<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 September 30, 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 November 3, 1998 was 9,142,809.
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
PART 1 - FINANCIAL INFORMATION PAGE
----
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C> <C>
Condensed Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997................................................ 3
Condensed Statements of Operations - Three and Nine Months Ended
September 30, 1998 and 1997 (unaudited).......................... 4
Condensed Statements of Cash Flows - Nine Months Ended
September 30, 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
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 11
SIGNATURES................................................................ 12
Exhibit Index............................................................. 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
RIBOZYME PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ------------
(unaudited)
<S> <C> <C>
Current assets
- --------------
Cash and cash equivalents $ 6,224,164 $15,302,775
Securities available-for-sale 1,801,872 799,616
Accounts receivable 2,692,000 8,044
Prepaid expenses and other current assets 236,044 355,559
----------- -----------
Total current assets 10,954,080 16,465,994
Equipment and leasehold improvements at cost,
net of accumulated depreciation and amortization 4,382,557 4,957,165
Notes receivable-related parties 130,466 231,932
Patent costs, net 2,793,313 2,510,705
Other assets, net 741,385 684,245
Total assets $19,001,801 $24,850,041
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
Current liabilities
- -------------------
<S> <C> <C>
Accounts payable-trade $ 1,020,366 $ 904,681
Accrued expenses 107,284 245,956
Current portion of long-term debt 1,571,979 2,077,771
------------ ------------
Total current liabilities 2,699,629 3,228,408
Long-term debt 350,770 698,633
Convertible debt 4,259,843 2,052,889
Stockholders' equity
- --------------------
Common stock 91,116 86,070
Additional paid-in capital 84,078,452 81,424,341
Deferred compensation and other (128,440) (135,376)
Accumulated deficit (72,349,569) (62,504,924)
------------ ------------
Total stockholders' equity 11,691,559 18,870,111
Total liabilities and stockholders' equity $ 19,001,801 $ 24,850,041
============ ============
</TABLE>
See notes to condensed financial statements
3
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue
Collaborative agreements $3,282,250 $ 550,000 $ 4,774,425 $ 1,444,000
Other income - 1,485 25,045 4,456
Interest income 131,792 163,155 511,787 544,775
---------- ----------- ----------- ------------
Total revenues 3,414,042 714,640 5,311,257 1,993,231
Expenses
Research and development 3,483,642 4,021,620 13,065,392 10,176,074
General and administrative 499,794 421,178 1,481,632 1,243,287
Interest expense 198,655 180,735 608,878 617,439
---------- ----------- ----------- ------------
Total expenses 4,182,091 4,623,533 15,155,902 12,036,800
Net loss $ (768,049) $(3,908,893) $(9,844,645) $(10,043,569)
========== =========== =========== ============
Net loss per share $ (0.08) $ (0.54) $ (1.10) $ (1.42)
Shares used in computing
net loss per share 9,110,220 7,200,704 8,924,564 7,092,915
========= ========= ========= =========
</TABLE>
See notes to condensed financial statements
4
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------------
1998 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (9,844,645) $(10,043,569)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,335,037 1,254,083
Compensation for forgiveness of notes
receivable-related parties 126,466 92,466
Compensation related to sales of stock 19,178 63,118
Gain on sale of investment in corporate partner (25,045)
Changes in operating assets and liabilities:
Accounts receivable (2,683,956) 72,022
Prepaid expenses and other 49,971 (10,803)
Other assets (298,958) (277,893)
Accounts payable 115,685 465,055
Accrued expenses 68,282 (55,972)
Deferred gain (4,456)
------------ ------------
Net cash used in operating activities (11,137,985) (8,445,949)
INVESTING ACTIVITIES
Additions to property, plant and equipment (715,974) (1,394,646)
Additions to deferred patent costs (335,245) (458,212)
Net (purchases) sales of securities available-for-sale (995,320) 3,750,430
Sale of investment in corporate partner 275,045
Transfer of restricted cash 52,669 220,161
Loan repayments-related parties 1,875 2,250
Loan advances-related parties (10,000) (175,000)
------------ ------------
Net cash (used in) provided by investing activities (1,726,950) 1,944,983
FINANCING ACTIVITIES
Net proceeds from sale of common stock 2,639,979 2,616,885
Payments under loan facilities (853,655) (1,296,357)
Borrowings under loan facilities 2,000,000 2,254,460
------------ ------------
Net cash provided by financing activities 3,786,324 3,574,988
Net decrease in cash and cash equivalents (9,078,611) (2,925,978)
Cash and cash equivalents at beginning of period 15,302,775 13,050,678
------------ ------------
Cash and cash equivalents at end of period $ 6,224,164 $ 10,124,700
============ ============
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 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 and nine-month period ending
September 30, 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.
Note 3: Stock Option Repricing
During the third quarter of 1998, the Company offered a repricing of
existing stock options to all of its current employees. Pursuant to the offer,
all non-executive employees were allowed to exchange each existing stock option
for a newly priced stock option one for one, with the new stock options having
an exercise price equal to the current market price of the underlying common
stock. If exchanged, the vesting term would start over beginning on the date of
exchange. A similar offer was given to all executives, except the options were
exchanged at a one for .75 ratio. As a result of the offer, approximately
891,000 options were canceled and 748,000 options were granted, effective
September 18, 1998.
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,
Germany ("Schering AG"), with the Parke-Davis division of Warner-Lambert
Corporation ("Parke-Davis"), with Roche Bioscience and with Glaxo Research and
Development Ltd. ("Glaxo Wellcome") 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.
In June 1998, the Company announced the formation of a new company, Atugen
Biotechnology GmbH ("Atugen"), in Berlin, Germany that will utilize RPI's
proprietary ribozyme and related technologies as a continuation of Company's
target validation and discovery business. The formation of Atugen is taking
place through private sector investments and funding commitments from the German
Government as part of its initiative to encourage new biotechnology investments
in Germany. The Company plans to retain a majority ownership position in Atugen,
receive license fees and have other ongoing business relationships with Atugen.
The Company currently has no sales revenue from any of its drug candidates,
has incurred losses since inception and, as of September 30,1998 has accumulated
a deficit of $72.3 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 and Nine Months Ended September 30, 1998 and 1997
Collaborative revenues increased to $3.3 million and $4.8 million for the
three and nine months ended September 30, 1998, from $550,000 and $1.4 million
for the corresponding periods in 1997. The increase is primarily due to a $2.5
million option payment from Chiron related to possible joint product development
of ANGIOZYME(TM). In addition, certain payments to the Company were made in
connection with agreements with Schering AG, Parke-Davis, IntelliGene, ALZA
Corporation, Roche Bioscience and Glaxo Wellcome. 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
held 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.
7
<PAGE>
Interest income has decreased to $132,000 and $512,000 for the three and
nine months ended September 30, 1998 compared to $163,000 and $545,000 for the
corresponding periods in 1997. The decrease is due to lower average balances in
the Company's cash and cash equivalents and securities available-for-sale during
the third 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.
Research and development expenses decreased to $3.5 million for the three
months ended September 30, 1998, compared to $4.0 million for the corresponding
period in 1997. The decrease was due to the increase in raw material purchases
during the third quarter of 1997 for the scale-up of manufacturing in
anticipation of clinical trials. However, research and development expenses
increased to $13.0 million for the nine months ended September 30, 1998,
compared to $10.2 million for the corresponding period in 1997. The increase is
due to increased staffing and raw material purchases during the first part of
1998 in order to scale-up clinical development and research efforts. The Company
expects research and development expenses to increase as it expands its
development programs, including pre-clinical studies and clinical trials.
General and administrative expenses increased 19% to $500,000 and $1.5
million, for the three and nine months ended September 30, 1998, compared to
$421,000 and $1.2 million, respectively, for the corresponding periods 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 increasing legal and other
professional fees in connection with the overall scale-up of the Company's
operations, business development efforts and patent protection.
Interest expense increased 10% to $199,000 for the three months ended
September 30, 1998, compared to $181,000 for the corresponding period in 1997.
The increase is attributable to accruing interest on $2.0 million borrowed
during the first half of 1998, as well as interest accrued on $2.0 million
borrowed during the last half of 1997, pursuant to an agreement with Schering
AG. According to the terms of the agreement, principle and interest payments
are deferred until maturity of the loans which is in April 2004. Interest
expense is expected to increase as the Company arranges for additional financing
for future operation of its business.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through public
offerings in April 1996 and October 1997, private placements of preferred stock,
loans from financial institutions and funds received under the Company's
collaborative agreements with a number of corporate partners including Schering
AG, Chiron, Parke-Davis and DowElanco. From inception through September 30,
1998, the Company has received approximately $29.0 million in net proceeds from
private placements, $31.1 million in net proceeds from public offerings, $9.8
million in loans and $29.5 million from its collaborations.
The Company's cash, cash equivalents and securities available-for-sale
were $8.0 million at September 30, 1998, compared to $16.1 million on December
31, 1997. The $8.1 million decrease in cash, cash equivalents and securities
available-for-sale is primarily the result of $13.8 million used for operations,
$1.1 million for investments in equipment and patents, and $854,000 in payments
under loan facilities, offset by collaborative funding and interest income of
$2.8 million, loan proceeds of $2.0
8
<PAGE>
million, proceeds of $275,000 from the sale of a corporate partner's stock, and
proceeds of $2.6 million from the sale of the Company's stock to a corporate
partner and other miscellaneous stock transactions.
The Company invests its cash, cash equivalents and securities
available-for-sale in interest-bearing investment grade securities.
As of September 30, 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 additional
loans of $1.0 million each in January 1998 and May 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 September 30, 1998, the
outstanding borrowings of $4.3 million were convertible into approximately
852,000 shares of the Company's common stock. 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 and in April 1998, Schering AG provided an additional
equity investment of $2.5 million in exchange for 465,117 shares of the
Company's common stock. 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 nine months
ended September 30, 1998, were $716,000, 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 and collaboration revenues 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
9
<PAGE>
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" ("Y2K").
Since 1997, the Company has been reviewing all internal, external and third-
party informational technology ("IT") systems related to its business. The
Company has completed an internal IT evaluation with satisfactory results and is
currently reviewing external and third-party IT systems for Y2K compliance.
External and third-party evaluations include requiring compliance certificates
from vendors, suppliers and significant businesses related to the Company. The
Company estimates it will complete external and third-party evaluations by the
second quarter of 1999. To date, all evaluations have uncovered minimum
exposure to Y2K problems. The Company currently estimates the internal Y2K cost
at approximately $60,000, which would include replacing hardware systems and
upgrading software. Estimates of external or third-party Y2K expenses available
at this time are immaterial, however, the Company continues to review
compliance. 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. However, a "worst case" scenario may include the temporary
interruption of research, development and business due to the necessity of
upgrading or replacing systems which are not Y2K compliant. An interruption may
lead to missed deadlines or delays in research, development and FDA filings.
The Company's contingency plan includes the following:
. regular back-up of all scientific and business related electronic data;
. archival of critical business paperwork;
. scheduling manufacturing campaigns not to extend or overlap the year 2000 time
change; and,
. upgrading security systems to be Y2K compliant (included in above dollar
amount).
Currently, the Company has determined that there is no significant exposure to
the Y2K issue, however, the Company will continue to evaluate all IT systems for
Y2K compliance throughout 1999.
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 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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 Employment Agreement dated September 8, 1998 between the
Company and Nassim Usman.
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. 333-34981, 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.
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: November 12, 1998 By: /s/ RALPH E. CHRISTOFFERSEN
----------------- ----------------------------
Ralph E. Christoffersen
President and Chief
Executive Officer
Dated: November 12, 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
<TABLE>
<CAPTION>
Exhibit Exhibit
No. Description
--- -----------
<S> <C>
3(i) Amended and Restated Certificate of Incorporation (1)
3(ii) Restated Bylaws (2)
10.1 Employment Agreement dated September 8, 1998 between the Company and Nassim Usman.
27 Financial Data Schedule
- -----
(1) Incorporated by reference from the Company's Registration Statement on Form
SB-2, file no. 333-34981, 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.
</TABLE>
13
<PAGE>
EXHIBIT 10.1
Dr. Nassim Usman August 28, 1998
RPI
Dear Nassim,
This letter is intended to confirm the terms of employment offered to you by
Ribozyme Pharmaceuticals, Inc. ("RPI") for the period you will be working
in Berlin, and acknowledge your acceptance of employment on the terms
detailed below.
The key terms are:
Start Date: September 1, 1998
Title: Interim Vice President of Research at Atugen
Biotechnology GmbH
Employer: RPI; all current RPI benefit programs will be extended
to Berlin with comparable coverage, and the other terms
of your RPI appointment not affected by this letter
remain unchanged.
Length of Appointment: Six months; if neither a CEO nor VP of Research is hired
by Atugen during this period, the appointment may be
extended by Atugen for an additional three months. Upon
completion of this temporary Atugen appointment, your
RPI appointment will return to its current status in all
aspects. If a VP Research is hired before the end of 6
months, your temporary appointment may be terminated
early if mutually agreed between RPI and Atugen.
Location: Atugen Biotechnology GmbH
Robert-Rossle-Strasse 10
13125 Berlin
Salary: $18,750 per month, which calculates to $225,000
annually, payable on the 1st and 16th of each month
beginning on Sept. 1, 1998.
Incentive Bonus: Up to $32,000, based on mutually agreed goals for Atugen
(attached) that are achieved during your appointment.
This bonus is separate from the bonus associated with
your position as Vice President of Research at RPI, and
includes funds for purchase of incidentals while in
Berlin.
Equity: Award of 123 shares of Atugen Common Stock ("Founder's
Stock"); it is also planned to recommend an additional
award of options for Atugen Stock from a Stock Option
pool expected to be created by Atugen.
Temporary Housing: Up to $ 4,000 /month will be provided for temporary
housing in Berlin.
<PAGE>
Car Rental: RPI will pay the dollar equivalent for rental of a 4-
door full-size car during your stay in Berlin.
Language Classes: RPI will pay for German language instruction for your
family during this appointment.
Family Travel: RPI will reimburse air travel expense (Business Class)
for you and your family for one trip from Berlin to the
USA and return during your appointment, in addition to
reimbursement for relocation expenses to/from Berlin.
Reimbursement for an additional round trip air fare for
Susan Grimm will be provided if required for medical
reasons.
Employee Fitness: RPI will pay for family health club membership during
your stay in Berlin.
Other Consideration: S. Grimm's current appointment at RPI will be converted
into a Leave Without Pay appointment during your stay in
Berlin, and will return to her current appointment upon
return to Boulder.
It is also anticipated that you will make periodic visits to Boulder during the
period of this appointment at mutually agreeable times. In addition, it is
intended to nominate you for appointment to the Atugen Supervisory Board at the
time it is established.
As to management of internal RPI matters during your absence, I will take over
the Chairperson position of the R&D Committee. In addition, the persons whom
you assign to take your duties during your absence will report to Tom Rossing
for administrative purposes. You should also assign someone to represent you on
current JMT committees.
Please sign both copies of this letter indicating your acceptance of its terms,
and return one copy to me. I think that this temporary appointment will allow a
good opportunity for further development of your skills and experience, and look
forward to working with you in that regard.
Sincerely,
/s/ Ralph E. Christoffersen
----------------------------
Ralph E. Christoffersen
CEO and President
Agreed and accepted:
Date: September 8, 1998
-----------------
Signature: /s/ Nassim Usman
----------------
Nassim Usman
cc. L. Bullock, personnel file
<PAGE>
NASSIM USMAN GOALS FOR ATUGEN APPOINTMENT
(6 MONTHS - Sept. 1998 through February, 1999)
1. Establish a Board-approved Research Plan for Atugen for 1998 and 1999. (20%).
2. Participate in and complete hiring of a CEO and VP Research for Atugen (20%).
3. Complete the successful transfer of RPI technology to Atugen for both target
validation and target discovery, including reagents and protocols, and
demonstrate successful operation in Berlin. (20%)
4. Complete the successful transfer of the Schering agreement to Atugen by
Oct. 1, 1998. (20%)
5. Hire at least 5 Associates/Technicians and one Scientist for Atugen (10%).
6. Support Atugen Business Development activities and new partner acquisition
schedule. (10%)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RIBOZYME PHARMACEUTICALS, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,224,164
<SECURITIES> 1,801,872
<RECEIVABLES> 2,692,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,954,080
<PP&E> 10,963,054
<DEPRECIATION> (6,580,497)
<TOTAL-ASSETS> 19,001,801
<CURRENT-LIABILITIES> 2,699,629
<BONDS> 0
0
0
<COMMON> 91,116
<OTHER-SE> 11,600,443
<TOTAL-LIABILITY-AND-EQUITY> 19,001,801
<SALES> 0
<TOTAL-REVENUES> 5,311,257
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,065,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 608,878
<INCOME-PRETAX> (9,844,645)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,844,645)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,844,645)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> 0
</TABLE>
