<PAGE>
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1998
or
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
_____________
Commission file number 0-27914
RIBOZYME PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
_____________
Delaware 34-1697351
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
2950 Wilderness Place
Boulder, Colorado 80301
(Address of principal executive offices)
Registrant's telephone number: (303) 449-6500
_____________
Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No ___
---
The number of shares of the registrant's common stock, par value $0.01 per
share, outstanding as of May 4, 1998 was 9,102,513.
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
PART 1 - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 1998 (unaudited) and
December 31, 1997...................................................... 3
Condensed Statements of Operations - Three Months Ended
March 31, 1998 and 1997 (unaudited).................................... 4
Condensed Statements of Cash Flows - Three Months Ended
March 31, 1998 and 1997 (unaudited).................................... 5
Notes to Condensed Financial Statements (unaudited).................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................... 11
SIGNATURES.................................................................. 12
Exhibit Index............................................................... 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
RIBOZYME PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
Current assets
- --------------
Cash and cash equivalents $ 11,162,276 $ 15,302,775
Securities available-for-sale 1,811,016 799,616
Restricted cash 30,096 52,669
Prepaid expenses and other current assets 234,260 310,934
------------ ------------
Total current assets 13,237,648 16,465,994
Equipment and leasehold improvements at cost,
net of accumulated depreciation and amortization 4,921,527 4,957,165
Notes receivable-related parties 204,466 231,932
Patent costs, net 2,623,658 2,510,705
Other assets, net 452,115 684,245
Total assets $ 21,439,414 $ 24,850,041
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
- -------------------
Accounts payable-trade $ 1,604,966 $ 904,681
Accrued expenses 99,550 245,956
Current portion of long-term debt 1,838,977 2,077,771
------------ ------------
Total current liabilities 3,543,493 3,228,408
Long-term debt 602,766 698,633
Convertible debt 3,073,556 2,052,889
Stockholders' equity
- --------------------
Common stock 86,096 86,070
Additional paid-in capital 81,431,451 81,424,341
Deferred compensation and other (132,686) (135,376)
Accumulated deficit (67,165,262) (62,504,924)
------------ ------------
Total stockholders' equity 14,219,599 18,870,111
Total liabilities and stockholders' equity $ 21,439,414 $ 24,850,041
============ ============
</TABLE>
See notes to condensed financial statements
3
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RIBOZYME PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
--------------------------
1998 1997
----------- -----------
Revenue
Collaborative agreements $ 740,000 $ 394,000
Other income 25,045 1,486
Interest income 212,329 205,495
----------- -----------
Total revenues 977,374 600,981
Expenses
Research and development 5,000,870 2,982,318
General and administrative 467,205 389,590
Interest expense 169,637 244,785
----------- -----------
Total expenses 5,637,712 3,616,693
Net loss $(4,660,338) $(3,015,712)
=========== ===========
Net loss per share $ (0.54) $ (0.43)
=========== ===========
Shares used in computing net loss per share 8,608,740 6,957,256
=========== ===========
See notes to condensed financial statements
4
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RIBOZYME PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(4,660,338) $(3,015,712)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 450,025 413,063
Compensation for forgiveness of notes
receivable-related parties 52,466 62,466
Gain on sale of investment in corporate partner (25,045) -
Changes in operating assets and liabilities:
Accounts receivable 544 35,481
Prepaid expenses and other 49,255 75,679
Other assets (9,688) (8,901)
Accounts payable 700,285 76,619
Accrued liabilities (125,739) (104,329)
Deferred gain - (1,486)
----------- -----------
Net cash used in operating activities (3,568,235) (2,467,120)
INVESTING ACTIVITIES
Additions to property, plant and equipment (404,708) (546,424)
Additions to deferred patent costs (130,813) (71,526)
Net sales (purchases) of securities available-for-sale (1,008,710) 218
Sale of investment in corporate partner 275,045 -
Transfer of restricted cash 22,573 72,043
Loan repayments-related parties 1,875 750
----------- -----------
Net cash used in investing activities (1,244,738) (544,939)
FINANCING ACTIVITIES
Net proceeds from sale of common stock 7,136 27,394
Payments under loan facilities and capital lease obligations (334,662) (393,145)
Borrowings under loan facilities 1,000,000 -
----------- -----------
Net cash provided by (used in) financing activities 672,474 (365,751)
Net decrease in cash and cash equivalents (4,140,499) (3,377,810)
Cash and cash equivalents at beginning of period 15,302,775 13,050,678
Cash and cash equivalents at end of period $11,162,276 $ 9,672,868
=========== ===========
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ending March 31,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1997.
Note 2: Net loss per share
In 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings per Share (SFAS 128). SFAS 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any potentially dilutive securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. No restatement of prior periods is necessary as the potentially dilutive
securities have been excluded from the computation as their effect is
antidilutive.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
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 therapeutic target validation services. 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
and target validation. The Company has entered into a collaboration with Chiron
Corporation ("Chiron") to develop ribozyme products for specific therapeutic
targets in human health, a second collaboration with Chiron in the target
validation area, and collaborations with Schering AG, Berlin ("Schering AG") and
with the Parke-Davis division of Warner-Lambert Corporation (Parke-Davis") to
validate new therapeutic targets from gene sequence data using the Company's
functional genomics technology. The Company has also licensed its technology to
DowElanco for certain agricultural applications and IntelliGene, Ltd.
("IntelliGene") for certain diagnostic applications.
The Company currently has no sales revenue from any of its drug candidates,
has incurred losses since inception and, as of March 31,1998 has accumulated a
deficit of $67.2 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 research and development, and general and
administrative expenses. The Company's results of operations may vary
significantly from period to period depending on several factors, such as timing
of certain expenses, the progress of the Company's research and development
efforts and fluctuations in collaborative payments.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
Collaborative revenues increased to $740,000 for the three months ended
March 31, 1998, from $394,000 for the corresponding period in 1997. The increase
is primarily due to $500,000 quarterly research payments made by Schering AG in
January 1998. Generally, collaborative agreement and contract revenue
fluctuations are the result of changes in the number of funded research projects
as well as the timing and completion of contract milestones.
During the first quarter of 1998, the Company recorded as other income a
gain of $25,000 from the sale of stock in a corporate partner. The privately
traded stock, which was purchased by the Company in the first quarter of 1996
for $250,000, was sold back to the corporate partner in January 1998.
Interest income increased slightly to $212,000 for the three months ended
March 31, 1998 compared to $205,000 for the corresponding period in 1997. The
slight increase is due to higher average balances in the Company's cash and cash
equivalents and securities available-for-sale in the first quarter of 1998, as
compared to the same quarter in 1997. Interest income generally fluctuates as a
result of the average amount of cash available for investment and prevailing
interest rates.
7
<PAGE>
Research and development expenses increased 68% to $5.0 million for the
three months ended March 31, 1998, compared to $2.9 million in the corresponding
period in 1997. The increase is due to increased staffing and raw material
purchases in order to scale-up clinical development and research efforts. The
Company expects research and development expenses to increase as it expands its
research and development programs, including pre-clinical studies and clinical
trials.
General and administrative expenses increased 20% to $467,000 for the three
months ended March 31, 1998, compared to $390,000 for the corresponding period
in 1997. The increase is primarily the result of increased staffing and
associated expenses necessary to manage and support the Company's expanding
operations and business development efforts. The Company expects general and
administrative expenses to continue to increase as a result of hiring additional
management and administrative personnel and the incurring of legal and other
professional fees in connection with the overall scale-up of the Company's
operations and business development efforts.
Interest expense decreased 31% to $170,000 for the three months ended March
31, 1998, compared to $245,000 for the corresponding period in 1997. The
decrease is attributable to the buy out of capital leases that terminated in the
first quarter of 1997. Interest expense is expected to increase as the Company
arranges for additional financing for future operation of its business.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company has financed its operations since inception through public
offerings in April 1996 and October 1997, private placements of preferred stock,
and funds received under the Company's collaborative agreements with Schering
AG, Chiron, Parke-Davis and DowElanco. As of June 30, 1997 the collaboration
with DowElanco was completed. From inception through March 31, 1998, the Company
has received approximately $29.0 million in net proceeds from private
placements, $31.1 million in net proceeds from public offerings and $25.2
million from its collaborations.
The Company's cash, cash equivalents and securities available-for-sale were
$12.9 million at March, 31 1998, compared to $16.1 million on December 31, 1997.
The $3.2 million decrease in cash, cash equivalents and securities available-
for-sale is primarily the result of $4.5 million used for operations (excluding
collaborative funding and interest income), $536,000 for investments in
equipment and patents, $342,000 in payments under loan facilities, offset by
collaborative funding and interest income of $952,000, loan proceeds of $1.0
million and proceeds of $275,000 from the sale of stock in a corporate partner.
The Company invests its cash, cash equivalents and securities available-
for-sale in interest-bearing investment grade securities.
As of March 31, 1998, up to $2.0 million in loans are available to the
Company in each calendar year through the year 2001, from Schering AG. The
Company received the first loan of $2.0 million in September 1997 and an
additional loan of $1.0 million in January 1998. The loans are related to the
Schering AG research collaboration entered into in April 1997. Amounts not used
in any calendar year may be carried forward to future years. According to the
terms of the Company's agreement with Schering AG, 50% of any borrowings on the
line of credit must be collateralized by equipment purchases. The loans, which
carry an interest rate of 8% per annum, are convertible into equity at the
option of Schering AG under certain circumstances. At March 31, 1998, the
outstanding borrowings of $3.1 million were convertible into approximately
517,700 shares of the Company's common stock.
8
<PAGE>
Principle and interest payments are deferred until maturity of the loans which
is in April 2004. In addition to the line of credit, Schering AG agreed to
provide $2.0 million in annual research funding for each year through April
2001, as well as $2.5 million per year in equity investments in each of years
1997 and 1998. In 1997, Schering AG made an equity investment of $2.5 million in
exchange for 212,766 shares of the Company's common stock. Subsequent to the end
of the quarter, in April 1998, the Company received an additional equity
investment of $2.5 million in exchange for 465,117 shares of the Company's
common stock, as well as an additional $1.0 million in loan proceeds and a
$500,000 quarterly research payment from Schering AG. Future loan and research
funding payments may be subject to certain restrictions, including receipt of
certain third party consents, and may be subject to the termination of the
research collaboration at Schering AG's option at any time after April 8, 1998.
Total additions for property, plant and equipment for the three months
ended March 31, 1997, were $405,000, all of which were financed through the
Company's existing loan facility from Schering AG.
The Company anticipates that its existing available cash, cash equivalents
and securities available-for-sale, combined with anticipated interest income,
collaboration revenues, and the combined proceeds from Schering AG of $4.0
million received after the end of the quarter ended March 31, 1998, will be
adequate to satisfy its anticipated capital requirements until mid 1999. The
Company expects to incur substantial additional research and development costs,
including: costs related to the Company's research, drug discovery and
development programs; Company acquisition of interests in products or services
currently held by third parties; preclinical and clinical trials of the
Company's products, if developed; manufacturing and marketing of products, if
any; as well as expenses such as prosecuting and enforcing patent claims and
general administrative and legal expenses. The Company will consider raising
cash whenever market conditions are favorable. Such capital may be raised
through additional public or private financing, as well as collaborative
relationships, borrowings and other available sources. There can be no assurance
that such funds will be available on favorable terms, if at all. If additional
funds are raised by issuing equity securities, further dilution to then existing
stockholders may result. There can be no assurance that any collaborative
relationships will successfully reduce the Company's funding requirements, and
arrangements with collaborative partners or others may require the Company to
relinquish or reduce rights to certain of its technologies, product candidates
or products.
In 1997, the FASB issued Statement of Financial Accounting Standards No.
130 Reporting Comprehensive Income, and Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information, both of which are required to be adopted by the Company in 1998.
The Company is not required to adopt the Standards for interim periods, but will
adopt the standards for the year ended December 31, 1998. The Company does not
expect any significant changes in its financial reporting or related disclosures
as a result of adoption of these Statements.
Until recently most computer programs were written to store only two digits
of date-related information in order to more efficiently handle and store data.
Thus the programs were unable to properly distinguish between the year 1900 and
the year 2000. This is referred to as the "Year 2000 Issue." During 1997, the
Company reviewed all internal, external and third-party computer applications
and determined that there is no significant exposure to the Year 2000 Issue.
Management does not believe the Company will have to modify or replace any
significant portions of its computer applications in order for the computer
systems to function properly with respect to the dates in the year 2000 and
thereafter.
9
<PAGE>
Statements in this Form 10-Q which are not strictly historical are
"forward-looking" statements which should be considered as subject to the many
uncertainties that exist in the Company's operations and business environment.
These uncertainties, which 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; ability to obtain collaborators;
ability to manufacture ribozymes in adequate amounts for its collaborations and
clinical trials; 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 the like, are set forth in the Company's 10-KSB for 1997 the year ended
December 31, 1997 which is on file with the U.S. Securities and Exchange
Commission, a copy of which is available from the Company.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Amended and Restated Certificate of Incorporation (1)
3(ii) Restated Bylaws (2)
10.1 Research Agreement dated February 26, 1998 between the
Company and Parke-Davis Pharmaceutical Research Division of
Warner-Lambert Company (3)
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
for which this report on Form 10-Q is filed.
______
(1) Incorporated by reference from the Company's Registration Statement on Form
SB-2, file no. 333-1908-D, dated September 5, 1997.
(2) Incorporated by reference from the Company's Registration Statement on Form
SB-2, file no. 333-1908-D, dated April 11, 1996.
(3) The Company has applied for confidential treatment with respect to portions
of this exhibit.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIBOZYME PHARMACEUTICALS, INC.
Dated: May 15, 1998 By: /s/ RALPH E. CHRISTOFFERSEN
------------ ----------------------------
Ralph E. Christoffersen
President and Chief
Executive Officer
Dated: May 15, 1998 By: /s/ LAWRENCE E. BULLOCK
------------ ------------------------
Lawrence E. Bullock
Vice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
12
<PAGE>
Exhibit Index
Exhibit Exhibit
No. Description
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3(i) Amended and Restated Certificate of Incorporation (1)
3(ii) Restated Bylaws (2)
10.1 Research Agreement dated February 26, 1998 between the Company and
Parke-Davis Pharmaceutical Research Division of Warner-Lambert Company
(3)
27 Financial Data Schedule
_____
(1) Incorporated by reference from the Company's Registration Statement on Form
SB-2, file no. 333-1908-D, dated September 5, 1997.
(2) Incorporated by reference from the Company's Registration Statement on Form
SB-2, file no. 333-1908-D, dated April 11, 1996.
(3) The Company has applied for confidential treatment with respect to portions
of this exhibit.
13
<PAGE>
EXHIBIT 10.1
THE CONFIDENTIAL PORTIONS OF THIS CONTRACT HAVE BEEN OMITTED PURSUANT TO
REGULATION 240.25B-2B OF THE SECURITIES EXCHANGE ACT OF 1934, AND HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION.
RESEARCH AGREEMENT
This Research Agreement (the "Agreement") is made and entered into as of
this 2nd day of March, 1998 ("Effective Date"), by and between Ribozyme
Pharmaceuticals Incorporated, a Delaware corporation with offices located
at 2950 Wilderness Place, Boulder, CO 80301 (hereinafter "RPI") and PARKE-
DAVIS PHARMACEUTICAL RESEARCH DIVISION OF WARNER-LAMBERT COMPANY, a
Delaware corporation with offices located at 2800 Plymouth Road, Ann Arbor,
MI 48105 (hereinafter "W-L") (W-L and RPI are collectively referred to as
the "Parties" and individually as a "Party").
WHEREAS, W-L has expertise in the development, commercialization,
distribution, marketing, and sale of pharmaceutical products world-wide and
desires to fund certain research and development activities in the field of
functional genomics;
WHEREAS, RPI is engaged in the research and development of certain patented
and/or proprietary Nucleic Acid Catalyst technology (including those
materials described in Exhibit A attached hereto) for therapeutic,
agricultural, animal health, diagnostic and functional genomics
applications, including the use of Nucleic Acid Catalysts to modulate gene
expression (the "Ribozyme Technology");
WHEREAS, RPI and W-L are parties to a Letter of Intent dated December 29,
1997 ("Letter"), attached hereto as Appendix B and incorporated herein by
reference.
WHEREAS, RPI and W-L wish to enter into a Research Agreement pursuant to
which the Parties will collaborate on the use of Nucleic Acid Catalyst in
functional genomics.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the Parties hereto agree as
follows:
1
<PAGE>
SECTION 1
---------
DEFINITIONS
1.1 "Affiliate" shall mean any corporation or other business entity controlled
---------
by, controlling or under common control with RPI. For purpose of this
Section 1.1, "control" shall mean direct or indirect beneficial ownership
of more than fifty percent (50%) of the voting stock or equity, or more
than fifty percent (50%) interest in the income of such corporation or
other business entity.
1.2 "Collaborator" shall mean [ ].
------------
1.3 "Confidential Information" shall mean confidential and proprietary
------------------------
information of RPI or W-L, including without limitation Test Information
(as defined herein under section 2.6) and other scientific data, technical
reports and business information, disclosed to the other Party, provided
that such information is in writing and marked "CONFIDENTIAL" or with a
similar legend, or is disclosed orally and is reduced to writing and marked
"CONFIDENTIAL" or with a similar legend within 30 days after such
disclosure.
1.4 "Field " shall mean any and all applications of Nucleic Acid Catalysts,
------
including without limitation, research, diagnostic, prophylactic and
therapeutic uses in or relating to, test tubes, cells, humans, animals,
plants and soil. Such Field will include functional genomics or gene
function identification in which the function of a gene is determined or a
new gene is discovered by use of a Nucleic Acid Catalyst. The Field shall
also include use of Nucleic Acid Catalyst to validate a therapeutic target.
1.5 "Ribozyme Technology" shall mean Proprietary Technology which constitutes
-------------------
Nucleic Acid Catalysts or improvements to Nucleic Acid Catalysts to which
RPI currently has rights including without limitation, their methods of use
in vitro and in vivo, synthesis, manufacture or design, or the synthesis of
components of such Nucleic Acid Catalysts, Nucleic Acid Catalysts targeted
against the Target Sequence and the corresponding target sites.
1.6 "Nucleic Acid Catalyst" shall mean any nucleotide base-containing molecule
---------------------
having the ability to repeatedly act on one or more types of molecules,
including but not limited to enzymatic nucleic acid molecules. By way of
example but not limitation, such molecules include those that are able to
repeatedly cleave nucleic acid molecules, peptides or other polymers, and
those that are able to cause the polymerization of such nucleic acids and
other polymers. Specifically, such molecules include ribozymes, DNAzymes,
external guide sequences and the like.
Confidential portions (designated by "[ ]") have been omitted pursuant to
regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and have
been filed separately with the Commission.
2
<PAGE>
Such molecules may also include modified nucleotides compared to standard
nucleotides found in DNA and RNA.
1.7 "Patent Rights" shall mean, collectively, all right, title and interest of
-------------
W-L in, to and under any and all patent applications covering or claiming
New Technology, divisions, continuations, and continuations-in-part based
on such applications, any and all foreign counterparts of any of the above,
any and all United States and foreign patents that may issue from any of
the above applications, and any and all reissues, reexaminations or
extensions of such United States and foreign patents.
1.8 "Performance Period" shall mean the period beginning on the Effective Date
------------------
and ending on the one year anniversary of the Effective Date, unless
terminated prior to such date in accordance with Section 11. Such Period
may be extended by mutual written agreement between the Parties.
1.9 "Proprietary Technology" shall mean any intellectual property
----------------------
developed, conceived and/or reduced to practice as a result of the Research
Program, including without limitation, know how, patentable and non-
patentable discoveries, inventions (as defined by US patent law), trade
secrets, and trade marks.
1.10 "Research Program" shall mean the research conducted during the
----------------
Performance Period, as further described in Appendix A attached hereto and
incorporated herein by reference.
1.11 "Target Sequence" shall mean a gene or partial sequence thereof, and those
---------------
elements necessary for its expression, regulation or its transcription or
replication product or intermediates or portions thereof, including either
DNA, RNA or protein disclosed to RPI by W-L under this Agreement.
1.12 "Validated Target" shall mean a gene or partial sequence thereof, and
----------------
those elements necessary for its expression, regulation or its
transcription or replication product or intermediates or portions thereof,
including either DNA, RNA or protein, validated in the cell culture system
using Ribozymes under this Agreement. A Target shall be deemed Validated
Target if, in the judgment of W-L, the application of Target-specific
Nucleic Acid Catalysts to tumor cells results in a potentially therapeutic
effect (including but not limited to (a) induction of cell death, (b)
[ ], and (c) [ ] and growth inhibition in a target
selective manner).
Confidential portions (designated by "[ ]") have been omitted pursuant to
regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and have
been filed separately with the Commission.
3
<PAGE>
SECTION 2
---------
SCOPE OF WORK
2.1 Effort. The Parties shall use their best efforts to conduct and perform
------
the Research Program.
2.2 The Joint Management and Research Team.
--------------------------------------
2.2.1 Constitution and Voting. The Collaboration shall be managed by a
------------------------
committee known as the "Joint Management Team" or "JMT". W-L and RPI
shall each have one vote on the JMT, and shall each have the right to
appoint four (4) representatives to the JMT. Two of the representatives
appointed by W-L shall be from its Collaborator, [ ].
Two votes must be cast in favor of a proposal in order for the proposal
to be adopted. In the event of a deadlocked vote on a proposal, the
Chief Executive Officer of RPI and Dr. Ronald M. Cresswell, Vice
President and Chairman, Pharmaceutical Research Division of W-L shall
discuss such proposal in good faith and shall use good faith efforts to
find a resolution to the deadlock.
2.2.2 Meetings. The JMT shall conduct meetings at least quarterly. Such
---------
meetings shall be held alternately in Boulder, Colorado and Ann Arbor,
Michigan or at sites otherwise designated by the JMT. The first such
meeting shall be held in Ann Arbor, Michigan. The host Party shall act as
chair of the meeting and the other Party shall act as secretary. The JMT
shall keep formal minutes of its meetings. Any member of the JMT may be
represented at any meeting by another member of the JMT or by a deputy.
In addition to regular JMT meetings, either Party may schedule a special
meeting at the other Party 's offices on 21 days prior written notice.
Under special circumstances, the JMT is also authorized to conduct
meetings by telephone.
2.2.3 Responsibilities.
-----------------
1) Collaboration Management. The primary responsibilities of the JMT
------------------------
shall include executive management of the Collaboration. The JMT
shall be the primary vehicle for communication and decision making
with respect to the Collaboration. The JMT may delegate a portion
of its activities to operational subcommittees, created by the
terms of this Agreement, to conduct, subject to the supervision and
control of the JMT, specific operations of the Collaboration.
Confidential portions (designated by "[ ]") have been omitted
pursuant to regulation 240.25b-2(b) of the Securities Exchange Act
of 1934, and have been filed separately with the Commission.
4
<PAGE>
2) Research Management. The JMT shall also be responsible for the
-------------------
day-to-day conduct and progress of the Research Program, including,
without limitation:
(i) directing and administering the Research Program;
(ii) providing a forum for the exchange of scientific information
among the scientists participating in the Research Program;
(iii) reviewing test reports derived from the research;
(iv) providing guidance to the Parties with respect to protection
of Proprietary Technology;
(v) resolving matters involving scientific questions; and
(vi) updating the Research Plan.
2.3 Access. During the term of this Agreement, the Parties will consult with
------
each other concerning the research to be performed under this Agreement.
Access to the laboratories of RPI shall be entirely under the control of
RPI. Access to the laboratories of W-L shall be entirely under the control
of W-L. Representatives of one Party shall be permitted to visit the
laboratories of the other Party only during usual hours of operation as
mutually agreed.
2.5 Reports. During the term of this Agreement, the Parties shall exchange at
-------
least one written report per three month period concerning results of the
research under this Agreement. The Parties agree to keep records of
sufficient detail to allow the critical examination of the data and the
composition of a written summary report, complete with exhibits that may
assist in the presentation of the results of the Research Program
(collectively, the "Test Information"). Within 30 days after expiration or
termination of this Agreement, the Parties shall provide each other with
copies of the Test Information. The Parties agree to treat the Test
Information as Confidential Information according to the provisions of
Section 8, below.
2.6 Test Information.
-----------------
2.6.1 The Parties shall retain joint-ownership of the Test Information
generated during the Research Program. Further, the Parties agree
not to disclose publicly any Test Information except as provided
below.
5
<PAGE>
2.6.2 Each Party shall have the right to use the reports and summaries of
the Test Information in its own research activities conducted in
connection with the Research Program. Notwithstanding any other
provision of this Agreement, without the express prior written
consent of the other, neither Party nor any of its Affiliates,
officers, employees, advisors or consultants may (i) disclose to any
third party, or publish such reports or summary, or (ii) reveal the
source of all or part of such reports or summary, provided that, W-L
may reveal the summary of the Test Information to the Collaborator.
2.6.3 Any individual or entity not otherwise bound by the provisions of
Section 8 below between RPI and W-L given access to any Test
Information or reports or summary thereof shall be obligated to sign
a binding confidentiality agreement containing terms substantially
the same as those set forth in this Section and Section 8 hereof.
2.7 Policies and Procedures. All research conducted hereunder shall be
-----------------------
performed in accordance with established federal government policies and
procedures, including without limitation, policies and procedures
applicable to research involving human subjects, laboratory animals and
hazardous agents and materials.
SECTION 3
---------
COMPLIANCE WITH LAWS.
RPI and W-L shall be responsible for complying with all federal, state, and
local laws, rules and regulations with regard to any work to be performed by
them pursuant to the terms of this Agreement.
6
<PAGE>
SECTION 4
---------
RESEARCH FUNDING
4.1 Funding.
-------
4.1.1 W-L shall pay to RPI US$[ ] in support of the Research Program
during the Performance Period which shall be made as described
below;
4.1.2 At W-L's request, RPI shall conduct a target validation study using
ribozymes (for example as described in the enclosed Appendix A) for
a minimum of [ ] additional target sequences to be provided by W-L,
for a fee of US$ [ ]per target sequence;
4.1.3 W-L may request RPI to carry out a secondary in vivo validation
study described in Appendix A. If W-L requests that RPI perform
additional research and development, including a secondary in vivo
validation study, W-L shall reimburse RPI at the rate of US$ [
] per FTE per year (one FTE is approximately equivalent to [ ]
person hours per year) for such additional support; and
4.1.4 W-L shall reimburse RPI on a [ ]
basis for the synthesis of ribozymes in quantities exceeding 0.2
mg. [ ] shall be calculated in accordance with RPI's accounting
methods consistently applied which methodology shall be calculated
in compliance with U.S. generally accepted accounting principles
(GAAP). [ ].
4.2 Payment. W-L shall make the payments, described in section 4.1.1 above, in
-------
U.S. dollars to RPI to fund reimbursable costs hereunder within 45 days of
execution of this Agreement. Payments under sections 4.1.2-4.1.4 shall be
made to RPI by W-L in U.S. dollars within 45 days of receiving an invoice
from RPI.
Confidential portions (designated by "[ ]") have been omitted pursuant to
regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and have
been filed separately with the Commission.
7
<PAGE>
Checks for all payments to RPI under this Agreement shall be made payable
to Ribozyme Pharmaceuticals Inc., and shall include reference to this
Agreement and shall be sent to:
Ribozyme Pharmaceuticals Inc.
2950 Wilderness Place
Boulder, CO 80301 ATTENTION: Alene Holzman
SECTION 5
---------
PUBLICATION
5.1 Notice. The Parties shall have the right to publish scientific papers or
------
make scientific presentations containing Test Information, provided that
such public disclosure does not violate the provisions of sections 2 and 8
herein, and/or such publication or presentation does not interfere with or
is inconsistent with the pursuit of Patent Rights by W-L. Publication and
presentation rights are subject to at least 45 days written notice prior to
sending to any other entity including a publisher, to the other Party along
with a copy of the proposed manuscript or, in the case of a proposed
presentation, submission of an abstract and slides of such presentation to
the other Party.
5.2 Publication. If the Party reviewing the Publication material has reason
-----------
to believe that any proposed manuscript or paper reveals a potentially
patentable invention, that Party shall notify the other Party in writing
within 30 days after receipt of notice of such intended publication and a
copy of the manuscript, or within 10 days after receipt of the proposed
abstract of such presentation. In such case, the Party seeking the
approval agrees to delay publication or public presentation until the
earlier to occur of the following: (i) a United States patent application
has been filed; or (ii) the Parties have determined, in consultation with
each other, that no patentable invention exists; or (iii) 60 days have
passed from the date of the reviewing Party's written notice to the other
Party above as described in the first sentence of Section 5.1 herein. The
authorship on any publication and/or abstract will be based on mutual
agreement between the Parties or as deemed scientifically appropriate.
8
<PAGE>
SECTION 6
---------
TRANSFER OF MATERIALS
6.1 Transfer. Upon RPI's request, W-L agrees to transfer to RPI biological
--------
materials created or otherwise developed during the term of this Agreement
under the Research Program. RPI agrees to transfer materials described in
Appendix A to W-L for use in the Research Program. Appendix A may be
modified from time to time in writing to correspond to materials sent by
RPI to W-L. Such biological materials shall be used by W-L for internal
research purposes only within the confines of the Research Program and
shall not be transferred to any third party, other than its Collaborator,
[ ], without the express prior written approval of RPI.
6.2 W-L shall not distribute or release the Ribozyme Technology to any person
other than research and laboratory personnel of W-L or its Affiliate, and
its Collaborator, [ ], who are all under obligations of
confidentiality, and shall ensure that no one will be allowed to take or
send the Ribozyme Technology to any other location, other than its
Collaborator, [ ], unless written permission is obtained
from RPI. This Ribozyme Technology is made available for investigational
use only in laboratory animals or in in-vitro experiments. W-L agrees that
the Ribozyme Technology will not be used for any other purpose. Neither
the Ribozyme Technology nor any biological materials associated therewith
will be used by W-L in human beings.
6.4 RPI shall not distribute or release the W-L proprietary technology
including W-L's cell lines and any Target Sequences (the "W-L Technology")
to any person other than research and laboratory personnel of RPI who are
under obligations of confidentiality, and shall ensure that no one will be
allowed to take or send the W-L Technology to any other location unless
written permission is obtained from W-L. This W-L Technology is made
available for investigational use only in laboratory animals or in in-vitro
experiments. RPI agrees that the W-L Technology will not be used for any
other purpose. Neither the W-L Technology nor any biological materials
associated therewith will be used in human beings by RPI.
Confidential portions (designated by "[ ]") have been omitted pursuant to
regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and have
been filed separately with the Commission.
9
<PAGE>
6.5 No Warranty. W-L AND RPI ACKNOWLEDGE AND AGREE THAT BIOLOGICAL MATERIALS
-----------
TRANSFERRED HEREUNDER ARE EXPERIMENTAL IN NATURE, HAVE NOT BEEN FULLY
CHARACTERIZED, AND SHALL BE USED WITH PRUDENCE AND APPROPRIATE CAUTION.
THE PROVIDER OF SUCH BIOLOGICAL MATERIALS MAKES NO REPRESENTATION OR
WARRANTY THAT THE USE OF SUCH BIOLOGICAL MATERIALS WILL NOT INFRINGE ANY
PATENT OR PROPRIETARY RIGHT OF A THIRD PARTY.
6.6 No Other Rights. Except as otherwise provided herein, W-L and RPI each
---------------
acknowledges that no right, title or interest in and to any biological
materials created or otherwise developed during the term of this Agreement
under the Research Program provided hereunder, or any other research
materials provided hereunder, is granted or implied.
6.7 Compliance with Laws. All materials exchanged by the parties hereunder
--------------------
(the "Materials") will be used in compliance with applicable federal, state
and local law, including NIH guidelines for work with recombinant DNA, if
applicable. In accord with ARTICLE 312.160, Title 21, Code of US Federal
Regulations, each receiving party certifies that (a) such Party is
regularly engaged in conducting investigations of the type described herein
and that the Materials will actually be used for tests in vitro or in
animals used only for laboratory research and (b) Materials will be
returned to the providing Party when the investigation discontinues or is
terminated. The Materials should be returned to the providing Party in the
original container with the original label in place. Also, any information
relating to the Materials and supplied by the providing Party must be
returned to the providing Party upon completion of the investigation.
SECTION 7
---------
INTELLECTUAL PROPERTY
7.1 Ownership.
---------
7.1.1 Proprietary Technology. Except as otherwise set forth herein,
-----------------------
ownership of Proprietary Technology (whether or not patentable)
shall be determined in accordance with United States laws of
inventorship. Except as set forth in subsection 7.1.2 hereof,
the owner (the iInventori) of any patentable Proprietary
Technology (an iInventioni) shall have the right, at its option
and expense, to prepare, file, and prosecute in its own name any
patent applications
10
<PAGE>
with respect to any Invention owned by it and to maintain any
patents issued. In connection therewith, the non-Inventor party
agrees to cooperate with the Inventor at the Inventoris expense
in the preparation and prosecution of all such patent
applications and in the maintenance of any patents issued. The
obligations set forth in this Section 7.1.1 shall survive the
expiration or termination of this Agreement.
7.1.2 Exceptions. W-L shall own all Inventions that constitute or
-----------
claim the formulation, composition of matter or use of any
compound supplied to RPI by W-L. RPI shall own all Inventions
that constitute Ribozyme Technology.
7.2 Joint Inventions:
-----------------
Proprietary Technology jointly invented by RPI and W-L, other than Ribozyme
Technology, will be jointly owned by RPI and W-L; however, subject to
Section 7.1.2, W-L will have the rights and responsibilities of the
iInventori as described in this Section 7 in respect of any such
patentable, jointly owned Proprietary Technology and RPI shall have the
rights and responsibilities of a non-Inventor therein. With regard to
Ribozyme Technology, RPI shall have the rights and responsibilities of the
iInventori as described in this Section 7 in respect of any such
patentable, jointly owned Proprietary Technology and W-L shall have the
rights and responsibilities of a non-Inventor therein. The party granted
the rights and responsibilities of iInventori hereunder shall use patent
counsel reasonably acceptable to the non-Inventor and shall pay all
expenses in connection with its preparation, filing, and prosecution of
patent applications that claim patentable, jointly owned Proprietary
Technology. All expenses in connection with the preparation, filing and
prosecution of patent applications that claim Inventions shall be borne by
the party deemed to be the Inventor or granted the rights and
responsibilities of the Inventor.
7.3. Patent Filing, Prosecution, Maintenance and Counsel.
---------------------------------------------------
7.3.1 The Inventor shall prepare, prosecute, and maintain (and shall
keep the other party currently informed of all steps to be taken
in such preparation, prosecution and maintenance of all of its
Patent Rights which claim an Invention and at the other partyis
request, shall furnish the other party with copies of such Patent
Rights and other related correspondence relating to such
Invention to and from patent offices and permit the other party
to offer its comments thereon before the Inventor makes a
submission to a patent office which could materially affect the
scope or validity of the patent coverage that may result. The
non-Inventor party shall offer-its
11
<PAGE>
comments promptly. RPI and W-L shall each promptly notify the
other of any infringement or unauthorized use of an Invention
which comes to its attention.
7.3.2 If the Inventor fails to (i) fulfill its obligations under
this Section 7 or (ii) protect against abandonment of a Patent
Right which claims an Invention, the Inventor shall permit the
non-Inventor party, at its option and expense, to undertake such
obligations. The party not undertaking such actions shall fully
cooperate with the other party and shall provide to the other
party whatever assignments and other documents that may be needed
in connection therewith. The party not undertaking such actions
may require a suitable indemnity against all damages, costs and
expenses and impose such other reasonable conditions as such
partyis advisors may require. If a party undertakes the
obligations of iInventori under this Section 7 with respect to
any Patent Rights of the other party under this Section 7.3.2, it
shall prosecute and maintain the same vigorously at its own
expense, and shall not abandon or compromise them or fail to
exercise any rights of appeal without giving the other party the
right to take over the prosecuting partyis conduct, at such other
partyis own expense.
SECTION 8
---------
CONFIDENTIALITY
8.1 Any Party receiving any Confidential Information from the other Party in
connection with the Research Program and/or the execution, delivery and
performance of this Agreement shall keep, and shall cause its affiliates,
officers, employees, students, technicians, advisors and consultants to
keep, all such Confidential Information in confidence and shall not
disclose such Confidential Information to third parties, and shall use it
only to conduct the Research Program or as provided in Section 2. Such
duty will include ensuring that any Confidential Information sent over non-
secure media (such as the Internet) to parties to whom such Party is
permitted to disclose Confidential Information is sent in a fashion which
essentially prevents access by third parties, including without limitation
use of encryption devices.
8.2 Each Party hereto warrants that each of their affiliates, officers,
employees, students, technicians, advisors and consultants to whom any
Confidential Information is revealed shall previously have been informed of
the confidential nature thereof and have agreed to be bound by the terms
and conditions of this Agreement. The Party receiving Confidential
Information shall ensure that the Confidential Information is not used or
disclosed by such affiliates, employees,
12
<PAGE>
students, technicians, advisors and consultants, except as permitted by
this Agreement, and such Party shall be responsible for any breach of this
Agreement.
8.3 The obligations of confidentiality and nonuse set forth in this
Agreement shall not apply to any portion of the Confidential Information
which:
(1) is or becomes public or available to the general public otherwise than
through the act or default of the receiving Party or its affiliates or
their employees, advisors or consultants; or
(2) is obtained by the receiving Party without a duty of confidentiality
from a third party who is lawfully in possession of such Confidential
Information and is not subject to an obligation of confidentiality
owed to the other Party or others; or
(3) is known, as shown by competent evidence, by the receiving Party or
any of its affiliates prior to disclosure under this Agreement and was
not obtained or derived directly or indirectly from the other Party;
or
(4) is disclosed by the receiving Party or its affiliates pursuant to a
requirement of law, including with out limitation, disclosures
required by the US Securities Exchange Commission,, provided that such
Party has complied with the provisions set forth in paragraph 8.4.
8.4 If the receiving Party or any of its affiliates becomes legally required
to disclose any Confidential Information, the receiving Party shall give
the other Party to this Agreement prompt notice of such fact so that such
Party may obtain a protective order or other appropriate remedy concerning
any such disclosure and/or waive compliance with the non-disclosure
provisions of this Agreement. The receiving Party and its Affiliates will
fully cooperate with the other Party to this Agreement in connection with
such Party's efforts to obtain any such order or other remedy. If any such
order or other remedy does not fully preclude disclosure or the other Party
to this Agreement waives such compliance, the receiving Party and its
affiliates will make such disclosure only to the extent that such
disclosure is legally required and will use its best efforts to have
confidential treatment accorded to the disclosed Confidential Information.
8.5 Term. The obligations of RPI and W-L under this Section 8 shall continue
----
for a period of 10 years after the expiration or termination of this
Agreement, whichever is the later.
8.6 Return of Materials. Upon expiration or termination of this Agreement,
-------------------
each Party shall return all copies of Confidential Information disclosed to
such Party, and all other materials provided to such Party under this
Agreement; provided
13
<PAGE>
that one copy of such Confidential Information and such materials may be
retained for archival or legal purposes only.
SECTION 9
---------
LIABILITY AND INDEMNIFICATION
9.1 Release from Liability. Each Party agrees to indemnify, defend, and hold
----------------------
the other Party and its officers, directors, shareholders, employers,
consultants and agent members from and against, and assume liability for
all claims by third parties relating to the indemnifying Party's wrongful
or negligent acts or omissions, or those of its officers, agents, students
or employees to the full extent allowed by law or breaches of this
Agreement or the representations and warranties contained herein. Each
Party warrants and represents that it has adequate liability insurance for
the protection of itself and its officers, employees, students and agents,
while acting within the scope of their employment by the Party.
9.2 Limitation of Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY
-----------------------
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING IN ANY WAY
OUT OF THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS
LIMITATION WILL APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE.
9.3 Force Majeure. The Parties will not be liable for any failure to perform
--------------
as required by this Agreement, to the extent such failure to perform is
caused by any reason beyond the control of either Party, or by reason of
any of the following: labor disturbances or disputes of any kind,
accidents, governmental policy, civil disorders, acts of aggression, acts
of God, energy or other conservation measures, failure of utilities,
mechanical breakdowns, material shortages, disease or similar occurrences.
14
<PAGE>
SECTION 10
----------
REPRESENTATIONS AND WARRANTIES
10.1 Representations of the Parties. Each Party represents and warrants that it
------------------------------
has the legal right, authority and power to enter into this Agreement and
meet the obligations set forth herein. Each Party further represents and
warrants that it has not previously granted, and will not grant to any
third party during the term of this agreement, any rights under the Patent
Rights that are inconsistent with the rights granted to the Party herein.
Each Party also warrants that it will ensure that all individuals working
on the Research Program will be made aware of this Agreement, and will be
bound by the terms of this Agreement, in particular their duty to assign
Proprietary Technology to it so that such can be licensed hereunder to RPI.
10.2 Limitation. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NO PARTY TO THIS
----------
AGREEMENT MAKES ANY WARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY
OPERATION OF LAW, BY STATUTE OR OTHERWISE, RELATING TO (i) ANY BIOLOGICAL
SAMPLES OR ANY RESEARCH MATERIALS PROVIDED UNDER THIS AGREEMENT TO ANY
OTHER PARTY OR (ii) ANY RESEARCH CONDUCTED UNDER THIS AGREEMENT OR (iii)
ANY INVENTION OR DISCOVERY CONCEIVED AND/OR REDUCED TO PRACTICE UNDER THIS
AGREEMENT, AND EACH PARTY TO THIS AGREEMENT SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO BIOLOGICAL MATERIALS.
SECTION 11
----------
TERM AND TERMINATION
11.1 Term. The term of this Agreement shall commence on the Effective Date and
----
continue until the end of the Performance Period, unless terminated prior
to such date in accordance with this Section 11, or extended by mutual
written agreement.
11.2 Termination at Will. Each Party may terminate this Agreement at any time
-------------------
for any reason or for no reason upon written notice to the other Party.
Such termination shall be effective upon receipt of such written notice.
11.3 Termination for Cause. Either Party shall have the right to terminate
---------------------
this Agreement following any material breach or default in performance
under this Agreement by the other Party upon sixty (60) days prior written
notice by
15
<PAGE>
certified mail to the breaching Party specifying the nature of
the breach or default. Unless the breaching Party has either cured or taken
such steps as may be reasonably expected to cure the breach or default
prior to the expiration of such sixty (60) day period, the non-breaching
Party, at its sole option, may terminate this Agreement upon written notice
to the breaching Party. Termination of this Agreement shall become
effective upon receipt of such notice by the breaching Party.
11.4 Termination for Insolvency. To the extent permitted by applicable law,
--------------------------
either Party may terminate this Agreement immediately upon written notice
without opportunity to cure if the other Party becomes the subject of a
voluntary or involuntary petition in bankruptcy or any proceeding relating
to insolvency, receivership, liquidation, or composition for the benefit of
creditors, if such petition or proceeding is not dismissed with prejudice
within ninety (90) days after filing.
11.5 Effect of Expiration or Termination.
-----------------------------------
(a) Upon expiration or termination of this Agreement, each Party to this
Agreement that received materials and samples from another Party to
this Agreement shall return to the providing Party any and all such
materials and samples in such Party's possession, including without
limitation any and all research data, biological samples and other
material, and other information.
(b) In the event RPI terminates this Research Agreement for cause under
Section 11.3, all Patent Rights will vest with RPI subject to any
royalty payments due W-L.
(c) In the event W-L or RPI terminates this Research Agreement under
Section 11.2, moneys that have been advanced to RPI and have not been
reasonably and necessarily expended pursuant to this Agreement shall
be reimbursed by RPI to W-L.
11.6 Survival. The following Sections of this Agreement shall survive
--------
expiration or termination of this Agreement: 5, 6, 7.1, 8, 9, and 12.
16
<PAGE>
SECTION 12
----------
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
12.1 Success Fee. [ ].
-----------
12.2 W-L shall have sole discretion over development of and the exclusive
right (with the right to sublicense) to develop a ribozyme product or a
non-ribozyme product against a Validated Target by RPI pursuant to the
Research Program.
12.2.1 If W-L elects to develop a ribozyme product, RPI and W-L will
negotiate appropriate terms in a separate License and Development
Agreement to be negotiated in good faith under commercially
reasonable terms by the parties, and any fees set forth in such an
agreement shall be reduced to reflect any of W-L's obligations to
third parties relating to the research, development or marketing of
such ribozyme products.
12.2.2 The right to use the Validated Target shall be exclusive to W-L.
RPI may not pursue these Validated Targets independently or with
another company, without W-L's prior written consent.
12.2.3 If W-L decides not to carry out a drug discovery or development
project against a named Target, RPI shall be free to use the data
generated under the research program to develop products against
such target, only after W-L has notified RPI in writing of its
intent not to pursue such target.
SECTION 13
----------
GENERAL PROVISIONS
13.1 No Use of Name. Neither Party shall use the name of the other in any
--------------
form of advertising or public promotion without the prior written approval
of the other.
13.2 Governing Law. This Agreement shall be governed by, construed, and
-------------
interpreted in accordance with the laws of the State of Colorado, without
reference to principles of conflicts of laws. This Agreement is subject to
all applicable USA laws and regulations, including but not limited to,
export control regulations regarding commodities and technical
data/information. Each Party specifically agrees not to export or re-export
any commodities and/or data/information in violation of any applicable USA
laws and/or regulations.
Confidential portions (designated by "[ ]") have been omitted pursuant to
regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and have
been filed separately with the Commission.
17
<PAGE>
13.3 Independent Contractors. The relationship of RPI and W-L established by
-----------------------
this Agreement is that of independent contractors, and nothing contained in
this Agreement shall be construed to (a) give any of the Parties hereto the
power to direct or control the day-to-day activities of another Party
hereto, (b) constitute the Parties as partners, joint venturers, co-owners
or otherwise as participants in a joint or common undertaking, or (c) allow
any of the Parties hereto to create or assume any obligation on behalf of
another Party hereto for any purpose whatsoever.
13.4 Assignment. This Agreement may not be assigned or transferred by any of
----------
the Parties hereto without the prior written consent of the other Party,
which will not be unreasonably withheld; provided, however, that other
Party may assign or transfer it's rights and obligations under this
Agreement to an affiliate of such Party or a successor to all or
substantially all of its assets or business relating to this Agreement,
whether by sale, merger, operation of law or otherwise upon written notice
to the other Party.
13.5 Entire Agreement. This Agreement constitutes the entire and only
----------------
agreement between the Parties relating to the subject matter hereof, and
all prior negotiations, representations, agreements and understandings are
superseded hereby.
13.6 Further Assurances. At any time or from time to time on and after the
------------------
Effective Date, W-L and RPI shall at the request of the other (a) deliver
to the other such records, data or other documents consistent with the
provisions of this Agreement, (b) execute, and deliver or cause to be
delivered, all such assignments, consents, documents or further instruments
of transfer or license, and (c) take or cause to be taken all such other
actions, as may reasonably deem necessary or desirable in order to obtain
the full benefits of this Agreement and the transactions contemplated
hereby.
13.7 Notices. Any notice or other communication required or permitted under
-------
this Agreement shall be in writing and will be deemed given as of the date
such notice is (a) hand delivered, or (b) mailed, postage prepaid, first
class, certified mail, return receipt requested, or (c) sent, shipping
prepaid, receipt requested by national courier service, to the Party at the
address listed below or at such other addresses as may be given from time
to time in accordance with the terms of this notice provision.
18
<PAGE>
If to RPI: Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, Colorado 80301
Attention: President & CEO
If to W-L: Parke-Davis Pharmaceutical Research Division
2800 Plymouth Road
Ann Arbor, MI 48105
Attention:Vice President and Chairman,
Pharmaceutical Research Division
With a Copy to: Parke-Davis Pharmaceutical Research Division
2800 Plymouth Road
Ann Arbor, MI 48105
Attention:Assistant General Counsel,
Pharmaceutical Research Division
13.8 Modification. No modification to this Agreement shall be effective unless
------------
assented to in writing by the Party to be charged.
13.9 Waiver. No waiver of any rights, shall be effective unless assented
------
to in writing by the Party to be charged and the waiver of any breach of
default shall not constitute a waiver of any other right hereunder or any
subsequent breach or default.
13.10 Headings. The headings of the several sections of this Agreement are
--------
intended for convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
13.11 Severability. In the event that any provision of this Agreement becomes
------------
or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if the result of such action materially changes the economic
benefit of this Agreement to RPI or W-L.
13.12 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19
<PAGE>
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby,
have caused this Agreement to be executed by their duly authorized
representatives as of the date first written above.
WARNER-LAMBART RIBOZYME PHARMACEUTICALS
COMPANY INCORPORATED
By: /s/Wendell Wierenga, Ph.D. By: /s/ Alene Holzman
-------------------------- -----------------
Wendell Wierenga, Ph.D. Alene Holzman
Senior Vice President, Worldwide Vice President,
Preclinical Research, Business Development
Development and Technologies
Parke-Davis, Pharmaceutical, Research
20
<PAGE>
APPENDIX A
I. RESEARCH PLAN [ ]
Confidential portions (designated by "[ ]") have been omitted pursuant to
regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and have
been filed separately with the Commission.
21
<PAGE>
APPENDIX B
Expense for COGS
----------------
Expenses included in, but not limited to, the Party's manufacturing cost:
1. Direct materials
2. Salaries, wages and benefits of personnel directly engaged in manufacturing
the product.
3. Overhead associated with direct production, including, but not limited to:
a. Depreciation, leasehold improvements and equipment leases
b. Repair and maintenance
c. Manufacturing supplies
4. Reasonable allocable general manufacturing overhead,
a. Manufacturing Administration
b. Materials Management
c. Validation and Calibration
d. Documentation and Compliance
e. Quality Assurance/Quality Control
f. Technical Services
g. Regulatory Compliance
5. Reasonable allocable General facilities overhead, including, but not
limited to:
a. Rent, utilities, property tax, insurance and other assigned general
facilities' costs
b. Purchasing
c. Environmental Health and Safety
d. Management Information Systems
e. Engineering
f. Accounting
g. Human Resources
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RIBOZYME PHARMACEUTICALS, INC. FOR THE THREE MONTHS
ENDED MARCH 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,162,276
<SECURITIES> 1,811,016
<RECEIVABLES> 7,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,237,648
<PP&E> 10,652,033
<DEPRECIATION> 5,730,506
<TOTAL-ASSETS> 21,439,414
<CURRENT-LIABILITIES> 3,543,493
<BONDS> 0
0
0
<COMMON> 86,096
<OTHER-SE> 14,133,503
<TOTAL-LIABILITY-AND-EQUITY> 21,439,414
<SALES> 0
<TOTAL-REVENUES> 977,374
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,000,870
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169,637
<INCOME-PRETAX> (4,660,338)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,660,338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,660,338)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> 0
</TABLE>
