455,752)
Borrowings under loan facilities 1,162,242 3,341,283
Payments on capital lease obligations (768,014) (1,039,974)
--------------------------------
Net cash provided by financing activities 25,349,697 14,187,856
--------------------------------
Net increase (decrease) in cash and cash equivalents 10,137,670 (2,814,114)
Cash and cash equivalents at beginning of year 2,913,008 5,727,122
--------------------------------
Cash and cash equivalents at end of year $ 13,050,678 $ 2,913,008
================================
</TABLE>
See accompanying notes.
F-7
<PAGE> 41
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Ribozyme Pharmaceuticals, Inc. ("RPI" or the "Company") was incorporated on
January 27, 1992 for the purpose of research, development and commercialization
of its ribozyme technology. To date, the Company has engaged in the research
and development of its ribozyme technology and has experienced significant
operating losses in each fiscal year since inception. The Company has not
generated any revenue from the commercialization of its ribozyme technology and
it expects to continue to incur significant operating losses over at least the
next several years.
BASIS OF PRESENTATION
The Company incurred a net loss of $15,267,580 for the year ended December 31,
1996 and has an accumulated deficit of $47,382,830 at December 31, 1996.
Development of the Company's products will require a commitment of substantial
additional funds to conduct the costly and time-consuming research, preclinical
and clinical testing necessary to bring its proposed products to market and to
establish manufacturing and marketing capabilities. The Company's future
capital requirements will depend on many factors, including, among others, the
progress of the Company's research, development and drug discovery efforts, the
ability of the Company to establish collaborative arrangements for clinical
testing, progress with preclinical studies and clinical trials, the time and
costs involved in obtaining regulatory approvals, the costs involved in
preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims, competing technological and market developments, changes in the
Company's existing research relationships, determination as to the commercial
potential of the Company's potential products, effective commercialization
activities and arrangements, and the cost and availability of third-party
financing for capital expenditures.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVERSE STOCK SPLIT
During 1996, the Company's Board of Directors and stockholders approved a
1-for-9 reverse stock split of its outstanding common stock and preferred
stock, to be effected on April 11, 1996, and approved the amendment of the
Company's Restated Certificate of Incorporation to adjust the Company's
authorized capital stock to 20,000,000 shares of $.01 par value common stock,
and 5,000,000 shares of $.01 par value preferred stock. All references in the
accompanying financial statements to the number of common and preferred shares
and to per share amounts, stock options and warrants, have been retroactively
restated to reflect the reverse stock split.
F-8
<PAGE> 42
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
Beginning January 1, 1996, net loss per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent shares
from stock options and warrants are excluded from the computation as their
effect is antidilutive. Prior to April 11, 1996, pursuant to Securities and
Exchange Commission Staff Accounting Bulletins and Staff Policy, common and
common equivalent shares issued during the 12-month period prior to the
proposed initial public offering at prices below the public offering price are
presumed to have been issued in contemplation of the public offering, even if
antidilutive, and have been included in the calculation as if they were
outstanding (using the treasury stock method and the initial public offering
price for common stock, stock options and warrants and the as converted method
for convertible preferred stock).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents. The Company's cash equivalents
are comprised of certificates of deposit, money market funds, and investment
securities with maturities of three months or less.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and equipment subject to financing obligations are
amortized on a straight-line basis over the shorter of their estimated useful
lives or the lease term.
DEFERRED PATENT COSTS
The Company capitalizes legal costs directly incurred in pursuing patent
applications as deferred patent costs. When such application results in an
issued patent, the related costs are amortized over the remaining legal life of
the patents, using the straight-line method. On a quarterly basis, the Company
reviews its issued patents and pending patent applications, and if it
determines to abandon a patent application or that an issued patent no longer
has economic value, the unamortized balance in deferred patent costs relating
to that patent is immediately expensed.
It is possible the above estimates of future economic life of the Company's
commercialization revenues, the amount of anticipated future commercialization
revenues, or both, will be reduced significantly in the near term due to
alternative technologies developed by other biotechnology or pharmaceutical
companies. As a result, the carrying amount of deferred patent costs may be
reduced in the future.
F-9
<PAGE> 43
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
(SFAS 121), which requires impairment losses to be recorded on long-lived
assets used in operations when indications of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. SFAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company adopted the
provisions of SFAS 121 in the first quarter of 1996 with no material effect to
its financial statements.
REVENUE RECOGNITION
Revenues recognized under the Company's collaborative research agreements and
grants are recorded as earned ratably over the term of the agreements.
Payments received in advance under these agreements are recorded as deferred
revenue until earned.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs are expensed as incurred.
CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements to
conform with the 1996 financial statement presentation.
2. SECURITIES AVAILABLE-FOR-SALE
Management has determined that all marketable securities held by the Company at
December 31, 1996 and 1995 were available-for-sale. Securities
available-for-sale are carried at fair value, with unrealized gains and losses
reported as a separate component of stockholders' equity. The amortized cost
of debt securities in this category is adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
investment income. Realized gains and losses and declines in value judged to
be other-than-temporary on securities available-for-sale are included in
investment income. Interest and dividends on securities available-for-sale are
included in investment income. The cost of securities sold is based on the
specific identification method.
F-10
<PAGE> 44
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
2. SECURITIES AVAILABLE-FOR-SALE (CONTINUED)
The following is a summary of securities available-for-sale:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST BASIS GAINS LOSSES FAIR VALUE
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At December 31, 1996:
Backed by government securities
(maturing in 1999 and 2025) $4,552,684 $ - $(9,214) $4,543,470
=======================================================
At December 31, 1995:
U.S. corporate securities
(maturing in 1996) $3,507,234 $ - $ - $3,507,234
=======================================================
</TABLE>
The gross realized losses on sales of securities available-for-sale totaled
$13,140 and $1,693 in 1996 and 1995, respectively.
3. LONG-TERM DEBT
Long-term debt as of December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
-----------------------------
<S> <C> <C>
Tenant improvement loan (I) $ 304,951 $ 693,077
Equipment loan (I) 714,728 1,128,617
Tenant interest loan (II) 710,800 878,955
Tenant improvement and equipment loan (II) 1,240,191 1,455,757
Equipment loan (III) 1,031,951 -
-----------------------------
$4,002,621 $4,156,406
=============================
</TABLE>
I. During 1994, the Company obtained a tenant improvement loan of $1,000,000
for leasehold improvements and an equipment loan to purchase up to
$1,500,000 of equipment. The interest rate on borrowings under these loan
facilities is the lender's prime rate plus 1.75% (10.00% (8.25% prime) at
December 31, 1996). The agreement requires monthly principal and interest
payments through August 1998.
II. In April 1995, the Company obtained a loan of $1,000,000 collateralized by
its tenant interest and certain existing leasehold improvements, and an
additional loan to purchase up to $1,500,000 of leasehold improvements and
equipment. The terms of the agreement call for fixed monthly principal
and interest payments through October 1998, assuming the Company exercises
a prepayment option. If the Company does not exercise the option, reduced
fixed payments will continue through June 2002.
F-11
<PAGE> 45
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
III. In December 1995, the Company negotiated an additional equipment credit
facility of $2,000,000 with a financial institution. The facility
commitment is to be terminated on June 30, 1997. The agreement requires
monthly principal and interest payments through April 2000, at which time
a final payment of $232,436 is due in full.
Interest expense for the years ended December 31, 1996 and 1995 relating to the
Company's long-term debt approximates the interest paid during the respective
periods.
All assets acquired under the above loan facilities represent collateral for
the amounts outstanding. In addition, the Company is required to maintain
minimum cash balances in the form of certificates of deposit with a financial
institution, in the amount of $295,402 and $1,209,930 at December 31, 1996 and
1995, respectively. These amounts are presented as restricted cash in the
accompanying balance sheets.
As of December 31, 1996, maturities of long-term debt are as follows:
AMOUNT
----------
<TABLE>
<S> <C>
1997 $1,572,189
1998 2,087,993
1999 316,090
Thereafter 26,349
----------
$4,002,621
==========
</TABLE>
4. LEASES AND COMMITMENTS
During 1992 and 1993, the Company sold and simultaneously leased back certain
property and equipment in connection with various lease agreements. All assets
under such leases consisted of general laboratory and scientific equipment,
office equipment, furniture, fixtures, and certain leasehold improvements. The
interest rate on borrowings under these leases is approximately 11%.
F-12
<PAGE> 46
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
4. LEASES AND COMMITMENTS (CONTINUED)
Assets and the related accumulated amortization included in the above leases
are as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------------------------
<S> <C> <C>
Machinery and equipment $ 926,297 $2,262,782
Office furniture and equipment 205,256 487,218
------------------------------
1,131,553 2,750,000
Less accumulated amortization 1,019,680 2,045,584
------------------------------
$ 111,873 $ 704,416
==============================
</TABLE>
The Company leases office space under a noncancelable operating lease which was
due to expire in June 1997; however, in March 1997 the Company extended the
term of the operating lease until June 2002. Total rent expense was $265,732
and $259,901 in 1996 and 1995, respectively.
The Company's lease commitments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASE OPERATING
OBLIGATIONS LEASE
----------- ----------
<S> <C> <C>
1997 $159,272 $ 290,940
1998 - 49,965
1999 - 13,560
2000 - 930
-------- ----------
159,272 $355,395
==========
Executory costs -
Amounts representing interest (7,179)
--------
$152,093
========
</TABLE>
5. STOCKHOLDERS' EQUITY
In April 1996, the Company completed an initial public offering of its common
stock, whereby 2,300,000 shares of the Company's common stock were sold at
$10.00 per share, resulting in net proceeds of approximately $20.6 million. As
a result of the Company's initial public offering, all preferred shares
outstanding were converted into an aggregate of 2,231,960 shares of common
stock.
Upon consummation of the initial public offering the Company sold 377,202
shares of common stock to Chiron Corporation ("Chiron") for $3,640,000.
Additionally, the Company received $1,800,000 from Chiron to complete the
purchase of warrants to purchase 444,444 shares of common stock, issued
concurrently with the IPO.
F-13
<PAGE> 47
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
5. STOCKHOLDERS' EQUITY (CONTINUED)
In March 1996, the Company adopted an Employee Stock Purchase Plan (the
"Purchase Plan"), authorizing the issuance of 300,000 shares pursuant to
purchase rights granted to employees of the Company. The Purchase Plan provides
a means by which employees purchase common stock of the Company through payroll
deductions. The Purchase Plan is implemented by offerings of rights to eligible
employees. Generally, each offering is twenty-four months' duration with
purchases occurring on each October 31 and April 30 during each offering (except
that April 30, 1996 will not be a purchase date). Common stock is purchased for
accounts of employees participating in the Purchase Plan at a price per share
equal to the lower of (i) 85% of the fair market value of a share of common
stock on the date of commencement of participation in the offering or (ii) 85%
of the fair market value of a share of common stock on the date of purchase.
Generally all regular employees, including executive officers, may participate
in the Purchase Plan and may authorize payroll deduction of up to 15% of their
base compensation for the purchase of stock under the plan. The Company's Board
of Directors has the authority to terminate the Purchase Plan at its discretion.
Shares are deemed issued for accounting purposes in the year the shares are
purchased.
Pursuant to an antidilution agreement (the "Antidilution Agreement") with a
founder of the Company, the Company agreed to issue additional shares to this
individual so that he will maintain a 5% interest in the fully diluted equity
of the Company until the occurrence of one of several events, including the
Company's initial public offering. Accordingly, effective April 11, 1996,
115,506 shares were issued related to the Antidilution Agreement which
represented the founder's 5% interest in the Company. No additional rights
under the Antidilution Agreement exist.
Below is a summary of common stock reserved by the Company at December 31, 1996
for issuance upon the exercise of the various options, warrants and the
purchase plan.
SHARES
---------
<TABLE>
<CAPTION>
<S> <C>
Stock option plans 1,180,863
Employee stock purchase plan 284,158
Warrants at $15.75 per share 10,793
Warrants at $40.50 per share 11,111
Warrants at $22.50 per share 465,554
---------
1,952,479
=========
</TABLE>
The Company's ability to pay dividends is restricted by the terms of its tenant
improvement and equipment loan facility agreements.
F-14
<PAGE> 48
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
6. STOCK OPTION PLANS
The Company established a Non-Qualified Stock Option Plan and an Incentive
Stock Option Plan (collectively, the "Plans"), under which it is authorized to
grant stock options to eligible employees, consultants, and other individuals,
as defined in the Plans. Options to purchase the Company's common stock are
exercisable at a price as determined by the Board of Directors at the time the
option is granted, which shall not be less than 100% of the fair market value
(110% in the case of 10 percent shareholders) at the date of grant. Vesting
rights are determined by the Board of Directors at the time the option is
granted and generally the options become exercisable at twenty percent at the
end of each of years one through five. If not exercised, the options expire
after ten years. The Board of Directors has also granted certain employees
options vesting upon achievement of certain contingent milestone events.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123), requires use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, if the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized. During 1996
and 1995, the Company recorded $137,617 and $297,709, respectively, of
compensation relating to the grant of milestone-vested stock options and the
Antidilution Agreement.
Pro forma information regarding net income and earnings per share is required
by SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of SFAS 123. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1996 and
1995, respectively: risk-free interest rates of 6.3% and 5.9%; a dividend yield
of 0%; volatility factors of the expected market price of the Company's common
stock of .566 and .566; and a weighted-average expected life of the option of 6
years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-15
<PAGE> 49
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
6. STOCK OPTION PLANS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except for earnings per share
information):
1996 1995
------------- -------------
Pro forma net loss
$(15,554,890) $(12,492,739)
Pro forma loss per share
(2.66) (3.87)
Changes in stock options for the years ended December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE
-------- ------------
<S> <C> <C>
Outstanding at December 31, 1994 353,195 $ .45-$4.50
Options granted 44,495 $ 2.70-$5.40
Options exercised/canceled (29,852) $ .45-$4.50
-------- ------------
Outstanding at December 31, 1995 367,838 $ .45-$5.40
Options granted 508,652 $2.70-$19.00
Options exercised/canceled (197,067) $ .45-$5.40
-------- ------------
Outstanding at December 31, 1996 679,423 $ .45-$19.00
======== ============
</TABLE>
Stock options vest as follows:
<TABLE>
<CAPTION>
OPTIONS
-------
<S> <C>
Currently exercisable 109,568
1997 132,893
1998 108,001
1999 105,288
2000 95,226
2001 and thereafter 89,382
Contingent vesting 39,065
-------
Total 679,423
=======
</TABLE>
F-16
<PAGE> 50
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
7. COLLABORATIVE AGREEMENTS
Parke-Davis
In April 1993, the Company entered into a research and development
collaboration agreement with the Parke-Davis division of the Warner-Lambert
Corporation ("Parke-Davis"), whereby Parke-Davis is to partially fund the
research and development costs incurred by the Company in developing and
commercializing ribozyme-based products for application to the treatment of
osteoarthritis and other diseases. Pursuant to the Parke-Davis agreement,
Parke-Davis purchased 100,100 shares of Series C preferred stock at a price of
$29.97 per share in 1993, 27,777 shares of Series C preferred stock at a price
of $36.00 per share in 1994, and 40,160 shares of Series F preferred stock at
$37.35 per share in 1995, for a total equity investment of $5,500,000. All
preferred shares were converted into 168,037 shares of common stock upon the
Company's initial public offering.
Also pursuant to the collaboration agreement, through December 31, 1996,
Parke-Davis provided $1,700,000 research and development funding to the
Company. Parke-Davis has agreed to provide up to $9 million of additional
funding upon the achievement of certain scientific milestones. The agreement
further provides that the Company shall supply all of Parke-Davis' ribozyme
requirements, at various prices above its costs, in both the research and
development and commercialization phases, and that the Company has co-promotion
rights to the commercial products developed under the Parke-Davis agreement.
Dow Elanco
In September 1993, the Company entered into a research and development study
with DowElanco (the "Feasibility Study") to demonstrate the stable integration
and the effective use of ribozymes to alter corn composition. If the
Feasibility Study is successful, it is the intent of the parties to enter into
a long-term license agreement for the development and commercialization of
ribozymes to the targets of interest. Pursuant to the terms of the Feasibility
Study, DowElanco agreed to reimburse the Company for all of its expenses
related to the Feasibility Study and, in 1994, purchased 41,666 shares of
Series D preferred stock at a price of $36.00 per share, for a total equity
investment of $1,500,000. All preferred shares were converted into 41,666
shares of common stock upon completion of the Company's initial public
offering.
Chiron
In July 1994, the Company entered into a research and development collaboration
agreement with Chiron to research, develop and market products directed towards
five genetic targets, and all human clinical indications associated with those
targets. The Company and Chiron will share equally in the costs and profits of
any jointly developed products.
F-17
<PAGE> 51
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
7. COLLABORATIVE AGREEMENTS (CONTINUED)
In addition, Chiron may, at its option, finance the Company's portion of its
Phase II and Phase III drug development costs for mutually approved programs.
The Company retains the option to reacquire its rights by reimbursing Chiron
for such development costs plus a predetermined risk premium. The term of the
research program is five years, with the terms of the agreement to be extended
if products are jointly developed. As part of this agreement, Chiron committed
to make a $10,000,000 equity investment in the Company. The components of this
investment are:
In 1994, Chiron purchased 100,000 shares of the Company's common stock at a
price of $3.60 per share, or $360,000; also in 1994 Chiron purchased
107,095 shares of Series E preferred stock at a price of $37.35 per share,
or $4,000,000. In 1996, the Company issued Chiron immediately upon the
closing of the Company's initial public offering a warrant to purchase
444,444 shares of the Company's common stock which is exercisable at a
price of $22.50 per share, for an aggregate purchase price of $4.50 per
warrant share. In 1994, Chiron paid the Company $0.45 per warrant share,
or $200,000. The balance of the warrant purchase price, $1,800,000, or
$4.05 per warrant share, was paid to the Company upon completion of its
initial public offering. Further, Chiron purchased 377,202 common shares
with an aggregate value of $3,640,000 upon completion of the Company's
initial public offering, at the initial public offering price less one-half
of the underwriting discount. Chiron also has a designated Board member on
the Company's Board of Directors. All preferred shares were converted into
142,222 shares of common stock upon completion of the Company's initial
public offering.
In February 1996, the Company entered into a collaboration with Chiron for the
use of ribozymes to characterize gene function. The collaboration gives Chiron
the right to develop and commercialize products that result from the
collaboration, and would entitle RPI to receive product development milestone
payments and royalties on sales of any such commercial products. Chiron and
RPI each pay a portion of the research and development expenses of the
collaboration, and the Company has provided Chiron $1,800,000 for research
funding related to the collaboration.
Pharmacia Biotech AB
In November 1995, the Company and Pharmacia Biotech AB entered into a
collaboration and license agreement for the improvement of production scale
synthesis of RNA and chimeric oligonucleotides. The goal of the collaboration
is to reduce the cost of manufacturing ribozymes and other oligonucleotide
products. Pharmacia Biotech AB will provide research funding, synthesis
support and instrumentation, while RPI will receive royalties on the sales of
modified RNA oligonucleotides and non-DNA primer support. As of December 31,
1996, the Company received $512,500 in funding pursuant to the agreement and an
additional $219,000 in January 1997.
8. COMMITMENT AND CONTINGENCY
During 1993, the Company entered into a sponsored research and license
agreement with an affiliate of the University of Colorado (the "Affiliate")
whereby, in order to maintain an annual right of first refusal on any ribozyme
invention by the Affiliate, the Company agreed to provide an unrestricted grant
for a total amount of $750,000. The agreement also provided for royalty
payments on future commercial product revenues by the Company to the Affiliate.
The Affiliate made an investment of approximately $41,000 for 46,188 shares of
the Company's common stock upon entering into the agreement.
F-18
<PAGE> 52
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
8. COMMITMENT AND CONTINGENCY (CONTINUED)
During 1996, the Company eliminated the royalty arrangement in exchange for
45,000 shares of its common stock. The Company has recognized expense related
to the exchange of $540,000 during 1996. The Company's remaining commitments
under the above unrestricted grant are as follows:
<TABLE>
<S> <C>
1997 $262,500
1998 112,500
--------
$375,000
========
</TABLE>
The Company is involved in legal proceedings which have arisen in the ordinary
course of business. In the opinion of management the outcome of the legal
proceedings will not have a material adverse impact on the Company's financial
position or operations.
9. RELATED PARTY TRANSACTIONS
At December 31, 1996 and 1995, the Company has a total of $225,000 and
$155,000, respectively, of non-interest bearing loans due primarily from three
officers. Of this balance, $125,000 can be forgiven by the Company under
certain employment agreement provisions. The remaining loan balances are
payable to the Company under various terms not to exceed 5 years. The Company
forgave $85,000 and $50,000 of these loans during each of the years ending
December 31, 1996 and 1995, respectively.
10. INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, Accounting for Income Taxes (SFAS 109). Under the
provisions of SFAS 109, a deferred tax liability or asset (net of a valuation
allowance) is provided in the financial statements by applying the provisions
of applicable tax laws to measure the deferred tax consequences of temporary
differences that will result in net taxable or deductible amounts in future
years as a result of events recognized in the financial statements in the
current or preceding years. At December 31, 1996, the Company has the
following net operating loss and tax credit carryforwards for income tax
purposes:
<TABLE>
<CAPTION>
NET RESEARCH AND STATE
OPERATING DEVELOPMENT INVESTMENT
EXPIRATION DATE LOSSES CREDITS CREDITS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 $ - $ - $14,000
2000 - - 11,000
2001 - - 6,000
2007 3,506,000 101,000 -
2008 7,363,000 185,000 -
2009 9,239,000 316,000 -
2010 11,923,000 139,000 -
2011 15,015,000 181,000 -
----------- -------- -------
Total $47,046,000 $922,000 $31,000
=========== ======== =======
</TABLE>
F-19
<PAGE> 53
Ribozyme Pharmaceuticals, Inc.
Notes to Financial Statements (continued)
10. INCOME TAXES (CONTINUED)
The Tax Reform Act of 1986 contains provisions that limit the utilization of
net operating loss and tax credit carryforwards if there has been a "change of
ownership" as described in Section 382 of the Internal Revenue Code. Such a
change of ownership may limit the Company's utilization of its net operating
loss and tax credit carryforwards, and could have been triggered by the
Company's initial public offering or by subsequent sales of securities by the
Company or its shareholders.
The components of the Company's deferred tax assets and liabilities as of
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 17,548,000 $ 11,979,000
Research and development and state
investment credit carryforwards 953,000 893,000
Depreciation 619,000 352,000
Other 6,000 26,000
------------ ------------
19,126,000 13,250,000
Valuation allowance (18,348,000) (12,686,000)
------------ ------------
Net deferred tax assets 778,000 564,000
Deferred tax liabilities:
Deferred patent costs $ 749,000 $ 555,000
Other 29,000 9,000
----------- ------------
Total deferred tax liabilities 778,000 564,000
----------- ------------
$ - $ -
</TABLE> ============ ============
F-20
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
3.1 * -- Amended and Restated Certificate of Incorporation dated April 17, 1996.
3.2 * -- By-laws of the Company, as amended.
4.1 * -- Reference is made to Exhibits 3.1 and 3.2.
4.2 * -- Specimen Stock Certificate.
10.1 * -- Form of Indemnity Agreement entered into between the Company and its directors and officers,
with related schedule.
10.2 * -- Company's Incentive Stock Option Plan (the "ISO Plan"), including form of Incentive Stock
Option Agreement under the ISO Plan.
10.3 * -- Company's Non-Qualified Stock Option Plan (the "NQSO Plan"), including form of Non-Qualified
Stock Option under the NQSO Plan.
10.4 * -- Company's 1996 Stock Option Plan (the "Option Plan"), including forms of Incentive Stock Option
and Nonstatutory Stock Option under the Option Plan.
10.5 * -- Company's 1996 Employee Stock Purchase Plan.
10.6 * -- Employment Agreement, dated May 1, 1992 between the Company and Ralph Christoffersen, Addendum
to Employment Agreement dated as of August 30, 1993, Second Addendum dated January 31, 1994 and
Third Addendum dated January 1, 1995.
10.7 * -- Incentive Stock Option Agreement between the Company and Ralph E. Christoffersen, dated as of
December 23, 1992.
10.8 * -- Incentive Stock Option Agreement between the Company and Ralph E. Christoffersen, dated as of
September 23, 1994.
10.9 * -- Warrant Purchase Agreement, dated as of March 15, 1995 between the Company and Hambrecht &
Quist Guaranty Finance, L.P.
10.10 * -- Warrant to Purchase Common Stock, dated as of March 15, 1995 issued to Hambrecht & Quist
Guaranty Finance, L.P.
10.11 * -- Warrant to Purchase Common Stock, dated as of February 22, 1993 issued to LINC Scientific
Leasing.
10.12 * -- Warrant to Purchase Common Stock, dated as of July 30, 1993 issued to Douglas E. Olson.
10.13 * -- Warrant to Purchase Common Stock, dated as of July 30, 1993 issued to Richard J. Warburg and
Ruth P. Warburg.
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
10.14 * -- Warrant to Purchase Common Stock, dated as of December 28, 1994 issued to Competitive
Technologies, Inc.
10.15 * -- Warrant to Purchase Common Stock, dated as of December 29, 1995 issued to Silicon Valley Bank.
10.16 * -- Warrant to Purchase Common Stock, dated July 26, 1996 issued to Silicon Valley Bank.
10.17 * -- Warrant to Purchase Common Stock, dated April 17, 1996, issued to Chiron Corporation.
10.18 * -- Collaborative Research, Development and Commercialization Agreement, dated July 15, 1994
between the Company and Chiron Corporation.
10.19 * -- Research Collaboration and Licensing Agreement, dated as of November 1, 1995 between the
Company and Pharmacia Biotech, AB
10.20 * -- Research and Development Collaboration Agreement, dated as of April 19, 1993 between the
Company and Parke-Davis Division of Warner-Lambert Company.
10.21 * -- First Amendment to the Research and Development Collaboration Agreement, dated April 19, 1993,
dated as of April 17, 1995 between the Company and Parke-Davis Division of Warner-Lambert
Company.
10.22 * -- Second Amendment to the Research and Development Collaboration Agreement, dated April 19, 1993,
dated as of February 8, 1996 between the Company and Parke-Davis Division of Warner-Lambert
Company.
10.23 * -- Financing Agreement, dated March 16, 1995 among Wilderness Place Holdings L.L.C., Hambrecht &
Quist Guaranty Finance, L.P. and the Company.
10.24 * -- Negotiable Promissory Note, dated October 7, 1992 between the Company and Ralph Christoffersen
and Addendum dated June 25, 1993.
10.25 * -- Employment Agreement, dated January 8, 1996 between the Company and Lawrence E. Bullock.
10.26 * -- Promissory Note, dated February 8, 1996 between the Company and Lawrence E. Bullock.
10.27 * -- Lease for Real Property, dated May 20, 1992 between Aero-Tech Investments and the Company.
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
10.28 * -- Non-Disturbance and Attornment Agreement, dated March 31, 1995 among General American Life
Insurance Company, Aero-Tech Investments, Wilderness Place Holdings L.L.C. and the Company.
10.29 * -- Master Lease Agreement, dated September 2, 1992 between the Company and LINC Scientific
Leasing.
10.30 * -- Loan and Security Agreement, dated February 28, 1994 between the Company and Silicon Valley
Bank.
10.31 * -- Loan Modification Agreement, dated December 21, 1994 between the Company and Silicon Valley
Bank.
10.32 * -- Loan and Security Agreement, dated December 29, 1995 between the Company and Silicon Valley
Bank and MMC/GATX Partnership No. 1.
10.33 * -- Warrant to Purchase Common Stock, dated as of December 29, 1995 issued to MMC/GATX Partnership
No. 1
10.34 * -- Agreement, dated February 29, 1996 between the Company and Chiron Corporation relating to
research and development funding.
10.35 -- Amendments to original Employment Agreements between the Company and Ralph E. Christoffersen,
Lawrence E. Bullock and Nassim Usman, pursuant to letters dated November 14, 1996, November 22,
1996 and December 15, 1996.
10.36 -- Promissory Note, dated June 4, 1996 between the Company and Nassim Usman.
10.37 -- Amendment to Lease for Real Property, dated March 13, 1997 between Aero-Tech Investments and
the Company.
10.38 ** -- Employment Agreement, dated May 2, 1996 between the Company and Nassim Usman.
10.39 ** -- Collaboration Agreement Regarding Use of Ribozymes to Determine Gene Function, dated
May 13, 1996 between the Company and Chiron Corporation.
10.40 *** -- Amended and Restated License Agreement, dated November 20, 1996, between the Company, University
Research Corporation, University of Colorado and United States Biochemical Corporation.
10.41 *** -- Amended and Restated Sublicense Agreement, dated November 20, 1996, between the Company and United
States Biochemical Corporation.
10.42 *** -- Amended and Restated License Agreement, dated November 20, 1996, between the Company and Competitive
Technologies, Incorporated.
10.43 *** -- Memorandum of Understanding, dated March 1, 1996 between the Company and DowElanco.
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C> <C>
10.44 *** -- Stock Subscription Agreement, dated September 1996, between the Company and University of
Research Corporation.
10.45 *** -- Stock Subscription Agreement, dated November 20, 1996, between the Company and United States
Biochemical Corporation.
10.46 *** -- Assignment of License and Restated License Agreement, dated November 20, 1996, among the
Company, United States Biochemical Corporation and Competitive Technologies.
10.47 *** -- Letter Agreement dated May 22, 1996, between the Company and ALZA Corporation.
10.48 *** -- Research and Development Collaboration Agreement dated December 2, 1996, between the Company
and Protogene Laboratories.
10.49 *** -- License Agreement dated February 14, 1997, between the Company and IntelliGene, Ltd.
10.50 * -- Subscription Agreement, dated as of April 17, 1995, between the Company and Parke-Davis
Davis Division of Warner-Lambert Company.
10.51 * -- Stock Purchase Agreement, dated as of June 28, 1995, among the Company and certain investors.
10.52 * -- Agreement dated March 1, 1996, between the Company and DowElanco Corporation relating to the
conversion of preferred stock.
10.53 * -- Stock Subscription Agreement dated as of October 30, 1995 between the Company and Gewestelijke
Investeringsmaatschappjj voor Vlaanderon n.v.
11.1 -- Statement regarding calculation of net loss per share.
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
27.1 -- Financial Data Schedule.
</TABLE>
* Incorporated by reference to the Company's Form S-B2 Registration
Statement, File No. 333-1908-D.
** Incorporated by reference to the Company's Form 10-QSB for the quarter
ended June 30, 1996.
*** To be filed by Amendment. The Company is applying for confidential
treatment with respect to portions of these exhibits.
<PAGE> 1
EXHIBIT 10.35
Dr. Ralph E. Christoffersen
December 15, 1996 CEO and President
Ribozyme Pharmaceuticals, Inc. 2950 Wilderness Place Boulder, CO 80301
Dear Chris,
This letter confirms the actions taken by the Compensation Committee and Board
at the December 5-6, 1996 meeting of the Board regarding 1996/97 compensation
for each of the three RPI Corporate Officers. The following decisions were
approved:
<TABLE>
<S> <C>
Nassim Usman:
- -------------
Salary $158,000 effective January 1, 1997
1996 Bonus $ 25,000 to be paid prior to the end of 1996
Stock Options Options for 10,000 shares of RPI Common Stock, at an exercise price equal to the RPI Common
Stock price at the end of the day on December 6, 1996. These options will vest over 5 years,
at a rate of 20% per year starting on December 1997.
1997 Goals To be mutually agreed with the RPI CEO, and consistent with RPI Corporate Goals. A bonus of up
to $25,000 will be paid at the end of 1997, depending upon achievement of goals.
Larry Bullock:
- --------------
Salary $136,250 effective January 1, 1997
1996 Bonus $ 25,000 to be paid shortly after January 1, 1997
Stock Options Options for 10,000 shares of RPI Common Stock, at an exercise price equal to the RPI Common
Stock price at the end of the day on December 6, 1996. These options will vest over 5 years,
at a rate of 20% per year starting on December 1997.
The performance-based options (5,556) associated with successfully completing the IPO are
vested, at an exercise price of $2.70 per share, and requiring that L. Bullock remain an
employee at RPI for two years beyond April 11, 1996.
1997 Goals To be mutually agreed with the RPI CEO, and consistent with RPI Corporate Goals. A bonus of up
to $25,000 will be paid at the end of 1997, depending upon achievement of goals.
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Ralph Christoffersen:
- ---------------------
Salary $269,500 effective January 1, 1997
1996 Bonus $25,000 to be paid shortly after January 1, 1997
$25,000 to be paid if any of two of the following goals are met prior to the end of
2Q97:
1) hire a VP R&D
2) hire a VP Business Development
3) complete GFTV deal #1 (excl. Chiron)
4) complete GFTV deal #2 (excl. Chiron)
</TABLE>
<TABLE>
<S> <C>
Loan Forgiveness The Company forgives an additional $50,000 of the indebtedness owed to RPI by R. Christoffersen
pursuant to Paragraph 5.6 of the employment Agreement; the balance of such indebtedness
currently outstanding after this forgiveness is $25,000. A one-time payment of $20,000 shall
be paid to R. Christoffersen shortly after January 1, 1997 to compensate for the tax liability
associated with forgiveness of $50,000 of the indebtedness.
Stock Options An award of 24,450 options to purchase RPI Common Stock is made, effective January 2, 1997, at
an exercise price equal to the price of RPI Common Stock at the end of the business day on
January 2, 1997. These options will vest over a period of five years at a rate of 20% per
year, beginning on January 2, 1998.
Other Actions It was verified that two performance-based option milestones have been met:
1) Achieve two years of financing (Milestone I.a. in January 3, 1996 letter from C.
Hartman to R. Christoffersen) - accomplished by the IPO; vests 8,888 options at an exercise
price of $2.70/share.
2) File IND #1 (Milestone I.b. in January 3, 1996 letter from C. Hartman to R.
Christoffersen) accomplished by filing the HIV IND on December 6, 1996; vests 6,666 options at
an exercise price of $2.70/share.
It was verified that the exercise price of the options awarded in the November 14, 1996 letter
from C. Hartman to R. Christoffersen is $11.85 per share.
1997 Goals The RPI Corporate Goals are approved as R. Christoffersen Goals for 1997; a bonus up to $50,000
will be paid at the end of 1997, depending upon achievement of Corporate Goals.
</TABLE>
Sincerely,
/s/ Charles M. Hartman
----------------------
Charles M. Hartman
Chairman
RPI Compensation Committee
cc: A. Evnin, D. Morgenthaler, A. Wiklund
<PAGE> 3
November 14, 1996
Dr. Ralph E. Christoffersen
CEO and President
Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, CO 80301
Dear Chris,
This letter confirms the following milestone award program for you pursuant to
an Executive Committee Meeting of the Board of Directors on October 30, 1996
where the Compensation Committee recommendations were approved. The milestones
to be achieved for the awarding of performance options to you are as follows:
(1) Complete one or two GFTV deals (in addition to Chiron) by the end of 1997
which, taken together, provide guaranteed funds to RPI of at least $10
million, at least $5 million of which is to be received by RPI by the end
of 1997 (10,000 options).
(2) Demonstrate efficacy in an animal model of a human disease using systemic
delivery of a chemically synthesized ribozyme by the end of 1997
sufficient to allow entry of the ribozyme into formal product development
(10,000 options).
The options will be granted, fully vested, effective the date of the
achievements.
Best Regards
/s/Charles M. Hartman
- ---------------------
Charles M. Hartman
Chairman, RPI Compensation Committee
cc: Outside Directors on Executive and Compensation Committees of RPI:
Dr. Anthony Evnin
Mr. David Morgenthaler
Mr. Anders Wiklund
<PAGE> 4
November 22, 1996
Dr. Ralph E. Christoffersen
CEO and President
Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, CO 80301
Dear Chris,
This letter is to inform you that RPI's Compensation Committee has recommended
and RPI's Executive Committee has approved the following options for RPI's
executive officers:
Ralph E. Christoffersen 55,550
Nassim Usman 26,892
Larry Bullock 33,779
These options are to be granted effective September 20, 1996 with an exercise
price of $11.85 which is the average of the 10 most recent closing prices
including September 20, 1996. The options will carry RPI's normal vesting
schedule.
Please take appropriate action to issue these options.
Sincerely,
/s/Charles M. Hartman
- ---------------------
Charles M. Hartman
Chairman, RPI Compensation Committee
<PAGE> 1
EXHIBIT 10.36
$75,000 Boulder, Colorado
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, Nassim Usman ("Borrower")
promises to pay to the order of Ribozyme Pharmaceutical Incorporated ("Holder")
at 2950 Wilderness Place, Boulder, Colorado 80301, or at such other place as
Holder may from time to time designate in writing to Borrower, in lawful money
of the United States, the principal sum of SEVENTY-FIVE THOUSAND AND NO/100
DOLLARS ($75,000.00), due and payable in full on May 22, 2001.
Borrower may prepay this loan in whole or in part, at any time without
penalty. Unless sooner repaid in accordance with the terms hereof, the
principal balance outstanding under this Note shall be repaid in five equal,
annual installments of $15,000 starting on May 22, 1997. So long as this Note
is not in default, this Note shall bear no interest.
This Note is secured by a Deed of Trust of even date herewith
encumbering property located in Boulder County, Colorado. This loan is
repayable in full if Borrower terminates employment with Holder, voluntary or
involuntary, before the loan is repaid in full or if Borrower sells encumbered
property.
If in the opinion of Holder it becomes necessary to employ counsel to
collect or enforce this Note, Borrower agrees to pay all costs, charges,
disbursements and reasonable attorney fees incurred by Holder in collecting or
enforcing this Note. Borrower hereby waives presentment of payment, notice of
nonpayment, demand, protest, and all conditions precedent to immediate and
unconditional liability for payment by Borrower upon default.
DATED on this 4th day of June , 1996, effective as of May 22, 1996.
IN WITNESS WHEREOF, the Borrower has executed this Note.
/s/ Nassim Usman
----------------
Nassim Usman
61
<PAGE> 1
EXHIBIT 10.37
March 12, 1997
Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, CO 80301
Attn: Mr. Larry Bullock
Re: LETTER AGREEMENT CONCERNING EXTENSION OF CURRENT LEASE
Dear Mr. Bullock:
The parties to this letter agreement are AERO-TECH INVESTMENTS, a
Colorado general partnership ("Aero-Tech") and Ribozyme Pharmaceuticals, Inc.,
a Delaware corporation ("RPI"). This letter also refers to a related party
known as Wilderness Place Holdings LLC, a Colorado limited liability company
("WPH").
RPI and Aero-Tech are parties to that certain Lease dated May 20, 1992
consisting of 29 pages, which has attached thereto a "Lease Information
Summary" of seven pages, an Exhibit A which is a floor plan identifying the
demised premises, an Exhibit B which is a description of certain improvements
to be installed as more particularly described in the Lease, an Exhibit C
entitled "Building Rules and Regulations" of three pages, an Exhibit C-1
entitled "Special Rules and Regulations Regarding Animals" of one page, and a
one-page Exhibit D entitled "High Voltage Electrical Equipment of Tenant"
(hereinafter referred to as the "Lease"). The Lease has been amended by that
certain "Amendment of Lease" dated March 23, 1995 and that certain "Amendment
of Lease" dated June 23, 1995. The Lease has also been amended by that certain
Agreement between RPI and Aero-Tech dated March 27, 1995 ("Side Agreement").
The Lease, as amended by each of the above-referenced documents, is hereinafter
referred to as the "Amended Lease." The Amended Lease was assigned by RPI, as
the tenant thereunder, to WPH. WPH, in turn, then subleased the Leased
Premises back to RPI. This transaction was accomplished by that certain Lease
and Sublease Agreement dated April 4, 1995 between WPH and RPI. Aero-Tech
consented to the subleasing transaction described above in that certain
"Consent to Assignment and 'Lease and Sublease'; and Amendment of Lease" by and
between Aero-Tech, RPI and WPH dated April 4, 1995. As referred to herein, the
"Amended Lease" shall specifically include those amendments contained in the
above-referenced Consent. The above- referenced Consent executed by Aero-Tech
shall hereinafter be referred to as the "Consent Agreement." All other
capitalized terms used in this letter agreement, but not otherwise defined
herein, shall have the meanings ascribed to such terms by the Amended Lease
and/or the Consent Agreement.
<PAGE> 2
Aero-Tech and RPI now desire to provide for further amendment of the
Amended Lease with the approval of WPH. This letter agreement is entered into
by Aero-Tech, RPI and WPH to provide for certain amendments to the terms and
conditions of the Amended Lease as set forth herein.
NOW, THEREFORE, in consideration of the premises, the respective
promises and covenants set forth herein, the consideration currently set forth
in the Amended Lease and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Aero-Tech, RPI and WPH agree as
follows:
1. Exercise of First Option to Extend. Notwithstanding any term,
condition or provision contained within the Amended Lease, WPH shall be and is
hereby deemed to have extended the Lease pursuant to that certain Option to
Extend contained in Section 13(a) of the Lease Information Summary attached to
the Amended Lease. As a result of the exercise of this option by WPH, the Term
of the Amended Lease shall be extended and the Term Expiration Date thereof
shall be and is hereby amended to read "June 30, 2002."
2. Exercise of Second Option to Extend. The Side Agreement
between RPI and Aero-Tech contains (in Section 2 thereof), an option for RPI to
extend the Amended Lease for a "Second Extended Term." Notwithstanding any
term or provision contained within the Amended Lease, RPI has and shall be
considered hereby to have exercised, in writing, RPI's option to extend the
Amended Lease for the Second Extended Term. RPI acknowledges that RPI shall be
bound by all terms and conditions of the Amended Lease with respect to the
Second Extended Term as set forth in the Side Agreement. RPI further
acknowledges that, in accordance with the specific terms and conditions of the
Side Agreement, no uncured event of default, and no event or condition which,
with the giving of notice or the passage of time or both, would constitute an
event or condition of default, shall exist under the Amended Lease upon the
date of commencement of the Second Extended Term. If such an event of default
exists at any time within 6 months prior to the date of commencement of the
Second Extended Term, Aero-Tech shall not be required to allow RPI to continue
occupancy of the Leased Premises during the Second Extended Term and the
Amended Lease shall then expire and terminate under its own terms and
conditions. (As used in the previous sentence, the term "Amended Lease" shall
be deemed to include any and all amendments to the original Lease, including
those amendments set forth in this letter agreement and any other Lease
amendments executed by the parties to the Lease or the Amended Lease prior to
the commencement of the Second Extended Term.) Notwithstanding any term or
condition contained in the Side Agreement and/or the Amended Lease, the Base
Rent for the Second Extended Term shall be equal to the greater of the
then-current monthly rent under the terms and conditions of the Amended Lease
or the Market Rent as defined in the Side Agreement. Base Rent shall continue
to be escalated by the CPI Index pursuant to the terms and conditions set forth
in the Amended Lease.
<PAGE> 3
3. WPH Reassignment. RPI hereby agrees to satisfy, in full, its
financial obligations to WPH and to cause WPH to assign the Amended Lease to
RPI (making RPI the sole and only tenant under the terms and conditions of the
Amended Lease) on or before March 31, 1999. WPH, in turn, agrees, upon full
satisfaction of RPI's financial obligations to WPH, to fully assign the Amended
Lease to RPI in accordance with the terms and conditions contained in the Lease
and Sublease Agreement between RPI and WPH. RPI hereby acknowledges that the
terms and conditions set forth in this paragraph of the letter agreement are
material consideration for and a primary inducement of Aero-Tech to enter into
the terms and conditions of this letter agreement. Default by RPI hereunder
shall specifically exclude, at the option of Aero-Tech, RPI's continued
occupancy of the Leased Premises during the Second Extended Term and shall be
considered a material default by RPI under the terms and conditions of the
Amended Lease.
RPI's Agreement to Leave Certain Lab Fixtures and Equipment in the
Leased Premises Upon any Vacation Thereof. Section 5.03 of the Amended Lease
states that all additions to or improvements of the Leased Premises, whether of
Building Standard Improvements or Tenant Extra Improvements, shall become the
property of Landlord upon installation and shall be surrendered to Landlord
upon termination of the Amended Lease by lapse of time or otherwise, subject to
Tenant's rights of removal with respect thereto as provided in Section 5.08 of
the Amended Lease, unless Landlord has otherwise agreed in writing to allow
some or all of the Tenant Extra Improvements to remain the property of Tenant
prior to installation thereof. Section 5.08 of the Amended Lease, among other
things, allows Tenant to remove "movable equipment or furniture" owned by
Tenant upon the expiration or other termination of the Amended Lease if Tenant
repairs all damage caused to the Leased Premises or the Project by such
removal. RPI and Aero-Tech hereby agree that if Aero- Tech elects, any and all
of the following items shall be and are hereby considered to be the "property
of Landlord" and shall specifically not be considered to be "movable equipment
or furniture owned by Tenant" all laboratory structures, fixtures and items
necessary for the Leased Premises to remain a usable, operational lab facility
including but not limited to all lab fixtures, air handling equipment, all roof
installations, exhaust fans, generators, boilers, sinks, fume hoods, casements,
cabinetry, circulating fans and associated equipment. "Moveable equipment or
furniture owned by Tenant" shall include but not be limited to office furniture
and equipment, portable equipment, NMR, synthisizers, portable water
purification equipment, laminar flow hoods, portable manufacturing equipment,
computer equipment and other portable personal property of the business.
Each of the above-referenced " Property of Landlord" items shall at the sole
option of the Landlord become the property of Landlord and shall be surrendered
to Landlord upon the termination or other expiration of this Amended Lease by
lapse of time or otherwise. RPI hereby agrees that all items surrendered to
Landlord pursuant to the terms and conditions of the Amended Lease shall be
free and clear of all liens or, in the alternative, RPI shall, at the time of
such expiration or other termination, make arrangements satisfactory to
Aero-Tech to service any outstanding debt with respect to such items. Each of
the terms and conditions within the Amended Lease referring to the
above-referenced items shall be and is hereby amended as more particularly set
forth herein. Any term or condition contained in
<PAGE> 4
paragraph IV of this letter, which are inconsistent with the existing
conditions of Section 5.03 of the Ammended Lease shall be deemed to control.
4. RPI's Waiver of Rights to Take Additional Space. RPI hereby
waives all existing rights of RPI to negotiate to take more space contained
within the Amended Lease; including but not limited to those rights set forth
in Section 15 of the Lease Information Summary and in Section 12 of the Consent
Agreement. RPI hereby acknowledges and agrees that RPI has no current rights,
after the effective date of this letter agreement, to negotiate to take more
space anywhere on the Project 5Intentionally Ommitted
5. Binding Effect. Aero-Tech and RPI hereby agree that the terms
and conditions contained within this letter agreement shall be effective
immediately and shall be binding upon and inure to the benefit of both
Aero-Tech and RPI whether or not this letter agreement is executed by WPH. In
the event that this letter agreement is not executed (for any reason) by WPH,
RPI and Aero-Tech hereby agree that the terms and conditions contained herein
shall bind only Aero-Tech and RPI and shall be effective whether or not RPI is
assigned the Amended Lease by WPH or, in the alternative, RPI, under any manner
or circumstances, becoming the sole tenant pursuant to the Amended Lease in
accordance with the terms hereof. If WPH does not execute this letter
agreement, the terms and conditions hereof shall become binding upon Aero-Tech
and RPI contemporaneously with any act or action causing RPI to become the sole
tenant under the terms and conditions of the Amended Lease.
6. Miscellaneous.
(a) Each reference to the term "Lease" and/or "Amended
Lease" contained in any document referenced herein shall be and is hereby
modified to include the Amended Lease, as amended hereby.
(b) Except as expressly modified or amended herein, the
terms and conditions of the Amended Lease shall remain unmodified and in full
force and effect, and are hereby ratified and reconfirmed by the parties
hereto.
(c) The terms and conditions contained in this letter
agreement shall be construed in accordance with the laws of the State of
Colorado.
(d) This letter agreement may be executed in
counterparts, each of which when taken together shall constitute the original
instrument. Facsimile signatures shall be acceptable to bind any party hereto.
<PAGE> 5
If you agree to be bound by and acknowledge the terms and conditions
contained within this letter agreement, please indicate your acceptance and
acknowledgment thereof in the signature blocks provided below. After
execution, please immediately forward conformed originals of this letter
agreement to Aero-Tech via facsimile transmission and personal delivery.
Very truly yours,
Landlord:
AERO-TECH INVESTMENTS
By: /s/ Alan Clamon
---------------
Name Printed
Title: Alan Clamon, Partner
--------------------
Agreed to, acknowledged and accepted this 13 day of
March, 1997.
Tenant:
RIBOZYME PHARMACEUTICALS, INC.
(SEAL) By: /s/ Lawrence Bullock
-----------------------
Name Printed: Lawrence E. Bullock
-------------------
Title: V.P. Finance & Admin, CFO
-------------------------
WILDERNESS PLACE HOLDINGS LLC
By:_______________________________
Name Printed:______________________
Title:______________________________
<PAGE> 1
EXHIBIT 11.1
Ribozyme Pharmaceuticals, Inc.
Computation of Net Loss Per Share
<TABLE>
<CAPTION>
Twelve Months Twelve Months
ending ending
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
Weighted average common shares
outstanding ............................................................. 5,165,717 981,671
Net effect of dilutive common stock
options and warrants pursuant to
Staff Accounting Bulletin No. 83 ........................................ 24,969 99,877
Assumed conversion of preferred stock
from original date of issuance,
pursuant to staff policy ................................................ 654,301 2,148,793
------------ ------------
Total ................................................................... 5,844,987 3,230,341
Net loss ................................................................ $(15,267,580) $(12,480,147)
============ ============
Net loss per share ...................................................... $ (2.61) $ (3.86)
============ ============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (No. 333-07135) pertaining to the Employee Stock Purchase Plan and the
1996 Stock Option Plan of Ribozyme Pharmaceuticals, Inc. of our report dated
February 6, 1997, with respect to the financial statements of Ribozyme
Pharmaceuticals, Inc. included in the Annual Report (Form 10-KSB) for the year
ended December 31, 1996.
/s/ERNST & YOUNG LLP
Denver, Colorado
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RIBOZYME PHARMACEUTICALS, INC. FOR THE YEAR ENDING
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,050,678
<SECURITIES> 4,543,470
<RECEIVABLES> 74,022
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,281,961
<PP&E> 8,050,151
<DEPRECIATION> 3,639,779
<TOTAL-ASSETS> 25,291,570
<CURRENT-LIABILITIES> 2,493,802
<BONDS> 0
0
0
<COMMON> 69,483
<OTHER-SE> 20,292,338
<TOTAL-LIABILITY-AND-EQUITY> 25,291,570
<SALES> 0
<TOTAL-REVENUES> 1,709,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,188,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 844,661
<INCOME-PRETAX> (15,267,580)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,267,580)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,267,580)
<EPS-PRIMARY> (2.61)
<EPS-DILUTED> 0
</TABLE>
