<PAGE>
As filed with the Securities and Exchange Commission on April 6, 1999.
Registration No. 333-75079
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
Ribozyme Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware 2834 34-1697351
(Primary Standard (I.R.S. Employer
(State or other IndustrialClassification Identification Number)
jurisdiction of Code Number)
incorporation or
organization)
2950 Wilderness Place
Boulder, Colorado 80301
(303) 449-6500
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
RALPH E. CHRISTOFFERSEN
Ribozyme Pharmaceuticals, Inc.
Chief Executive Officer and President
2950 Wilderness Place
Boulder, Colorado 80301
(303) 449-6500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies:
HERBERT H. DAVIS III JAMES R. TANENBAUM
ROTHGERBER JOHNSON & LYONS LLP STROOCK & STROOCK & LAVAN LLP
1200 17th Street, Suite 3000 180 Maiden Lane
Denver, Colorado 80202 New York, New York 10038
(303) 623-9000 (212) 806-6048
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Proposed
Amount Maximum Proposed Maximum Amount of
Title of Shares to be Offering Price Aggregate Registration
to be Registered Registered Per Share(1) Offering Price(1) Fee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common 1,800,000
Stock, $0.01 par value per share.. Shares $5.00 $9,000,000 $2,655.00+
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933.
+ Previously paid.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the SEC, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 26, 1999
PROSPECTUS
- ----------
1,800,000 Shares
Ribozyme Pharmaceuticals, Inc.
[LOGO OF RPI APPEARS HERE]
Common Stock
-------------
Ribozyme Pharmaceuticals, Inc. is offering and selling 1,800,000 shares of
common stock with this prospectus. Ribozyme Pharmaceuticals' common stock is
quoted on the Nasdaq National Market under the symbol "RZYM." On March 24,
1999, the last reported sale price of the common stock on the Nasdaq National
Market was $5.00 per share. See "Price Range of Common Stock."
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $
Placement Agency Fees........................................... $
Proceeds to Ribozyme Pharmaceuticals............................ $
</TABLE>
Hambrecht & Quist LLC will act as the placement agent in connection with the
offering and will use its best efforts to introduce Ribozyme Pharmaceuticals to
investors. Ribozyme Pharmaceuticals is offering the shares on an all or none
basis only to selected institutional and accredited investors. Hambrecht &
Quist LLC has no commitment to buy any of the shares offered. All investor
funds received prior to the closing of the offering will be deposited into
escrow with an escrow agent until closing. If Ribozyme Pharmaceuticals does not
receive investor funds for the full amount of the offering, the offering will
be terminated and any funds received will be returned promptly.
-------------
Investing in the common stock involves a high degree of risk.
See "Risk Factors" beginning on page 5.
-------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Prospectus dated March 26, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................... 1
Risk Factors......................................................... 5
Use of Proceeds...................................................... 14
Price Range of Common Stock.......................................... 15
Dividend Policy...................................................... 15
Capitalization....................................................... 16
Dilution............................................................. 17
Selected Financial Data.............................................. 18
Management's Discussion and Analysis of
Financial Condition and Results of Operations....................... 19
Business............................................................. 24
Management........................................................... 40
Certain Transactions................................................. 50
Principal Stockholders............................................... 52
Description of Capital Stock......................................... 54
Plan of Distribution................................................. 57
Legal Matters........................................................ 57
Experts.............................................................. 58
Additional Information............................................... 58
</TABLE>
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information that you
should consider before investing in our common stock. You should read the
entire prospectus carefully, including "Risk Factors" and the financial
statements, before making an investment decision.
Ribozyme Pharmaceuticals, Inc.
Business
Ribozyme Pharmaceuticals is developing a new class of drugs based on
Professor Thomas R. Cech's discovery of "ribozymes," for which he shared a
Nobel Prize. Ribozymes, a form of ribonucleic acid ("RNA"), have the ability to
selectively inhibit protein production. Because many human disease states
result from abnormal protein production, we believe that ribozymes apply to a
wide range of human diseases. We are currently conducting preclinical
development and clinical trials for our two lead product candidates, ANGIOZYME
and HEPTAZYME. We are collaborating with Chiron Corporation ("Chiron") in the
development and commercialization of ANGIOZYME, a drug for the treatment of
solid tumor cancers. We have completed Phase Ia clinical trials in healthy
volunteers, will commence Phase Ib trials in cancer patients in the first
quarter of 1999 and expect to begin Phase II trials by the end of the year. We
are collaborating with Eli Lilly and Company ("Lilly") for the development and
commercialization of HEPTAZYME, a drug for the treatment of Hepatitis C, a
viral liver disease. HEPTAZYME is in preclinical testing, and we expect to file
an investigational new drug application before the end of the year. We are also
researching several other product candidates and expect to begin preclinical
testing on one of these product candidates by the end of 1999.
Ribozymes also may be used for gene function identification and target
validation, the process by which genes that cause or contribute to human
disease are identified. We have target validation and discovery partnerships
with Schering AG, Roche Biosciences, GlaxoWellcome, Chiron and Parke-Davis. In
1998, we transferred our gene function identification and target validation
technology to a newly formed German company, Atugen Biotechnology GmbH
("Atugen"). Upon its formation, Atugen received over $20 million in multi-year
funding from a combination of venture capital, an investment by us and German
government grants and loans. Pursuant to this technology transfer, we acquired
a substantial equity interest in Atugen while retaining our rights to develop
ribozymes as therapeutics. As a result of this technology transfer, we will
focus exclusively on the development of ribozymes as human therapeutics and
will subcontract target validation and discovery services to Atugen.
The Market Opportunity
Our two lead product candidates, ANGIOZYME and HEPTAZYME, are therapeutics
for large markets. ANGIOZYME is a drug which targets solid tumor cancers, such
as cancers of the lung, breast, prostate, colon and rectum. These cancers
account for over 750,000 new cancer cases and 200,000 deaths per year in the
United States alone. HEPTAZYME targets the Hepatitis C virus ("HCV"), the most
common blood-borne infection in the United States. Each year in the United
States, HCV infects approximately 50,000 people and causes 10,000 deaths.
Existing therapies are ineffective in over 50% of Hepatitis C patients and have
serious side effects.
The Ribozyme Advantage
We believe ribozymes offer significant advantages over other approaches to
treating human disease. Ribozymes can selectively inhibit protein production by
binding to and cutting apart its associated messenger RNA ("mRNA") sequence.
Many common human diseases involve either abnormal protein production or RNA
viruses. Ribozymes can be used to treat human disease in two ways. First,
ribozymes can be designed
1
<PAGE>
to inhibit abnormal protein production associated with a disease. Second,
ribozymes can be designed to target RNA viruses or protein production in other
infectious agents that cause disease. Ribozymes also are useful in identifying
the function of specific genes (validating targets) and in diagnosing disease.
Strategy
Our primary business objective is to use our technology to identify and
develop drugs containing ribozymes to treat or prevent human disease. Our
strategy to achieve this objective includes the following:
. develop identified product candidates,
. identify new product candidates,
. partner with others to develop products,
. focus on human therapeutics and license other applications of our
technology, and
. maintain and expand our patent portfolio and proprietary technology.
Patents
Our patents and proprietary technology provide a significant competitive
advantage in the use of ribozymes in drug development. Our licenses to patents
of Dr. Cech and others, together with patents issued to and filed by us, give
us the exclusive rights to control the manufacture, use and sale of ribozymes.
Our current patent portfolio includes 84 issued or allowed patents and over 100
applications.
Our corporate headquarters are located at 2950 Wilderness Place, Boulder,
Colorado 80301, and our telephone number is (303) 449-6500. Our web site
address is www.rpi.com. Information contained on our website does not
constitute part of this prospectus.
2
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered............................... 1,800,000 shares
Common stock to be outstanding after the offering.. 10,982,135 shares
Use of proceeds.................................... To fund preclinical and
clinical trials of our
products, continued
research and development,
and for general corporate
purposes
Nasdaq National Market symbol...................... RZYM
</TABLE>
- --------
This information is based on the number of shares outstanding at March 15,
1999. It excludes:
. 1,478,493 shares reserved for issuance under our stock option plan, of
which 1,386,487 shares were outstanding at a weighted average exercise
price of $4.18 per share.
. 487,458 shares issuable upon the exercise of outstanding warrants at a
weighted average exercise price of $22.76 per share.
. 1,100,844 shares issuable to one of our collaborators upon conversion of
outstanding debt, assuming a conversion price of $4.88 per share, which
was the closing price of our common stock on March 15, 1999.
. 200,168 shares available for issuance under our Employee Stock Purchase
Plan.
3
<PAGE>
Summary Financial Data
The selected historical financial data presented below is derived from the
financial statements of Ribozyme Pharmaceuticals. The financial statements for
each of the five years ended December 31, 1994, 1995, 1996, 1997 and 1998 have
been audited by Ernst & Young LLP, independent auditors. The as adjusted
balance sheet data summarized below reflects the application of the net
proceeds from the sale of the 1,800,000 shares of common stock offered by
Ribozyme Pharmaceuticals at the assumed offering price of $5.00 after deducting
estimated placement agency fees and offering expenses. You should read this
information together with the more detailed information presented in "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our audited financial statements and related
notes.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- --------- --------- --------- ---------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total revenues......... $ 1,587 $ 1,675 $ 1,709 $ 2,778 $ 9,622
Expenses:
Research and
development......... 9,212 12,204 14,189 15,170 16,941
General and
administrative...... 1,291 1,397 1,943 1,886 1,813
Interest expense..... 334 554 845 844 704
-------- --------- --------- --------- ---------
Total expenses..... 10,837 14,155 16,977 17,900 19,458
Equity in loss of
unconsolidated
affiliate............. -- -- -- -- 1,082
-------- --------- --------- --------- ---------
Net loss............... $ (9,250) $ (12,480) $ (15,268) $ (15,122) $ (10,918)
======== ========= ========= ========= =========
Net loss per share
(basic and diluted)
...................... (3.52) (3.86) (2.61) (2.04) (1.22)
Shares used in
computing net loss per
share (basic and
diluted).............. 2,627 3,230 5,845 7,420 8,978
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------
Actual As Adjusted
------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and securities available-for-
sale................................................... $ 6,512 14,612
Working capital......................................... 4,467 12,567
Total assets............................................ 19,224 27,324
Capital lease obligations and long-term debt, net of
current portion........................................ 4,545 4,545
Accumulated deficit..................................... (73,422) (73,422)
Total stockholders' equity.............................. 11,034 19,134
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.
We are in an early stage of development and have a limited operating history
We are a development stage biotechnology company. We have focused our
research and development efforts on potential products and services based on
ribozyme technology. We formed our company in 1992 and have only a limited
operating history for you to review in evaluating our business. All of our
products are in early stages of development, have never generated any sales and
require extensive testing before commercialization. An investor in our common
stock must consider the risks frequently encountered by early stage companies
in the biotechnology industry. These risks include our ability to:
. obtain the financial resources necessary to develop, test, manufacture
and market products,
. engage corporate partners to assist in developing, testing, manufacturing
and marketing our products,
. satisfy the requirements of clinical trial protocols, including patient
enrollment,
. establish and demonstrate the clinical efficacy of our products,
. obtain necessary regulatory approvals, and
. market our products to achieve acceptance and use by the medical
community in general.
We have a history of losses and expect future losses
We have not yet generated any revenues from the commercial sale of our
products and cannot assure you that we will ever generate revenues from product
sales. To date, we have dedicated most of our financial resources to research
and development and general and administrative expenses.
We have incurred significant losses and have had negative cash flows from
operations since inception. We have funded our activities primarily from sales
of stock, revenues under research and development agreements and lines of
credit. As of December 31, 1998, our accumulated deficit was $73.4 million.
We expect to incur operating losses for at least the next several years
because we plan to spend substantial amounts on research and development of
products, including preclinical studies and clinical trials, and, if we obtain
necessary regulatory approvals, on sales and marketing efforts. We cannot
assure you that we will ever become profitable or that we will remain
profitable, if and when we become profitable.
We depend upon our collaborative relationships and these third parties may not
continue to work with us
Engaging corporate partners and other third parties to help us develop, test
and manufacture our products is a key element of our strategy. As a result,
many important aspects of our business depend upon the activities of these
partners, including Chiron, Lilly and Schering AG, which may be outside of our
control. These factors include:
. extension, renewal or termination of collaborative relationships by
partners,
. payments based upon our company meeting performance milestones,
. development by partners of technologies that compete with those being
developed with us, which would result in a potential loss of revenue for
us,
. decision to develop or market any products with us,
. withdrawal of resources for our products,
5
<PAGE>
. termination at will under existing agreements,
. loss of royalty payments and licensing rights to jointly developed
products if we are unwilling or unable to fund our share of development
costs.
. relinquish some or all of our rights to our products, and
. negotiation of additional collaborative agreements with partners.
Should our corporate partners, Chiron or Lilly, elect not to proceed with
development of our two leading products, it may have a significant adverse
affect on our operating results and the price of our common stock. Both Chiron
and Lilly may unilaterally terminate their agreements with us. If other
corporate partners with whom we have entered into collaborative agreements
elect not to continue with our collaborations, it may have a significant
adverse affect on our operating results and the price of our common stock.
We may not be successful in developing our products
All of our products are in an early stage of development and will require
expensive and lengthy testing and regulatory clearances. None of our products
has received necessary regulatory approvals. None of our products has entered
clinical trials for efficacy and our most advanced product candidate,
ANGIOZYME, has just completed Phase Ia trials. We may experience delays in
clinical development if we cannot enroll a sufficient number of patients for
our clinical trials. We do not expect any of our products to be commercially
available for at least five years. The success of our business depends upon our
ability to develop and market successfully our products, if and when they
become commercially available. There are many reasons that we may fail in our
efforts to develop our products, including the possibility that:
. our products will not be safe and/or effective, and therefore will not
receive regulatory approval,
. our products will be too expensive to manufacture or market,
. our products will not receive broad market acceptance,
. other parties will hold proprietary rights that prevent us from marketing
our products, and
. other parties will market similar or superior products with greater
market acceptance.
The grant by us to our collaborators of exclusive rights to products against
specified gene sequences could delay development of those products
We have granted exclusive rights to our collaborators to products targeting
specific gene sequences. Many of these rights will revert to us if the product
is not being actively developed by our collaborator, which could have the
effect of slowing development of the product. However, some of our
collaborators have the right to reserve exclusive rights to specified products
for a period of time, even if they are not developing a product. Also, many of
our collaboration agreements require us to offer our collaborators a right of
first offer as to certain targets and products. Such requirements may slow our
development process and may prevent us from entering into other collaborative
agreements.
Under our product development collaboration with Chiron, Chiron has the
exclusive right to develop products against up to five targets designated by it
for the term of Chiron's collaboration with us, which could exceed 30 years. In
addition, Chiron may at any time reserve for 18 months the exclusive rights to
additional targets, not to exceed four. Under our gene function and target
validation agreement, Chiron may reserve the exclusive right to products
against additional targets for up to two and a half years.
Under our collaboration with Schering AG, Schering AG may reserve
indefinitely the exclusive right to products against targets designated by it.
Under our collaboration with Roche, Roche can reserve products against a
specified number of diseases for up to three years. Under our collaborations,
up to approximately 50 targets may be reserved at any time. Development of the
products subject to these exclusivity provisions
6
<PAGE>
is out of our control. Development may be delayed, and these products will not
be available to us during the exclusivity term either to develop internally or
in collaboration with third parties.
There is uncertainty as to the availability of additional financing
We anticipate that the net proceeds of this offering, together with our
existing financial resources and expected revenues from our collaborations,
should be sufficient to meet our capital and operating requirements into mid-
2001. We will need to raise substantial additional capital to fund our
operations. However, changes in research and development plans or changes in
our collaborative relationships may require us to make additional, unexpected
large future expenditures and may significantly reduce our expected revenues
from our collaborations. Additional funding may be available in the public or
private capital markets and through collaboration agreements with partners upon
achievement of performance milestones. If we raise funds by selling more stock,
your ownership share in us will be diluted. In addition, we may grant future
investors rights superior to those of the common stock that you are purchasing.
We do not know if additional funding will be available at all or on acceptable
terms when needed. If the results of our clinical trials are not favorable, it
will be much more difficult for us to raise additional funds. If we are unable
to obtain funding, we may need to curtail some or all research and development
programs, to obtain funds through arrangements that require us to relinquish
rights to some or all of our products or to declare bankruptcy.
Atugen is a newly formed company and will require considerable time and
attention from our management team; we may not exercise control over Atugen's
management
Atugen is a new company without a permanent CEO, a permanent CFO, or its own
business development team. Pursuant to the terms of a service agreement between
Atugen and us, Atugen has access to our management, including our business
development team, for a limited time. There is no assurance that Atugen will be
able to hire the management and business development professionals needed for
its success. Therefore, our management may need to continue to dedicate time
and resources to both the management and business development of Atugen which
may detract from management's attention to our business. In addition, while we
have the right to appoint two designees to Atugen's Board of Directors, we do
not exercise control over Atugen's business and operations.
Clinical trial results may result in delays or failure to obtain FDA approval
and inability to sell our products
Before approving a drug for commercial sale as a treatment for a disease, the
FDA and other regulatory authorities require that the safety and effectiveness
of the drug be demonstrated in humans. This is demonstrated by showing results
from adequate and well-controlled clinical trials in which the drug is used to
treat patients suffering from the disease. The clinical trial process is
complex and uncertain. Positive results from preclinical testing and early
clinical trials do not ensure positive results in later clinical trials. Our
products may produce undesirable side effects in humans which could cause us,
our collaborative partners or the FDA to delay or halt clinical trials of that
product. We cannot predict when or whether our clinical trials will adequately
demonstrate a product's safety and effectiveness or whether the FDA or other
regulatory authority will agree with the sufficiency of the trial results. If
our clinical trials do not demonstrate the safety or effectiveness of our
products, or if we otherwise fail to obtain regulatory approval for our
products, we will not be able to generate revenues from the commercial sale of
our products.
The FDA can impose other restrictions on our operations that increase costs or
delay or prohibit sales
The FDA and other regulatory authorities will continue to review our products
and periodically inspect the facilities used to manufacture those products both
before and after granting regulatory approvals. If the
7
<PAGE>
FDA or other regulatory authorities identify problems with a product, the
manufacturer or its facility, they may impose restrictions that may include:
. warning letters,
. operating restrictions,
. suspensions of regulatory approvals,
. delays in obtaining new product approvals,
. withdrawal of the product from the market,
. product recalls,
. seizure of products,
. fines,
. injunctions, and
. criminal prosecution.
These actions could significantly delay or prevent the marketing of our
products.
Our products must obtain regulatory approval in other countries which could
delay or prohibit sales in those countries
The Company and licensees of our products must obtain regulatory approvals in
countries other than the United States before marketing products in those
countries. The requirements governing the conduct of clinical trials, product
licensing and pricing of drugs vary widely from country to country. Some
countries require approval of the sale price of a drug before it can be
marketed. In many countries, the pricing review period begins after product
licensing approval is granted. As a result, we or our licensees may obtain
regulatory approval for a product in a particular country, but be subject to
price regulation which may prevent the sale of the product at satisfactory
prices.
Our products require materials that may not be readily available or cost
effective, which may adversely affect our competitive position or profitability
All of the products we are developing are new chemical entities and are not
yet available in commercial quantities. Raw materials necessary for the
manufacture of our products may not be available in sufficient quantities or at
a reasonable cost in the future. Therefore, our products may not be available
at a reasonable cost in the future. Delays in obtaining raw materials or in
product manufacturing could delay our submission of products for regulatory
approval and our initiation of new development programs, which could, in turn,
materially impair our competitive position and potential profitability.
We experience a substantial degree of uncertainty relating to patents that
could result in the loss of patent protection or in claims against us
Our success will depend to a large extent on our ability and our licensors'
abilities to:
. obtain and maintain United States and foreign patent protection for
products and processes,
. preserve trade secrets, and
. operate without infringing the proprietary rights of third parties.
Legal standards relating to the validity of patents covering pharmaceutical
and biotechnological inventions and the scope of claims made under these
patents are still developing. As a result, our ability to obtain and enforce
patents that protect our products is uncertain and involves complex legal and
factual questions. Our basic patents expire in 2008 in the United States and in
2007 in Europe and Japan; however, although our license to these patents
extends through 2007 or 2008, our licensor preserves the right to
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<PAGE>
terminate our license before such time under certain circumstances. We have
received approval of some patent applications for improvements and
modifications to these patents and we have filed patent applications for other
improvements and modifications which have not yet been approved.
We cannot be certain that the inventors of subject matter covered by our
patents and patent applications were the first to invent or the first to file
patent applications for these inventions. Furthermore, we cannot guarantee that
any patents will issue from any pending or future patent applications owned by
or licensed to us. Existing or future patents may be successfully challenged,
invalidated, found to be unenforceable, infringed upon, or circumvented by
others so that our patent rights would not create an effective competitive
barrier. We also cannot assure you that the scope of our issued patents will be
sufficiently broad to offer meaningful protection against competitive products.
We have filed documents in opposition of two patents granted to a competitor in
Europe. Competitors have filed documents in opposition of our patents in Europe
and Japan. The patent opposition in Japan has been resolved in our favor. We
may not have identified all United States and foreign patents that pose a risk
of infringement.
We may incur substantial costs and delays as a result of proceedings and
litigation regarding patents and other proprietary rights
Litigation regarding patents and other intellectual property rights is
extensive in the biotechnology industry. Patents have been applied for and, in
some cases, issued to others claiming technologies closely related to ours. As
a result, and in part due to the ambiguities and evolving nature of
intellectual property law, we periodically receive notices of potential
infringement of patents held by others. Although we have successfully resolved
these types of claims to date, we may not be able to do so in the future.
We may be forced to litigate if an intellectual property dispute arises. Such
litigation could involve proceedings declared by the United States Patent and
Trademark Office or the International Trade Commission, as well as affected
third parties. Intellectual property litigation can be extremely expensive, and
such expense, as well as the consequences should we not prevail, could
seriously harm our business.
Proceedings and litigation involving our patents or patent applications could
result in adverse findings about:
. the patentability of our inventions and products, and/or
. the enforceability, validity or scope of protection offered by our
patents.
The manufacture, use or sale of our products may infringe on the patent
rights of others. If we are unable to avoid infringing another party's patent
rights, we may be required to seek a license, defend an infringement action or
challenge the validity of the patents in court. Patent litigation is costly and
time consuming. We may not have sufficient resources to bring these actions to
a successful conclusion. In addition, if we do not obtain a license, do not
successfully defend an infringement action or are unable to have infringing
patents declared invalid, we may:
. incur substantial monetary damages,
. encounter significant delays in marketing our products, and
. be unable to participate in the manufacture, use or sale of products or
methods of treatment requiring licenses.
In addition, we regularly enter into agreements to in-license technologies
and patent rights. Should we fail to comply with the terms of those agreements,
including payment of any required maintenance fees or royalties, we would lose
the rights to those technologies and patents.
Disclosure of our trade secrets could aid competitors
Because trade secrets and other unpatented proprietary information are
critical to our business, we attempt to protect our trade secrets by entering
into confidentiality agreements with third parties, employees
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<PAGE>
and consultants. However, these agreements can be breached and, if they are,
there may not be an adequate remedy available to us. In addition, third parties
may independently discover trade secrets and proprietary information. If our
trade secrets become known, our competitive position may suffer. Costly and
time-consuming litigation could be necessary to enforce and determine the scope
of our proprietary rights.
Our executive officers, key personnel and advisors are critical to our business
and they may not remain with us in the future
Our future success depends to a significant extent on the skills, experience
and efforts of our management and scientific team. In addition, we rely on
consultants and advisors, including the members of our scientific advisory
board, to formulate research and development strategy. The loss of any or all
of these individuals could damage our business.
We may not be able to recruit and retain the personnel that we need to succeed
Our products and services are highly technical in nature. In general, only
highly qualified and trained scientists have the necessary skills to develop
and market our products and provide our services. We face intense competition
in recruiting these professionals from pharmaceutical and biotechnology
companies, universities and other research institutions. Any failure on our
part to hire, train and retain a sufficient number of qualified professionals
would seriously damage our business. We do not generally enter into employment
agreements requiring scientific employees to continue in our employment for any
period of time.
We may not be able to keep up with the rapid technological change in the
biotechnology and pharmaceutical industries, which could obsolete our products
Biotechnology and related pharmaceutical technologies have undergone and
continue to undergo rapid and significant change. We expect that the
technologies associated with biotechnology research and development will
continue to develop rapidly. Our future will depend in large part on our
ability to maintain a competitive position with respect to these technologies.
Any compounds, products or processes that we develop may become obsolete before
we recover expenses incurred in developing those products.
Competition in the biotechnology and pharmaceutical markets may result in
competing products and reduce our revenues
The markets for our products will be very competitive. Our competitors
include multinational pharmaceutical and chemical companies, specialized
biotechnology firms, and universities and other research institutions. Our
competitors may be more successful because of:
. greater financial resources,
. greater experience in research and development,
. greater success in obtaining regulatory approval,
. stronger sales and marketing efforts, and
. earlier receipt of approval for competing products.
Competitors may have developed or could develop new technologies that compete
with our products or even render our products obsolete.
We believe that customers in our markets display a significant amount of
loyalty to their initial supplier of a particular product. Therefore, it may be
difficult to generate sales to customers who have purchased products from
competitors. To the extent we are unable to be the first to develop and supply
new products, our competitive position will suffer.
10
<PAGE>
We lack sales and marketing experience and will rely upon third parties to
market our products
We will have to develop a sales force or rely on arrangements with third
parties to market, distribute and sell any products we develop. We intend to
rely on third parties with established direct sales forces to market the
products we develop. These third parties may have significant control over
important aspects of the commercialization of our products, including market
identification, marketing methods, pricing, sales force recruitment and
management and promotional activities. We may be unable to control the actions
of these third parties. We may be unable to make arrangements with third
parties to perform these activities on favorable terms. Further, any internal
capabilities or third-party arrangements may not be successful.
Our success may depend on third-party reimbursement of patients' costs for our
products
Our ability to market products successfully will depend in part on the extent
to which various third parties are willing to reimburse patients for the costs
of our products and related treatments. These third parties include government
authorities, private health insurers and other organizations, such as health
maintenance organizations. Third-party payors are increasingly challenging the
prices charged for medical products and services. Accordingly, if less costly
drugs are available, third-party payors may not authorize or may limit
reimbursement for our products, even if our products are safer or more
effective than the alternatives. In addition, the trend toward managed
healthcare and government insurance programs could result in lower prices and
reduced demand for our products. Cost containment measures instituted by
healthcare providers and any general healthcare reform could affect our ability
to sell products and may have a material adverse effect on us. We cannot
predict the effect of future legislation or regulation concerning the
healthcare industry and third-party coverage and reimbursement on our business.
Accidents related to hazardous materials could adversely affect our business
Our operations require the controlled use of hazardous and radioactive
materials. Although we believe our safety procedures comply with the standards
prescribed by federal, state and local regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident, we could be liable for any damages that
result, which could seriously damage our business. Additionally, an accident
could damage our research and manufacturing facilities and operations.
Potential product liability claims could affect our earnings and financial
condition
We face a potential risk of product liability claims based on the testing,
manufacturing and marketing of our products. We carry product liability
insurance relating to potential claims arising from our clinical trials which
is limited in scope and amount but which we believe to be adequate. However, we
may be unable to maintain this insurance at a reasonable cost or in sufficient
amounts to protect us against potential losses. A successful product liability
claim or series of claims brought against us could have an adverse effect on
our business.
You will experience immediate and substantial dilution
Purchasers in this offering will pay more for their shares than existing
stockholders or individuals who acquire shares by exercising options granted
before this offering. At an assumed public offering price of $5.00 per share,
you will experience immediate dilution of $3.52 per share in pro forma net
tangible book value. You will also experience additional dilution upon (1) the
exercise by holders of outstanding options and warrants, (2) the conversion by
Schering AG of outstanding debt into shares of our common stock or (3) upon
Lilly's equity investment.
Absence of dividends could reduce our attractiveness to investors
Some investors favor companies that pay dividends. We have never declared or
paid any cash dividends on our common stock. We intend to retain any future
earnings for funding growth and, therefore, we do not
11
<PAGE>
anticipate paying cash dividends on our common stock in the foreseeable future.
Because we may not pay dividends, your return on this investment likely depends
on your ability to sell our stock at a profit.
We have never declared or paid cash dividends on our common stock. We
currently intend to retain future earnings, if any, to support the development
of our business and for general corporate purposes, and do not anticipate
paying any cash dividends in the foreseeable future. We are also party to
agreements restricting our payment of dividends.
Our common stock has limited trading volume and a history of volatility which
could impair your investment
The historical trading volume of our common stock has been limited. An active
public market for the common stock may not develop or be sustained. As a
result, you may be unable to sell shares purchased in this offering at the time
or price desired. The trading price of our common stock may fluctuate
substantially due to:
. quarterly variations in our operating results,
. our ability to raise additional funds,
. changes in the status of our corporate collaborative agreements,
. changes in earnings estimates by market research analysts,
. clinical trials of products,
. research activities, technological innovations or new products by us or
our competitors,
. developments or disputes concerning patents or proprietary rights,
. sales of our stock by existing holders,
. timing or denial by the FDA of clinical trial protocols or marketing
applications,
. securities class actions or other litigation,
. changes in government regulations, and
. general economic conditions.
The market price of the common stock, and the market prices for securities of
biotechnology companies generally, have fluctuated dramatically in recent
years. These fluctuations have sometimes been unrelated to the operating
performance of the affected companies. As a result, the value of your shares
could vary significantly from time to time.
Both our corporate documents and Delaware law have anti-takeover provisions
that may discourage transactions for control at premium prices
Our corporate documents:
. require procedures to be followed and time periods to be met for any
stockholder to propose matters to be considered at annual meetings of
stockholders, including nominating directors for election at those
meetings, and
. authorize our Board of Directors to issue up to 5,000,000 shares of
preferred stock without stockholder approval and to set the rights,
preferences and other designations, including voting rights, of those
shares as the Board of Directors may determine.
These provisions, alone or in combination with each other, may discourage
transactions involving actual or potential changes of control, including
transactions that otherwise could involve payment of a premium over prevailing
market prices to holders of common stock.
In addition, we are subject to provisions of the Delaware General Corporation
Law that may make some business combinations more difficult. Accordingly,
transactions that otherwise could involve payment of a premium over prevailing
market prices to holders of common stock may be discouraged or more difficult
for our company than for other companies organized in other jurisdictions.
12
<PAGE>
Year 2000 issues may result in unanticipated costs or adverse effects on
operations
Many currently installed systems and software products are coded to accept
only two digit entries in the date code field. Beginning in the year 2000,
these date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, in less than one year,
computer systems and/or software used by many companies may need to be upgraded
to comply with these "Year 2000" requirements. We are in the process of working
with our software vendors to ensure that the software that we have licensed
from third parties will operate properly in the year 2000 and beyond. In
addition, we are working with our external suppliers, service providers and
corporate partners to ensure that they and their systems will be able to
support our needs and, where necessary, interoperate with our server and
networking hardware and software infrastructure in preparation for the year
2000.
We anticipate that we will incur less than $60,000 to complete our review and
remediation efforts. However, significant uncertainty exists concerning the
potential costs and effects associated with any year 2000 compliance. Any year
2000 compliance problems of ours, our customers or vendors could have a
material adverse effect on our business, results of operations and financial
condition.
FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business," and elsewhere in this prospectus are
"forward-looking statements." These forward-looking statements include, but are
not limited to, statements about our plans, objectives, expectations and
intentions and other statements contained in this prospectus that are not
historical facts. When used in this prospectus, the words "expect,"
"anticipate," "intend," "plan," "believe," "seek," "estimate" and similar
expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements, including our
plans, objectives, expectations and intentions and other factors discussed
under "Risk Factors."
13
<PAGE>
USE OF PROCEEDS
Ribozyme Pharmaceuticals will receive an estimated $7,300,000 in net proceeds
from the sale of the 1,800,000 shares of common stock offered by us, assuming a
public offering price of $5.00 per share and after deducting the estimated
placement agency fee and offering expenses. We intend to use these proceeds to
fund our preclinical studies and clinical trials of our products, research and
development and for working capital and other general corporate purposes. The
amounts we actually expend will vary significantly depending on a number of
factors, including:
. results of preclinical studies and clinical trials of products,
. progress of our research and development programs,
. cost and timing of regulatory approvals,
. terms of any collaborative arrangements into which we enter,
. commercial potential of our products,
. status of competitive products,
. technological advances, and
. hiring of additional personnel.
As a result, we will retain significant discretion in the application of
these funds.
We anticipate that the net proceeds of this offering, together with our
existing financial resources and expected revenues from our collaborations,
should be sufficient to meet our capital and operating requirements into mid-
2001. This estimate is based on assumptions that could be negatively impacted
by the matters discussed in "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
Until we use the net proceeds as described above, we will invest them in
short-term, interest-bearing, investment grade securities.
14
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the symbol
"RZYM." The following table sets forth, for the periods indicated, the high and
low sales prices per share of our common stock as reported on the Nasdaq
National Market.
<TABLE>
<CAPTION>
High Low
------ -----
<S> <C> <C>
Year Ended December 31, 1997
First Quarter................................................ $16.50 $9.88
Second Quarter............................................... $12.38 $8.63
Third Quarter................................................ $12.00 $7.38
Fourth Quarter............................................... $11.38 $7.00
Year Ended December 31, 1998
First Quarter................................................ $ 9.34 $5.13
Second Quarter............................................... $10.50 $4.88
Third Quarter................................................ $ 6.25 $2.00
Fourth Quarter............................................... $ 7.63 $3.31
Year Ended December 31, 1999
First Quarter (through March 24, 1999)....................... $ 5.75 $4.06
</TABLE>
The sale price of the common stock as reported on the Nasdaq National Market
on March 24, 1999, was $5.00 per share. At March 24, 1999, there were
approximately 148 holders of record of our common stock.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock during any
of the periods presented above. We currently intend to retain future earnings,
if any, to support the development of our business and for general corporate
purposes, and do not anticipate paying any cash dividends in the foreseeable
future. We are also party to agreements restricting our ability to pay
dividends.
15
<PAGE>
CAPITALIZATION
The following table describes our capitalization as of December 31, 1998, on
an actual basis and as adjusted to give effect to our receipt of the estimated
net proceeds from the sale of 1,800,000 shares of common stock offered by us at
the public offering price of $5.00 per share, after deducting the estimated
placement agency fee and offering expenses. When you read this table, it is
important that you also read "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and related notes.
<TABLE>
<CAPTION>
December 31, 1998
---------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Long-term debt and capital lease obligations, net of
current.............................................. $ 4,545 $ 4,545
Stockholders' equity:
Voting convertible preferred stock, $0.01 par value
per share; 5,000,000 shares authorized; no shares
outstanding........................................ 0 0
Common stock, $0.01 par value per share; 20,000,000
shares authorized; 9,181,455 shares issued and
outstanding, actual; 10,981,455 shares issued and
outstanding, as adjusted*.......................... 92 110
Additional paid-in capital.......................... 84,434 92,516
Deferred compensation............................... (69) (69)
Accumulated deficit................................. (73,423) (73,423)
-------- --------
Total stockholders' equity........................ 11,034 19,134
-------- --------
Total capitalization.............................. $ 15,579 $ 23,679
======== ========
</TABLE>
- --------
* As of March 15, 1999, as adjusted amount excludes the following:
. 1,478,493 shares reserved for issuance under our stock option plan, of
which 1,386,487 shares were outstanding, at a weighted average exercise
price of $4.18 per share;
. 487,458 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $22.76 per share;
. 1,100,844 shares issuable to one of our collaborators upon conversion of
outstanding debt, assuming a conversion price of $4.88 per share (our
common stock price on March 15, 1999); and
. 200,168 shares available for issuance under our Employee Stock Purchase
Plan. See "Description of Capital Stock--Warrants" and "Management--Stock
Option Plan."
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<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the as adjusted net tangible book value per share of our
common stock after this offering. We calculate net tangible book value per
share by dividing the net tangible book value (total assets less intangible
assets and total liabilities) by the number of outstanding shares of common
stock.
Our net tangible book value as of December 31, 1998, was $8.1 million in the
aggregate or $0.89 per share. After giving effect to the sale of the 1,800,000
shares of common stock we are offering at an assumed public offering price of
$5.00 per share, and the deduction of the estimated placement agency fee and
offering expenses payable by us, our net tangible book value as of December 31,
1998, as adjusted, would have been $16.2 million in the aggregate, or $1.48 per
share. This represents an immediate increase in the net tangible book value of
$0.59 per share to existing stockholders and an immediate dilution in net
tangible book value of $3.52 per share to new investors purchasing shares in
this offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Public offering price per share................................. $5.00
Net tangible book value per share as of December 31, 1998..... $0.89
Increase per share attributable to new investors.............. $0.59
-----
As adjusted net tangible book value per share after this
offering....................................................... $1.48
-----
Dilution per share to new investors............................. $3.52
=====
</TABLE>
At December 31, 1998, we had outstanding the following options and warrants
to purchase shares of common stock:
<TABLE>
<CAPTION>
Weighted Average
Number Exercise Price
--------- ----------------
<S> <C> <C>
Stock option plan................................. 1,347,572 $ 4.21
Warrants.......................................... 487,458 $22.76
---------
Total........................................... 1,835,030
</TABLE>
Additionally, on March 15, 1999, there were:
. 92,006 options available for future grant under our stock option plan,
. 200,168 shares available for issuance under our Employee Stock Purchase
Plan, and
. 1,100,844 shares issuable to one of our collaborators upon conversion of
outstanding debt, assuming a conversion price of $4.88 per share (our
common stock price on March 15, 1999).
To the extent we issue these additional shares, there will be further
dilution to new investors.
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are derived from our audited financial
statements. Our financial statements for 1994, 1995, 1996, 1997 and 1998 have
been audited by Ernst & Young LLP, independent auditors. These historical
results do not necessarily indicate future results. When you read this data, it
is important that you also read our financial statements and related notes, as
well as the section "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Collaborative
agreements........... $ 1,145 $ 1,178 $ 759 $ 1,976 $ 8,963
Grant and other
income............... 172 102 14 7 25
Interest income....... 270 395 936 795 634
--------- --------- --------- --------- ---------
Total revenues...... 1,587 1,675 1,709 2,778 9,622
Expenses:
Research and
development.......... 9,212 12,204 14,189 15,170 16,941
General and
administrative....... 1,291 1,397 1,943 1,886 1,813
Interest expense...... 334 554 845 844 704
--------- --------- --------- --------- ---------
Total expenses...... 10,837 14,155 16,977 17,900 19,458
--------- --------- --------- --------- ---------
Equity in loss of
unconsolidated
affiliate.............. -- -- -- -- 1,082
--------- --------- --------- --------- ---------
Net loss................ $ (9,250) $ (12,480) $ (15,268) $ (15,122) $ (10,918)
========= ========= ========= ========= =========
Net loss per share
(basic and diluted).... $ (3.52) $ (3.86) $ (2.61) $ (2.04) $ (1.22)
========= ========= ========= ========= =========
Shares used in computing
net loss per share
(basic and diluted).... 2,627 3,230 5,845 7,420 8,978
Balance Sheet Data:
Cash, cash equivalents
and securities
available-for-sale..... $ 7,734 $ 6,420 $ 17,594 $ 16,102 $ 6,512
Working capital......... 5,640 4,648 15,788 13,238 4,467
Total assets............ 12,392 14,223 25,292 24,850 19,224
Capital lease
obligations and long-
term debt, net of
current portion........ 1,853 3,179 2,430 2,752 4,545
Accumulated deficit..... (19,635) (32,115) (47,383) (62,505) (73,422)
Total stockholders'
equity................. 8,247 8,478 20,362 18,870 11,034
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Financial
Statements of Ribozyme Pharmaceuticals and the notes therein included elsewhere
in this prospectus. Our discussion contains forward-looking statements based
upon current expectations that involve risks and uncertainties, such as our
plans, objectives, expectations and intentions. Our actual results and the
timing of certain events could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors," "Business" and elsewhere in this
prospectus.
Overview of our Business
Ribozyme Pharmaceuticals was founded to develop commercial products and
services based upon the significant potential of "ribozymes," a discovery of
Professor Thomas R. Cech for which he shared a Nobel Prize. Our primary
business focus is to use our technology to develop a new class of drugs
consisting of ribozymes to treat or prevent human disease. We are in various
stages of preclinical development and clinical trials for two lead product
candidates: ANGIOZYME for the treatment of solid tumor cancers and HEPTAZYME
for the treatment of Hepatitis C. Chiron is our collaborator for the
development and commercialization of ANGIOZYME. Lilly is our collaborator for
the development and commercialization of HEPTAZYME. We have gene function
identification and target validation agreements with Schering AG, Roche
Biosciences and GlaxoWellcome. In addition, we have existing gene function
identification and target validation agreements with Chiron and Parke-Davis
which are substantially complete, but we may be obligated to perform additional
work.
We recently completed Phase Ia clinical trials for our most advanced product
candidate, ANGIOZYME. We expect to commence Phase Ib trials in the first
quarter of 1999 and Phase II trials by the end of the year. We expect to file
an IND for our second product candidate, HEPTAZYME, by the end of the year and
commence clinical trials in 2000. To date, we have committed substantially all
our resources to our research and product development programs. We have not
generated any revenues from product sales, nor do we anticipate any in the
foreseeable future. Our revenues consist primarily of research payments and
milestones from our collaborators. We depend upon funding from external
financing and corporate collaborations for our research and product development
programs and expect to do so for the foreseeable future.
We expect to commit significant additional resources conducting clinical
trials for ANGIOZYME and HEPTAZYME, as well as for clinical trials for other
potential product candidates. In addition, although we believe our existing
manufacturing facilities and those available from contract manufacturers will
be satisfactory for the manufacture of our current product candidates through
clinical trials, we will need to commit significant resources in order to
support manufacture on a commercial scale. We have not been profitable since
inception and have an accumulated deficit of $73.4 million as of December 31,
1998. Losses have resulted primarily from our research and development
programs. We anticipate incurring additional losses as ANGIOZYME, HEPTAZYME and
other product candidates advance through development. In addition, some
payments under our collaborations are contingent upon our meeting particular
research or development goals. Therefore, we are subject to significant
variation in the timing and amount of our revenues and results of operations
from period to period.
In 1998, we transferred our gene function identification and target
validation technology to Atugen in exchange for a substantial equity interest.
We will continue our existing gene function identification and target
validation agreements with our collaborators by subcontracting services to be
performed to Atugen. Atugen will enter into gene function identification and
target validation agreements directly with collaborators, but we will retain
rights to (1) use the technology internally, and (2) develop ribozymes as
therapeutic agents against targets validated by Atugen. In 1998, we received a
one-time license fee from Atugen for a portion of our gene function
identification and target validation technology. We will receive
19
<PAGE>
payments for: (1) management and administrative services we provide, (2)
oligonucleotides and (3) prosecution of relevant patents. In addition, we will
retain exclusive manufacturing rights to ribozyme therapeutic agents resulting
from validation services. Atugen will be reimbursed for any subcontracting
services it provides to us on a full time equivalent basis.
Our revenues are denominated in U.S. dollars, therefore, we have not been
exposed to foreign currency translation risks and have not engaged in any
hedging instruments.
Results of Operations for Years Ended December 31, 1998, 1997 and 1996
Revenues. Revenues from collaborative agreements increased from $2.0 million
for the year ended December 31, 1997, to $9.0 million in 1998. The increase was
primarily due to $6.0 million recorded for Chiron partnership payments related
to the product development of ANGIOZYME. In addition, we received approximately
$650,000 in collaborative revenue in 1998 due to new target validation
agreements with Roche, Parke-Davis and GlaxoWellcome.
Revenues from collaborative agreements increased from $759,000 in 1996 to
$2.0 million in 1997. The increase was primarily due to $1.5 million in
research payments made by Schering AG in 1997. The 1997 payments from Schering
AG were the first payments in the collaboration which includes $2.0 million in
annual research funding over the five-year term of the collaboration, provided
the agreement is extended for each of those years.
Interest income was $936,000, $795,000 and $635,000 for the years ended 1996,
1997, and 1998, respectively. The higher interest income in 1996 resulted from
increased cash balances due to our initial public offering in April 1996.
Interest income has decreased in the last three years due to declining cash
balances. Interest income generally fluctuates as a result of cash available
for investment and prevailing interest rates.
Expenses. Research and development expenses increased from $14.2 million in
1996 to $15.2 million in 1997, and increased to $16.9 million for the year
ended December 31, 1998. These increases were primarily due to the hiring of
additional personnel and the overall scale-up of research and product
development. Research and development expenses consist primarily of:
. clinical and preclinical supplies and related costs,
. salaries and benefits for scientific, regulatory, quality control and
pilot manufacturing personnel,
. consultants,
. supplies,
. occupancy costs, and
. depreciation for laboratory equipment and facilities.
In 1998, expenses were primarily related to ANGIOZYME development and target
validation service costs. We expect research and development expenses to
continue to increase as ANGIOZYME and HEPTAZYME proceed through clinical trials
and manufacturing.
General and administrative expense decreased slightly from $1.9 million in
1996 to $1.89 million in 1997, and decreased slightly again to $1.81 million
for the year ended December 31, 1998. The slight decrease in general and
administrative expense in 1997 was primarily due to higher expenses in 1996
which included one-time cash and stock bonus payments made to our executive
officers in connection with our initial public offering in April 1996. The
decrease in 1998 was due to reimbursements of $480,000 made to us from Atugen
related to management's time during closing and start-up of operations. We
expect general and administrative expenses 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 expansion of our
operations and business development efforts.
20
<PAGE>
Interest expense has remained stable at $845,000 in 1996, $844,000 in 1997
and $704,000 in 1998. We expect interest expense to increase as we continue to
borrow under existing or new lines of credit to finance equipment purchases.
In 1998, in connection with our initial cash investment of $2.0 million and
the transfer of our gene identification and target validation technology to the
newly formed affiliate, Atugen, we retained a 49.5% equity interest in the
voting stock of this company. However, at December 31, 1998, our interest
represents 83.2% of the outstanding common stock of Atugen. We do not meet the
criteria for consolidation of this affiliate because (1) we control less than
50% of Atugen's voting stock, and (2) the preferred shareholders retain
significant participating rights. Accordingly, we have accounted for our
investment in Atugen under the equity method. As a result, we have recorded our
share of the unconsolidated affiliate's 1998 net loss, or $1.1 million as
equity in loss of unconsolidated affiliate in our 1998 Statement of Operations.
At December 31, 1998, our remaining net investment in Atugen is $860,000, which
we expect to be eliminated entirely during 1999 as we share further in Atugen's
losses.
Liquidity and Capital Resources
We have financed our operations since inception through public offerings in
April 1996 and October 1997, private placements of preferred stock and funds
received under our collaborative agreements. From inception through December
31, 1998, we have received approximately:
. $29.0 million in net proceeds from private placements,
. $31.1 million in net proceeds from public offerings,
. $39.2 million from our collaborations, and
. $9.8 million from equipment financing.
We had cash, cash equivalents and securities available-for-sale of $6.5
million at December 31, 1998, compared with $16.1 million at December 31, 1997,
and $17.6 million at December 31, 1996. The $9.6 million decrease from 1997 to
1998 and the $1.5 million decrease from 1996 to 1997 were primarily the result
of cash used for research and development, investment in equipment, payments
under loan facilities and expenses incurred for general corporate purposes,
offset by net proceeds from the sale of common stock and preferred stock, loan
proceeds and research payments from collaborations.
We invest our cash, cash equivalents and securities available-for-sale in
interest-bearing investment grade securities.
Total additions for property, plant and equipment during 1998 were $936,000,
most of which were financed through our existing equipment loan facility with
Schering AG.
Schering AG made a $2.5 million equity investment in us in May 1997 in
exchange for 212,766 shares of common stock and made an additional equity
investment of $2.5 million for 465,117 shares in April 1998. Separately,
Schering AG provided loans of $2.0 million in each of 1997 and 1998. We
received an additional $1.0 million advanced on this loan facility in January
1999. Schering AG will continue to provide loans of up to $2.0 million annually
for each of the next three years, provided that the collaboration is continued,
at Schering AG's option, in each of those years. If Schering AG does not
continue the collaboration, we will need to seek alternative sources of
financing. Amounts not used in any calendar year may be carried forward to
future years. According to the terms of our 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 8.0% per annum, are
immediately convertible into equity at the option of Schering AG. At December
31, 1998, the outstanding borrowings of $4.3 million were convertible into
approximately 992,000 shares of our common stock. Principal and interest
payments are deferred until maturity of the loans which is April 2004. In
addition, Schering AG made research payments of $2.0 million and $1.5 million
in 1998 and 1997, respectively. If the collaboration is continued, Schering AG
will make research payments of $2.0 million a year for each year through April
2001, but Schering AG may terminate its collaboration at any time. We may
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earn success fees upon product development milestones and will manufacture
synthetic ribozyme products and receive royalties on sales of products
resulting from the collaboration. Schering AG may terminate the research
collaboration at any time by paying us termination fees.
We anticipate that net proceeds of this offering, together with our existing
financial resources and expected revenues from our collaborations should be
sufficient to meet our anticipated operating and capital requirements through
mid-2001. We expect to incur substantial additional costs, including:
. costs related to our research, drug discovery and development programs,
. preclinical and clinical trials of our products, if developed,
. prosecuting and enforcing patent claims,
. general administrative and legal items, and
. manufacturing and marketing of products, if any.
We do not have any currently available credit facilities from which we may
borrow. In the future we may raise additional capital through public or private
financing, as well as from new collaborative relationships, new credit
facilities and other sources. We cannot assure you that funds will be available
on favorable terms, if at all. If we raise additional funds by issuing equity
securities, the holdings of existing stockholders will be further diluted. In
addition, future collaborative relationships may not successfully reduce our
funding requirements which may require us to relinquish or reduce rights to our
technologies or products. See "Risk Factors."
At December 31, 1998, we had available net operating loss carryforwards,
research and development credit carryforwards and state investment credit
carryforwards of $73.4 million, $1.5 million and $31,000, respectively, for
income tax purposes. Our ability to utilize our net operating loss
carryforwards is subject to an annual limitation in future periods pursuant to
the "change in ownership" rules under Section 382 of the Internal Revenue Code.
Year 2000 Affect on Computer Systems
Year 2000 issues result from the inability of some computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways; typically the year 2000 is represented as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business.
Based on our evaluations and remediation efforts, we do not anticipate that
we will incur any significant costs relating to the assessment and remediation
of year 2000 issues. To date, we estimate that we have spent approximately
$20,000 in reviewing and remediating year 2000 issues and that total
expenditures incurred in completing our review and remediation efforts will not
exceed $60,000. These expenditures are budgeted as part of our operating
expenses. However, expenditures for year 2000 remediation efforts may exceed
this amount if unforeseen complications arise. Also, we or our vendors,
suppliers and corporate partners may not be able to successfully identify and
remedy all potential year 2000 problems.
We have developed and are implementing a contingency plan including the
following:
. maintaining all data in hard copy that is generated or collected by our
vendors, suppliers and collaborators so any loss of data due to year 2000
problems could be re-entered manually,
. maintaining all of our accounting records in hard copy so that we can
continue to manually pay vendors, employees, consultants and
collaborators in the event that our accounting software or other computer
programs or systems malfunction,
. maintaining hard copies of all scientific and business related electronic
data,
. archiving critical business paperwork,
. scheduling manufacturing campaigns not to extend or overlap the year 2000
time change, and
. upgrading security systems.
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We continue to review these requirements to complete our contingency plan for
noncritical business functions.
We do not believe that we will have to modify or replace any significant
portions of our computer applications in order for our computer systems to
continue to function properly in the year 2000. However, a "worst case"
scenario may include the temporary interruption of research, development and
business if we need to upgrade or replace computer systems.
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BUSINESS
An overview of our company
Ribozyme Pharmaceuticals is developing a new class of drugs based on
Professor Thomas R. Cech's discovery of "ribozymes," for which he shared a
Nobel Prize. Ribozymes, a form of ribonucleic acid ("RNA"), have the ability to
selectively inhibit protein production. Because many human disease states
result from abnormal protein production, we believe that ribozymes are
applicable to a wide range of human diseases. We are currently conducting
preclinical development and clinical trials for our two lead product
candidates, ANGIOZYME and HEPTAZYME. We are collaborating with Chiron for the
development and commercialization of ANGIOZYME, a drug for the treatment of
solid tumor cancers. We are collaborating with Lilly for the development and
commercialization of HEPTAZYME, a drug for the treatment of Hepatitis C, a
viral liver disease. Ribozymes also are useful in identifying the function of
specific genes (target validation) and in diagnosing disease. Our primary
business focus is to use our patented technology to develop a new class of
drugs containing ribozymes to treat or prevent human disease. In 1998, we
transferred our target validation and discovery technology to Atugen in return
for a substantial equity interest.
The traditional process of drug discovery and development
Traditional drug discovery and development is difficult, time consuming and
extremely costly. Historically, diseases have been treated using drugs
developed based on clinical observation of symptoms which were correlated with
abnormal physiological processes and, where possible, biochemical changes. Most
drugs are chemicals designed to inhibit the function of a targeted molecule
with as few unwanted side effects as possible. Drug discovery is a complex
process, which includes:
. selecting a target (usually a protein),
. developing a screening assay,
. chemically synthesizing large numbers of different molecules tested in
cell cultures and in animal models for their effect on the target,
. using those test results to narrow down the number of molecules, and
. refining the molecules through additional chemical synthesis and testing.
Unfortunately, drugs produced from this traditional process may have
undesirable side effects due to interactions with non-targeted molecules. These
side effects can limit the effective use of a drug.
Pharmaceutical companies are under intense competitive pressure to identify
and commercialize novel drugs having fewer side effects more quickly and cost
effectively. Pricing pressures from managed care organizations, governmental
agencies and other third-party payors, coupled with the proliferation of new
technologies that offer revolutionary approaches to drug design and
development, are causing major changes in the drug development process.
Genetic function and human disease
The abnormal production of proteins, which are products of genes, directly
causes many human diseases. The abnormality may be due to a defective gene or
to the over- or under-production of a protein by a "normal" gene. The abnormal
production of proteins may have direct effects on cells within the body or may
initiate a series of events involving other proteins within the body, thereby
producing disease. The gene functions of infectious agents, such as viruses,
allow replication and growth of infectious agents in the human body.
Production of proteins from genes, called protein "expression," generally
involves two steps. First, the information from the DNA sequence of the gene is
"transcribed" to mRNA. The second step involves
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"translation" of the mRNA and its information into a protein. The process by
which genetic information is "expressed" in the form of a protein is highly
selective; production of a particular protein generally requires its own
specific DNA sequence which leads to a corresponding specific mRNA sequence.
Blocking a gene's function, and hence the production of its associated
proteins, is an increasingly vital tool in treating and diagnosing human
disease.
Our ribozyme technology
Our approach to drug discovery and development begins by either identifying a
gene in humans causing or contributing to disease or identifying an essential
gene in a disease-causing infectious agent. We analyze the nucleotide sequence
of the target gene and create a complementary ribozyme nucleotide sequence.
A ribozyme is a sequence of nucleotides that has a catalytic core capable of
cleaving a specific mRNA molecule. Ribozymes act as "molecular scissors" by
cutting mRNA molecules into two ineffective strands, thereby preventing protein
production. Each ribozyme destroys only a specifically targeted mRNA sequence,
thereby minimizing the risk of unwanted side effects. In addition, ribozymes
can be used to identify gene function and validating the disease contributing
function of a specific gene. In this way, ribozymes assist in the
identification of new drug candidates. Our ribozyme technology is an important
bridge between the growing body of knowledge regarding gene function and its
contribution to the treatment or prevention of human diseases.
We initially test the effectiveness of the ribozyme in cell cultures or in
animal models. If the ribozyme reduces or stops production of the protein
associated with the disease, or slows the associated growth or spread of the
disease, not only has the disease contributing function of the gene been
validated, but also a drug candidate has been identified.
Once we identify a target gene and related ribozyme, we optimize the
ribozyme's effectiveness by (1) varying the length of the portion of the
ribozyme which binds to the mRNA to maximize the ribozyme's selectivity and (2)
modifying the chemical structure to increase the ribozyme's stability in the
human body. To successfully commercialize ribozyme products to treat or prevent
human disease, we must successfully deal with technical issues such as:
. ribozyme design,
. stability,
. selectivity,
. drug delivery and cellular absorption,
. safety,
. effectiveness, and
. manufacturing synthesis and scale up.
To date, we have achieved a number of significant milestones important to the
development of ribozymes and related technical issues, including the following:
Design. We have developed a proprietary computer program to design ribozymes
against sites in a target mRNA sequence. This program allows us to accelerate
the identification of potential ribozyme product candidates and design multiple
back-up candidates.
Stability. To be useful as a treatment, a ribozyme must remain stable in
human serum and cells long enough to destroy the targeted mRNA and ideally long
enough for each ribozyme molecule to destroy several mRNA molecules. Unmodified
ribozymes are stable and fully active in human serum for only a few seconds. We
have successfully produced chemically-modified ribozymes that are stable and
fully active in
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human serum and cells for more than 10 days. We believe this level of stability
will be sufficient for ribozymes to be effective drugs.
Selectivity. Based on third-party studies and our internal work, we believe
that a ribozyme with a binding region of approximately 15 nucleotides is
optimal. A binding region of this length is expected to match, on a statistical
basis, only one specific mRNA sequence in the entire human genome. Since the
ribozyme should interact only with the target mRNA, it should not affect other
gene function and, therefore, should not have side effects when used as a drug.
The high degree of selectivity of ribozymes has been demonstrated both by us
and by third parties.
Drug Delivery and Cellular Absorption. Successful development of any drug
requires that the drug be delivered to the desired site in the body. We are
exploring local and systemic delivery of chemically synthesized ribozymes, as
well as vector delivery. For example, we have demonstrated systemic delivery of
chemically synthesized ribozymes without any delivery vehicle using either
intravenous or subcutaneous delivery in several animal models and in humans.
Additionally, we have identified several proprietary carriers which, when
combined with chemically synthesized ribozymes, have shown significant
increases in the effective delivery of ribozymes to a variety of different cell
types relative to ribozymes without a carrier.
Safety. We have completed single and multiple dose animal safety studies with
several ribozymes which have confirmed the ribozymes' lack of toxicity. For
example, ANGIOZYME has shown a lack of toxicity in rodents and monkeys. As a
result, the FDA has allowed initial human clinical trials to be carried out in
healthy volunteers. A Phase Ia trial in healthy volunteers has now been
completed and has shown an excellent safety and tolerability profile.
Effectiveness. We have demonstrated through internal research and in
conjunction with our collaborators that our ribozymes reduce the amount of
target mRNA and the level of corresponding protein produced as well as inhibit
the spread of disease. Studies showing the effectiveness of ribozymes have been
conducted in multiple animal models for cancer in both models of solid tumor
growth and metastasis, and in cell cultures for viral replication.
Manufacturing Capabilities and Scale Up. To meet our needs for preclinical
studies, clinical trials and the eventual commercialization of ribozymes, we
must have the ability to manufacture a sufficient amount of ribozymes. We and
our collaborators have developed proprietary technology allowing us to
synthesize several thousand stabilized ribozymes in milligram quantities per
month. These quantities are sufficient to permit us to perform direct cell-
based screening of multiple potential target sites in short periods of time. We
have also developed the capability to manufacture kilogram quantities under the
FDA's current good manufacturing practices ("cGMP"). In addition, when we
combine our manufacturing capabilities with available contract manufacturing,
we expect to be able to produce those drugs currently under development in
sufficient quantities, and of the quality required by the FDA, for our
anticipated clinical trials.
The potential advantages of ribozymes in treating a disease
We believe that ribozymes offer the following advantages over traditional
approaches to treating diseases:
Potential Broad Applicability. Once a gene has been identified, a ribozyme
can be designed to target and destroy the associated mRNA to inhibit the
related gene function. Therefore, all diseases for which a gene can be
identified as a cause or an essential contributing factor of diseases are
potentially treatable with a ribozyme drug. In addition, identifying the
essential genes of viruses and other infectious agents that cause human disease
creates the potential to develop ribozyme products to inhibit these genes from
functioning and, consequently, prevent the targeted infectious agent from
surviving or reproducing.
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High Selectivity. The mechanism by which traditional drugs act on a target
gene or protein often is not well understood. Consequently, the side effects of
such drugs are difficult to predict and characterize. Side effects may be
reduced or avoided by using ribozymes designed to attach to and cut only a
specific targeted mRNA, a significant advantage over traditional drug
therapies. We have observed the selectivity of ribozymes in both animal studies
and human clinical trials. Because of this selectivity, only the function of
the targeted genetic sequence is affected; other molecules and gene functions
are not altered.
Destruction of Target. Instead of temporarily preventing gene function like
traditional drugs, ribozymes destroy the target mRNA and stop the associated
protein production. By contrast, most drugs do not destroy their target. This
inherent feature of ribozymes may offer significant advantage in the treatment
of diseases caused by infectious agents such as viruses. For example, cleavage
of target viral mRNA by ribozymes will inhibit the virus's ability to
propagate, which may cause significant reduction in viral load in the patient.
Our business strategy
Our primary business objective is to use our technology to identify and
develop drugs containing ribozymes to prevent or treat human disease. Our
secondary objective is to license our technology to others on terms which could
provide us an economic benefit. Our strategy for achieving these objectives
includes the following goals:
Develop Identified Product Candidates. We are developing two products,
ANGIOZYME and HEPTAZYME. In collaboration with Chiron, we are developing
ANGIOZYME for the treatment of solid tumor cancers and metastasis, and possibly
for other diseases that require extensive new blood vessel formation. We have
completed a Phase Ia clinical trial for ANGIOZYME in healthy volunteers. We
will soon commence Phase Ib clinical trials in cancer patients. Internally, we
identified a second product, HEPTAZYME, for the treatment of Hepatitis C. In
collaboration with Lilly, we are conducting preclinical testing for HEPTAZYME
and we plan to file an IND before year-end.
Identify New Product Candidates. We have developed a variety of sources to
identify additional product candidates. Internally, we are researching several
product candidates and intend to begin preclinical testing and development of
one of these product candidates by year-end. We believe that our relationship
with Atugen could provide an important source of new product candidates for us.
Atugen will seek additional partners in the pharmaceutical and biotechnology
industries using Atugen's gene function identification and validation
technology. We have retained rights to develop ribozymes against any targets
validated by Atugen on its own or for its partners. We are engaged in several
collaborations to validate selected genetic sequences as candidates for drugs
development. Under these collaborations, we have the right to develop ribozyme
products against validated targets not developed by our collaborators.
Partner with Others to Develop Products. We intend to develop our products in
collaboration with larger corporate partners. In the past, we have entered into
collaborations prior to identifying product candidates and performing the
research and preclinical testing necessary to bring such products to
development. In the future, we intend to demonstrate a product candidate's
commercial potential through preclinical testing and, perhaps, early clinical
trials using internally funded research. We believe entering into a development
collaboration after a product's potential has been demonstrated will improve
our negotiating position. Our development process with HEPTAZYME prior to
entering into the Lilly collaboration is an example of this new partnering
strategy.
Focus on Human Therapeutics and License Other Applications of Our
Technology. We will look for opportunities to license our technology on terms
which provide a reasonable opportunity for significant business benefit. In
late 1998, we transferred our gene function identification and validation
technology to Atugen in exchange for an equity interest in Atugen. We expect
Atugen to continue to build the target validation and discovery business by
actively pursuing collaborations with new corporate partners. We will benefit
from Atugen's activities through our ownership interest in Atugen, as well as
through the rights we retained to develop ribozymes against targets validated
by Atugen.
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Maintain and Expand Patent Portfolio and Proprietary Technology. To maximize
the value of our technology, we dedicate substantial resources to the discovery
of new inventions. We aggressively pursue patent protection. We currently own,
or have exclusive licenses to, 84 issued or allowed patents worldwide and have
over 100 patent applications pending worldwide.
Our product programs
The development process for our products starts with research and preclinical
development. Research includes identification of a target protein, synthesis of
an appropriate ribozyme to block expression of the target protein, and testing
the activity of the ribozyme in a specific cell population. Preclinical testing
includes pharmacology and toxicology testing in cell cultures and animal
models, product formulation, dosage studies and manufacturing scale-up for
submission of the necessary data to comply with regulatory requirements of the
FDA and similar agencies in other countries prior to commencement of human
trials. Regulatory requirements concerning the conduct of clinical trials are
described below in the section "--Government regulation of our drug development
activities."
We are currently in various stages of development and clinical trials for two
products. ANGIOZYME is being developed to treat solid tumor cancers, but it may
also be applicable to other diseases such as diabetic retinopathy and macular
degeneration. HEPTAZYME is being developed to treat Hepatitis C.
Angiozyme
For a cancerous tumor to grow, the body must generate new blood vessels
surrounding the tumor to supply the blood necessary for tumor growth, a process
known as angiogenesis. In many cases, the Vascular Endothelial Growth Factor
("VEGF") molecule and its receptor are essential to angiogenesis. ANGIOZYME was
developed to inhibit the production of the VEGF receptor, thereby slowing or
stopping angiogenesis and related tumor growth. Animal studies conducted by us
and by independent third parties showed dramatic reduction in tumor growth and
metastasis. Animal studies using ribozymes alone and in conjunction with
existing cytotoxic cancer therapies demonstrated the elimination of metastasis
of the cancer. As a result of our research and preclinical studies, the FDA
approved an IND allowing us to begin clinical trials. We completed Phase Ia
clinical trials in healthy volunteers in January 1999. These trials, conducted
on 14 healthy volunteers, demonstrated safety and tolerability and showed no
drug related side effects. We will soon commence Phase Ib clinical trials
testing safety and tolerability in at least 16 cancer patients with a broad
spectrum of solid tumors and metastasis. We expect to initiate Phase II
clinical trials prior to the end of 1999.
If the results of clinical trials are positive, ANGIOZYME could be developed
as a treatment of some solid tumor cancers such as cancers of the lung, breast,
prostate, colon and rectum. These cancers account for over 750,000 new cancer
cases and over 200,000 deaths per year in the United States alone. In addition,
ANGIOZYME could also be used in products for the treatment of other diseases in
which angiogenesis is a contributor such as the eye diseases, macular
degeneration and diabetic retinopathy.
ANGIOZYME is being developed in collaboration with Chiron. We have control of
all development activities and decision. The material terms of the agreement
with Chiron are discussed below.
Heptazyme
We are developing a potential product to treat Hepatitis C, a viral disease
of the liver ("HCV"). There are over four million chronically infected persons
in the United States and over 175 million worldwide. HCV infects approximately
50,000 people with over 10,000 deaths associated with HCV each year in the
United States. It is the most common blood borne infection in the United States
and has been identified as a "silent epidemic" and "a daunting challenge to
public health" by the United States Congress.
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Current therapies for HCV are effective in less than 50% of existing patients
and they have serious side effects. Our research and preclinical testing has
indicated that HEPTAZYME selectively cuts HCV RNA in a manner that
significantly inhibits viral replication in cell culture. These results were
presented at a meeting of the American Association for the Study of Liver
Diseases in November 1998. It is also expected to be effective against all
known HCV sub-types, which now number over 90. We intend to conduct toxicology
and other preclinical studies commencing in the second quarter of 1999 and file
an IND with the FDA by the end of 1999.
HEPTAZYME is being developed in collaboration with Lilly. The material terms
of the agreement are described below.
Other Programs. In collaboration with Chiron, the City of Hope and Children's
Hospital (Los Angeles), we have successfully completed a gene therapy HIV Phase
I/IIa clinical trial. The treatment phase of this trial was completed in
December 1997. Five patients were treated, and no drug-related toxicities were
observed. In 1998, a proof-of-principle Phase II clinical trial in AIDS
Lymphoma patients was initiated. The pilot trial is intended to assess the
viability of the gene therapy approach for delivering anti-HIV ribozymes. The
commercial viability of current gene therapy technologies and thus the future
of this program will be decided during 1999.
Internally, we are researching several product candidates and intend to begin
preclinical testing and development of one of these product candidates by year-
end.
Chiron Collaboration. In July 1994, we entered into an agreement with Chiron
to collaborate exclusively on up to five specific targets selected by Chiron.
Four targets are currently subject to the exclusivity provision, including
ANGIOZYME and the target of our HIV product, thus Chiron has the right to
select an additional exclusive target. From time to time during the term of the
collaboration, Chiron also has the right to reserve four potential targets. In
addition, Chiron may replace exclusive targets with other targets including
reserved targets. No target may be selected as an exclusive or reserved target
if the rights to such target have been granted to a third party or such target
is the subject of an active internal development program.
Unless otherwise mutually agreed, no target may be reserved for more than 18
months after its designation. During the 18-month period, we cannot develop, or
grant rights to third parties to develop, products against a reserved target.
Following such period, Chiron will not have any rights to a reserved target
unless during the 18-month period the reserved target replaces another target
as an exclusive target.
Pursuant to the collaboration, we commenced a five-year joint research
program which expires in July 1999. During the five-year program, each party
pays for its own research and preclinical development of products. Additional
collaborative research may be done on a product against targets by mutual
agreement and either party may research and conduct preclinical testing on its
own, at its own cost.
Either party may propose that an IND be submitted and Phase I clinical trials
be commenced for a product against exclusive targets. If the other party does
not agree to share equally in the development costs through Phase I clinical
trials, the party not sharing in the Phase I development cost forfeits any
rights to the proposed product.
If, after jointly funded Phase I clinical trials have been completed, one
party discontinues funding its share of the costs of clinical development that
party would not share equally in the profits from product sales but would
receive a royalty based on net sales of that product. However, the non-
participating party may regain its interest in the profits of the product by
repaying the other party one-half of the development costs incurred solely by
the other party, plus a predetermined risk premium, at either the commencement
of Phase III testing or the filing of a New Drug Application ("NDA") or Product
License Application ("PLA").
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In some instances we may pay up to 50% of such payment in shares of common
stock. If development of a product is funded equally by the parties, we will
share equally the profits from product sales.
We have retained the right to manufacture chemically synthesized ribozyme
products resulting from the collaboration whether developed jointly or
individually by each party.
Chiron holds exclusive worldwide marketing rights for all jointly developed
products, subject to a co-promotion agreement for sales in North America and
Europe. In Asia, Chiron has exclusive marketing rights with the right to
sublicense, although we have retained the right to share in 50% of the profits.
The collaboration terminates on the later of (1) 30 years after the first
commercial sale of the last jointly developed product arising out of the
collaboration or (2) upon the expiration of patents or 15 years after the first
commercial sale for a solely developed product.
As part of the collaboration, in 1994 Chiron made an equity investment of
$4.36 million in our stock. In addition, Chiron purchased 377,202 shares of our
common stock for $3.64 million in 1996. Also in 1996, Chiron purchased warrants
for 444,444 shares of our common stock for $2.0 million, exercisable at a price
of $22.50 per share with an expiration date of December 30, 2004.
We and Chiron could not reach agreement on a development plan for ANGIOZYME.
In consideration for the payment by Chiron of $5.0 million of our research
costs related to ANGIOZYME prior to the filing of the IND for ANGIOZYME, we
amended the collaboration agreement in the following manner. If the parties do
not agree as to the plans, timing or budget for any development activities, our
proposed plans, timing and budget will be adopted but we must then fund 55% of
the costs for such development activities. If the total costs do not exceed our
proposed budget, Chiron must pay us 5% of the total costs incurred for such
development activities.
Lilly Collaboration. In March 1999, we entered into a collaboration with Eli
Lilly and Company ("Lilly") pursuant to which Lilly was granted the exclusive
worldwide right to develop and commercialize HEPTAZYME and any other ribozyme
drug for the treatment of HCV infection. If Lilly abandons or does not
diligently pursue the development of HEPTAZYME or another ribozyme drug for the
treatment of HCV infection, all rights to HEPTAZYME and such other ribozymes
revert to us, subject to the right of Lilly to receive royalty payments, if
applicable, on the sale of products developed by us or our third-party
collaborators.
Lilly will pay us $9.2 million in 1999, which includes: funding for research,
clinical trial materials and a $7.5 million equity investment. Including
development milestones, which we will be entitled to receive if a commercial
product is offered for sale in the United States, Europe and Japan, we would
receive as much as $38 million, including the $9.2 million. In addition we will
be entitled to royalties on the sale of products developed pursuant to the
collaborations. We would also realize increased revenues from product
manufacturing and research.
We have the right to manufacture all ribozymes for clinical trials. In
addition, we have the manufacturing rights for any commercial product developed
from the collaboration subject to Lilly's right to manufacture a portion of the
commercial product, in which event Lilly must pay us an increased royalty on
product sales.
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Gene Validation
We developed a gene function identification and target validation business
internally to generate revenues and accelerate the discovery of potential drugs
using ribozymes. We entered into gene function identification and target
validation agreements with Schering AG, Chiron, Parke-Davis, Roche and
GlaxoWellcome and developed with our collaborators additional technologies
helpful in target validation and discovery. These technologies use ribozymes
and other oligonucleotides to block the function of genetic sequences selected
by our partners. The effect of the ribozyme or other oligonucleotides in cell
cultures or animal models is then analyzed to determine whether the protein
associated with the disease or the disease itself is reduced or eliminated.
Alternatively, a genetic sequence, the function of which is unknown, can be
analyzed using ribozyme inhibition in a collection of cell culture assays or
animal models that represent a broad range of biological functions.
Gene Validation Collaborations. We entered into gene function identification
and target validation agreements with various collaborators and granted
licenses to these collaborators to use our technology to develop products
identified or validated under these collaborations.
. Schering AG. In April 1997, we entered into a research collaboration with
Schering AG focusing on the use of ribozymes and related technologies for gene
function validation. We provide our expertise in ribozyme design, synthesis and
delivery, and Berlex Laboratories, Inc., a United States subsidiary of Schering
AG, provides candidate gene or expressed sequence tag targets, screening in
cell culture and animal models as well as development and commercialization
expertise to the collaboration. We anticipate that hundreds of potential
targets may be examined over a five-year period.
Schering AG may reserve exclusive rights to a specified number of targets at
any time. Rights to a Schering AG target will revert to us, however, if
Schering AG is not developing or selling a product against such target.
Schering AG may not reserve exclusive rights to a target if we have granted a
third party license for products against that target or we are conducting an
active internal program for the development of a product against that target.
Schering AG has a license to commercialize both ribozyme and non-ribozyme
products from any validated targets subject to paying us certain milestone
success fees and royalties on product sales. We have the right to manufacture
ribozyme products developed by Schering AG and to develop independently any
ribozyme product not developed by Schering AG, unless Schering AG is developing
a non-ribozyme product against the same target and agrees to pay specified
milestone success payments to us in exchange for our relinquishing our right to
make ribozyme products against such target.
In May 1997, Schering AG purchased 212,766 shares of our common stock for
$2.5 million and in 1998 Schering AG purchased 465,117 shares of common stock
for $2.5 million. Separately, Schering AG provided loans of $2.0 million in
both 1997 and 1998. We received an additional $1.0 million on this loan
facility in January 1999. Schering AG will continue to provide loans of up to
$2.0 million annually through 2001, provided that the collaboration continues
in each of those years. If Schering AG does not continue the collaboration, we
will need to seek alternative sources of financing. The loans, which carry an
interest rate of 8% per annum, are immediately convertible into equity at
Schering AG's option. At December 31, 1998, our outstanding borrowings of $4.3
million were convertible into approximately 992,000 shares of our common stock.
Principal and interest payments are deferred until maturity of the loans which
is in April 2004. In addition, Schering AG made research payments of $1.5
million in 1997 and $2.0 million in 1998 and, provided that the collaboration
is continued, will make research payments of $2.0 million a year through 2001,
but Schering AG may terminate its collaboration at any time. Upon payment of
termination fees to us, the research collaboration may be terminated at
Schering AG's option at any time.
. Roche. In May 1998, we entered into a gene function identification and
target validation collaboration with Roche. Roche may obtain the exclusive
right to up to a specified number of targets over approximately five years if
it requests and pays for validation research for such targets. Roche may
reserve the rights to all targets related to a particular disease for up to
three years. It may not obtain the rights to products for a target or disease
which we have granted to third parties or to targets which we have patented
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or for which we have pending patent applications. We do not receive periodic
fees from Roche but rather Roche pays us a set amount for the specific research
activities conducted on its behalf and for materials used in the research
program.
Roche also is obligated to make payments for successful target validations.
Roche has the right to develop ribozyme or non-ribozyme products against
targets discovered or validated under the collaboration subject to the payment
to us of milestone success fees and royalties on product sales. We have the
right to manufacture ribozyme products developed by Roche and to develop
independently any ribozyme product not developed by Roche.
. GlaxoWellcome. In July 1998, we entered into an agreement with
GlaxoWellcome to evaluate our gene function identification and validation
technology on a limited number of genes. GlaxoWellcome paid research fees to us
in connection with the evaluation program for reagents plus the cost of any
services or additional reagents requested by them. We will not be entitled to
any royalties or other payments in connection with products developed by
GlaxoWellcome against the initial targets covered by the evaluation agreement.
. Chiron. In May 1996, we entered into a gene function identification and
target validation collaboration with Chiron for the use of ribozymes to
validate gene function. We and Chiron each pay a portion of the research and
development expenses of the collaboration. We paid Chiron $1.8 million for
research funding related to the collaboration. We do not receive periodic fees
but rather Chiron pays a predetermined amount for materials actually used in
the collaboration. The collaboration with Chiron is substantially complete, but
we may be obligated to perform additional work.
Chiron has the option to reserve exclusive rights to a specified number of
targets for up to two and a half years as well as the exclusive right to any
products developed against the targets subject to the collaboration. We are
entitled to: (1) receive success payments related to the development of any
products arising under the agreement; (2) receive milestone success payments
for the development of ribozyme products and royalties on sales of any
commercial products containing ribozymes; (3) manufacture synthetic ribozymes;
and (4) develop any ribozyme product not developed by Chiron subject to the
payment of royalties on product sales to Chiron. Chiron also has the right to
manufacture endogenously delivered ribozyme products developed by us.
. Parke-Davis. In March 1998, we entered into a gene function identification
and target validation collaboration with Parke-Davis to use our technology to
validate genes as therapeutic targets. We do not receive periodic fees but
rather Parke-Davis pays for our research and for materials provided by us.
Parke-Davis will have the exclusive right to develop oligonucleotide products
against targets validated under the collaboration pursuant to a mutually
satisfactory license which we anticipate would provide for the payment of
milestone success fees and royalties on product sales. The collaboration with
Parke-Davis is substantially complete, but we may be obligated to perform
additional work.
We expect to subcontract these agreements to Atugen in the future, subject to
the consent of our collaborators. If an agreement is subcontracted to Atugen,
we will retain any rights we have now under the collaboration to (1) milestone
success payments under the collaboration agreement; (2) royalties on products
developed by our collaborators; and (3) develop ribozyme products which our
collaborators choose not to develop under the terms of the agreements subject
to royalties from product that may be payable to our collaborators.
Formation of Atugen. In 1998, we transferred our gene function identification
and target validation technologies to Atugen in exchange for an equity interest
in Atugen. This opportunity was attractive to us because substantial funding
was available from both outside investors and the German government. This
funding would not otherwise have been available to us and should allow us to
benefit indirectly from Atugen's expansion of the target validation business
and technology.
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We will benefit from Atugen's activities in the future in several ways:
. we retain an interest in Atugen and, as of December 31, 1998, owned 49.5%
of its equity,
. we have the right to develop ribozymes against targets validated by
Atugen for its customers,
. we will be paid by Atugen for ribozymes and other material manufactured
by us pursuant to our exclusive manufacturing rights,
. we will be paid by Atugen for a portion of our costs of prosecuting
patents applicable to Atugen's business,
. we will be paid by Atugen for certain administrative and other services
rendered by us to Atugen, and
. we retain the right to use the target validation and discovery technology
in non-high throughput applications for our own use and in connection
with limited research and development collaborations with third parties.
Financing for Atugen was accomplished through a combination of venture
capital investment, an investment by us and German government grants and loans.
We contributed $2.0 million in cash to Atugen. On December 31, 1998, we owned a
49.5% equity interest in Atugen. Our equity interest in Atugen is subject to
dilution if additional equity is issued for any purpose, such as to raise
additional capital in connection with acquisitions or in connection with stock
option or similar incentive plans for Atugen employees.
We have the right to name two of six designees to Atugen's Board of Directors
and the Chairman of the Board for as long as we and BB BioVentures together own
a majority of Atugen's outstanding stock. Nonetheless, most corporate actions
taken by Atugen require a 75% vote or consent of the holders of Atugen's
outstanding stock.
Pursuant to a service agreement with Atugen, we provide a business
development team which devotes 50% of its time to support Atugen's business
development efforts for nine months and, at Atugen's option, for an additional
three months. Our CEO, CFO and Vice President of Research, Dr. Christoffersen,
Mr. Bullock and Dr. Usman, respectively, devote up to 25% of their time to
Atugen activities for the first six months to ensure a smooth transfer of
technology. They will make every reasonable attempt to accommodate any
additional time needed by Atugen during or after the six month period.
As part of the formation, Atugen received exclusive royalty-free licenses to
our extensive patents and technologies for target validation and discovery. We
received a one-time $2.0 million license payment in 1999 for a portion of the
licensed technology. The initial technology base includes our entire gene
function identification and target validation technologies for both chemically
synthesized and expressed nucleic acids, including target site selection, cell
culture assays, RNA and other assays, optimized delivery vehicles and animal
pharmacology.
Atugen's primary goal is to accelerate discovery and validation of human
health therapeutic targets. It will provide a variety of technologies and
services to utilize information emerging from human genome sequencing efforts
to determine which genes are key factors causing human disease. The significant
technology base transferred from us to Atugen combined with the substantial
initial capitalization should allow Atugen to improve the speed and certainty
of identifying and validating new therapeutic targets both for corporate
partners and for internal use. As part of the formation, Atugen acquired
Transgenics Berlin-Buch GmbH in return for equity in Atugen. This transaction
provides Atugen with transgenic animal capabilities, allowing early and rapid
animal model assessment of the effect of inhibiting expression of a targeted
gene sequence using a ribozyme. Atugen formally opened its research and
administrative facilities in January 1999 on the Biomedical Research Campus of
the Max Delbruck Center in Berlin-Buch, Germany.
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Other licenses
An element of our business strategy is to enter into licensing agreements or
other arrangements to exploit our technology. We seek licensing partners who
pursue the development of drugs for human diseases and other applications of
our technology which we cannot otherwise develop due to our limited resources.
In the past, we have entered into the following two licenses for such
activities.
Dow AgroSciences LLC. In September 1993, we entered into a collaborative
research feasibility study with Dow AgroSciences LLC. The goal of the
feasibility study was to demonstrate the ability of ribozymes to alter corn oil
traits. Dow AgroSciences provided research support for the feasibility study
conducted by us. The feasibility study was completed successfully in April 1997
and we entered into a long-term license agreement with Dow AgroSciences. The
agreement provides Dow AgroSciences with a worldwide, non-exclusive license to
some of our technology to commercialize oil, meal and starch products in corn
and several other crops. As consideration for the long-term license agreement,
41,666 shares of our common stock held by Dow AgroSciences were returned to us.
We will receive royalties on products sold; however, we do not expect to
receive royalties, if any, from this license for a substantial period of time.
IntelliGene. In March 1997, we granted a worldwide exclusive license to some
of our technology to IntelliGene to develop and sell diagnostics for several
target diseases using ribozymes. IntelliGene is a private, venture-backed
biotechnology company headquartered in Jerusalem, Israel with an office in
Sudbury, Massachusetts. IntelliGene is developing diagnostic products using
ribozymes created using a process called in vitro evolution. The agreement
provides for IntelliGene to develop diagnostic tests initially against six
infectious diseases in their laboratories in Jerusalem and elsewhere, and to
develop, make and sell diagnostic products based on these tests, either alone
or through sublicenses. We received a license fee and will receive royalties on
product sales. We do not expect to receive royalties, if any, from this license
for a substantial period of time.
Our competition
We are engaged in the rapidly changing business of developing treatments for
human disease through gene modulation. Competition among entities attempting to
develop gene modulation products for disease treatment is intense and is
expected to increase. We face direct competition from other companies engaged
in the research, development and commercialization of ribozyme-based technology
as well as competition from companies attempting other methods of gene
expression control, such as antisense and triplex. In addition, we compete with
large pharmaceutical companies and established biotechnology firms, many of
whom are developing new products for the treatment of the same diseases
targeted by us. In some cases, those companies have already commenced clinical
trials for their products. Many of these companies have significantly greater
financial resources and expertise in research and development, manufacturing,
preclinical studies and clinical trials, obtaining regulatory approvals and
marketing than us. Our collaborators and licensees may be conducting research
and development programs directed at the same diseases that we are targeting.
Smaller companies may also prove to be significant competitors, particularly
through collaborative arrangements with large pharmaceutical and biotechnology
companies. In addition, companies that complete clinical trials, obtain
required regulatory approvals and commence commercial sales of their products
before their competitors may achieve a significant competitive advantage.
Academic institutions, governmental agencies and other public and private
research organizations also conduct research, seek patent protection and
establish collaborative arrangements for products and clinical development and
marketing. These companies and institutions compete with us in recruiting and
retaining highly qualified scientific and management personnel.
In addition, we face competition based on product efficacy, safety, the
timing and scope of regulatory approvals, availability of supply, marketing and
sales capability, reimbursement coverage, price and patent position.
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Our patents and proprietary technology
Protecting patents and other proprietary rights is crucial to developing our
business. In addition to patents, we rely upon trade secrets, know-how and
continuing technological innovations in the design, synthesis, and purification
of ribozymes and in nucleic acid chemistry. We also rely on licensing
opportunities to develop and maintain our competitive position. It is our
policy to file patent applications when appropriate to protect technology,
inventions, and improvements that are considered important in the development
of our business.
At the core of our technology are inventions and patents of the University of
Colorado developed by Dr. Thomas R. Cech and various of his associates.
Pursuant to the University's policies, these inventions and the related patents
(the "Cech Technology") became the property of the University. The Cech
Technology was assigned to the University's affiliate, University Research
Corporation ("URC"), which in turn assigned the rights to license parts of the
Cech Technology to Competitive Technologies, Inc. United States Biochemical
Corporation ("USB") licensed the Cech Technology pursuant to two sublicenses.
We have entered into a license with URC and sublicenses with USB and
Competitive Technologies pursuant to which we have obtained the exclusive
(except for non-commercial academic research) worldwide right to the Cech
Technology to, among other things, make, use and sell ribozymes and ribozyme
products covered by the licensed patents. The URC license and USB sublicense
are fully paid. The Competitive Technologies license provides for the payment
of a royalty on sales of ribozyme products covered by the licensed patents. We
may grant sublicenses to the licensed technology subject to the payment to
Competitive Technologies of a share of royalty income from such sublicenses or
a royalty on sales from sublicensed products, methods or services, depending on
the particular licensed patents involved. In addition, we must pay Competitive
Technologies a share of any option fee, license fee, prepaid royalty or other
"front-end" fee other than research and development funding paid in connection
with such sublicense.
In September 1993, we were granted a right of first refusal to license any
new inventions, improvements and patents related to ribozyme technology
developed by Dr. Cech or others at the University, in exchange for payments. To
maintain this right, we agreed to fund research at CU through an unrestricted
grant of $750,000 payable in various installments over a five-year period. This
grant has been paid in full. In addition, we have agreed to pay CU a fee for
each invention accepted by us under the license.
As part of our overall intellectual property strategy, we selectively enter
into agreements with academic institutions either to license pre-existing
technology or to support the development of new technologies and gain the
commercial rights to such new technologies.
As a result of these licenses and sublicenses, and our own internal research,
we currently have the rights to 84 issued or allowed patents, and more than 100
patent applications under consideration worldwide. This includes exclusive
worldwide rights to 61 patents issued in the United States, 3 patents issued in
Europe, 1 patent issued in Japan and 8 patents issued in Australia. In
addition, Notices of Allowance have been received for at least 11 patents from
the United States Patent and Trademark Office. Six of the 61 United States
issued patents, 1 European patent and 1 Japanese patent cover enzymatic RNA and
the use of an enzymatic RNA to cleave a single stranded RNA (the "Cech
Patents"). The Cech Patents grant us the right to exclude others from
practicing ribozyme technology as it is currently known to us in the United
States, Europe and Japan irrespective of the application, the method of
production, the method of purification, or the ribozyme motif used. Unless
extended, the Cech Patents will expire in December 2008 in the United States
and December 2007 in Europe and in Japan. The additional issued patents cover
both ribozyme technology (e.g., ribozyme design, synthesis, chemical
modifications, delivery, ribozyme motifs, vector production, target site
selection) as well as application to specific therapeutic targets.
In addition, we have filed or hold exclusive licenses to more than 100
pending United States and related foreign applications. Our patent portfolio
includes approximately 40 United States applications for various
areas of interest in human therapeutics and diagnostics and agricultural uses.
The portfolio also includes
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approximately 80 United States applications related to the chemistry, design,
optimization, manufacture and delivery of ribozyme products. These patents
collectively extend our ribozyme patent coverage well beyond the life of the
Cech Patents.
We have filed opposition documents against two patents granted to a
competitor in Europe. Opposition proceedings against two of our European and
Japanese patents have been initiated by our competitors. The Japanese
Opposition Division has rejected competitor oppositions, and has issued a
notification that it will maintain our Japanese patent without change. The
opposition proceedings against our European patent are still ongoing. In
addition, we anticipate interference proceedings against some of our patents
and patent applications in the United States. Our patents and applications are
soundly based, but the extent of protection may vary in different countries and
no assurance can be given that any patent will provide commercially significant
protection or will not be challenged, invalidated, or circumvented. Litigation
could prove necessary to protect our patent position, which would result in our
incurring substantial costs as well as diverting our efforts. Atugen will be
responsible for the patent prosecution costs for patents transferred to it.
Competitors or other patent holders could bring legal actions against us
involving our patents, patent applications or rights to use proprietary
technology. If any actions succeed, in addition to any potential liability for
damages, we could be enjoined from selling the affected product, or be required
to obtain a license in order to continue to manufacture or market the product.
There can be no assurance that we would prevail in any such action or that any
license required under any such patent would be made available on acceptable
terms, if at all. There has been, and there will likely continue to be,
significant litigation in the pharmaceutical industry regarding patent and
other intellectual property rights. Any additional litigation could consume a
substantial portion of the our resources regardless of the outcome.
Government regulation of our drug development activities
The development, manufacture and potential sale of therapeutics is subject to
extensive regulation by United States and foreign governmental authorities. In
particular, pharmaceutical products undergo rigorous preclinical and clinical
testing and to other approval requirements by the FDA in the United States
under the federal Food, Drug and Cosmetic Act and the Public Health Service Act
and by comparable agencies in most foreign countries.
Before testing agents with potential therapeutic value in healthy human test
subjects or patients may begin, stringent government requirements for
preclinical data must be satisfied. The data, obtained from studies in several
animal species, as well as from laboratory studies, are submitted in an IND
application or its equivalent in countries outside the United States where
clinical studies are to be conducted. Preclinical data must provide an adequate
basis for evaluating both the safety and the scientific rationale for the
initiation of clinical trials.
Clinical trials are typically conducted in three sequential phases, although
these phases may overlap. In Phase I, which frequently begins with initial
introduction of the compound into healthy human subjects prior to introduction
into patients, the product is tested for safety, adverse affects, dosage,
tolerance, absorption, metabolism, excretion and clinical pharmacology. Phase
II typically involves studies in a small sample of the intended patient
population to assess the efficacy of the compound for a specific indication to
determine dose tolerance and the optimal dose range as well as to gather
additional information relating to safety and potential adverse effects. Phase
III trials are undertaken to further evaluate clinical safety and efficacy in
an expanded patient population at geographically dispersed study sites to
determine the overall risk-benefit ratio of the compound and to provide an
adequate basis for product labeling. Each trial is conducted in accordance with
certain standards under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Data from preclinical and clinical trials are submitted to the FDA as an NDA
for marketing approval and to other health authorities as a marketing
authorization application. The process of completing clinical
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trials for a new drug is likely to take a number of years and requires the
expenditure of substantial resources. Preparing an NDA or marketing
authorization application involves considerable data collection, verification,
analysis and expense. There can be no assurance that FDA or any other health
authority approval will be granted on a timely basis, if at all. The approval
process is affected by a number of factors, primarily the risks and benefits
demonstrated in clinical trials as well as the severity of the disease and the
availability of alternative treatments. The FDA or other health authorities may
deny an NDA or marketing authorization application if the authority's
regulatory criteria are not satisfied or may require additional testing or
information.
Even after initial FDA or other health authority approval has been obtained,
further studies, including Phase IV post-marketing studies, may be required to
provide additional data on safety and will be required to gain approval for the
use of a product as a treatment for clinical indications other than those for
which the product was initially tested. Also, the FDA or other regulatory
authorities may require post-marketing reporting to monitor the side effects of
the drug. Results of post-marketing programs may limit or expand the further
marketing of the products. Further, if there are any modifications to the drug,
including changes in indication, manufacturing process or labeling or a change
in manufacturing facility, an application seeking approval of such changes will
be required to be submitted to the FDA or other regulatory authority.
Whether or not FDA approval has been obtained, approval of a product by
regulatory authorities in foreign countries must be obtained prior to
commencing commercial sales of the product in such countries. The requirements
governing the conduct of clinical trials and product approvals vary widely from
country to country, and the time required for approval may be longer or shorter
than that required for FDA approval. Although there are some procedures for
unified filings for certain European countries, in general, each country at
this time has its own procedures and requirements. Further, the FDA regulates
the export of products produced in the United States and may prohibit the
export of such products even if these are approved for sale in other countries.
In addition to FDA requirements, the National Institute of Health ("NIH") has
established guidelines for research involving recombinant DNA molecules, which
are utilized by us and our collaborators and licensees. These guidelines apply
to all recombinant DNA research within the United States or its territories
which is conducted at or supported by the NIH. Under current guidelines,
proposals to conduct clinical research involving gene therapy which is
supported by the NIH must be reviewed by the NIH Recombinant DNA Advisory
Committee. Our vector delivery of ribozymes will need to be reviewed by this
Committee.
We are also subject to regulation under the Occupational Safety and Health
Act, the Environmental Protection Act, the Toxic Substances Control Act, the
Resources Conservation and Recovery Act and other present and potential future
federal, state and local regulations.
Completing the multitude of steps necessary before marketing can begin
requires the expenditure of considerable resources and a lengthy period of
time. Delay or failure in obtaining the required approvals, clearances or
permits by us, our corporate partners or our licensees would have a material
adverse affect on our ability to generate sales or royalty revenue. The impact
of new or changed laws or regulations cannot be predicted with any accuracy.
Our manufacturing and marketing strategies
To support our preclinical and clinical trial manufacturing requirements, we
constructed manufacturing facilities that we believe comply with applicable
regulatory requirements. We have also established operational quality assurance
and quality control procedures. We believe that our existing facilities and
those available from contract manufacturers will be satisfactory for production
of ribozymes needed through clinical trials for our products currently in
development.
We do not currently have the facilities or means to manufacture, market,
distribute or sell on a commercial scale any of products we may develop. We
will need to develop our own facilities or contract
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with third parties for the manufacture of products. We have expanded our
quality control and quality assurance program internally, including adopting a
set of standard operating procedures designed to assure that any products
manufactured by or for us are made in accordance with cGMP and other applicable
domestic and foreign regulations.
In connection with establishing of our manufacturing capabilities, we have
entered into agreements with Pharmacia Biotech and Protogene. In November 1995,
we agreed to collaborate with Pharmacia Biotech to develop better synthesis and
purification methods for the preparation of modified amidites and chimeric
oligonucleotides on a large scale. The goal of the collaboration is to reduce
the cost of manufacturing ribozymes and other oligonucleotides products that
use amidites. Pharmacia Biotech, a subsidiary of Pharmacia & Upjohn, Inc., has
expertise in the manufacture of oligonucleotides synthesis and purification
instrumentation and software. Under the terms of the collaboration, Pharmacia
Biotech is providing us with synthesis instrumentation and software, research
funding and milestone payments, a portion of which may be set-off against
future royalties payable to us.
In December 1996, we entered into an agreement with Protogene, a private
biotechnology company, to develop an instrument allowing high throughput
synthesis of non-DNA oligonucleotides. Under the terms of the agreement, we
have purchased an instrument manufactured by Protogene.
We expect to market and sell any products developed, at least initially,
directly and through co-promotion or other licensing arrangements with third
parties, including our collaborators. In some markets, we may enter into
distribution or partnership agreements with pharmaceutical or biotechnology
companies that have large, established sales organizations.
Our Employees
As of March 15, 1999, we had 65 full-time employees, including a technical
scientific staff of 50. Our future performance depends significantly on the
continued service of our key personnel. None of our employees are covered by
collective bargaining arrangements. We believe our employee relations are good.
Legal Proceedings
We are not actively involved in any litigation which could reasonably be
expected to have a material adverse effect on our business or the results of
our operations.
Properties
We lease approximately 30,000 square feet of laboratory, manufacturing and
office space at 2950 Wilderness Place, Boulder, Colorado, under an operating
lease that lasts through June 2007. This facility will be sufficient to meet
our needs at least through 2000.
Our Scientific Advisory Board
We are assisted in our research and development activities by our Scientific
Advisory Board composed of leading scientists who meet with us several times
each year to review our research and development activities, and to discuss
technological advances and our business. We also have collaborative
relationships with several board members that further advance our product
development. Our current Scientific Advisory Board members are:
Thomas R. Cech, Ph.D. Distinguished Professor, Department of Chemistry &
Biochemistry, University of Colorado; Chairman, SAB
Gerald Joyce, M.D., Ph.D. Professor, Department of Molecular Biology, Scripps
Research Institute
Edward Mocarski, Ph.D. Professor and Chairman, Departments of Microbiology &
Immunology, Stanford University
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Gary Nabel, M.D., Ph.D. Professor, Departments of Internal Medicine and
Biological Chemistry, University of Michigan
Bruce Sullenger, Ph.D. Assistant Professor, Departments of Experimental
Surgery and Genetics, Duke University
Olke C. Uhlenbeck, Ph.D. Professor, Department of Chemistry and Biochemistry,
University of Colorado
Each member has entered into an exclusive consulting agreement with Ribozyme
Pharmaceuticals in the field of ribozymes and signed confidentiality and non-
disclosure agreements. In 1998, they each received:
. an annual retainer of $4,000 paid quarterly,
. an honorarium of $1,000 per day for meetings attended, and
. options for 4,000 shares of our common stock, which vest ratably over
three years.
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MANAGEMENT
Directors and Executive Officers
The directors and executive officers of Ribozyme Pharmaceuticals are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ralph E. Christoffersen, 61 Chief Executive Officer, President and Director
Ph.D. (1)................
Lawrence E. Bullock....... 43 Vice President of Administration and Finance,
Chief Financial Officer and Secretary
Alene A. Holzman.......... 42 Vice President of Business Development and
General Manager of Target Validation and
Discovery Business
Thomas H. Rossing, M.D.... 49 Vice President of Product Development
Nassim Usman, Ph.D........ 39 Vice President of Research
David T. Morgenthaler (1) 79 Chairman of the Board
(2)......................
Jeremy L. Curnock Cook (1) 49 Director
(3)......................
Anthony B. Evnin, Ph.D. 58 Director
(1) (2)..................
David Ichikawa (3)........ 46 Director
Anders P. Wiklund (2) 58 Director
(3)......................
</TABLE>
- --------
(1) Member of the Executive Committee.
(2)Member of the Compensation Committee.
(3)Member of the Audit Committee.
Ralph E. Christoffersen, Ph.D., has served as Chief Executive Officer,
President and Director of Ribozyme Pharmaceuticals since June 1992. From 1989
to June 1992, Dr. Christoffersen was Senior Vice President and Director of U.S.
Research at SmithKline Beecham Pharmaceuticals, a pharmaceutical company. From
1983 to 1989, he held senior management positions in research at The Upjohn
Company, a pharmaceutical company. Prior to joining The Upjohn Company, Dr.
Christoffersen served as a Professor of Chemistry and Vice Chancellor for
Academic Affairs at the University of Kansas, and as President of Colorado
State University. He received his Ph.D. in physical chemistry from Indiana
University.
Lawrence E. Bullock has served as Vice President of Administration and
Finance, Chief Financial Officer and Secretary, since January 1996. From
December 1990 to January 1996, Mr. Bullock was Chief Financial Officer,
Director of Finance and Administration and Secretary of La Jolla Pharmaceutical
Company, a biopharmaceutical company. Mr. Bullock received his M.B.A. from the
University of Utah.
Alene A. Holzman has served as Vice President of Business Development and
General Manager of Target Validation and Discovery Business since April 1997.
From January 1990 to March 1997, Ms. Holzman was Vice President of ChemTrak
Corporation, a medical technology firm, where she was responsible for finance,
business development and marketing and sales. From 1987 to 1990, she was Vice
President of CytoSciences, Inc., a biomedical company, and from 1981 to 1987
she was Vice President of Marketing and Sales for Hana Biologics, Inc. (now
Cell Genesys Corporation), a biotechnology firm. Ms. Holzman received her
M.B.A. from the University of California at Berkeley.
Thomas H. Rossing, M.D., has served as Vice President of Product Development
since July 1997. From July 1996 to July 1997, Dr. Rossing was Vice President of
Clinical Development and Regulatory Affairs at GeneMedicine, Inc., a
biotechnology company. From March 1993 to July 1996, Dr. Rossing was Director
of International Respiratory Clinical Research at GlaxoWellcome, a
pharmaceutical company. He has also
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served as Director of Clinical Pharmacology and Worldwide Regulatory Liaison at
Merck Research Laboratories, a pharmaceutical company, and a staff physician at
Brigham and Women's Hospital in Boston, Massachusetts. He received his M.D.
degree from Harvard University. Dr. Rossing announced that he is retiring
effective August 31, 1999.
Nassim Usman, Ph.D., has served as Vice President of Research since May 1996.
From April 1994 until May 1996, Dr. Usman served as Director of Chemistry and
Biochemistry Research at Ribozyme Pharmaceuticals and from September 1992 until
April 1994 Dr. Usman served as Senior Scientist in Chemistry and Biochemistry.
From January 1987 to September 1992, Dr. Usman was a Postdoctoral Fellow and
Scientist in the Departments of Biology and Chemistry at the Massachusetts
Institute of Technology. Dr. Usman received his Ph.D. in chemistry from McGill
University.
David T. Morgenthaler has served as a director since February 1992 and was
elected Chairman of the Board in December 1995. Mr. Morgenthaler was a founder
of and has been Managing Partner of Morgenthaler Ventures, a private venture
capital firm, since 1968. He has been a director of a number of public and
private companies. Mr. Morgenthaler received his M.S. degree from the
Massachusetts Institute of Technology.
Jeremy L. Curnock Cook has served as a director since July 1995. Mr. Cook is
a director of Rothschild Asset Management, an investment fund, and has been
responsible for the Rothschild Bioscience Unit since 1987. Mr. Cook founded the
International Biochemicals Group in 1975 which he subsequently sold to Royal
Dutch Shell in 1985, remaining as Managing Director until 1987. He is also a
director of the International Biotechnology Trust plc, Creative BioMolecules
Inc., Targeted Genetics Inc., Cantab Pharmaceuticals plc, Sugen, Inc., Cell
Therapeutics, Inc., Amrad Corporation, Vanguard Medica plc, Angiotech
Pharmaceuticals, Inc., Inflazyme Pharmaceuticals, Inc. and Biocompatibles
International plc. Mr. Cook received an M.A. in Natural Sciences from Trinity
College Dublin.
Anthony B. Evnin, Ph.D., has served as a director since February 1992. Dr.
Evnin has been a General Partner of Venrock Associates, a venture capital
partnership, since 1975. He is also a director of AxyS Pharmaceutical
Corporation, Centocor, Inc., Opta Food Ingredients, Inc., and Triangle
Pharmaceuticals, Incorporated. Dr. Evnin received his Ph.D. from the
Massachusetts Institute of Technology.
David Ichikawa has served as a director since May 1998. Mr. Ichikawa has been
employed by Chiron Corporation, a biotechnology company, since September 1994
and is currently Vice President of Finance and Operations of Chiron
Technologies. He has also held management positions at Boehringer Mannhiem
Corporation and Chiron (Cetus) Corporation. Mr. Ichikawa received his M.B.A.
from the University of California at Berkeley.
Anders P. Wiklund has served as a director since August 1994. Since January
1997, Mr. Wiklund has been the principal of Wiklund International, an advisory
firm to the biotechnology and pharmaceutical industries. From 1967 through
1996, Mr. Wiklund served in numerous executive positions for the Kabi and
Pharmacia group of companies, including President and CEO of Kabi Vitrum Inc.
and Kabi Pharmacia, Incorporated. Mr. Wiklund is also a director of Trega
Bioscience, Inc., Medivir, A.B. and InSite Vision, Inc., as well as private
company boards. Mr. Wiklund received a Master of Pharmacy degree from the
Pharmaceutical Institute in Stockholm.
41
<PAGE>
Executive Compensation
The following table summarizes the compensation paid to or earned by our
Chief Executive Officer and our other four most highly compensated executive
officers whose annual compensation exceeded $100,000 in 1998 ("Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------------- ----------------------------------
Shares
Other Restricted Underlying All
Annual Stock Options Other
Name and Principal Position Year Salary($) Bonus($) Comp.($) Awards(#) Granted(#) Comp.($)
- --------------------------- ---- ---------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ralph E. Christoffersen,
Ph.D. ................. 1998 285,670 50,000 37,862(1) 198,748(2) 4,998(3)
Chief Executive Officer
and 1997 269,520 50,000 45,000(1) -- 129,450 4,744(3)
President 1996 247,248 -- 70,000(1) 188,100(4) 97,770 153,910(4)
Lawrence E. Bullock .... 1998 150,800 25,000 75,883(5) -- 85,957(2) 4,998(3)
Vice President of
Administration 1997 136,254 25,000 35,524(5) -- 37,500 4,744(3)
and Finance, CFO and
Secretary 1996 118,433 15,000 24,993(5) -- 66,000 --
Alene A. Holzman(6)..... 1998 156,900 6,500 37,721(7) -- 100,000(2) 4,998(3)
Vice President of
Business 1997 108,557 12,500 28,389(7) -- 80,000 3,494(3)
Development and General
Manager of Target
Validation and
Discovery Business
Thomas H. Rossing,
M.D.(8)................ 1998 250,650 -- 34,000(9) -- 110,624(2) 4,998(3)
Vice President of 1997 105,859 22,000 84,008(9) -- 107,500 --
Product Development
Nassim Usman, Ph.D. .... 1998 183,038(11) 23,000 25,841(10) 99,167(2) 4,998(3)
Vice President of
Research 1997 158,004 -- 25,397(10) -- 45,000 4,744(3)
1996 132,919 25,000 20,499(10) -- 53,892 --
</TABLE>
- --------
(1) Includes (a) $50,000 in 1996 and $25,000 in each of 1997 and 1998 for
forgiveness of a loan made to Dr. Christoffersen for relocation expenses;
and (b) $20,000 in each of 1996 and 1997 and $12,862 in 1998 to assist him
with the tax liability relating to the loan forgiveness.
(2) Includes shares granted in connection with the stock option repricing in
1998. See "Stock Option Plan--Repricing." All Named Executive Officers
received an option to purchase 0.75 share of common stock in exchange for
an option representing one share.
(3) Matching contributions in common stock made by Ribozyme Pharmaceuticals
under our 401(k) Salary Reduction Plan.
(4) Dr. Christoffersen received a bonus of $342,010, payable $153,910 in cash
and $188,100 in shares of common stock (18,810 shares at our initial public
offering price of $10.00 per share), upon closing of our initial public
offering in April 1996.
(5) Includes (a) $9,058 and $9,641 in 1996 and 1997, respectively, representing
implied interest related to an interest-free loan made to Mr. Bullock for
relocation expenses; (b) $15,000 in each of 1997 and 1998 for partial
forgiveness of the loan; (c) $7,883 in each of 1997 and 1998 for taxes
relating to the loan; (d) $3,000 in each of 1997 and 1998 as reimbursements
for dependent daycare expenses; and (e) $15,935 and $50,000, in 1996 and
1998, respectively, to reimburse Mr. Bullock for relocation expenses.
(6) Ms. Holzman joined Ribozyme Pharmaceuticals on April 1, 1997.
(7) Includes (a) $10,036 in 1997 representing implied interest related to an
interest-free loan made to Ms. Holzman for relocation expenses; (b) $15,853
and $9,721 in 1997 and 1998, respectively, to reimburse Ms. Holzman for
relocation expenses; (c) $25,000 in 1998 for partial forgiveness of the
loan; and (d) $2,500 and $3,000 in 1997 and 1998, respectively, as
reimbursements for dependent day care expenses.
42
<PAGE>
(8) Dr. Rossing joined Ribozyme Pharmaceuticals on July 28, 1997.
(9) Includes (a) $14,901 in 1997 representing implied interest related to an
interest-free loan made to Dr. Rossing for relocation expenses; (b)
$34,000 in 1998 for partial forgiveness of the loan; and (c) $69,107 in
1997 to reimburse Dr. Rossing for relocation expenses.
(10) Includes (a) $20,499 in 1996 representing implied interest related to an
interest-free loan made to Dr. Usman for relocation expenses; (b) $15,000
in each of 1997 and 1998 for partial forgiveness of the loan; (d) $7,883
in each of 1997 and 1998 for taxes relating to the loan; and (d) $2,496 in
each of 1997 and 1998 as reimbursements for dependent day care expenses.
(11) Includes $13,988 in additional salary for Dr. Usman's three month
temporary position as Vice President of Atugen.
Stock Option Plan
In March 1996 we amended, restated and merged our stock option plans and
named the resulting plan the 1996 Stock Option Plan (the "Plan"). Currently,
1,478,493 shares of our common stock are reserved for issuance under the Plan.
As of March 15, 1999, options to purchase 1,386,487 shares were outstanding
under the Plan. The Plan will terminate in January 2006, unless earlier
terminated by the Board of Directors. The purpose of the Plan is to:
. attract and retain qualified personnel,
. provide additional incentives to our employees, officers, directors and
consultants, and
. promote the success of our business.
Under the Plan, we may grant or issue incentive stock options and
supplemental (non-qualified) stock options to our consultants, employees,
officers and directors.
Administration. Our Board has delegated administration of the Plan to a
Compensation Committee comprised of three independent directors (see "Board
Committees"). Subject to the limitations set forth in the Plan, the Board or
the Compensation Committee has the authority to:
. select the persons to whom grants are to be made,
. designate the number of shares to be covered by each option,
. determine whether an option is an incentive stock option or a non-
statutory stock option,
. establish vesting schedules, and
. subject to restrictions, specify the type of consideration to be paid
upon exercise and to specify other terms of the options.
Terms. The maximum term of options granted under the Plan is ten years,
however, the maximum term is five years for incentive options granted to a
person who at that time owns 10% of the total combined voting power of all
classes of stock. The aggregate fair market value of the stock with respect to
which incentive stock options are first exercisable in any calendar year may
not exceed $100,000 per optionee. Any portion in excess of $100,000 shall be
treated as non-statutory stock options. Options granted under the Plan are non-
transferable and generally expire upon the earlier of the stated expiration
date or three months after the termination of an optionee's service to Ribozyme
Pharmaceuticals. However, the expiration date would be 18 months in the event
the optionee's employment terminates by reason of death, or 12 months in the
event the optionee's employment terminates due to disability, or a longer or
shorter period as may be specified in the option agreement.
Our Board has discretion in connection with a merger, consolidation,
reorganization or similar corporate event where we are the surviving
corporation to prescribe the terms and conditions for the modifications of the
options granted under the Plan. If we are not the surviving corporation in the
event of our dissolution or
43
<PAGE>
liquidation, or our merger or consolidation, all outstanding options will
terminate unless assumed by another corporation.
No specific vesting schedule is required under the Plan. The exercise price
of incentive stock options must equal at least the fair market value of the
common stock on the date of grant, except that the exercise price of incentive
stock options granted to any person who at the time of grant owns stock
possessing more than 10% of the combined voting power of all classes of stock
must be at least 110% of the fair market value of the stock on the date of
grant. The exercise price on non-statutory stock options under the Plan may be
no less than 85% of the fair market value of the common stock on the date of
grant.
Repricing. In September 1998 our Board of Directors approved a repricing of
all employee stock options outstanding under the Plan. Pursuant to this
repricing, each Named Executive Officer holding options received 0.75 option
for each one option surrendered with a new vesting date and an exercise price
of $3.00 per share. All non-executive employees who were option holders
received one new option for each one option surrendered with a new vesting date
and an exercise price of $3.00 per share. As a result of this repricing offer,
890,921 options were canceled and 747,060 options were granted effective
September 18, 1998.
44
<PAGE>
The following table contains information about stock options granted to each
of the Named Executive Officers during 1998 under the Plan:
Option Grants in 1998
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
% of Total Potential Realizable
Number of Options Value at
Shares Granted Annual Rate of Stock
Underlying to Price Appreciation
Options Employees Exercise for Option Term(4)
Granted in Price Expiration ---------------------
(#)(1) 1998(2) ($/Share)(3) Date 5%($) 10%($)
---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ralph E.
Christoffersen......... 76,874(5) 6.7% $3.00 09-18-08 145,037 367,552
*76,874(5) 6.7 3.00 09-18-08 145,037 367,552
22,500 2.0 5.63 12-02-08 79,665 201,887
*22,500 2.0 5.63 12-02-08 79,665 201,887
------- ----
198,748 17.4
Lawrence E. Bullock..... 39,395(5) 3.4 3.00 09-18-08 74,326 188,356
*21,562(5) 1.9 3.00 09-18-08 40,681 103,093
12,500 1.1 5.63 12-02-08 44,258 112,160
*12,500 1.1 5.63 12-02-08 44,258 112,160
------- ----
85,957 7.5
Alene A. Holzman........ 30,000(5) 2.6 3.00 09-18-08 56,601 143,437
*30,000(5) 2.6 3.00 09-18-08 56,601 143,437
20,000 1.8 5.63 12-02-08 70,814 179,455
*20,000 1.8 5.63 12-02-08 70,814 179,455
------- ----
100,000 8.8
Thomas H. Rossing....... 40,312(5) 3.5 3.00 09-18-08 76,056 192,741
*40,312(5) 3.5 3.00 09-18-08 76,056 192,741
15,000 1.3 5.63 12-02-08 53,110 134,592
*15,000 1.3 5.63 12-02-08 53,110 134,592
------- ----
110,624 9.6
Nassim Usman............ 44,542(5) 3.9 3.00 09-18-08 84,037 212,965
*29,625(5) 2.6 3.00 09-18-08 55,893 141,644
12,500 1.1 5.63 12-02-08 44,258 112,160
*12,500 1.1 5.63 12-02-08 44,258 112,160
------- ----
99,167 8.7
</TABLE>
- --------
* These options become 100% vested upon the completion of various research or
business performance milestones.
(1) All options, other than performance-based options which are indicated by *,
vest in increments of 20% over a five-year period and first become
exercisable on the first anniversary of the grant date. Options granted in
connection with the stock option repricing first vest on September 18,
1999. The options are granted for a term of ten years, subject to earlier
termination in events related to termination of employment.
(2) In 1998 we granted options representing an aggregate of 1,139,560 shares of
our common stock to our employees, including the Named Executive Officers.
(3) The exercise price of each option was equal to the fair market value of the
common stock on the date of the option grant as determined by the Board of
Directors.
(4) Amounts reported in these columns show hypothetical gains that may be
realized upon exercise of the options, assuming the market price of common
stock appreciates at the specified annual rates of
45
<PAGE>
appreciation, compounded annually over the term of the options. These
numbers are calculated based upon rules promulgated by the SEC. Actual
gains, if any, depend on the future performance of our common stock and
overall market conditions.
(5) Shares granted in connection with the stock option repricing.
The following table contains information about the number and value of stock
options held by each Named Executive Officer as of December 31, 1998. No other
Named Executive Officer exercised any stock options during 1998. A stock
option is "in-the-money" if the closing market price of our common stock
exceeds the exercise price of the stock option. The value of "in-the-money"
unexercised stock options set forth in the table represents the difference
between the exercise price of these options and the closing sales price of our
common stock on December 31, 1998, as reported by the Nasdaq National Market,
$4.38 per share.
1998 Year-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998(#) at December 31, 1998($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Ralph E. Christoffersen.... 69,706/174,374 176,794/178,536
Lawrence E. Bullock........ 17,847/89,394 28,295/91,863
Alene A. Holzman........... 12,001/87,250 16,560/65,205
Thomas H. Rossing.......... 9,000/101,624 12,420/98,841
Nassim Usman............... 28,265/85,885 47,537/84,288
</TABLE>
Employment agreements
Ralph E. Christoffersen. In May 1992, we entered into an employment
agreement with Ralph E. Christoffersen, Ph.D., our President and Chief
Executive Officer, which, as amended, currently provides for:
. an annual salary of $297,000,
. an annual performance-based cash bonus of up to $80,000,
. an interest-free loan of $250,000 which has been forgiven in its
entirety,
. repayment of relocation expenses,
. stock options to acquire 74,444 shares of common stock at an exercise
price of $0.45 per share which vest ratably over five years,
. stock options to acquire 31,446 shares of common stock at an exercise
price of $0.45 per share which vested upon our completion of performance
milestones,
. stock options for common stock as reflected in the tables in this
"Management" section, and
. a bonus of $342,010, paid in cash and common stock upon the completion of
our initial public offering in April 1996.
Dr. Christoffersen's agreement may be terminated upon his death, disability
or for cause. If we terminate Dr. Christoffersen's employment, he is entitled
to receive all accrued salary and benefits up to his termination and, unless
he has been terminated for cause, nine months of severance pay at the same
monthly rate as in effect at the time of his termination. If termination
occurs after January 1, 2000, Dr. Christoffersen shall be paid a lump sum cash
payment of up to $27,500.
Lawrence E. Bullock. In January 1996, we entered into an employment
agreement with Lawrence E. Bullock, our Vice President of Administration and
Finance, Chief Financial Officer and Secretary, which, as amended, currently
provides for:
46
<PAGE>
. an annual salary of $158,350,
. an annual performance-based cash bonus of up to 20% of his current
salary,
. a signing bonus of $15,000,
. stock options for common stock as reflected in the tables in this
"Management" section, and
. repayment of relocation expenses, including an interest-free loan of
$75,000 made in 1996 and forgivable in five equal installments, grossed-
up for taxes, as long as Mr. Bullock remains employed by us. The loan had
an outstanding balance of $30,000 as of March 15, 1999.
If we terminate Mr. Bullock's employment without cause, he is entitled to six
months' severance pay at his then current salary.
Nassim Usman, Ph.D. In May 1996, we entered into an employment agreement with
Nassim Usman, Ph.D., our Vice President of Research, which, as amended,
currently provides for:
. an annual salary of $177,925,
. an annual performance-based cash bonus of up to 20% of his current
salary,
. stock options for common stock as reflected in the tables in this
"Management" section, and
. an interest-free loan of $75,000 made in May 1996 and forgivable in five
equal installments, grossed-up for taxes, as long as Dr. Usman remains
employed by us. The loan had an outstanding balance of $45,000 as of
March 15, 1999.
If we terminate Dr. Usman's employment without cause, he will be entitled to
six months' severance pay at his then current salary.
Alene A. Holzman. In February 1997, we entered into an employment agreement
with Alene A. Holzman, our Vice President of Business Development and General
Manager of Target Validation and Discovery Business, which, as amended,
currently provides for:
. an annual salary of $166,325,
. an annual performance-based cash bonus of up to 20% of her current
salary,
. stock options for common stock as reflected in the tables in this
"Management" section, and
. an interest-free loan of $75,000 made in June 1997 and forgivable in
three equal installments as long as Ms. Holzman is employed by us. The
loan had an outstanding balance of $50,000 as of March 15, 1999.
If we terminate Ms. Holzman's employment without cause, she is entitled to
six months' severance pay at her then current salary.
Thomas H. Rossing. In July 1997, we entered into an employment agreement with
Thomas H. Rossing, M.D., our Vice President of Product Development, which, as
amended, currently provides for:
. an annual salary of $258,175,
. an annual performance-based cash bonus of up to 15% of his current
salary,
. stock options for common stock as reflected in the tables in this
"Management" section, and
. an interest-free loan of $100,000 made in September and 1997 forgivable
in three equal installments as long as Dr. Rossing is employed by us. The
loan had an outstanding balance of $66,000 as of March 15, 1999.
Dr. Rossing has given notice that he will retire from Ribozyme
Pharmaceuticals on August 31, 1999. If we terminate Dr. Rossing's employment
without cause prior to that time, he will be entitled to six months' severance
pay at his then current salary.
47
<PAGE>
Employee Benefits
Executive Bonus Plan. In March 1998, our Executive Bonus Plan was adopted by
the Board of Directors. This Bonus Plan provides our executive officers with
the opportunity to earn an annual bonus contingent upon their fulfillment of
annual goals as determined by our Compensation Committee comprised of three
independent directors. The Compensation Committee has complete authority to
establish the goals for each executive officer, to interpret all provisions of
the Bonus Plan and to make all other determinations necessary or advisable for
the administration of the Bonus Plan. The Compensation Committee may award each
of our executive officers with an annual bonus comprised of one or more of the
following:
. cash payment,
. stock options pursuant to our stock option plan, or
. forgiveness of any portion of the principal of interest-free loans
provided to the executive officer.
Section 401(k) Plan. As part of our effort to attract and maintain high
quality staff, we adopted a 401(k) Salary Reduction Plan and Trust on June 1,
1992. Our employees may make pre-tax elective contributions of up to 20% of
their salary, subject to limitations prescribed by law. All contributions are
paid to a trustee who invests for the benefit of members of the 401(k) Plan. In
March 1997, the 401(k) Plan was amended to provide that we may match the
employee's contributions with common stock. We may amend or terminate the
401(k) Plan at any time, subject to legal restrictions.
Employee Stock Purchase Plan. In March 1996, we adopted an Employee Stock
Purchase Plan (the "Purchase Plan"), which authorizes the issuance of up to
300,000 share of our common stock to eligible employees. Generally, each
offering lasts for twenty-four months, and purchases are made on each October
31 and April 30 during each offering. For example, the initial offering began
on April 11, 1996, and terminated on April 30, 1998. Common stock is purchased
for accounts of employees participating in the Purchase Plan at a price per
share equal to the lower of:
. 85% of the fair market value of a share of common stock on the date of
commencement of participation in the offering, or
. 85% of the fair market value of a share of common stock on the date of
purchase.
Generally, all regular employees, including executive officers, may
participate in the Purchase Plan and may authorize payroll deductions of up to
15% of their base compensation for the purchase of common stock under the
Purchase Plan. Our Board of Directors has the authority to terminate the
Purchase Plan at its discretion. As of March 1, 1999, 99,832 shares had been
issued pursuant to the Purchase Plan.
Director Compensation
Fees. All non-employee directors receive a fee of:
. $1,000 per day for each Board or Committee meeting attended, and
. $500 per day for participating telephonically in a meeting of the Board
or a Committee.
Stock Options. Non-employee directors may also receive stock options for
5,000 shares of our stock annually under our stock option plan. In 1997 and
1998, each non-employee director was granted an option to purchase 5,000
shares. The options vest after one year of service. In addition, Mr. Wiklund
received an option to purchase 4,444 shares in June 1994, of which 1,111 shares
vested immediately and the remaining 3,333 shares vest in increments of 20%
over five years starting in 1995.
Board Committees
The Board has established an Audit Committee, a Compensation Committee and an
Executive Committee. The Executive Committee, consisting of Messrs.
Morgenthaler (Chairman) and Cook and Drs. Christoffersen and Evnin, manages and
operates our business.
48
<PAGE>
The Compensation Committee, consisting of Dr. Evnin (Chairman) and Messrs.
Morgenthaler and Wiklund:
. reviews and recommends for Board approval grants of options pursuant to
our stock option plan,
. decides salaries and incentive compensation for our employees and
consultants, and
. recommends compensation for executive officers.
The Audit Committee, consisting of Messrs. Ichikawa (Chairman), Cook and
Wiklund:
. recommends to the Board the selection of independent auditors,
. reviews the results and scope of the audit and other services provided by
our independent auditors, and
. reviews and evaluates our audit and control functions.
Compensation Committee Interlocks
The members of our Compensation Committee have no interlocking relationships
as defined under SEC regulations.
Director and Officer Indemnification and Liability
Pursuant to provisions of Delaware General Corporation Law ("DGCL"), we have
adopted provisions in our certificate of incorporation which provide that our
directors shall not be personally liable for monetary damages to us or our
stockholders for breach of fiduciary duty as a director, except for liability:
. for any breach of the director's duty of loyalty to us or our
stockholders,
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
. under Section 174 of the DGCL relating to improper dividends or
distributions, and
. for any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our bylaws authorize us to indemnify our officers, directors, employees and
agents to the extent permitted by the DGCL. Pursuant to Section 145 of the
DGCL, which empowers us to enter into indemnification agreements with our
officers, directors, employees and agents, we have entered into separate
indemnification agreements with our directors and executive officers which may,
in some cases, be broader than the specific indemnification provisions
contained in the DGCL. The indemnification agreements may require us to
indemnify the executive officers and directors against liabilities that may
arise by reason of their status or service as directors or executive officers,
other than liabilities arising from acts or omissions not in good faith or
willful misconduct, and to advance expenses incurred as a result of any
proceeding against them as to which they could be indemnified.
There is no pending litigation or proceeding involving any of our directors,
officers, employees or agents where indemnification will be required or
permitted, and we are not aware of any threatened litigation or proceeding that
may result in a claim for indemnification.
49
<PAGE>
CERTAIN TRANSACTIONS
We believe that the following transactions were in our best interests. As a
matter of policy, these transactions were, and all future transactions between
Ribozyme Pharmaceuticals and any of our officers, directors or principal
stockholders will be:
. approved by a majority of the independent members of our Board of
Directors,
. entered into on terms no less favorable to Ribozyme Pharmaceuticals than
could be obtained from unaffiliated third parties, and
. entered into in connection with bona fide business purposes.
Executive Loans. We made interest-free loans for relocation expenses to our
executive officers when we hired them. We have forgiven all or a portion of the
outstanding principal amount of each loan under the terms of each officer's
employment agreement. See "Management--Employment Agreements."
<TABLE>
<CAPTION>
Balance as of
Name Loan Amount March 15, 1999
---- ----------- --------------
<S> <C> <C>
Ralph E. Christoffersen, Ph.D. ................. $250,000(1) $ 0
Lawrence E. Bullock............................. 75,000(2) 30,000
Nassim Usman, Ph.D. ............................ 75,000(3) 45,000
Alene A. Holzman................................ 75,000(4) 50,000
Thomas H. Rossing............................... 100,000(5) 66,000
</TABLE>
- --------
(1) $50,000 forgiven in each of June 1993, January 1995, January 1996 and
January 1997, and $25,000 forgiven in each of January 1994 and January
1998.
(2) $15,000 forgiven in each of June 1997, January 1998 and January 1999.
(3) $15,000 forgiven in each of June 1997 and May 1998.
(4) $25,000 forgiven in March 1998.
(5) $34,000 forgiven in July 1998.
Chiron Transactions. Chiron and Ribozyme Pharmaceuticals granted each other
licenses to technologies and agreed to undertake research activities pursuant
to a collaboration agreement. Chiron purchased:
. 100,000 shares of our common stock for a purchase price of $3.60 per
share,
. 107,095 shares of our Series E Preferred Stock for a purchase price of
$37.35 per share, and
. a warrant at a price of $4.50 per warrant share, exercisable for 444,444
shares of our common stock for an exercise price of $40.50 per share.
In February 1996, we amended the warrant issuable to Chiron to reduce the
exercise price from $40.50 per share to $22.50 per share. When we closed our
initial public offering in April 1996, Chiron:
. purchased 377,202 shares of our common stock for $3,640,000 at the
initial public offering price less one-half of the underwriting discount,
. paid us $1,800,000 to complete the purchase of its warrant, and
. received 35,127 additional shares of our common stock pursuant to anti-
dilutive provisions.
Chiron also has a representative on our Board of Directors.
In May 1996, we entered into a second collaboration with Chiron for the use
of ribozymes to characterize gene function. The collaborations give Chiron the
right to develop and commercialize products that result from the collaboration,
and entitle us to receive product development milestone payments and royalties
on sales of commercial products. Chiron and Ribozyme Pharmaceuticals each pay a
portion of the
50
<PAGE>
research and development expenses of the collaboration, and we agreed to
provide Chiron $1.8 million, which was paid in 1996, for research funding
related to the proposed collaboration.
Schering AG Transaction. In April 1997, we entered into a research
collaboration with Schering focusing on the use of ribozymes and related
technologies for gene function validation. Schering AG purchased:
. 212,766 shares of our common stock for $2.5 million in May 1997, and
. 465,117 shares of our common stock for $2.5 million in 1998.
Separately, Schering AG provided loans of $2.0 million in both 1997 and 1998.
We received an additional $1.0 million on this loan facility in January 1999.
Schering AG will continue to provide loans of up to $2 million annually for
each year through 2001, provided that the collaboration is continued in each of
those years. The loans, which carry an interest rate of 8% per annum, are
convertible into equity at Schering AG's option under certain circumstances.
Principal and interest payments are deferred until maturity of the loans in
April 2004.
In addition, Schering AG made research payments of $1.5 million in 1997 and
$2.0 million in 1998 and, provided that the collaboration is continued, will
make research payments of $2 million a year through 2001. All payments are
subject to some restrictions, including receipt of third party consents. Upon
payment of termination fees to us, the research collaboration may be terminated
at Schering AG's option at any time.
Atugen Transaction. In 1998, we and other investors formed Atugen. Financing
for Atugen was accomplished through a combination of venture capital, an
investment by us and German government grants and loans. We contributed $2.0
million in cash to Atugen. On December 31, 1998, we owned a 49.5% equity
interest in Atugen. All five of our executive officers and two of our employees
received shares of Atugen's common stock in the formation at no cost to them,
for which we will receive a one-time compensation expense of approximately
$81,000. Currently, these seven people hold 5.5% of Atugen's common stock.
As part of the formation, Atugen received exclusive royalty-free licenses to
our extensive patents and technologies for target validation and discovery. We
will receive a one-time $2.0 million up-front license payment in 1999. We also
will be compensated for providing management and other services to Atugen under
the terms of a services agreement.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table summarizes information regarding the beneficial ownership
of our outstanding securities as of March 15, 1999 (which includes shares that
may be acquired on the exercise of stock options vested or warrants exercisable
through May 15, 1999), by:
. each person or group that we know owns more than 5% of the outstanding
shares of common stock,
. each of our directors,
. each Named Executive Officer listed in the Summary Compensation Table,
and
. all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days are deemed outstanding for
computing the percentage ownership of the person holding the options but are
not deemed outstanding for computing the percentage ownership of any other
person. Except as otherwise indicated in the footnotes to this table, we
believe that each stockholder identified in the table has sole voting and
investment power with respect to all shares listed opposite their names. Unless
otherwise indicated, the following officers, directors and stockholders can be
reached at the principal offices of Ribozyme Pharmaceuticals.
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
----------------------
Number of Shares Before After
Name and Address Beneficially Owned Offering Offering
---------------- ------------------ --------- ---------
<S> <C> <C> <C>
Schering Berlin Venture
Corporation...................... 1,778,727(1) 17.3% 14.7%
3400 Change Bridge Road
Monteville, New Jersey 07045
Chiron Corporation................ 1,063,868(2) 11.1% 9.3%
4560 Horton Street
Emeryville, California 94608
International Biotechnology Trust
plc.............................. 1,012,633 11.0% 9.2%
c/o Rothschild Asset Management,
Ltd.
Five Arrows House
St. Swithin's Lane
London EC4N 8NR England
Ralph E. Christoffersen, Ph.D. ...
. 159,434(3) 1.7% 1.4%
Jeremy L. Curnock Cook............ 1,017,633(4) 11.1% 9.3%
Anthony B. Evnin, Ph.D. .......... 320,773(5) 3.5% 2.9%
David Ichikawa.................... 0(6) 0% 0%
David T. Morgenthaler............. 377,874(7) 4.1% 3.4%
Anders P. Wiklund................. 8,733(8) * *
Lawrence E. Bullock............... 29,606(9) * *
Alene Holzman..................... 15,799(10) * *
Thomas H. Rossing, M.D. .......... 9,899(11) * *
Nassim Usman, Ph.D................ 30,746(12) * *
Executive officers and directors
as a group (10 persons).......... 1,970,497(13) 21.1% 17.7%
</TABLE>
- --------
* Less than 1%.
52
<PAGE>
(1) Includes 1,100,844 shares convertible from outstanding debt assuming a
conversion price of $4.88 per share.
(2) Includes 444,444 shares issuable upon exercise of warrants.
(3) Includes options to purchase 69,706 shares.
(4) Includes options to purchase 5,000 shares and 1,012,633 shares held by the
International Biotechnology Trust plc, for which Rothschild Asset
Management, Ltd. ("Rothschild") acts as investment advisor. Mr. Cook is a
director of Rothschild but disclaims beneficial ownership of these shares.
(5) Includes options to purchase 5,000 shares, 218,022 shares held by Venrock
Associates and 97,751 shares held by Venrock Associates II, L.P. Mr. Evnin
is a general partner of both partnerships and disclaims beneficial
ownership of these shares except to the extent of his general partnership
interests.
(6) Excludes 1,063,868 shares held by Chiron. Mr. Ichikawa is employed by
Chiron and disclaims beneficial ownership of those shares.
(7) Includes options to purchase 5,000 shares, 362,874 shares held by
Morgenthaler Venture Partners III and 10,000 shares held by Morgenthaler
Family Partnership. Mr. Morgenthaler is a general partner of both
partnerships and disclaims beneficial ownership of these shares except to
the extent of his general partnership interests.
(8) Includes options to purchase 8,733 shares.
(9) Includes options to purchase 21,180 shares.
(10) Includes options to purchase 12,000 shares.
(11) Includes options to purchase 9,000 shares.
(12) Includes options to purchase 28,265 shares and 532 shares owned by Dr.
Usman's spouse to which Dr. Usman disclaims beneficial ownership.
(13) Includes options to purchase 163,884 shares.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our Certificate of Incorporation provides for authorized capital stock of
25,000,000 consisting of 20,000,000 shares of common stock, par value $0.01 per
share, and 5,000,000 shares of preferred stock, par value $0.01 per share. The
following summary of material provisions of our common stock and preferred
stock is not complete and may not contain all the information you should
consider before investing in the common stock. You should carefully read our
Certificate of Incorporation which is filed as an exhibit to the registration
statement of which this prospectus is a part.
Common Stock
Holders of common stock are entitled to one vote per share in the election of
directors and on all other matters on which stockholders are entitled or
permitted to vote. Holders of common stock are not entitled to cumulative
voting rights. Therefore, holders of a majority of the shares voting for the
election of directors can elect all the directors. Subject to the terms of any
outstanding series of preferred stock, the holders of common stock are entitled
to dividends in amounts and at times as may be declared by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." Upon
liquidation or dissolution, holders of common stock are entitled to share
ratably in all net assets available for distribution to stockholders after
payment of any liquidation preferences to holders of preferred stock. Holders
of common stock have no redemption, conversion or preemptive rights.
Warrants
As of March 15, 1999, we had warrants outstanding to purchase an aggregate of
487,458 shares (subject to adjustment) of common stock as follows:
<TABLE>
<CAPTION>
Shares Exercise Price Expiration Date
------ -------------- ---------------
<S> <C> <C>
9,523 $15.75 10-01-00
1,270 $15.75 N/A*
11,111 $40.50 12-28-01
16,666 $22.50 09-01-03
2,222 $22.50 12-29-05
444,444 $22.50 04-17-06
2,222 $22.50 04-17-06
</TABLE>
- --------
* These warrants are redeemable at our option at any time upon 15 days' notice
for an aggregate price of $200.
Preferred Stock
The Board of Directors has the authority to issue up to 5,000,000 shares of
preferred stock and to fix the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of our common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that we may issue in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, may have the effect of
delaying, deferring or preventing a change in control of Ribozyme
Pharmaceuticals, may discourage bids for our common stock at a premium over the
market price of the common stock and may adversely affect the market price of
and the voting and other rights of the holders of the common stock. We have no
present plans to issue shares of preferred stock.
Convertible Debt
As of March 15, 1999, there were 1,100,844 shares of common stock issuable
upon conversion of the outstanding notes payable to Schering AG, assuming
amounts of $5,372,117 and a conversion price of $4.88 per share based on the
closing price of our common stock on March 15, 1999. Schering AG may convert
the note into shares of common stock at any time.
54
<PAGE>
Delaware Anti-Takeover Law and Charter Provisions
Provisions of our Certificate of Incorporation and Bylaws are intended to
enhance continuity and stability in our Board of Directors and in our policies,
but might have the effect of delaying or preventing a change in control of
Ribozyme Pharmaceuticals and may make more difficult the removal of incumbent
management even if the transactions could be beneficial to the interests of
stockholders. A summary description of these provisions is below:
Authority to Issue Preferred Stock. The Certificate of Incorporation
authorizes the Board, without stockholder approval, to establish and to
issue shares of one or more series of preferred stock, each series having
the voting rights, divided rates, liquidation, redemption, conversion and
other rights as may be fixed by the Board.
Stockholder Actions and Meetings. The Bylaws direct that special meetings
of the stockholders may only be called by a majority of the members of the
Board of Directors, the Chairman of the Board of Directors, the President
or the holders of not less than 10% of the total voting power of all shares
of our capital stock entitled to vote in the election of directors. The
Bylaws further provide that stockholders' nominations to the Board of
Directors and other stockholder business proposed to be transacted at
stockholder meetings must be timely received by us in a proper written form
which meets the prescribed content requirements.
Limitation of Director Liability. Section 102(b)(7) of the Delaware
General Corporation Law ("DGCL") authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty
of care. Although Section 102(b) does not change directors' duty of care it
enables corporations to limit available relief to equitable remedies such
as injunction or rescission. Our Certificate of Incorporation limits the
liability of directors to the company or its stockholders (in their
capacity as directors but not in their capacity as officers) to the fullest
extent permitted by Section 102(b). Specifically, our directors will not be
personally liable for monetary damages for breach of a director's fiduciary
duty as a director, except for liability:
. for any breach of the director's duty of loyalty to us or our
stockholders,
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
. for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL, or
. for any transaction from which the director derived an improper
personal benefit.
Indemnification. To the maximum extent permitted by law, our Bylaws
provide for mandatory indemnification of directors and permit
indemnification of our officers, employees and agents against all expense,
liability and loss to which they may become subject or which they may incur
as a result of being or having been our director, officer, employee or
agent. In addition, we must advance or reimburse directors, and may advance
or reimburse officers, employees and agents for expenses incurred by them
as a result of indemnifiable claims.
Section 203 of the DGCL generally provides that a stockholder acquiring
more than 15% of the outstanding voting stock of a corporation subject to
the statute but less than 85% of the outstanding voting stock may not
engage in some business combinations with the corporation for a period of
three years after the date on which the stockholder became an interested
stockholder unless:
. prior to this date, the corporation's Board of Directors approved
either the business combination or the transaction in which the
stockholder became an interested stockholder, or
. the business combination is approved by the corporation's Board of
Directors and authorized at a stockholders' meeting by a vote of at
least two-thirds of the corporation's outstanding voting stock not
owned by the interested stockholder.
55
<PAGE>
Under Section 203, these restrictions will not apply to some business
combinations proposed by an interested stockholder following the earlier of the
announcement or notification of a particular extraordinary transaction
involving the corporation and a person who was not an interested stockholder
during the previous three years or who became an interested stockholder with
the approval of the corporation's Board of Directors, if the extraordinary
transaction is approved or not opposed by a majority of the directors who were
directors prior to any person becoming an interested stockholder during the
previous three years or were recommended for election or elected to succeed
those directors by a majority of those directors.
Section 203 defines the term "business combination" to encompass a wide
variety of transactions with or caused by an interested stockholder, including
transactions in which the interested stockholder receives or could receive a
benefit on other than a pro rata basis with other stockholders, such as
mergers, asset sales, issuances of additional shares to the interested
stockholder, transactions with the corporation which increase the proportionate
interest in the corporation directly or indirectly owned by the interested
stockholder or transactions in which the interested stockholder receives other
benefits.
The provisions of Section 203, together with the ability of our Board of
Directors to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in control of
Ribozyme Pharmaceuticals. The provisions also could discourage, impede or
prevent a merger, tender offer or proxy contest, even if this event would be
favorable to the interests of stockholders. Our stockholders, by adopting an
amendment to the Certificate of Incorporation or Bylaws, may elect not to be
governed by Section 203 effective 12 months after adoption. Neither our
Certificate of Incorporation nor Bylaws currently exclude us from the
restrictions imposed by Section 203.
Registration Rights
As of March 15, 1999, the holders of approximately 677,883 shares of common
stock (the "Registrable Shares") are entitled to rights with respect to the
registration of their shares for offer and sale to the public under the
Securities Act. Under these provisions, holders of Registrable Shares may
request that we file up to two registration statements under the Securities Act
to register such shares. We may also be required to effect an unlimited number
of registrations on Form S-3. Further, whenever we propose to register any of
our shares under the Securities Act, we must allow the holders to include all
Registrable Shares to be included in the registration, subject to limitations.
We are required to bear all expenses (except underwriting discounts, selling
commissions and stock transfer taxes) of all registrations.
Holders of warrants that are exercisable for 487,458 shares of our common
stock have the same registration rights for these shares when they are issued.
Transfer Agent
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company, New York, New York.
56
<PAGE>
PLAN OF DISTRIBUTION
We will enter into a placement agency agreement with Hambrecht & Quist LLC,
pursuant to which Hambrecht & Quist LLC will agree to act as placement agent in
connection with the offering. Hambrecht & Quist LLC will use its best efforts
to introduce Ribozyme Pharmaceuticals to selected institutional and accredited
investors who will purchase the shares. Hambrecht & Quist LLC has no obligation
to buy from us any of the shares.
Hambrecht & Quist LLC will solicit indications of interest from investors for
the full amount of the offering. We will not request effectiveness until
Hambrecht & Quist LLC has informed us that it has received indications of
interest for the full amount of the offering. Investor funds will not be
accepted until the registration statement is declared effective.
All investor funds will be deposited into an escrow account set up at
Citibank, N.A. for the benefit of the investors. Citibank, N.A., acting as
escrow agent, will invest all funds it receives in accordance with Rule 15c2-4
under the Exchange Act of 1934, as amended. Any interest collected on the funds
will be returned to Ribozyme Pharmaceuticals and investors on the closing date.
Before the closing date, Citibank, N.A. will notify Ribozyme Pharmaceuticals
and Hambrecht & Quist LLC that all of the funds to pay for the shares have been
received. We will deposit the shares with the Depository Trust Company upon
receiving a notice from Citibank, N.A. The shares will then be credited to the
respective accounts of the investors.
If funds are not received for all of the shares being offered, then all funds
that were deposited into escrow will be returned to investors and the offering
will terminate.
We have agreed to indemnify Hambrecht & Quist LLC and other persons against
some liabilities under the Securities Act. Hambrecht & Quist LLC has informed
us that it will not engage in overallotment, stabilizing transactions or
syndicate covering transactions in connection with the offering.
We have agreed to pay Hambrecht & Quist LLC a fee equal to 8% of the proceeds
of this offering; provided, however, that we will not be obligated to pay
Hambrecht & Quist LLC a fee in respect of the sale of any shares offered hereby
to certain specified investors. We also agreed to reimburse Hambrecht & Quist
LLC for up to $150,000 for expenses that it incurs in connection with the
offering.
We have agreed not to issue, and our directors and officers have also agreed
that they will not, directly or indirectly, offer, sell or otherwise dispose of
or arrange to dispose of any shares of common stock or any securities
convertible into or exercisable for, or any rights to purchase or acquire, our
common stock, for a period of 90 days after the date of the prospectus without
Hambrecht & Quist LLC's prior consent.
For a period of 18 months from the date of this prospectus, we have granted
Hambrecht & Quist LLC (provided this offering is completed) the right to
provide us with investment banking services on an exclusive basis in all
matters for which we seek such services, with certain exceptions. Furthermore,
we have agreed that, if within 18 months after the termination of Hambrecht &
Quist LLC's engagement, we sell shares of our common stock to investors
previously identified and/or contacted by Hambrecht & Quist LLC, then we will
pay Hambrecht & Quist LLC, at the time of each such sale, an amount equal to
the placement agency fee described above with respect our gross proceeds from
each such sale.
Affiliates of Hambrecht & Quist LLC own 16,666 warrants to purchase our
common stock at an exercise price of $9.00.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for Ribozyme Pharmaceuticals by Rothgerber Johnson & Lyons, LLP, Denver,
Colorado. Legal matters in connection with this offering will be passed upon
for Hambrecht & Quist LLC by Stroock & Stroock & Lavan LLP, New York, New York.
57
<PAGE>
EXPERTS
The financial statements of Ribozyme Pharmaceuticals at December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998,
appearing in this prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
Ribozyme Pharmaceuticals is subject to the informational requirements of the
Securities Exchange Act, and, accordingly, files reports, proxy statements and
other information with the SEC. These reports, proxy statements and other
information filed with the SEC are available for inspection and copying at the
public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, and at the SEC's Regional Offices: 500 West
Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center, New
York, NY 10048. The public may obtain information on the operation of the
public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a
site on the World Wide Web at "http://www.sec.gov" that contains reports, proxy
statements and other information regarding registrants that file electronically
with the SEC. In addition, these materials and other information concerning
Ribozyme Pharmaceuticals can be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, DC 20006.
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act to register with the SEC the securities we are offering with
this prospectus. This prospectus is a part of that registration statement. As
allowed by SEC rules, this prospectus does not contain all of the information
contained in the registration statement or the exhibits to that registration
statement. For further information with respect to Ribozyme Pharmaceuticals and
the common stock we are offering, you should refer to the registration
statement. Statements in this prospectus concerning the contents of any
contract or other document are not necessarily complete. You should refer to
the copy of the contract or other document filed with the SEC as an exhibit to
the registration statement. With respect to each document filed with the SEC as
an exhibit to the registration statement, you should refer to the exhibit for a
more complete description of the matter involved.
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................. F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Ribozyme Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Ribozyme Pharmaceuticals,
Inc. ("the Company") as of December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity, and cashflows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ribozyme Pharmaceuticals, Inc.
at December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Denver, Colorado
February 16, 1999
F-2
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 6,511,512 $ 15,302,775
Securities available-for-sale.................... -- 799,616
Restricted cash.................................. -- 52,669
Accounts receivable.............................. 3,898,581 8,044
Notes receivable--related parties................ 118,466 127,341
Prepaid expenses and other....................... 84,766 175,549
------------ ------------
Total current assets........................... 10,613,325 16,465,994
Property, plant, and equipment:
Machinery and equipment.......................... 6,478,223 5,673,115
Leasehold improvements........................... 3,582,664 3,567,106
Office furniture and equipment................... 1,065,049 1,007,104
------------ ------------
11,125,936 10,247,325
Accumulated depreciation......................... (6,903,742) (5,290,160)
------------ ------------
4,222,194 4,957,165
Notes receivable--related parties.................. 162,466 231,932
Deferred patent costs, net of accumulated
amortization (1998--$271,328;
1997--$171,039)................................... 2,905,575 2,510,705
Investment in Atugen Biotechnology GmbH............ 860,216 --
Other assets....................................... 460,515 684,245
------------ ------------
Total assets....................................... $ 19,224,291 $ 24,850,041
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade.......................... $ 750,514 $ 904,681
Accrued liabilities.............................. 396,143 245,956
Deferred revenue--current portion................ 400,000 --
Current portion of long-term debt................ 498,179 2,077,771
------------ ------------
Total current liabilities...................... 2,044,836 3,228,408
Deferred revenue--long-term portion................ 1,600,000 --
Long-term debt..................................... 200,455 698,633
Convertible debt................................... 4,344,612 2,052,889
Commitments
Stockholders' equity:
Voting convertible preferred stock, $.01 par
value; 5,000,000 shares authorized; no shares
outstanding..................................... -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; 9,181,455 and 8,607,022 shares
issued and outstanding in 1998 and 1997,
respectively.................................... 91,815 86,070
Additional paid-in capital....................... 84,434,213 81,424,341
Accumulated deficit.............................. (73,422,491) (62,504,924)
Unrealized loss on securities available-for-
sale............................................ -- (5,064)
Deferred compensation............................ (69,149) (130,312)
------------ ------------
Total stockholders' equity..................... 11,034,388 18,870,111
------------ ------------
Total liabilities and stockholders' equity......... $ 19,224,291 $ 24,850,041
============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Collaborative agreements.......... $ 8,962,813 $ 1,976,500 $ 759,122
Grant and other income............ 25,045 6,642 13,981
Interest income................... 634,569 794,968 936,397
------------ ------------ ------------
Total revenues.................. 9,622,427 2,778,110 1,709,500
Expenses:
Research and development.......... 16,941,652 15,169,731 14,188,836
General and administrative........ 1,812,860 1,886,108 1,943,583
Interest expense.................. 703,711 844,365 844,661
------------ ------------ ------------
Total expenses.................. 19,458,223 17,900,204 16,977,080
Equity in loss of unconsolidated
affiliate.......................... 1,081,771 -- --
------------ ------------ ------------
Net loss............................ $(10,917,567) $(15,122,094) $(15,267,580)
============ ============ ============
Net loss per share.................. $ (1.22) $ (2.04) $ (2.61)
Shares used in computing net loss
per share.......................... 8,978,355 7,419,650 5,844,987
</TABLE>
See accompanying notes.
F-4
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Unrealized
------------------- -------------------- Paid-In Accumulated Loss on Deferred
Shares Amount Shares Amount Capital Deficit Securities Compensation Total
---------- ------- ---------- -------- ----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995........... 982,501 $ 9,825 2,231,960 $ 22,321 $40,725,061 $(32,115,250) $ -- $(163,989) $ 8,477,968
Conversion of
preferred stock
in connection
with initial
public
offering....... 2,231,960 22,321 (2,231,960) (22,321) -- -- -- -- --
Issuance of
common stock
relating to
certain
antidilution
rights in
connection with
initial public
offering....... 841,279 8,412 -- -- (8,412) -- -- -- --
Issuance of
common stock
for cash
- --initial public
offering, net
of issuance
costs of
$816,990....... 2,300,000 23,000 -- -- 20,550,010 -- -- -- 20,573,010
Issuance of
common stock
for cash
- --other......... 510,829 5,108 -- -- 3,762,048 -- -- -- 3,767,156
Payment on
warrants....... -- -- -- -- 1,800,000 -- -- -- 1,800,000
Issuance of
common stock
for employee
bonus.......... 18,810 188 -- -- 187,912 -- -- -- 188,100
Issuance of
common stock
under employee
stock purchase
plan........... 15,842 158 -- -- 131,172 -- -- -- 131,330
Compensation for
issuance of
common stock
and options.... -- -- -- -- 162,530 -- -- (24,913) 137,617
Issuance of
common stock
for services... 2,083 21 -- -- 23,413 -- -- -- 23,434
Issuance of
common stock
relating to
certain royalty
agreements..... 45,000 450 -- -- 539,550 -- -- -- 540,000
Unrealized loss
on securities
available-for-
sale........... -- -- -- -- -- -- (9,214) -- (9,214)
Net loss........ -- -- -- -- -- (15,267,580) -- -- (15,267,580)
------------
Comprehensive
income/(loss).. (15,276,794)
---------- ------- ---------- -------- ----------- ------------ ------ --------- ------------
Balance at
December 31,
1996........... 6,948,304 69,483 -- -- 67,873,284 (47,382,830) (9,214) (188,902) 20,361,821
Issuance of
common stock
for cash
- --public
offering, net
of issuance
costs of
$634,796....... 1,400,000 14,000 -- -- 10,551,204 -- -- -- 10,565,204
Issuance of
common stock
for cash....... 212,766 2,128 -- -- 2,497,872 -- -- -- 2,500,000
Issuance of
common stock
for cash
- --under stock
option plan.... 30,001 300 -- -- 51,404 -- -- -- 51,704
Issuance of
common stock
under employee
stock purchase
plan........... 29,875 298 -- -- 310,303 -- -- -- 310,601
Issuance of
common stock
under 401(k)
plan-stock
match.......... 19,409 194 -- -- 155,078 -- -- -- 155,272
Cancellation of
common stock
relating to
license
agreement...... (33,333) (333) -- -- 333 -- -- -- --
Compensation for
issuance of
common stock
and options.... -- -- -- -- (15,137) -- -- 58,590 43,453
Net loss........ -- -- -- -- -- (15,122,094) -- -- (15,122,094)
Change in
unrealized loss
on securities
available-for-
sale........... -- -- -- -- -- -- 4,150 -- 4,150
------------
Comprehensive
income/(loss).. (15,117,944)
---------- ------- ---------- -------- ----------- ------------ ------ --------- ------------
Balance at
December 31,
1997........... 8,607,022 86,070 -- -- 81,424,341 (62,504,924) (5,064) (130,312) 18,870,111
Issuance of
common stock
for cash....... 465,117 4,651 -- -- 2,495,349 -- -- -- 2,500,000
Issuance of
common stock
for cash
- --under stock
option plan.... 21,689 217 -- -- 45,545 -- -- -- 45,762
Issuance of
common stock
under employee
stock purchase
plan........... 54,115 542 -- -- 307,608 -- -- -- 308,150
Issuance of
common stock
under 401(k)
plan-stock
match.......... 33,512 335 -- -- 190,371 -- -- -- 190,706
Compensation for
issuance of
common stock
and options.... -- -- -- -- (29,001) -- -- 61,163 32,162
Change in
unrealized loss
on securities
available-for-
sale........... -- -- -- -- -- -- 5,064 -- 5,064
Net loss........ -- -- -- -- -- (10,917,567) -- -- (10,917,567)
------------
Comprehensive
income/(loss).. (10,912,503)
---------- ------- ---------- -------- ----------- ------------ ------ --------- ------------
Balance at
December 31,
1998........... $9,181,455 $91,815 -- $ -- $84,434,213 $(73,422,491) $ -- $ (69,149) $ 11,034,388
========== ======= ========== ======== =========== ============ ====== ========= ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities
Net loss............................ $(10,917,567) $(15,122,094) $(15,267,580)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Depreciation....................... 1,670,825 1,665,044 1,648,435
Amortization....................... 92,107 74,051 40,747
Equity in loss of unconsolidated
affiliate......................... 1,081,771 -- --
Write-off of deferred patent
costs............................. 11,836 93,557 --
Compensation related to common
stock and options................. 278,150 280,177 889,151
Compensation related to issuance of
affiliate's stock................. 81,000 -- --
Compensation for forgiveness of
notes receivable--related
parties........................... 126,466 92,466 92,466
Loss on sale of securities
available-for-sale................ -- -- 13,140
Gain on sale of investment in
corporate partner................. (25,045) -- --
Loss (gain) on disposal of
equipment......................... 541 (1,126) --
Accrued interest included in
convertible debt.................. 291,723 52,889 --
Changes in operating assets and
liabilities:
Accounts receivable.............. (3,890,537) 65,978 (55,962)
Prepaid expenses and other....... 90,783 38,168 (55,882)
Other assets..................... (18,087) (277,807) (29,260)
Accounts payable--trade.......... (154,167) 351,777 3,866
Accrued liabilities.............. 150,186 29,340 130,226
Deferred revenue................. 2,000,000
Deferred gain.................... -- (5,515) (27,130)
------------ ------------ ------------
Net cash used by operating
activities.......................... (9,130,015) (12,663,095) (12,617,783)
Investing activities
Additions to property, plant, and
equipment........................... (936,395) (2,213,311) (1,541,412)
Additions to deferred patent costs... (506,994) (660,581) (558,895)
Sale (purchase) of investment in
corporate partner................... 275,045 -- (250,000)
Proceeds from sale of equipment...... -- 2,600 --
Net sales of securities available-
for-sale............................ 804,680 3,748,005 (1,058,590)
Investment in unconsolidated
affiliate........................... (2,022,987) -- --
Transfer of restricted cash.......... 52,669 242,733 914,528
Loan repayments--related parties..... 1,875 3,000 56,625
Loan advances--related parties....... (50,000) (175,000) (156,500)
------------ ------------ ------------
Net cash (used) provided by investing
activities.......................... (2,382,107) 947,446 (2,594,244)
Financing activities
Net proceeds from sale of shares of
common stock and of warrants........ 2,798,630 13,346,056 26,271,496
Payments under loan facilities....... (2,077,771) (1,480,677) (1,316,027)
Borrowings under loan facilities..... 2,000,000 2,254,460 1,162,242
Payments on capital lease
obligations......................... -- (152,093) (768,014)
------------ ------------ ------------
Net cash provided by financing
activities.......................... 2,720,859 13,967,746 25,349,697
------------ ------------ ------------
Net (decrease) increase in cash and
cash equivalents.................... (8,791,263) 2,252,097 10,137,670
Cash and cash equivalents at
beginning of year................... 15,302,775 13,050,678 2,913,008
------------ ------------ ------------
Cash and cash equivalents at end of
year................................ $ 6,511,512 $ 15,302,775 $ 13,050,678
============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Summary of Significant Accounting Policies
Description of Business
Ribozyme Pharmaceuticals, Inc. ("RPI" or the "Company") was founded in 1992
to capitalize on the broad potential of ribozymes for use in the development of
human therapeutics and therapeutic target validation services. To date, the
Company has engaged in the research and development of its ribozyme technology
and has experienced significant operating losses in each fiscal year since
inception. The Company has not generated any revenue from the commercialization
of its ribozyme technology and it expects to continue to incur significant
operating losses over at least the next several years.
During 1998, the Company formed Atugen Biotechnology GmbH ("Atugen"), a
German company located in Berlin. Atugen's primary goal is to utilize RPI's
proprietary ribozyme and related technologies and accelerate gene function
validation and discovery of human health therapeutic targets. Financing for
Atugen was accomplished through a combination of venture capital, an investment
by RPI and German government grants and loans. As part of the formation, Atugen
received exclusive licenses to RPI patents and technologies for target
validation and discovery. In addition, in 1998 Atugen acquired Transgenics
Berlin-Buch GmbH ("Transgenics") in exchange for Atugen common stock, which
allowed access to DNA "chip" technologies. As of December 31, 1998, the Company
owned 49.5% of the Atugen voting stock and accounts for its investment in
Atugen using the equity method. RPI plans to retain ownership in and have other
on-going business relationships with Atugen.
Capital Requirements and Management's Plans
The Company incurred a net loss of $10,917,567 for the year ended December
31, 1998 and has a accumulated deficit of $73,422,491 at December 31, 1998.
Development of the Company's products will require a commitment of
substantial additional funds to conduct the costly and time-consuming research,
preclinical and clinical testing necessary to bring its proposed products to
market and to establish manufacturing and marketing capabilities. The Company's
future capital requirements will depend on many factors, including, among
others, the progress of the Company's research, development and drug discovery
efforts, the ability of the Company to establish collaborative arrangements for
clinical testing, progress with preclinical studies and clinical trials, the
time and costs involved in obtaining regulatory approvals, the costs involved
in preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims, competing technological and market developments, changes in the
Company's existing research relationships, determination as to the commercial
potential of the Company's potential products, effective commercialization
activities and arrangements, and the cost and availability of third-party
financing for capital expenditures.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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
F-7
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
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.
Prior to April 11, 1996, pursuant to Securities and Exchange Commission Staff
Accounting Bulletins and Staff Policy, all convertible securities issued prior
to the Company's initial public offering, even if antidilutive, have been
included in the basic loss per share calculation as if they were outstanding.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents. The Company's cash equivalents
are comprised of certificates of deposit, money market funds, and investment
securities with maturities of three months or less.
Property, Plant, and Equipment
Property, plant, and equipment is stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the assets. Useful
lives of laboratory equipment and furniture are estimated at five years and all
computer equipment is estimated at three years. Leasehold improvements and
equipment subject to financing obligations are amortized on a straight-line
basis over the shorter of their estimated useful lives or the term of the
lease.
Deferred Patent Costs
The Company capitalizes legal costs directly incurred in pursuing patent
applications as deferred patent costs. When such applications result in an
issued patent, the related costs are amortized over the remaining legal life of
the patents, using the straight-line method. On a quarterly basis, the Company
reviews its issued patents and pending patent applications, and if it
determines to abandon a patent application or that an issued patent no longer
has economic value, the unamortized balance in deferred patent costs relating
to that patent is immediately expensed.
It is possible the above estimates of future economic life of the Company's
commercialization revenues, the amount of anticipated future commercialization
revenues, or both, will be reduced significantly in the near term due to
alternative technologies developed by other biotechnology or pharmaceutical
companies. As a result, the carrying amount of deferred patent costs may be
reduced in the future.
Revenue Recognition
Revenues recognized under the Company's collaborative research agreements and
grants are recorded as earned ratably over the term of the agreements.
Research and Development Expenses
Research and development costs are expensed as incurred.
New Accounting Pronouncements
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 were adopted by the Company during
F-8
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
1998. As a result of the adoption of Statement 130, the Company has reported
comprehensive income (loss) as a component of the Statement of Stockholders'
Equity. There was no change in the Company's financial reporting as a result of
the adoption of Statement 131.
Reclassifications
Certain amounts in the December 31, 1997 financial statements were
reclassified to conform with the December 31, 1998 presentation. These
reclassifications had no impact on the reported results of operations.
2. Securities Available-for-Sale
Management has determined that at December 31, 1998 all marketable securities
held by the Company were cash and cash equivalents. At December 31, 1997
management determined that certain marketable securities held by the Company at
December 31, 1997 were available-for-sale. Securities available-for-sale are
carried at fair value, with unrealized gains and losses reported as a component
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in investment income. Realized gains and losses
and declines in value judged to be other-than-temporary on securities
available-for-sale are included in investment income. Interest and dividends on
securities available-for-sale are included in investment income. The cost of
securities sold is based on the specific identification method. There were no
gross realized gains or losses on sales of securities available-for-sale in
1998 or 1997.
3. Long-Term Debt
Long-term debt as of December 31 consists of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Equipment loan (I).................................... $ -- $ 263,301
Tenant interest loan (II)............................. -- 496,066
Tenant improvement and equipment loan (II)............ -- 972,703
Equipment loan (III).................................. 698,634 1,044,334
Convertible debt (IV)................................. 4,344,612 2,052,889
---------- ----------
$5,043,246 $4,829,293
========== ==========
</TABLE>
I. During 1994, the Company obtained a tenant improvement loan of
$1,000,000 for leasehold improvements and an equipment loan to purchase up
to $1,500,000 of equipment. The interest rate on borrowings under these
loan facilities was 10.00% at December 31, 1997. The agreement required
monthly principal and interest payments through August 1998, at which time
the loan was paid in full.
II. In April 1995, the Company obtained a loan of $1,000,000
collateralized by its tenant interest and certain existing leasehold
improvements, and an additional loan to purchase up to $1,500,000 of
leasehold improvements and equipment. The terms of the agreement call for
fixed monthly principal and interest payments through October 1998,
assuming the Company exercised a prepayment option. In December 1998, the
Company exercised the prepayment option and paid off the loan at its
carrying amount.
III. In December 1995, the Company negotiated an additional equipment
credit facility of $2,000,000 with a financial institution. The facility
commitment was terminated on June 30, 1997. The agreement requires monthly
principal and interest payments through April 2000, at which time a final
payment of $283,328 is due in full. The interest rate on these borrowings
was 12% at December 31, 1998 and 1997.
IV. In April 1997, the Company entered into a collaboration agreement
with a corporate partner whereby, among other items, the Company may borrow
from the partner up to $2.0 million annually for each of the next five
years. The loans are collaterallized 50% by equipment purchases. The loans
F-9
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
carry an interest rate of 8% per annum and under certain circumstances are
convertible into equity at the option of the corporate partner. Principal
and interest payments on the loans are deferred until maturity of the loans
which is in April 2004. The collaboration and loan facility may be
terminated at the option of the partner any time.
Cash paid for interest for the years ended December 31, 1998, 1997 and 1996
was $411,988, $791,476 and $844,661, respectively. At December 31, 1998 the
carrying amounts of the Company's long-term debt approximates fair value as all
borrowings bear interest rates which are comparable to the current market rate
for such borrowings.
All assets acquired under the above loan facilities represent collateral for
the amounts outstanding. In addition, the Company was required to maintain
minimum cash balances in the form of certificates of deposit with a financial
institution, in the amount of $0 and $52,669 at December 31, 1998 and 1997,
respectively. These amounts are presented as restricted cash in the
accompanying balance sheets.
As of December 31, 1998, maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
1999.............................................................. $ 498,179
2000.............................................................. 200,455
2001.............................................................. --
2002.............................................................. --
2003.............................................................. --
Thereafter........................................................ 4,344,612
----------
$5,043,246
==========
</TABLE>
4. Leases
The Company leases office space under a noncancelable operating lease which
was extended until June 2007. Total rent expense, including miscellaneous
laboratory equipment rentals, was $493,188, $443,796 and $496,774 in 1998, 1997
and 1996 respectively.
The Company's lease commitments at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Operating
Lease
----------
<S> <C>
1999.............................................................. $ 478,516
2000.............................................................. 363,480
2001.............................................................. 363,480
2002.............................................................. 363,480
2003.............................................................. 363,480
2004 and thereafter............................................... 1,272,180
----------
$3,204,616
==========
</TABLE>
5. Stockholders' Equity
In April 1996, the Company completed an initial public offering of its common
stock, whereby 2,300,000 shares of the Company's common stock were sold at
$10.00 per share, resulting in net proceeds of approximately $20.6 million. As
a result of the Company's initial public offering, all preferred shares
outstanding were converted into an aggregate of 2,231,960 shares of common
stock.
F-10
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Upon consummation of the initial public offering the Company sold 377,202
shares of common stock to Chiron Corporation ("Chiron") for $3,640,000.
Additionally, the Company received $1,800,000 from Chiron to complete the
purchase of warrants to purchase 444,444 shares of common stock, issued
concurrently with the IPO.
The Company adopted an Employee Stock Purchase Plan (the "Purchase Plan"),
authorizing the issuance of 300,000 shares pursuant to purchase rights granted
to employees of the Company. The Purchase Plan provides a means by which
employees purchase common stock of the Company through payroll deductions. The
Purchase Plan is implemented by offerings of rights to eligible employees.
Generally, each offering is twenty-four months' duration with purchases
occurring on each October 31 and April 30 during each offering (except that
April 30, 1996 was not a purchase date). Common stock is purchased for accounts
of employees participating in the Purchase Plan at a price per share equal to
the lower of (i) 85% of the fair market value of a share of common stock on the
date of commencement of participation in the offering or (ii) 85% of the fair
market value of a share of common stock on the date of purchase. Generally all
regular employees, including executive officers, may participate in the
Purchase Plan and may authorize payroll deduction of up to 15% of their base
compensation for the purchase of stock under the plan. The Company's Board of
Directors has the authority to terminate the Purchase Plan at its discretion.
Shares are deemed issued for accounting purposes in the year the shares are
purchased.
Pursuant to an antidilution agreement (the "Antidilution Agreement") with a
founder of the Company, the Company agreed to issue additional shares to this
individual so that he would maintain a 5% interest in the fully diluted equity
of the Company until the occurrence of one of several events, including the
Company's initial public offering. Accordingly, effective April 11, 1996,
115,506 shares were issued related to the Antidilution Agreement which
represented the founder's 5% interest in the Company. No additional rights
under the Antidilution Agreement exist.
Below is a summary of common stock reserved by the Company at December 31,
1998 for issuance upon the exercise of the various options, warrants and the
401(k) and purchase plans.
<TABLE>
<CAPTION>
Shares
---------
<S> <C>
Stock option plans................................................. 1,479,173
Employee stock purchase plan....................................... 200,168
Employee 401(k) stock match........................................ 247,079
Warrants at $15.75 per share....................................... 10,793
Warrants at $40.50 per share....................................... 11,111
Warrants at $22.50 per share....................................... 465,554
---------
2,413,878
=========
</TABLE>
The Company's ability to pay dividends is restricted by the terms of its
tenant improvement and equipment loan facility agreements.
6. Stock Option Plans
The Company has established a Non-Qualified Stock Option Plan and an
Incentive Stock Option Plan (collectively, the "Plans"), under which it is
authorized to grant stock options to purchase up to 1,317,154 shares of the
Company's common stock to eligible employees, consultants, and other
individuals, as defined in the Plans. In May 1997, the Company's shareholders
approved an additional 350,000 shares of the Company's common stock to be
reserved for issuance pursuant to the Plans. Options to purchase the Company's
common stock are exercisable at a price as determined by the Board of Directors
at the time the
F-11
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
option is granted, which shall not be less than 100% of the fair market value
(110% in the case of 10 percent shareholders) at the date of grant. Vesting
rights are determined by the Board of Directors at the time the option is
granted and generally the options become exercisable at twenty percent at the
end of each of years one through five. If not exercised, the options expire
after ten years. The Board of Directors has also granted certain employees
options vesting upon achievement of certain contingent milestone events.
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, 890,921 options
were canceled and 747,060 options were granted, effective September 18, 1998.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123), requires use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, if the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized. During 1998,
1997 and 1996, the Company recorded $32,162, $43,453 and $137,617,
respectively, of compensation relating to the grant of stock options and the
Antidilution Agreement, all of which relates to pre-IPO issuances which have
been deferred until vesting has been completed.
Pro forma information regarding net income and earnings per share is required
by SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options under the fair value
method of SFAS 123. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1998, 1997 and 1996, respectively: risk-free
interest rates of 4.7%, 6.4% and 6.3%; a dividend yield of 0%; volatility
factors of the expected market price of the Company's common stock of .967,
.638 and .566; and a weighted-average expected life of the option of 6 years.
The weighted average fair value of stock options granted during 1998, 1997 and
1996 was $4.04, $5.88 and $6.59, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-12
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Pro forma net loss................ $(11,948,280) $(16,153,548) $(15,554,890)
Pro forma loss per share.......... (1.33) (2.18) (2.66)
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma net loss may not be
representative of that to be expected in future years.
Changes in stock options for the years ended December 31, 1998 and 1997 were
as follows:
<TABLE>
<CAPTION>
Exercise
Options Price
---------- ---------------
<S> <C> <C>
Outstanding at December 31, 1995................ 367,838 $ .45--$ 5.40
Options granted................................. 508,652 $ 2.70--$ 19.00
Options exercised/canceled...................... (197,067) $ .45--$ 5.40
---------- ---------------
Outstanding at December 31, 1996................ 679,423 $ .45--$ 19.00
Options granted................................. 604,300 $ 7.50--$ 13.50
Options exercised/canceled...................... (64,833) $ .45--$ 19.00
---------- ---------------
Outstanding at December 31, 1997................ 1,218,890 $ .45--$ 15.25
Options granted................................. 1,174,560 $ 3.00--$ 8.13
Options exercised/canceled...................... (1,045,878) $ .45--$ 15.25
---------- ---------------
Outstanding at December 31, 1998................ 1,347,572 $ .45--$ 12.78
========== ===============
</TABLE>
The weighted average exercise price of options outstanding at December 31,
1998, 1997 and 1996 was $4.21 and $9.31 and $8.93, respectively.
Stock options vest as follows:
<TABLE>
<CAPTION>
Options
---------
<S> <C>
Currently exercisable............................................. 258,279
1999.............................................................. 219,492
2000.............................................................. 176,592
2001.............................................................. 159,938
2002.............................................................. 149,583
2003 and thereafter............................................... 172,160
Contingent vesting................................................ 211,528
---------
Total............................................................. 1,347,572
=========
</TABLE>
7. Collaborative Agreements
Parke-Davis
In April 1993, the Company entered into a research and development
collaboration agreement with the Parke-Davis division of the Warner-Lambert
Corporation ("Parke-Davis"), whereby Parke-Davis was to partially fund the
research and development costs incurred by the Company in developing and
commercializing ribozyme-based products for application to the treatment of
osteoarthritis and other diseases. Pursuant to the Parke-Davis agreement,
Parke-Davis purchased 100,100 shares of Series C preferred stock at a price of
$29.97 per share in 1993, 27,777 shares of Series C preferred stock at a price
of $36.00 per share in 1994, and 40,160 shares of Series F preferred stock at
$37.35 per share in 1995, for a
F-13
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
total equity investment of $5,500,000. All preferred shares were converted into
168,037 shares of common stock upon the Company's initial public offering.
Also pursuant to the collaboration agreement, through December 31, 1996,
Parke-Davis provided $1,700,000 research and development funding to the
Company. As of June 30, 1997, the collaboration agreement has been completed.
In March 1998, the Company entered into a Target Validation agreement with
Parke-Davis. The agreement gives Parke-Davis access to the Company's
proprietary ribozyme technology which will assist Parke-Davis in determining
which genes are valid therapeutic targets. Under the terms of the contract, the
Company will design and synthesize ribozymes against target genes designated by
Parke-Davis and perform various studies to determine the level of gene
expression inhibition achieved. Parke-Davis will fund the research and may
provide milestone payments or success fees to the Company if Parke-Davis uses
the information to derive compounds to take into development.
Dow Agrosciences
In September 1993, the Company entered into a research and development study
with Dow Agrosciences (the "Feasibility Study") to demonstrate the stable
integration and the effective use of ribozymes to alter corn composition.
Pursuant to the terms of the Feasibility Study, Dow Agrosciences reimbursed the
Company for all of its expenses related to the Feasibility Study and, in 1994,
purchased 41,666 shares of Series D preferred stock at a price of $36.00 per
share, for a total equity investment of $1,500,000. All preferred shares were
converted into 41,666 shares of common stock upon completion of the Company's
initial public offering.
The Feasibility Study was completed in 1997 and the parties entered into a
long-term license agreement for the development and commercialization of
ribozymes to the targets of interest. As consideration for the long-term
license agreement, 41,666 shares of common stock held by Dow Agrosciences were
returned to the Company. The Company canceled 33,333 of the shares and reissued
the remaining 8,333 shares to CTI as a consideration of royalty, due to the
license transaction.
Chiron
In July 1994, the Company entered into a research and development
collaboration agreement with Chiron to research, develop and market products
directed towards five genetic targets, and all human clinical indications
associated with those targets. The Company and Chiron will share equally in the
costs and profits of any jointly developed products. In addition, Chiron may,
at its option, finance the Company's portion of its Phase II and Phase III drug
development costs for mutually approved programs. The Company retains the
option to reacquire its rights by reimbursing Chiron for such development costs
plus a predetermined risk premium. The term of the research program is five
years, with the terms of the agreement to be extended if products are jointly
developed. As part of this agreement, Chiron committed to make a $10,000,000
equity investment in the Company. The components of this investment are:
In 1994, Chiron purchased 100,000 shares of the Company's common stock at
a price of $3.60 per share, or $360,000; also in 1994 Chiron purchased
107,095 shares of Series E preferred stock at a price of $37.35 per share,
or $4,000,000. In 1996, the Company issued Chiron immediately upon the
closing of the Company's initial public offering a warrant to purchase
444,444 shares of the Company's common stock which is exercisable at a
price of $22.50 per share, for an aggregate purchase price of $4.50 per
warrant share. In 1994, Chiron paid the Company $0.45 per warrant share, or
$200,000. The balance of the warrant purchase price, $1,800,000, or $4.05
per warrant share, was paid to the Company upon completion of its initial
public offering. Further, Chiron purchased 377,202 common
F-14
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
shares with an aggregate value of $3,640,000 upon completion of the
Company's initial public offering, at the initial public offering price
less one-half of the underwriting discount. Chiron also has a designated
Board member on the Company's Board of Directors. All preferred shares were
converted into 142,222 shares of common stock upon completion of the
Company's initial public offering.
In May 1996, the Company entered into a collaboration with Chiron for the use
of ribozymes to characterize gene function. The collaboration gives Chiron the
right to develop and commercialize products that result from the collaboration,
and would entitle RPI to receive product development milestone payments and
royalties on sales of any such commercial products. Chiron and RPI each pay a
portion of the research and development expenses of the collaboration, and the
Company provided Chiron $1,800,000 in 1996 for research funding related to the
collaboration.
In September 1998, the Company received a $2.5 million option payment from
Chiron related to the possible joint product development of ANGIOZYME. In
December 1998, Chiron paid the final option payment of $2.5 million to
guarantee its position as a joint collaborator for the development of
ANGIOZYME. In addition, and coinciding with the second option payment, Chiron
agreed to share equally in the costs of product development of ANGIOZYME. In
1998, the Company recorded $1,048,138 in revenues related to Chiron product
development payments.
Pharmacia Biotech AB
In November 1995, the Company and Pharmacia Biotech AB entered into a
collaboration and license agreement for the improvement of production scale
synthesis of RNA and chimeric oligonucleotides. The goal of the collaboration
is to reduce the cost of manufacturing ribozymes and other oligonucleotide
products. Pharmacia Biotech AB will provide research funding, synthesis support
and instrumentation, while RPI will receive royalties on the sales of modified
RNA oligonucleotides and non-DNA primer support. As of December 31, 1998, the
Company has received $731,500 in funding pursuant to the agreement.
Schering AG, Berlin
On April 9, 1997, the Company entered into a research collaboration with
Schering AG, Berlin, ("Schering AG") focusing on the use of ribozymes for
therapeutic target validation, as well as the development of ribozymes as
therapeutic agents. The collaboration will utilize the special selectivity of
ribozymes to validate new molecular therapeutic targets and to discover new
therapeutic agents based on those targets. The Company will provide its
expertise in ribozyme design, synthesis and delivery, and Berlex Laboratories,
Inc., a U.S. subsidiary of Schering AG ("Berlex") will provide candidate
targets, cell culture screens, animal models and development and
commercialization expertise to the collaboration. The Company anticipates that
hundreds of potential targets may be examined over a five year period with
Berlex having the option to commercialize products from any validated targets.
Schering AG made an equity investment in the Company in May 1997 of $2.5
million in exchange for 212,766 shares of common stock, and made an additional
equity investment of $2.5 million for 465,117 shares in April 1998. Separately,
Schering AG provided a loan of $2.0 million in 1997, and subsequently $2.0
million in 1998. Schering AG will continue to provide loans of up to $2.0
million annually for each of the next three years, provided that the
collaboration is continued in each of those years. 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 December 31, 1998, the outstanding
borrowings of $4.3 million were convertible into approximately 992,000 shares
of the Company's common
F-15
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
stock. Principal and interest payments are deferred until maturity of the loans
which is in April 2004. In addition, Schering AG made research payments of $2.0
million and $1.5 million in 1998 and 1997, respectively. Provided that the
collaboration is continued, Schering AG will make research payments of $2
million a year for each year through April 2001. The Company may earn success
fees upon product development milestones and will manufacture synthetic
ribozyme products and receive royalties on sales of both ribozyme and non-
ribozyme products resulting from the collaboration. All such payments are
subject to some restrictions, including receipt of certain third party
consents. Upon payment of termination fees paid to the Company, the research
collaboration may be terminated at Schering AG's option any time.
Roche Bioscience
In May 1998, the Company entered into a Target Validation agreement with
Roche Bioscience. The agreement gives Roche Bioscience access to the Company's
proprietary ribozyme technology which will assist Roche Bioscience in
determining which genes are valid therapeutic targets. Under the terms of the
contract, the Company will design and synthesize ribozymes against target genes
designated by Roche Bioscience and perform various studies to determine the
level of gene expression inhibition achieved. Roche Bioscience will fund the
research and may provide milestone payments or success fees to the Company if
Roche Bioscience uses the information to derive compounds to take into
development.
8. Commitments and Contingency
At the core of the Company's technology are inventions and patents of the
University of Colorado ("CU") which were developed by Dr. Thomas R. Cech and
various associates of Dr. Cech. Pursuant to the policies of CU, these
inventions and the patents issued thereon, (the "Cech Technology") became the
property of CU. The Cech Technology was assigned to CU's affiliate, University
Research Corporation ("URC"), which in turn assigned the rights to license
certain of the Cech Technology to Competitive Technologies, Inc. ("CTI"),
formerly known as University Patents, Inc. United States Biochemical
Corporation ("USB") licensed the Cech Technology pursuant to two sublicenses.
One of these sublicenses was for the Cech Technology held by CTI. In November
1996, USB assigned to the Company its rights under the sublicense from CTI and
the Company entered into an amended and restated license with CTI. The Company
also has obtained a license from URC and a sublicense from USB for other Cech
Technology held by URC. The CTI license, URC license and USB sublicense
together grant the Company the exclusive (except for non-commercial academic
research) worldwide right, among other things, to make, use and sell RNA
enzymes covered by licensed patents and products incorporating them. The URC
license and USB sublicense are fully paid. The CTI license provides for the
payment of a royalty on sales of products incorporating RNA enzymes, covered by
licensed patents, and for certain minimum annual royalties. The Company may
grant sublicenses to the licensed technology subject to the payment to CTI of a
share of royalty income from such sublicenses or a royalty on sales from
sublicensed products, methods or services, depending on the particular licensed
patents involved. In addition, the Company must pay CTI a share of any option
fee, license fee, prepaid royalty or other "front-end" fee other than research
and development funding paid in connection with such sublicense. At the
Company's discretion, the payment may be in either cash or equity.
During 1993, the Company was granted the right of first refusal to license
any new inventions, improvements and patents related to ribozyme technology
developed by Dr. Cech or others at CU, in exchange for certain payments. In
order to maintain the right of first refusal, the Company agreed to fund
research at CU through an unrestricted grant of $750,000 payable in various
installments over a five year period commencing in September 1993. URC made an
investment of approximately $41,000 for 46,188 shares of the Company's common
stock upon entering into the agreement.
F-16
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
During 1996, the Company eliminated the royalty arrangement in exchange for
45,000 shares of its common stock. The Company recognized expense related to
the exchange of $540,000 during 1996. The Company's final payment under the
above unrestricted grant was $113,000, which was paid in 1998.
The Company is involved in legal proceedings which have arisen in the
ordinary course of business. In the opinion of management the outcome of these
legal proceedings will not have a material adverse impact on the Company's
financial position or operations.
9. Related Party Transactions
At December 31, 1998, 1997 and 1996, the Company had a total of $280,932,
$320,000, and $225,000, respectively, of non-interest bearing loans due from
officers. The balances may be forgiven by the Company under certain employment
agreement provisions. The loan balances are forgivable or payable to the
Company under various terms not to exceed 5 years. The Company forgave
$126,466, $80,000 and $85,000 of these loans during each of the years ending
December 31, 1998, 1997 and 1996, respectively.
10. Formation of Atugen, an unconsolidated German Affiliate
In 1998, the Company transferred its gene function and target validation
business and technology to Atugen, a separately funded German affiliate.
Financing for Atugen was accomplished through an equity investment of $2.0
million from RPI, a venture capital investment of $7.0 million and a commitment
by the German government to provide grants and loans of up to $10.0 million. As
a result, at December 31, 1998, RPI retained a 49.5% ownership in Atugen. In
connection with its formation, Atugen received exclusive royalty-free licenses
to RPI patents and technologies for target validation and discovery in exchange
for a one-time $2.0 million payment which was received by RPI in January 1999.
The entire amount of this one-time payment has been deferred as of December 31,
1998 and will be amortized over the five-year term of the license agreement and
reflected in the Company's equity in earnings or loss of this unconsolidated
affiliate.
According to a service agreement executed by both parties, RPI will provide
management support, technologies, facilities and reagents to Atugen for
reasonable fees. RPI will retain rights to develop ribozyme therapeutic agents
against targets validated by Atugen.
In 1998, RPI gave to its officers and certain other employees stock
representing a 5.5% interest in the newly formed Atugen at no personal cost to
the individuals. As a result, the Company's 1998 Statement of Operations
includes $81,000 of compensation related to the share grant.
11. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes (SFAS 109).
Under the provisions of SFAS 109, a deferred tax liability or asset (net of a
valuation allowance) is provided in the financial statements by applying the
provisions of applicable tax laws to measure the deferred tax consequences of
temporary differences that will result in net taxable or deductible amounts in
future years as a result of events recognized in the financial statements in
the current or preceding years.
F-17
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
At December 31, 1998, the Company has the following net operating loss and
tax credit carryforwards for income tax purposes:
<TABLE>
<CAPTION>
Net Research and State
Operating Development Investment
Expiration Date Losses Credits Credits
--------------- ----------- ------------ ----------
<S> <C> <C> <C>
1999..................................... $ -- $ -- $14,000
2000..................................... -- -- 11,000
2001..................................... -- -- 6,000
2007..................................... 3,506,000 101,000 --
2008..................................... 7,363,000 185,000 --
2009..................................... 9,239,000 316,000 --
2010..................................... 11,953,000 139,000 --
2011..................................... 15,125,000 181,000 --
2012..................................... 15,291,000 297,000 --
2018..................................... 11,248,000 298,000 --
----------- ---------- -------
Total.................................... $73,725,000 $1,517,000 $31,000
=========== ========== =======
</TABLE>
The Tax Reform Act of 1986 contains provisions that limit the utilization of
net operating loss and tax credit carryforwards if there has been a "change of
ownership" as described in Section 382 of the Internal Revenue Code. Such a
change of ownership may limit the Company's utilization of its net operating
loss and tax credit carryforwards, and could have been triggered by the
Company's initial public offering or by subsequent sales of securities by the
Company or its shareholders.
The components of the Company's deferred tax assets and liabilities as of
December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............. $ 27,499,000 $ 23,324,000
Research and development and state investment
credit carryforwards........................ 1,516,000 1,102,000
Depreciation................................. 639,000 618,000
Other........................................ 62,000 12,000
------------ ------------
29,716,000 25,056,000
Valuation allowance.......................... (28,610,000) (24,097,000)
------------ ------------
Net deferred tax assets...................... 1,106,000 959,000
Deferred tax liabilities:
Deferred patent costs........................ 1,084,000 936,000
Other........................................ 22,000 23,000
------------ ------------
Total deferred tax liabilities............... 1,106,000 959,000
------------ ------------
$ -- $ --
============ ============
</TABLE>
F-18
<PAGE>
RIBOZYME PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
11. Employee Savings Plan
The Company has a 401(k) plan which allows participants to contribute 1% to
15% of their salary, subject to eligibility requirements and annual limits. The
Board may, at its sole discretion, approve matching contributions with the
Company's common stock. In both 1998 and 1997, the Board approved a 50% common
stock match equal to total participant deferrals made in each respective year.
The Company stock match is subject to vesting restrictions.
12. Subsequent Event
In March 1999, the Company entered into a collaboration with Eli Lilly and
Company ("Lilly") to conduct research, development and commercialization of
HEPTAZYME, the Company's ribozyme for the treatment of hepatitis C virus
("HCV") infection. Under the terms of the agreement, the Company will receive
approximately $9.2 million in 1999, which includes initial fees, funding for
research and clinical trial expenses, and an equity investment. In addition,
the Company may receive success fees related to various development milestones
and royalties on future sales of products developed related to the
collaboration. Lilly will receive the exclusive worldwide commercialization
rights to products that result from this collaboration, including the HEPTAZYME
product. The Company has retained certain rights to manufacture HEPTAZYME
products resulting from the collaboration.
F-19
<PAGE>
ANGIOZYME(TM) and HEPTAZYME(TM) are trademarks of Ribozyme Pharmaceuticals.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,800,000 Shares
[LOGO OF RPI APPEARS HERE]
Common Stock
------------
PROSPECTUS
------------
HAMBRECHT & QUIST LLC
------------
, 1999
------------
You should rely only on information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. We are offering to sell, and seeking offers to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses Of Issuance And Distribution
The following table sets forth the various expenses in connection with the
distribution and sale of the securities being registered which will be paid by
us. All amounts are estimates except for the SEC registration fee:
<TABLE>
<S> <C>
SEC registration fee............................................... $ 2,390
Printing and mailing expenses...................................... $ 40,000
Nasdaq listing fee................................................. $ 17,500
Legal fees and expenses............................................ $ 75,000
Accounting fees and expenses....................................... $ 40,000
--------
TOTAL.......................................................... $174,890
========
</TABLE>
Item 14. Indemnification Of Directors And Officers
Article XI of our Bylaws provides for indemnification of our directors to the
fullest extent permitted by law, as now in effect or later amended. Article XI
of our Bylaws also permits the indemnification to the same extent of our
officers, employees or agents if, and to the extent, authorized by the Board of
Directors. In addition, the Bylaws provide for indemnification against expenses
incurred by a director to be paid by us at reasonable intervals in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall be ultimately determined that he is not entitled to be indemnified by
us. The Bylaws further provide for a contractual cause of action on the part of
our directors for indemnification claims that have not been paid by us.
Article VI of our Certificate of Incorporation, as amended, limits under
certain circumstances the liability of our directors for a breach of their
fiduciary duty as directors. These provisions do not eliminate the liability of
a director (1) for a breach of the director's duty of loyalty to us or our
stockholders, (2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the General Corporate Law of the State of Delaware ("DGCL") (relating to the
declaration of dividends and purchase or redemption of shares in violation of
the DGCL) or (4) for any transaction from which the director derived an
improper personal benefit.
Section 145 of the DGCL contains provisions regarding indemnification, among
others, of officers and directors. Section 145 of the DGCL provides in relevant
part:
(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
II-1
<PAGE>
(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
Delaware law also permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director or officer against any liability
asserted against him and incurred by him in such capacity or arising out of his
status as such, whether or not the corporation has the power to indemnify him
against that liability under Section 145 of the DGCL.
We also have provided liability insurance for each director and officer for
losses arising from claims or charges made against them while acting in their
capacities as our directors or officers.
The above discussion of our corporate documents is not intended to be
exhaustive and is respectively qualified in its entirety by our corporate
documents.
Item 15. Recent Sale Of Unregistered Securities
The following table sets forth the Ribozyme Pharmaceuticals' sales of
unregistered securities for the past three years. All transactions listed below
involved the issuance of common stock and options to acquire shares of common
stock prior to commencement of the offering described in the foregoing
prospectus. No underwriters were employed with respect to the sale of any of
the securities listed below. All shares were issued in reliance upon Section
4(2) and/or 3(b) of the Securities Act.
<TABLE>
<CAPTION>
Securities Issued Purchaser Date Acquired Consideration
- ----------------- ----------- ------------- -------------
<S> <C> <C> <C>
212,776 shares of common stock.......... Schering AG May 1997 $2,500,000
465,117 shares of common stock.......... Schering AG May 1998 $2,500,000
</TABLE>
II-2
<PAGE>
Item 16. Exhibits And Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1+ Form of Placement Agency Agreement dated , 1999, between Ribozyme
Pharmaceuticals and Hambrecht & Quist LLC
1.2+ Form of Escrow Agreement dated , 1999, between Ribozyme
Pharmaceuticals Hambrecht & Quist LLC and Citibank, N.A.
3.1 Amended and Restated Certificate of Incorporation of Ribozyme
Pharmaceuticals dated April 17, 1996(5)
3.2 Bylaws of Ribozyme Pharmaceuticals, as amended(1)
4.1 Specimen Stock Certificate(1)
5.1+ Opinion of Rothgerber Johnson & Lyons LLP
10.1 Form of Indemnity Agreement entered into between Ribozyme
Pharmaceuticals and its directors and officers, with related
schedule(1)
10.2 Ribozyme Pharmaceuticals' Incentive Stock Option Plan, including form
of Incentive Stock Option Agreement(1)
10.3 Ribozyme Pharmaceuticals' Non-Qualified Stock Option Plan, including
form of Non-Qualified Stock Option Agreement(1)
10.4 Ribozyme Pharmaceuticals' 1996 Stock Option Plan, including forms of
Incentive Stock Option and Nonstatutory Stock Option Agreements(1)
10.5 Ribozyme Pharmaceuticals' 1996 Employee Stock Purchase Plan(1)
10.6 Employment Agreement dated January 1, 1997, between Ribozyme
Pharmaceuticals and Ralph E. Christoffersen(5)
10.7 Incentive Stock Option Agreement between Ribozyme Pharmaceuticals and
Ralph E. Christoffersen dated December 23, 1992(1)
10.8 Incentive Stock Option Agreement between Ribozyme Pharmaceuticals and
Ralph E. Christoffersen dated September 23, 1994(1)
10.9 Warrant Purchase Agreement dated March 15, 1995, between Ribozyme
Pharmaceuticals and Hambrecht & Quist Guaranty Finance(1)
10.10 Warrant to Purchase Common Stock dated March 15, 1995, issued to
Hambrecht & Quist Guaranty Finance(1)
10.11 Warrant to Purchase Common Stock dated February 22, 1993, issued to
LINC Scientific Leasing(1)
10.12 Warrant to Purchase Common Stock dated July 30, 1993, issued to
Douglas E. Olson(1)
10.13 Warrant to Purchase Common Stock dated July 30, 1993, issued to
Richard J. Warburg and Ruth P. Warburg(1)
10.14 Warrant to Purchase Common Stock dated December 28, 1994, issued to
Competitive Technologies, Inc.(1)
10.15 Warrant to Purchase Common Stock dated December 29, 1995, issued to
Silicon Valley Bank(1)
10.16 Warrant to Purchase Common Stock dated July 26, 1996, issued to
Silicon Valley Bank(1)
10.17 Warrant to Purchase Common Stock dated April 17, 1996, issued to
Chiron Corporation(1)
10.18 Collaborative Research, Development and Commercialization Agreement
dated July 15, 1994, between Ribozyme Pharmaceuticals and Chiron
Corporation(1)
10.19 Research Collaboration and Licensing Agreement dated November 1, 1995,
between Ribozyme Pharmaceuticals and Pharmacia Biotech, AB(1)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.20 Research and Development Collaboration Agreement dated April 19, 1993,
between Ribozyme Pharmaceuticals and Parke-Davis Division of Warner-
Lambert Company(1)
10.21 First Amendment to the Research and Development Collaboration
Agreement dated April 17, 1995, between Ribozyme Pharmaceuticals and
Parke-Davis Division of Warner-Lambert Company(1)
10.22 Second Amendment to the Research and Development Collaboration
Agreement dated February 8, 1996, between Ribozyme Pharmaceuticals
and Parke-Davis Division of Warner-Lambert Company(1)
10.23 Financing Agreement dated March 16, 1995, among Wilderness Place
Holdings L.L.C., Hambrecht & Quist Guaranty Finance, L.P. and
Ribozyme Pharmaceuticals(1)
10.24 Negotiable Promissory Note dated October 7, 1992, between Ribozyme
Pharmaceuticals and Ralph Christoffersen and Addendum dated June 25,
1993(1)
10.25 Employment Agreement dated January 8, 1996, between Ribozyme
Pharmaceuticals and Lawrence E. Bullock(1)
10.26 Promissory Note dated February 8, 1996, between Ribozyme
Pharmaceuticals and Lawrence E. Bullock(1)
10.27 Lease for Real Property dated May 20, 1992, between Aero-Tech
Investments and Ribozyme Pharmaceuticals(1)
10.28 Non-Disturbance and Attornment Agreement dated March 31, 1995, among
General American Life Insurance Company, Aero-Tech Investments,
Wilderness Place Holdings L.L.C. and Ribozyme Pharmaceuticals(1)
10.29 Master Lease Agreement dated September 2, 1992, between Ribozyme
Pharmaceuticals and LINC Scientific Leasing(1)
10.30 Loan and Security Agreement dated February 28, 1994, between Ribozyme
Pharmaceuticals and Silicon Valley Bank(1)
10.31 Loan Modification Agreement dated December 21, 1994, between Ribozyme
Pharmaceuticals and Silicon Valley Bank(1)
10.32 Loan and Security Agreement dated December 29, 1995, between Ribozyme
Pharmaceuticals and Silicon Valley Bank and MMC/GATX Partnership No.
1(1)
10.33 Warrant to Purchase Common Stock dated December 29, 1995, issued to
MMC/GATX Partnership No. 1(1)
10.34 Agreement dated February 29, 1996, between Ribozyme Pharmaceuticals
and Chiron Corporation relating to research and development funding(1)
10.35 Amendments to original Employment Agreements between Ribozyme
Pharmaceuticals and Ralph E. Christoffersen, Lawrence E. Bullock and
Nassim Usman, pursuant to letters dated November 14, 1996, November
22, 1996, and December 15, 1996(3)
10.36 Promissory Note dated June 4, 1996, between Ribozyme Pharmaceuticals
and Nassim Usman(3)
10.37 Amendment to Lease for Real Property dated March 13, 1997, between
Aero-Tech Investments and Ribozyme Pharmaceuticals(3)
10.38 Employment Agreement dated May 2, 1996, between Ribozyme
Pharmaceuticals and Nassim Usman(2)
10.39 Collaboration Agreement Regarding Use of Ribozymes to Determine Gene
Function dated May 13, 1996, between Ribozyme Pharmaceuticals and
Chiron Corporation(2)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.40 Amended and Restated License Agreement dated November 20, 1996, between
Ribozyme Pharmaceuticals, University Research Corporation, University
of Colorado and United States Biochemical Corporation(3)*
10.41 Amended and Restated Sublicense Agreement dated November 20, 1996,
between Ribozyme Pharmaceuticals and United States Biochemical
Corporation(3)*
10.42 Amended and Restated License Agreement dated November 20, 1996, between
Ribozyme Pharmaceuticals and Competitive Technologies,
Incorporated(3)*
10.43 Memorandum of Understanding dated March 1, 1996, between Ribozyme
Pharmaceuticals and DowElanco(1)
10.44 Stock Subscription Agreement dated September 1996 between Ribozyme
Pharmaceuticals and University of Research Corporation(3)*
10.45 Stock Subscription Agreement dated November 20, 1996, between Ribozyme
Pharmaceuticals and United States Biochemical Corporation(3)*
10.46 Assignment of License and Restated License Agreement dated November 20,
1996, among Ribozyme Pharmaceuticals, United States Biochemical
Corporation and Competitive Technologies(3)*
10.47 Letter Agreement dated May 22, 1996, between Ribozyme Pharmaceuticals
and ALZA Corporation(3)*
10.48 Research and Development Collaboration Agreement dated December 2,
1996, between Ribozyme Pharmaceuticals and Protogene Laboratories(3)*
10.49 License Agreement dated February 14, 1997, between Ribozyme
Pharmaceuticals and IntelliGene, Ltd.(3)*
10.50 Subscription Agreement dated April 17, 1995, between Ribozyme
Pharmaceuticals and Parke-Davis Division of Warner-Lambert Company(1)
10.51 Stock Purchase Agreement dated June 28, 1995, among Ribozyme
Pharmaceuticals and investors(1)
10.52 Agreement dated March 1, 1996, between Ribozyme Pharmaceuticals and
DowElanco Corporation relating to the conversion of preferred stock(1)
10.53 Stock Subscription Agreement dated October 30, 1995, between Ribozyme
Pharmaceuticals and Gewestelijke Investeringsmaatschappij voor
Vlaanderon n.v.(1)
10.54 Research, License, Supply and Royalty Agreement between Schering
Aktiengesellschaft and Ribozyme Pharmaceuticals dated April 9,
1997(4)*
10.55 Purchase Agreement dated April 9, 1997, among Ribozyme Pharmaceuticals,
Schering Berlin Venture Corporation and Schering
Aktiengesellschaft(4)*
10.56 Employment Agreement dated February 27, 1997, between Ribozyme
Pharmaceuticals and Alene Holzman(5)
10.57 Employment Agreement dated July 5, 1997, between Ribozyme
Pharmaceuticals and Thomas Rossing(5)
10.58 Executive Bonus Plan dated March 27, 1998(6)
10.59 Research, Collaboration and License Agreement dated May 19, 1998,
between Ribozyme Pharmaceuticals and Roche Bioscience, a division of
Syntex (U.S.A.) Inc.(7)*
10.60 Employment Agreement dated September 8, 1998, between Ribozyme
Pharmaceuticals and Nassim Usman(8)
10.61 Participation Agreement dated August 31, 1998, as amended, and related
documents between Ribozyme Pharmaceuticals and Atugen Biotechnology
GmbH(9)**
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.62 Research Collaboration and License Agreement dated March 17, 1999,
between Ribozyme Pharmaceuticals and Eli Lilly and Company**
23.1+ Consent of Ernst & Young LLP, Independent Auditors
23.2+ Consent of Rothgerber Johnson & Lyons LLP (included in Exhibit 5.1)
24.1+ Power of attorney (included on the signature page of this
Registration Statement)
</TABLE>
- --------
+ Previously filed.
* Ribozyme Pharmaceuticals has applied for and received confidential
treatment with respect to portions of these exhibits.
** Ribozyme Pharmaceuticals has applied for confidential treatment with
respect to portions of these exhibits.
(1) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form SB-2 Registration Statement, File No. 333-1908-D.
(2) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-QSB for the quarter ended June 30, 1996.
(3) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-KSB for the year ended December 31, 1996.
(4) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 8-K dated June 12, 1997.
(5) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form SB-2 Registration Statement, dated September 5, 1997,
File No. 333-34981.
(6) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-K for the year ended December 31, 1997.
(7) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-Q/A for the quarter ended June 30, 1998.
(8) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-Q for the quarter ended September 30, 1998.
(9) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 8-K dated March 19, 1999.
(b) Financial Statement Schedules
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements or
notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
II-6
<PAGE>
(iii) To include any material with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provision described under Item 20 or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-L AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
FORM S-1 REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED IN BOULDER, COLORADO, ON APRIL 6, 1999.
Ribozyme Pharmaceuticals, Inc.
/s/ Ralph E. Christoffersen
By: _________________________________
RALPH E. CHRISTOFFERSEN, PH.D.
Chief Executive Officer and
President
In accordance with the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to Form S-1 Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ralph E. Christoffersen Chief Executive Officer April 6, 1999
______________________________________ and President (Principal
RALPH E. CHRISTOFFERSEN, PH.D. Executive Officer)
/s/ Lawrence E. Bullock Vice President, April 6, 1999
______________________________________ Administration Finance,
LAWRENCE E. BULLOCK Chief Financial Officer
and Secretary (Principal
Financial and Accounting
Officer)
/s/ David T. Morgenthaler* Chairman of the Board of April 6, 1999
______________________________________ Directors
DAVID T. MORGENTHALER
/s/ Jeremy C. Cook* Director April 6, 1999
______________________________________
JEREMY C. COOK
/s/ Anthony B. Evnin* Director April 6, 1999
______________________________________
ANTHONY B. EVNIN, PH.D.
/s/ David Ichikawa* Director April 6, 1999
______________________________________
DAVID ICHIKAWA
/s/ Anders Wiklund* Director April 6, 1999
______________________________________
ANDERS WIKLUND
*/s/ Lawrence E. Bullock
______________________________________
LAWRENCE E. BULLOCK
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1+ Form of Placement Agency Agreement dated , 1999, between Ribozyme
Pharmaceuticals and Hambrecht & Quist LLC
1.2+ Form of Escrow Agreement dated , 1999, between Ribozyme
Pharmaceuticals, Hambrecht & Quist LLC and Citibank N.A.
3.1 Amended and Restated Certificate of Incorporation of Ribozyme
Pharmaceuticals dated April 17, 1996(5)
3.2 Bylaws of Ribozyme Pharmaceuticals, as amended(1)
4.1 Specimen Stock Certificate(1)
5.1+ Opinion of Rothgerber Johnson & Lyons LLP
10.1 Form of Indemnity Agreement entered into between Ribozyme
Pharmaceuticals and its directors and officers, with related
schedule(1)
10.2 Ribozyme Pharmaceuticals' Incentive Stock Option Plan, including form
of Incentive Stock Option Agreement(1)
10.3 Ribozyme Pharmaceuticals' Non-Qualified Stock Option Plan, including
form of Non-Qualified Stock Option Agreement(1)
10.4 Ribozyme Pharmaceuticals' 1996 Stock Option Plan, including forms of
Incentive Stock Option and Nonstatutory Stock Option Agreements(1)
10.5 Ribozyme Pharmaceuticals' 1996 Employee Stock Purchase Plan(1)
10.6 Employment Agreement dated January 1, 1997, between Ribozyme
Pharmaceuticals and Ralph E. Christoffersen(5)
10.7 Incentive Stock Option Agreement between Ribozyme Pharmaceuticals and
Ralph E. Christoffersen dated December 23, 1992(1)
10.8 Incentive Stock Option Agreement between Ribozyme Pharmaceuticals and
Ralph E. Christoffersen dated September 23, 1994(1)
10.9 Warrant Purchase Agreement dated March 15, 1995, between Ribozyme
Pharmaceuticals and Hambrecht & Quist Guaranty Finance(1)
10.10 Warrant to Purchase Common Stock dated March 15, 1995, issued to
Hambrecht & Quist Guaranty Finance(1)
10.11 Warrant to Purchase Common Stock dated February 22, 1993, issued to
LINC Scientific Leasing(1)
10.12 Warrant to Purchase Common Stock dated July 30, 1993, issued to
Douglas E. Olson(1)
10.13 Warrant to Purchase Common Stock dated July 30, 1993, issued to
Richard J. Warburg and Ruth P. Warburg(1)
10.14 Warrant to Purchase Common Stock dated December 28, 1994, issued to
Competitive Technologies, Inc.(1)
10.15 Warrant to Purchase Common Stock dated December 29, 1995, issued to
Silicon Valley Bank(1)
10.16 Warrant to Purchase Common Stock dated July 26, 1996, issued to
Silicon Valley Bank(1)
10.17 Warrant to Purchase Common Stock dated April 17, 1996, issued to
Chiron Corporation(1)
10.18 Collaborative Research, Development and Commercialization Agreement
dated July 15, 1994, between Ribozyme Pharmaceuticals and Chiron
Corporation(1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.19 Research Collaboration and Licensing Agreement dated November 1, 1995,
between Ribozyme Pharmaceuticals and Pharmacia Biotech, AB(1)
10.20 Research and Development Collaboration Agreement dated April 19, 1993,
between Ribozyme Pharmaceuticals and Parke-Davis Division of Warner-
Lambert Company(1)
10.21 First Amendment to the Research and Development Collaboration
Agreement dated April 17, 1995, between Ribozyme Pharmaceuticals and
Parke-Davis Division of Warner-Lambert Company(1)
10.22 Second Amendment to the Research and Development Collaboration
Agreement dated February 8, 1996, between Ribozyme Pharmaceuticals and
Parke-Davis Division of Warner-Lambert Company(1)
10.23 Financing Agreement dated March 16, 1995, among Wilderness Place
Holdings L.L.C., Hambrecht & Quist Guaranty Finance, L.P. and Ribozyme
Pharmaceuticals(1)
10.24 Negotiable Promissory Note dated October 7, 1992, between Ribozyme
Pharmaceuticals and Ralph Christoffersen and Addendum dated June 25,
1993(1)
10.25 Employment Agreement dated January 8, 1996, between Ribozyme
Pharmaceuticals and Lawrence E. Bullock(1)
10.26 Promissory Note dated February 8, 1996, between Ribozyme
Pharmaceuticals and Lawrence E. Bullock(1)
10.27 Lease for Real Property dated May 20, 1992, between Aero-Tech
Investments and Ribozyme Pharmaceuticals(1)
10.28 Non-Disturbance and Attornment Agreement dated March 31, 1995, among
General American Life Insurance Company, Aero-Tech Investments,
Wilderness Place Holdings L.L.C. and Ribozyme Pharmaceuticals(1)
10.29 Master Lease Agreement dated September 2, 1992, between Ribozyme
Pharmaceuticals and LINC Scientific Leasing(1)
10.30 Loan and Security Agreement dated February 28, 1994, between Ribozyme
Pharmaceuticals and Silicon Valley Bank(1)
10.31 Loan Modification Agreement dated December 21, 1994, between Ribozyme
Pharmaceuticals and Silicon Valley Bank(1)
10.32 Loan and Security Agreement dated December 29, 1995, between Ribozyme
Pharmaceuticals and Silicon Valley Bank and MMC/GATX Partnership No.
1(1)
10.33 Warrant to Purchase Common Stock dated December 29, 1995, issued to
MMC/GATX Partnership No. 1(1)
10.34 Agreement dated February 29, 1996, between Ribozyme Pharmaceuticals
and Chiron Corporation relating to research and development funding(1)
10.35 Amendments to original Employment Agreements between Ribozyme
Pharmaceuticals and Ralph E. Christoffersen, Lawrence E. Bullock and
Nassim Usman, pursuant to letters dated November 14, 1996, November
22, 1996, and December 15, 1996(3)
10.36 Promissory Note dated June 4, 1996, between Ribozyme Pharmaceuticals
and Nassim Usman(3)
10.37 Amendment to Lease for Real Property dated March 13, 1997, between
Aero-Tech Investments and Ribozyme Pharmaceuticals(3)
10.38 Employment Agreement dated May 2, 1996, between Ribozyme
Pharmaceuticals and Nassim Usman(2)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.39 Collaboration Agreement Regarding Use of Ribozymes to Determine Gene
Function dated May 13, 1996, between Ribozyme Pharmaceuticals and
Chiron Corporation(2)
10.40 Amended and Restated License Agreement dated November 20, 1996,
between Ribozyme Pharmaceuticals, University Research Corporation,
University of Colorado and United States Biochemical Corporation(3)*
10.41 Amended and Restated Sublicense Agreement dated November 20, 1996,
between Ribozyme Pharmaceuticals and United States Biochemical
Corporation(3)*
10.42 Amended and Restated License Agreement dated November 20, 1996,
between Ribozyme Pharmaceuticals and Competitive Technologies,
Incorporated(3)*
10.43 Memorandum of Understanding dated March 1, 1996, between Ribozyme
Pharmaceuticals and DowElanco(1)
10.44 Stock Subscription Agreement dated September 1996 between Ribozyme
Pharmaceuticals and University of Research Corporation(3)*
10.45 Stock Subscription Agreement dated November 20, 1996, between Ribozyme
Pharmaceuticals and United States Biochemical Corporation(3)*
10.46 Assignment of License and Restated License Agreement dated November
20, 1996, among Ribozyme Pharmaceuticals, United States Biochemical
Corporation and Competitive Technologies(3)*
10.47 Letter Agreement dated May 22, 1996, between Ribozyme Pharmaceuticals
and ALZA Corporation(3)*
10.48 Research and Development Collaboration Agreement dated December 2,
1996, between Ribozyme Pharmaceuticals and Protogene Laboratories(3)*
10.49 License Agreement dated February 14, 1997, between Ribozyme
Pharmaceuticals and IntelliGene, Ltd.(3)*
10.50 Subscription Agreement dated April 17, 1995, between Ribozyme
Pharmaceuticals and Parke-Davis Division of Warner-Lambert Company(1)
10.51 Stock Purchase Agreement dated June 28, 1995, among Ribozyme
Pharmaceuticals and investors(1)
10.52 Agreement dated March 1, 1996, between Ribozyme Pharmaceuticals and
DowElanco Corporation relating to the conversion of preferred stock(1)
10.53 Stock Subscription Agreement dated October 30, 1995, between Ribozyme
Pharmaceuticals and Gewestelijke Investeringsmaatschappij voor
Vlaanderon n.v.(1)
10.54 Research, License, Supply and Royalty Agreement between Schering
Aktiengesellschaft and Ribozyme Pharmaceuticals dated April 9,
1997(4)*
10.55 Purchase Agreement dated April 9, 1997, among Ribozyme
Pharmaceuticals, Schering Berlin Venture Corporation and Schering
Aktiengesellschaft(4)*
10.56 Employment Agreement dated February 27, 1997, between Ribozyme
Pharmaceuticals and Alene Holzman(5)
10.57 Employment Agreement dated July 5, 1997, between Ribozyme
Pharmaceuticals and Thomas Rossing(5)
10.58 Executive Bonus Plan dated March 27, 1998(6)
10.59 Research, Collaboration and License Agreement dated May 19, 1998,
between Ribozyme Pharmaceuticals and Roche Bioscience, a division of
Syntex (U.S.A.) Inc.(7)*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.60 Employment Agreement dated September 8, 1998, between Ribozyme
Pharmaceuticals and Nassim Usman(7)
10.61 Participation Agreement dated August 31, 1998, as amended, and related
documents between Ribozyme Pharmaceuticals and Atugen Biotechnology
GmbH(9)**
10.62 Research Collaboration and License Agreement dated March 17, 1999,
between Ribozyme Pharmaceuticals and Eli Lilly and Company**
23.1+ Consent of Ernst & Young LLP, Independent Auditors
23.2+ Consent of Rothgerber Johnson & Lyons LLP (included in Exhibit 5.1)
24.1+ Power of attorney (included on the signature page of this Registration
Statement)
</TABLE>
- --------
+ Previously filed.
* Ribozyme Pharmaceuticals has applied for and received confidential treatment
with respect to portions of these exhibits.
** Ribozyme Pharmaceuticals has applied for confidential treatment with
respect to portions of these exhibits.
(1) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form SB-2 Registration Statement, File No. 333-1908-D.
(2) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-QSB for the quarter ended June 30, 1996.
(3) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-KSB for the year ended December 31, 1996.
(4) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 8-K dated June 12, 1997.
(5) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form SB-2 Registration Statement, dated September 5,
1997, File No. 333-34981.
(6) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-K for the year ended December 31, 1997.
(7) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-Q/A for the quarter ended June 30, 1998.
(8) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 10-Q for the quarter ended September 30, 1998.
(9) Documents incorporated by reference herein to certain exhibits to Ribozyme
Pharmaceuticals' Form 8-K dated March 19, 1999.
<PAGE>
Exhibit 10.62
CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO REGULATION
240.25B-2B OF THE SECURITIES EXCHANGE ACT OF 1934. [*] INDICATES OMITTED
MATERIAL THAT IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST AND IS FILED
SEPARATELY WITH THE COMMISSION.
Research Collaboration and License Agreement
between
Eli LILLY and Company
and
Ribozyme Pharmaceuticals Inc.
March 17, 1999
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS...............................................................2
2. CONDUCT OF THE RESEARCH AND DEVELOPMENT UNDER THE COLLABORATION..........11
3. MANAGEMENT OF COLLABORATION..............................................12
4. PRODUCT DEVELOPMENT......................................................14
5. DIAGNOSTIC PRODUCTS......................................................14
6. PAYMENTS.................................................................14
7. RECORDS; AUDITS; AND REPORTS.............................................17
8. PATENT RIGHTS AND INFRINGEMENT...........................................19
9. LICENSES AND OTHER COMMERCIAL RIGHTS.....................................21
10. MANUFACTURING AND PURCHASE OF RIBOZYME PRODUCTS..........................22
11. DISCOUNT.................................................................23
12. CONFIDENTIALITY..........................................................23
13. REPRESENTATIONS, WARRANTIES AND COVENANT BY BOTH PARTIES.................24
14. INDEMNIFICATION..........................................................26
15. TERM AND TERMINATION.....................................................27
16. PUBLICITY................................................................29
17. DISPUTE RESOLUTION.......................................................29
18. ASSIGNMENT AND DELEGATION................................................30
19. ADDITIONAL TERMS.........................................................31
[*] Confidential treatment requested 1
<PAGE>
RESEARCH COLLABORATION AND LICENSE AGREEMENT
THIS RESEARCH COLLABORATION AND LICENSE AGREEMENT is entered into on
March 17, 1999 (the "Effective Date"), by and between ELI LILLY AND COMPANY, an
Indiana corporation, having a place of business at LILLY Corporate Center,
Indianapolis, Indiana 46285 ("LILLY"), and RIBOZYME PHARMACEUTICALS INC., a
Delaware corporation, having a place of business at 2950 Wilderness Place,
Boulder, Colorado, 80301 ("RPI"). LILLY (and its Affiliates) and RPI may be
referred to herein as a "Party" or, collectively, as "Parties." LILLY and RPI
shall include their Affiliates throughout this Agreement.
WHEREAS, RPI is conducting a program to design and develop Ribozymes for
the prevention and treatment of Hepatitis C virus infection; and
WHEREAS, LILLY is interested in developing and commercializing
pharmaceutical products to treat Hepatitis C virus infection and would like to
collaborate with RPI in a research and development effort specifically using
Ribozyme Technology to target hepatitis C virus;
WHEREAS, LILLY and RPI have entered into an Option Agreement, January 26,
1999, herein incorporated by reference (Appendix F) and contingent upon the
parties performing the obligations contained in Decision 1 therein and now have
entered into this Agreement; and
WHEREAS, RPI and LILLY believe that each party can bring significant and
complementary strengths to a collaboration and wish to proceed in accordance
with the terms of the following agreement.
Now, Therefore, in consideration of the premises and the mutual covenants
and agreements expressed herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound, the Parties agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Affiliate" means a business entity that owns, controls, is owned by,
controlled by, is under common ownership or common control with a Party.
For the purposes of this definition, the possession (directly or
indirectly) of more than fifty percent (50%) of the outstanding voting
securities of an entity or the maximum ownership permitted by law or
administrative practice, or the right to receive fifty percent (50%) or
more of the profits or earnings of an entity shall be deemed to constitute
ownership or control.
1.2 "Agreement" means this agreement together with all appendices and
schedules hereto.
1.3 "Base Royalties" shall have the meaning set forth in Section 6.5.1.
[*] Confidential treatment requested 2
<PAGE>
1.4 "Basic Therapeutic Utility" means certain chemical or physical
modification of the Ribozyme incorporated in a Ribozyme Product to
facilitate the utility of a Ribozyme Product as a therapeutic in the
Field. Such modification shall not include the Delivery System unless the
Drug Delivery System is required for the therapeutic utility.
1.5 "Caruthers Patents" shall mean the inventions and discoveries which are
the subject of, or which are covered in whole or in part by, the claims
included in U.S. Patent Numbers 4,415,732; 4,458,066; 4,500,707;
4,668,777; 4,973,679; 5,132,418; and 5,153,319 and any corresponding
patent applications or any patents that may issue thereon throughout the
world, including any extensions, renewals, divisions, continuations,
continuations-in-part, patents of addition, and/or reissues thereof,
including any patent application and any patents issuing thereon
throughout the world, including any extensions, renewals, continuations,
continuations-in-part, divisions, patents of additions and/or reissues
thereof, filed upon any invention the practice of which would infringe the
claims covered by the foregoing patents.
1.6 "Cech Patents" shall mean the inventions and discoveries which are the
subject of, or which are covered in whole or in part by, the claims
included in (i) U.S. Patent Application Serial Number 937,327, filed
December 3, 1986 entitled RNA RIBOZYME POLYMERASES, DEPHOSPHORYLASES,
RESTRICTION ENDORIBONUCLEASES AND METHODS (the "327 Patent Application") ,
(ii) the United States Patents listed in Appendix B under Cech Patents,
and any patents issuing thereon as well as any corresponding patent
applications or any patents that may issue thereon throughout the world,
including any extensions, renewals, divisions, continuations,
continuations-in-part, patents of addition, and/or reissues thereof,
including any patent application and any patents issuing thereon
throughout the world, including any extensions, renewals, continuations,
continuations-in-part, divisions, patents of additions and/or reissues
thereof, filed upon any invention the practice of which would infringe the
claims covered by the foregoing patents, which invention was made by
Thomas R. Cech, Arthur J. Zaug and Michael D. Been, and/or persons acting
under their direction and control at the University of Colorado, which is
the work product of the Research Support Funding Agreement between USB and
the University of Colorado Foundation entered into on May 20, 1987 (the
"RSFA") and which was conceived or reduced to practice during the term of
the RSFA.
1.7 "Change of Control" shall mean a merger or acquisition by, with or of RPI
in which the equity holders of RPI immediately prior to such event do not
hold at least [ * ] of the equity of the resulting entity, and a single
new acquiring party controls at [ * ] of the equity of the resulting
entity or the sale of all or substantially all the assets of RPI to a
Third Party.
1.8 "Clinical Development" shall mean activities related to the development
obligations of a party in connection with clinical trials, with respect to
a Ribozyme Product for a particular indication.
[*] Confidential treatment requested 3
<PAGE>
1.9 "Combination Product" means any pharmaceutical product which comprises the
Ribozyme Product and another active compound(s) effective in treating HCV
infections.
1.10 "Combined Product" means one or more Ribozyme Products, which may be a
Combination Product, marketed as a unit with the Delivery System.
1.11 "Confidential Information" means each party's confidential information
disclosed in writing or if disclosed orally, confirmed within 30 days in
writing and marked confidential which includes: inventions, know-how and
data, and shall include, without limitation, the terms of this Agreement,
research, development, manufacturing, marketing, financial, regulatory,
personnel and other business information and plans, whether in oral,
written, graphic or electronic form and whether in existence as of the
Effective Date or developed or acquired in the future, except as otherwise
provided in Article 12.2.
1.12 "Control" or "Controlled" shall refer to possession of the ability to
grant a license or sublicense of patent rights, know-how or other
intangible rights as provided for herein without violating terms of any
agreement or other arrangement with any Third Party.
1.13 "Cost of Goods" or "COGS" shall mean fully-loaded costs of supplying
Ribozymes 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). Expenses
include raw materials, labor, quality control testing, labeling, packaging
and shipping costs, depreciation for capital investment in plant and
equipment for the manufacture of bulk drug and Research Ribozymes, as
further outlined in Appendix B hereto.
1.14 "Cost of Products" or "COPS" shall mean fully-loaded costs of supplying
Ribozyme Products calculated in accordance with LILLY's accounting methods
consistently applied which methodology shall be calculated in compliance
with U.S. generally accepted accounting principles (GAAP). For the
Purposes of this Agreement, COPS shall include COGS, Third Party Royalty
burden, Royalties due RPI, final filling/finishing and packaging of the
Ribozyme Product and only for purposes of this COPS calculation final
filling/finishing and packaging cost is not to exceed [ * ] of the average
bulk drug cost calculated [ * ]
1.15 "Cover" (including variations thereof such as "Covered", "Coverage", or
"Covering") means that the making, having made, using, offering for sale,
selling or importing of a particular product would infringe a Valid Claim
of an issued patent in the absence of license rights under such patent.
The determination of whether a product is Covered by particular patent
rights shall be made on a country by country basis.
1.16 "CPI" or "Consumer Price Index" shall mean the consumer price index for
all urban consumer series ID: CUUR0000SA0 as published from time to time
by the Bureau of Labor Statistics, where October 1998 was 164.0.
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1.17 "Delivery Systems" shall mean a substrate, encapsulant, mechanical device
or other means for delivering Ribozyme to a patient in need of treatment,
which Delivery System, in the absence of a Ribozyme would have no Basic
Therapeutic Utility.
1.18 "Drug Approval Application" means an application for Regulatory Approval
required to be approved before marketing and commercial sale of a Ribozyme
Product in humans as a biologic or a drug (and an associated device or
delivery system, if necessary) in a regulatory jurisdiction, including but
not limited to NDA and BLA for the United States and their counterparts in
other countries.
1.19 "Eckstein Patents" shall mean the inventions and discoveries which are the
subject of, or which are covered in whole or in part by, the claims
included in (i) U.S. Patent Application Serial Number 965,411, filed
December August 9, 1993 entitled MODIFIED RIBOZYMES (the "411 Patent
Application"); (ii) the United States Patent Numbers 5,672,695; 5,698,687;
and 5,817,635, and any patents issuing thereon as well as any
corresponding patent applications or any patents that may issue thereon
throughout the world, including any extensions, renewals, divisions,
continuations, continuations-in-part, patents of addition, and/or reissues
thereof, including any patent application and any patents issuing thereon
throughout the world, including any extensions, renewals, continuations,
continuations-in-part, divisions, patents of additions and/or reissues
thereof, filed upon any invention the practice of which would infringe the
claims covered by the foregoing patents.
1.20 "Existing Third Party Patents" [ * ]
1.21 "Far East" shall mean East Asian and South-East Asian countries bordering
on the Pacific Ocean, including Japan, China, South Korea, Thailand,
Philippines, and Taiwan,
1.22 "FDA" means the United States Food and Drug Administration of the
Department of Health and Human Services, and any successor entities.
References herein to the FDA shall include to the extent applicable any
comparable foreign regulatory authority that has the authority to grant
full Regulatory Approval.
1.23 "Field" shall mean applications of Ribozymes as therapeutics for treating
Hepatitis C Virus (HCV) infection as a primary indication, including
without limitation, research, prophylactic and therapeutic uses, in test
tubes, cells, humans, and animals.
1.24 "First Commercial Sale" of a Ribozyme Product shall mean the first regular
sale for use or consumption of such Ribozyme Product in a country after
required marketing and pricing approval has been granted by the governing
health regulatory authority of such country to a Third Party.
1.25 "FTE" means one full time-equivalent research and/or development employee.
An FTE will be defined as [ * ].
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1.26 "Immunologic Based Compound" means a compound that modifies the immune
system such that an antiviral response occurs and excludes, for example, a
compound that directly targets the hepatitis C RNA, a compound that
directly targets the HCV proteins, proteases, helicases or polymerases.
1.27 "IND" means an Investigational New Drug application as defined 21 C.F.R.
312 and any revisions thereof governing the FDA, as may be amended from
time to time. For purposes of this Agreement, an investigator held
Investigational New Drug application shall not be deemed an IND.
1.28 "Invention" means any patentable discovery or invention in the Field made
under this Agreement and within the scope of the R&D Plan.
1.29 "Know-How" means all non-public, proprietary information related to the
research, development, use, manufacture or administration of Ribozyme in
the Field possessed and/or developed by either party under this Agreement.
1.30 "LILLY Development Costs" of a Ribozyme Product shall mean the world wide
fully-burdened costs to a party of performing development of such Ribozyme
Product and preparing and prosecuting regulatory applications with respect
to such Ribozyme Product. This shall include, without limitation, the
direct cost of labor and benefits, materials (including clinical
supplies), overhead (including indirect costs and general and
administrative expenses) and fees or other Third Party expenses.
1.31 "LILLY Technology License" means a license granted hereunder pursuant to
which LILLY shall grant a non-exclusive, worldwide, royalty-bearing (in
accordance with Sections 4.2.1, 4.2.2, 15.4.3 or 15.4.4) license under the
LILLY Technology to RPI for purposes of developing a Ribozyme Product.
1.32 "LILLY Technology" means the Invention and/or Non-Patented Technology
owned or Controlled by LILLY.
1.33 "LILLY" means LILLY and/or any of its Affiliates.
1.34 "Major Europe" means United Kingdom, Germany, France, Italy or Spain.
1.35 "Net Sales" shall mean:
a) The gross amount invoiced by a Party, its Affiliates and sublicensees
to Third Party customers on any sale, transfer or other disposition of
a Ribozyme Product, less (i) trade quantity and cash discounts allowed;
(ii) commissions, discounts, refunds, rebates, charge backs,
retroactive price adjustments, and any other allowances which
effectively reduce the net selling price; (iii) product returns and
allowances; (iv) that portion of the sales value associated with
Delivery Systems; (v) any tax imposed on the production, sale, delivery
or use of the Ribozyme Product; (vi) allowance for customary
distribution of [ * ] ; (vii) any other similar, reasonable, and
customary deductions which are properly recorded as a reduction of
sales under GAAP, consistently applied using the selling Party's then-
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current standard procedures and methodology, including its then current
standard exchange rate methodology for the translation of foreign
currency sales into U.S. Dollars ("Dollars"). Notwithstanding the
foregoing, the provision under sub-section (iv) above shall not apply
if RPI has made any technical contribution towards any component of the
Delivery System which causes a significant reduction in the quantity of
Ribozyme Product administered to a patient in each dose as approved by
JDT and determined on a cost contribution basis by each party.
b) In the event that the Ribozyme Product is sold as part of a Combination
Product, the Net Sales from the Ribozyme Product, for the purposes of
determining royalty payments, shall be determined by multiplying the
Net Sales of the Combination Product by the fraction, A / (A+B) where A
is the weighted (by sales volume) average sale price of the Ribozyme
Product when sold separately in finished form, and B is the weighted
(by sales volume) average sale price of the other product(s) sold
separately in finished form.
c) In the event that the weighted average sale price of the Ribozyme
Product can be determined but the weighted average sale price of the
other product(s) cannot be determined, Net Sales for purposes of
determining royalty payments shall be calculated by multiplying the Net
Sales of the Combination Product by the fraction A / C where A is the
weighted (by sales volume) average sale price of the Ribozyme Product
when sold separately in finished form and C is the weighted (by sales
volume) average selling price of the Combination Product.
d) In the event that the weighted average sale price of the other
product(s) can be determined but the weighted average sale price of the
Ribozyme Product cannot be determined, Net Sales for purposes of
determining royalty payments shall be calculated by multiplying the Net
Sales of the Combination Product by the following formula: one (1)
minus B / C where B is the weighted (by sales volume) average sale
price of the other product(s) when sold separately in finished form and
C is the weighted (by sales volume) average selling price of the
Combination Product.
e) In the event that the weighted average sale price of both the Ribozyme
Product and the other product(s) in the Combination Product cannot be
determined, the Net Sales of the Ribozyme Product shall be deemed to be
equal to [ * ]of the Net Sales of the Combination Product.
f) The weighted average sale price for a Ribozyme Product, other
product(s), or Combination Product shall be calculated once each
Calendar Year and such price shall be used during all applicable
royalty reporting periods for the entire Calendar Year. When
determining the weighted average sales price of a Ribozyme Product,
other product(s), or Combination Product, the weighted average sale
price shall be calculated using the data arising from the twelve (12)
months of the preceding Calendar Year. In the initial partial Calendar
Year, a forecasted weighted average sale price will be used for the
Ribozyme Product, other product(s), or Combination Product. Any over or
under payment due to a difference between forecasted and actual
weighted average sale prices will be paid or credited in the first
Calendar Quarter royalty payment of the following Calendar Year.
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g) In the event the Delivery System is sold as part of a Combined Product
(as defined above), the Net Sales of the Delivery System, for the
purposes of determining royalty payments, shall be determined by
multiplying the Net sales of the Combined Product by the fraction,
A/(A+B) where A is the average sale price of the Delivery System when
sold separately in finished form, and B is the average sales price of
the other product(s) sold separately in finished form. In the event
that such average sale price cannot be determined for both the Delivery
System and other products in combination, Net sales for purposes of
determining royalty payments shall be calculated by multiplying the Net
Sales of the Combined Product by the fraction C/(C-D) where C is the
selling Party's cost of goods of the Delivery system D is the selling
Party's cost of the goods of the other product(s) determined in
accordance with the method of accounting normally employed by the
selling Party in computing cost of goods.
1.36 "Non-Patented Technology" means know-how, trade secrets or other
information or materials that are not patentable or, for a possibly
patentable discovery or invention, on which the parties choose not to file
a patent, made under this Agreement and within the scope of the Research
and/or Development Plan.
1.37 "Patent Cost Reimbursement" means Patent Costs, relating to the RPI Patent
Rights licensed to LILLY hereunder, reimbursed to RPI by LILLY as
specifically provided under Section 6.3.
1.38 "Patent Costs" means the fees and expenses paid to outside legal counsel
and other Third Parties, and filing, prosecution and maintenance expenses,
incurred in connection with the establishment and maintenance of Patent
Rights.
1.39 "Patent Rights" means all rights under Patents.
1.40 "Patent" means (i) patents (including inventor's certificates) that
include one or more Valid Claims, including without limitation any
substitution, extension (including supplemental protection certificate),
registration, confirmation, reissue, reexamination or renewal thereof and
(ii) pending applications, including provisional applications,
continuations, divisionals, and continuations-in-part of any of the
foregoing.
1.41 "Phase I" means studies conducted in accordance with Good Clinical
Practices ("GCPs") in a small number of healthy volunteers or patients to
establish an initial safety profile and pharmacokinetics of a Ribozyme
Product for an indication in the Field.
1.42 "Phase II" means that portion of the clinical development program which
provides for the initial trials of a product on a limited number of
patients for the primary purpose of evaluating safety, dose ranging and
efficacy in the proposed therapeutic indication, as more precisely defined
by the rules and regulations of the FDA and corresponding rules and
regulations in other countries.
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1.43 "Phase III" means that portion of the clinical development program which
provides for the continued trials of a Ribozyme Product on sufficient
numbers of patients to establish the safety and efficacy of a product for
the desired claims and indications, as more precisely defined by the rules
and regulations of the FDA and corresponding rules and regulations in
other countries. Any trial designed to support a NDA without further
clinical studies will be considered a Phase III trial for purposes of this
Agreement.
1.44 "Phenotype" means the entire physical, biochemical, and physiological
makeup of an individual as determined both genetically or environmentally
and any one or any group of such traits.
1.45 "Pivotal" means a clinical trial upon the completion of which a decision
is made to obtain the necessary Regulatory Approval in Japan immediately
prior to Product Launch in Japan.
1.46 "Pre-clinical Reimbursement" means reimbursement by LILLY of costs
incurred by RPI as of the Effective Date of this Agreement. relating to
the overall research and development of Ribozyme Technology, including
Ribozymes targeting the HCV RNA. The Pre-clinical Reimbursement is
specifically set forth in Section 6.3 herein.
1.47 "Product Effectiveness" means demonstration of the ability of a Ribozyme
Product to cause statistically significant reduction in patient serum HCV
RNA. Other Product Effectiveness criteria (business and scientific) shall
be determined based on mutual agreement of the Parties and as approved by
the JDT. The JDT shall develop a timeline to address the Product
Effectiveness criteria.
1.48 "Product Launch" shall mean the First Commercial Sale of a Ribozyme
Product in a particular territory.
1.49 "Regulatory Approval" means any approvals, product and/or establishment
licenses, registrations or authorizations of any federal, state or local
regulatory agency, department, bureau or other governmental entity,
necessary for the manufacture, use, storage, importation, export,
transport, or sale of the Ribozyme Products in a regulatory jurisdiction.
1.50 "Research and Development Plan" or "R&D Plan" means a plan approved by the
Joint Steering Committee in accordance with Section 2.1, but no plan shall
be for [ * ], describing the research and development of a Ribozyme
Product and which contains the following information: (i) the Commencement
Date; (ii) a definition of various end-points; (iii) the key goals and
target dates to accomplish each goal, (iv) the requirements for success
for each stage of development, and (v) the quantity of FTE support to be
paid to RPI by LILLY.
1.51 "Research Collaboration" means the overall collaboration between the
Parties.
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1.52 "Responsible Party" means the Party responsible for Patent Management.
1.53 "Ribozyme Product" or "Product" means a substance that (i) is or is
intended to be sold commercially, and (ii) contains a Ribozyme as an
active therapeutic or diagnostic (subject to Article 5) for use in the
Field.
1.54 "Ribozyme Technology" means all inventions, improvements, know-how or
other developments relating to Ribozymes in the Field, including the
identification, manufacture, synthesis, delivery, use, enhancement and
control of Ribozymes which is a work product of or relating to Ribozymes
Controlled as of the Effective Date and during the Term by RPI, and all
foreign equivalents, counterparts, patents and patent applications
throughout the world that may issue thereon, including any extensions,
renewals, divisions, continuations, continuations-in-part, patents of
addition and reissues thereof and including those listed in Appendix A.
1.55 "Ribozyme" means a ribonucleic acid-based molecule able to cause catalytic
cleavage of itself or another molecule independent of protein.
1.56 "Royalty Term" means, in the case of any Ribozyme Product, in any country,
the period of time commencing on the First Commercial Sale of such
Ribozyme Product and ending upon the expiration of the last to expire of
the Patent Rights Controlled by RPI as to LILLY's payment of royalties and
LILLY as to RPI's payment of royalties, Covering such Ribozyme Product in
such country. Royalty Term shall be determined on a Product by Product,
country by country basis.
1.57 "RPI" shall mean Ribozyme Pharmaceutical Inc. and/or any of its
Affiliates.
1.58 "RPI Background Patent Rights" means all rights under Patents existing as
of the Effective Date that RPI Controls, including Patent Rights for the
Ribozyme Technology.
1.59 "RPI Patent Rights" means RPI Background Patent Rights and all Patent
Rights claiming an RPI Invention.
1.60 "Scientifically Reasonable and Diligent Efforts" means, unless the Parties
agree otherwise, those efforts consistent with the exercise of prudent
scientific and business judgment, as applied to other research,
development and commercialization programs or products of similar
scientific and commercial potential within the relevant product lines of
the Party developing the Ribozyme Product and its Affiliates.
Scientifically Reasonable and Diligent Efforts shall also mean the use of
commercially reasonable diligent efforts to develop, commercialize and
market a Ribozyme Product.
1.61 "Submission" shall mean when documentation is filed with the appropriate
regulatory agency and such agency has accepted that documentation as
satisfactory for further regulatory action.
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1.62 "Successful Completion" means that a toxicity study or clinical trial has
been completed and has met the criteria established by the JDT at the
beginning of the study for what would be deemed a successful result of
such toxicity study or clinical trial and a decision is made by LILLY to
proceed to the next stage of clinical trials.
1.63 "Third Party" means an entity other than RPI or LILLY and its
sublicensees.
1.64 "Valid Claim" means a claim of an issued patent which claim has not
lapsed, expired, been canceled or become abandoned and has not been
declared invalid by an unreversed and unappealable decision or judgment of
a court or other appropriate body of competent jurisdiction, and which has
not been admitted to be invalid or unenforceable through reissue or
disclaimer.
2. CONDUCT OF THE RESEARCH AND DEVELOPMENT UNDER THE
COLLABORATION
2.1 R&D Plan. The research and development shall be conducted in accordance
with the R&D Plan. The R&D Plan shall include planned Clinical Development
activities for the Clinical Development of Ribozyme Products. The proposed [ * ]
R&D Plan is attached as Appendix C and is subject to amendment and final
approval by the JDT under this Agreement within sixty (60) days of the Effective
Date. All such R&D Plans can be amended from time to time in writing by the JDT
when significant changes occur in the goals or resource needs of a study and
target dates to accomplish such goals. On or before October 1 (commencing [ * ]
of each calendar year of the research and development program, the JDT shall use
its best efforts to agree upon a R&D Plan for the following calendar year. If
the JDT is unable to reach agreement on an annual R&D Plan by October 1 of the
year preceding the calendar year in which such plan is to go into effect, the
matter shall be referred to the JSC for resolution. With respect to preclinical
research, the R&D Plan shall identify the general tasks, and associated costs
(including all the R&D Plan approved FTEs and other support of RPI activities by
LILLY necessary for RPI to perform its obligations under this Agreement), to be
accomplished by each party during the following year. Once an annual R&D Plan is
adopted and fully funded, each party will use Scientifically Reasonable and
Diligent Efforts to perform the tasks allocated to it under such R&D Plan.
2.2 Efforts. Each Party shall use Scientifically Reasonable and Diligent
Effort to perform the respective responsibilities set forth in the R&D Plan.
Except as expressly provided in Section 6.1 or as otherwise agreed from time to
time by the Parties, LILLY and RPI shall each bear all of its own expenses
incurred in connection with the performance of this Agreement.
2.3 Availability of Resources. Each Party shall maintain laboratories, offices
and all other facilities reasonably necessary to carry out the activities
provided under the Research Plan. Each Party agrees to make its employees and
non-employee consultants reasonably available at their respective places of
employment to consult
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with the other Party on issues arising in the course of a study and in
connection with any request from any regulatory agency, including, without
limitation, regulatory, scientific, technical and clinical testing issues.
Representatives of RPI and LILLY may, upon reasonable notice and at times
reasonably acceptable to the other Party (i) visit the facilities where the
research is being conducted; and (ii) consult informally, during such visits and
by telephone and electronic mail, with personnel of the other Party performing
work on the Research Collaboration.
2.4 Reports. Each Party shall make summary presentations of research progress
at each meeting of the JDT pursuant to a pre-determined agenda. Each Party will
also communicate informally and through the JDT to inform the other of research
done under the Research Plan.
3. MANAGEMENT OF COLLABORATION
3.1 Formation of Joint Development Team. The Collaboration shall be managed by
a group of key senior research and development executives from RPI and LILLY who
will direct and oversee all of the research and development (the "Joint
Development Team" or "JDT"). The JDT shall be comprised of [ * ] (unless a Party
chooses to have fewer members) appointed by each of LILLY and RPI. Either Party
may appoint substitute or replacement members of the JDT to serve as their
representatives. The initial members of the JDT shall be appointed by the
Parties within thirty (30) days following the Effective Date. The JDT shall have
the responsibility and authority to: (i) review and approve the R&D Plan; (ii)
monitor all of the research and development under this Agreement; (iii)
coordinate tasks and responsibilities under the R&D Plans; (iv) review and
approve achievement of clinical milestones; and (v) alert management of both
Parties when there are significant changes in the timeframe and/or costs
contained in the R&D Plan and when target dates will not be met, what remedial
actions are to be taken. All major decisions, such as approval of the budget and
clinical milestones, shall be finally approved by the JSC.
3.2 Formation of the Joint Steering Committee. The collaborative effort
conducted hereunder shall be conducted under the overall direction of a Joint
Steering Committee comprised of [ * ] members. [ * ] members shall be appointed
by each of LILLY and RPI not later than thirty (30) days after the Effective
Date. All decisions of the Joint Steering Committee shall be unanimous. Either
party may change its representation on the Joint Steering Committee at any time
by written notice to the other. The JSC shall hold meetings at least [ * ]times
annually in person, by telephone or video-conference by previous agreement. The
Parties shall assume all meeting costs of their representatives to the JSC.
Minutes shall be kept of all Joint Steering Committee meetings and circulated to
the parties for approval. Minutes shall be deemed approved unless any member of
the Joint Steering Committee objects to the accuracy of such minutes within five
(5) days of receipt.
3.3 Meetings of Joint Development Team. The JDT shall initially meet at least
[ * ] times per year at locations and times to be determined by the JDT, with
the intent of meeting at alternating locations in Boulder, Colorado and
Indianapolis,
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Indiana, with each Party to bear all travel and related costs for its members.
In addition to regular JDT meetings, either Party may schedule a special meeting
at the other Party's offices on [ * ] notice. Under special circumstances and
upon approval of a majority of the members, the JDT is also authorized to
conduct meetings by telephone or video-conference. In addition, there shall be
regular contact by telephone, e-mail or other communication between meetings.
The Parties shall assume all meeting costs of their representatives to the JDT.
3.4 Decision-Making Process.
3.4.1 Decisions of the JDT shall be made by unanimous consensus when
possible, and otherwise by majority vote, subject to the right of either party
to appeal any decision of the JDT to the Joint Steering Committee. All decisions
made or actions taken by the JDT shall be made [ * ] is called upon to make a
decision or to take action. No vote of the JDT may be taken unless a majority of
the members of the JDT are present, including at least one (1) representative of
each party. The JDT shall keep minutes of any meeting at which a decision is to
be reached and shall circulate such minutes to all members of the JDT and the
Joint Steering Committee [ * ]. Minutes shall be deemed approved unless any
member of the JDT or the Joint Steering Committee objects to the accuracy of
such minutes [ * ] of receipt. Any party desiring to appeal a decision of the
JDT to the Joint Steering Committee shall make its appeal in writing to the
Joint Steering Committee within [ * ] days of receipt of the minutes for the
meeting at which the decision was made. Action pursuant to any decision appealed
to the Joint Steering Committee shall be suspended pending a determination by
the Joint Steering Committee to accept, reject or modify the decision of the
JDT. Any party may at any time request reconsideration of any issue if such
party in good faith believes that substantial changes in circumstances have
occurred that necessitate such reconsideration.
3.4.2 The JDT may appoint one or more other committees ("Advisory
Committees") to perform such functions as the JDT may determine. Unless a party
elects not to participate on a particular Advisory Committee, all Advisory
Committees shall have at least one representative of each party. Advisory
Committees may provide advice and make recommendations to the JDT, but shall
have no authority to bind the JDT or any of the parties.
3.4.3 Any disagreement, which cannot be resolved by the vote of the JDT,
shall be referred to the Joint Steering Committee. If the dispute remains
unresolved, the matter shall be referred to the [ * ] of RPI and the [ * ] LILLY
or such equivalent level executive. If the dispute remains unresolved, then the
Parties will enter into a non-binding arbitration process.
3.5 Governance Following Product Launch. As soon as practicable following
product launch of a Ribozyme Product, the parties shall meet to review whether
it is appropriate to continue the collaboration under the day to day management
of the JDT, or whether the objectives of the JDT have been substantially
achieved and it is appropriate to disband or reorganize the JDT. Regardless of
whether the parties elect to disband or reorganize the JDT, the Joint Steering
Committee shall continue to provide overall direction to the collaboration.
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4. PRODUCT DEVELOPMENT
4.1 LILLY's Exclusive Rights to Develop Ribozyme Products. Subject to the
exceptions set forth in Sections 4.2.1 and 4.2.2, LILLY shall have the
exclusive, worldwide right to develop, commercialize and market Ribozyme
Products in the Field.
4.2 RPI's Rights to Ribozyme Products. Subject to the following Sections 4.2.1
and 4.2.2, RPI shall exclusively and diligently perform its obligations for the
development of Ribozymes in the Field with LILLY.
4.2.1 Due Diligence Failure. [ * ]
4.2.2 Termination of a Ribozyme Product. [ * ]
4.3 Regulatory Work. LILLY shall be responsible for determining all regulatory
responsibilities for the preparation and filing of all Drug Approval
Applications in the name of LILLY and all activities necessary for such Drug
Approval Applications including but not limited to the manufacture, marketing
and sale of any Ribozyme Product. Any such work to be conducted by RPI under
this Agreement will be fully-funded by LILLY as approved in the R&D Plan.
4.4 Medical Activity Decisions. LILLY shall solely determine whether to
proceed with the Clinical Development of a Ribozyme Product; however such
decisions shall be subject to 4.2.1 and 4.2.2.
4.5 Adverse Event Reporting. Lilly will report adverse events and serious
adverse events which occur during the development or marketing of the Product to
the relevant regulatory authorities promptly according to the applicable
regulations. RPI will report to Lilly serious adverse events and spontaneously
reported adverse events of which it becomes aware of within 3 business days of
RPI's initial receipt of such information, in order that Lilly can fulfill its
obligations to the appropriate regulatory authorities.
4.6 Marketing. LILLY shall have the exclusive, worldwide right to market and
sell any Ribozyme Product developed under this Agreement with RPI unless the
rights revert to RPI [ * ]
5. DIAGNOSTIC PRODUCTS
5.1 Diagnostic Product Rights. [ * ]
5.2 Diagnostic Products. [ * ]
6. PAYMENTS
6.1 FTE Support.
6.1.1 Workplan. LILLY shall provide to RPI funding according to the Workplan
provided under the R&D Plan at an FTE rate of [ * ] per FTE per year to
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support RPI research and development in accordance with the R&D Plan. [ * ] The
number of FTEs for which RPI will receive reimbursement will be set forth in the
Workplan on an annual basis. RPI, on a quarterly basis, will provide to LILLY
the names of employees working on the R&D Plan and the number of hours billed to
LILLY for each employee along with the number of hours that are based on work
done in the United States and shall be invoiced to LILLY by RPI within thirty
(30) days after the conclusion of each quarter. LILLY shall also pay RPI for any
other expenses as provided in the Workplan in addition to the agreed upon FTEs
and as expressly approved by the JDT.
6.1.2 Third Party Services. When the services of outside contractors,
consultants, or any Third Party are required and approved by the Joint
Development Team, LILLY will reimburse RPI for its actual costs paid and
documented for such services. RPI agrees not to mark-up such costs and LILLY
shall not pay profits to RPI for such costs unless approved by the JDT.
6.1.3 Payment. Payments due under Section 6.1.1 shall be due from LILLY to
RPI [ * ]
6.2 Ribozyme Costs. Subject to the terms of this [ * ]. Agreement, RPI agrees
to provide Ribozymes for the Clinical Development studies at [ * ]
6.3 License Fee and Reimbursements. In consideration of rights granted by RPI
under this Agreement, LILLY has agreed to purchase [ * ]in RPI [ * ]of [ * ]
under a Stock Purchase Agreement. [ * ]
[ * ]
6.4 Milestones.
6.4.1 Clinical Milestones for Ribozyme Products [ * ]. LILLY shall pay RPI
the following amounts within [ * ] after the first occurrence of the following:
Amount Milestone
[ * ]
6.4.2 [ * ]
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6.4.3 [ * ]
6.4.4 Credits.
6.4.4.1 [ * ]
6.4.4.2 [ * ]
6.4.4.3 [ * ]
6.5 Royalties
6.5.1 Base Royalty. LILLY shall pay RPI Royalties on the Net Sales of each
Ribozyme Product for the Royalty Term according to the following schedule ("Base
Royalties"). The following worldwide Annual Net Sales for each Royalty tier
shall be adjusted annually relative to the Effective Date according to the CPI.
Worldwide Annual Net Sales Royalty
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
Royalty Calculation Example:
For [ * ] in annual sales (not CPI adjusted in this example)
[ * ]
6.5.2 Third Party Royalties.
6.5.2.1 [ * ]
6.5.2.2 Basic Therapeutic Utility. [ * ] is responsible for the payment of any
royalties or other payments to Third Parties in respect of the use of the
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Ribozyme Technology necessary to develop and commercialize a Ribozyme Product to
the point of Basic Therapeutic Utility subject to the provisions under the
Discount section hereunder (Article 11).
6.5.2.3 Delivery Systems. [ * ] shall be responsible for the payment of any
royalties or other payments to Third Parties in respect of the use of a Third
Party Delivery System, so long as such Delivery System is not required for Basic
Therapeutic Utility.
6.5.2.4 Other Third Party Royalties. [ * ]
6.5.3 RPI Royalties. RPI shall pay LILLY a royalty of [ * ] on the Net Sales
of each Ribozyme Product if RPI obtains rights to a Ribozyme Product in
accordance with Section 4.2.1 or 4.2.2.
6.5.4 Other Ribozyme products. During the Term of this Agreement, should
LILLY enter into a collaboration or development program in the Field using
Ribozymes covered by a Valid Claim under RPI Patent Rights with a Third party,
LILLY will pay RPI the royalties due under this Agreement for such Patent
Rights.
7. RECORDS; AUDITS; AND REPORTS
7.1 Records. During the term of this Agreement and for a period of two years
thereafter, the Party paying royalties (the "Royalty Paying Party") shall keep
(and shall require its Affiliates and sublicensees to keep,) full, true and
accurate books of account containing all particulars that may be necessary for
the purpose of calculating all royalties payable to the other Party (the
"Royalty Receiving Party").
7.2 Audit. At the Royalty Receiving Party's expense, Royalty Receiving Party
or its authorized independent public accountant has the right to engage Royalty
Paying Party's independent public accountant, or an independent public
accountant agreed to mutually by the Parties, where the public accountant is a
reputable national U.S. accounting firm to perform an audit, conducted in
accordance with generally accepted auditing standards in the United States of
America, of such books and records of Royalty Paying Party that are deemed
necessary by Royalty Paying Party's independent public accountants to report on
Net Sales of the Ribozyme Product for the period or periods requested by Royalty
Receiving Party. Such audit shall not be performed more frequently than once per
calendar year nor more frequently than once with respect to records covering any
specific period of time, upon at least [ * ] prior written notice, and shall be
conducted during regular business hours in such a manner as to not unnecessarily
interfere with Royalty Paying Party's normal business activities. All
information, data documents and abstracts herein referred to shall be used only
for the purpose of verifying royalty statements or compliance with this
Agreement, shall be treated as the Royalty Paying Party's Confidential
Information subject to the obligations of this Agreement and need not be
retained more than [ * ] after completion of an audit hereof, if an audit has
been requested; nor more than [ * ] from the end of the calendar year to which
each shall pertain;
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nor more than [ * ] after the date of termination of this Agreement. The failure
of the Royalty Receiving Party to request verification of any royalty
calculation during the period when records must be retained shall be deemed
acceptance of the accuracy of such reporting.
7.3 Manufacturing/Clinical/Testing Audit Rights. Upon LILLY's written
request, RPI will allow LILLY to review its cGMP processes and procedures as
such processes relate to bulk drug and the preparation of Ribozyme Product. Such
audit shall be subject to the confidentiality Article 12. Such reviews shall
occur as soon as reasonably practical. LILLY shall have the right to inspect all
manufacturing and testing facilities and operations (including Third Parties) to
assure compliance with cGMP requirements and regulatory commitments. RPI will
assure compliance with regulatory commitments and will correct any deficiencies
prior to manufacturing of any Ribozyme Product.
7.4 Payment; Reports. All royalty payments due to either Party under this
Agreement shall be paid in United States dollars within [ * ] after the end of
each calendar quarter [ * ] for royalties due from sublicensees), and all other
payments will be due within [ * ] of receipt of billing unless otherwise
specifically provided herein. Each payment of royalties shall be accompanied by
a report of Net Sales in sufficient detail to permit confirmation of the
accuracy of the royalty payment made.
7.4.1 Exchange Rate. Royalty payments and reports for the sale of Ribozyme
Products shall be calculated and reported for each calendar quarter. With
respect to each quarter, for countries other than the United States, whenever
for the purpose of calculating royalties conversion from any foreign currency
shall be required, such foreign currencies shall be converted into United States
dollars for the countries concerned, using LILLY's normal practices used to
prepare its audited financial statements for internal and external reporting
purposes using GAAP which use a widely accepted source of published exchange
rates.
7.4.2 Prohibited Royalty Rates. If rates of royalties provided for herein are
prohibited by law or regulation in any country where a Ribozyme Product is sold,
the Royalty Paying Party shall pay to the Royalty Receiving Party a royalty at
the highest rate permitted in that country for a license of the type herein
granted, provided that such rate is not greater than the rate applicable under
this Agreement.
7.5 Manner and Place of Payment. All payments owed under this Agreement shall
be made by wire transfer, unless otherwise specified by the receiving Party.
7.6 Late Payments. In the event that any payment, including royalty, milestone
and research payments, due hereunder is not made when due, the payment shall
accrue interest from the date due until the date paid at the rate of [ * ] per
month; provided that in no event shall such rate exceed the maximum legal annual
interest rate. The payment of such interest shall not limit any Party from
exercising any other rights it may have as a consequence of the lateness of any
payment. In the event that any payment, including royalty, milestone and
research payments, due hereunder is not made when due, [ * ] due date, this
Agreement shall be referred to dispute resolution mechanism under Article 17.
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7.7 Taxes. All turnover and other taxes levied on account of the royalties
and other payments accruing to each Party under this Agreement shall be paid by
the Party receiving such royalty or other payment for its own account, including
taxes levied on income of the Royalty Receiving Party. If provision is made in
law or regulation for withholding, such tax shall be deducted from the royalty
or other payment made by the Party making such payment to the proper taxing
authority and a receipt of payment of the tax secured and promptly delivered to
the Royalty Receiving Party. Each Party agrees to assist the other Party in
claiming exemption from such deductions or withholdings under any double
taxation or similar agreement or treaty from time to time in force.
8. PATENT RIGHTS AND INFRINGEMENT
8.1 Inventorship. Any Invention that is made (i) solely by one or more
representatives of RPI shall be deemed invented solely by RPI (a "RPI
Invention"); (ii) solely by one or more representatives of LILLY shall be deemed
invented solely by LILLY (a "LILLY Invention"); and (iii) jointly by one or more
representatives of RPI and one or more representatives of LILLY shall be deemed
invented jointly by RPI and LILLY (a "joint Invention"). Any Non-Patented
Technology that is made (i) solely by one or more representatives of RPI shall
be deemed invented solely by RPI, (ii) solely by one or more representatives of
LILLY shall be deemed invented solely by LILLY; and (iii) jointly by one or more
representatives of RPI and one or more representatives of LILLY shall be deemed
invented jointly by RPI and LILLY. Determination of inventorship shall be made
in accordance with the patent laws of the United States of America. If the
parties cannot agree on inventorship, determination of inventorship shall be
made by mutually agreed upon patent counsel in accordance with the patent laws
of the United States of America.
8.2 Ownership.
8.2.1 All Inventions and Non-Patented Technology shall be owned by the Party
who invented it or, if a joint Invention or joint Non-Patented Technology,
jointly as the case may.
8.2.2 For LILLY sole Inventions and Non-Patented Technology covering Ribozyme
Technology, RPI shall have a royalty-free, non-exclusive license without a right
to sublicense.
8.3 Patent Management.
8.3.1 Filing Party. The Party owning the Invention shall be responsible for
the preparation, filing, prosecution, and maintenance (the "Patent Management")
of a Patent for such Invention(the "Filing Party"), subject to the provisions of
Section 8.3. For jointly invented Inventions, the Parties will mutually decide
who will be responsible for filing and will share all expenses.
8.3.2 Ribozymes. Except as set forth below, RPI shall take any and all
actions necessary with respect to the Patent Management of Patents, including
those LILLY Inventions or joint Inventions, claiming Ribozymes and Ribozyme
targets
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discovered or identified as a result of performance under this Agreement
("Ribozyme Inventions"). Prosecution will be at RPI's sole expense with LILLY
having the right to pursue prosecution of those Ribozyme Inventions RPI chooses
not to pursue at LILLY's expense. The Filing Party shall provide the other Party
with drafts of any Patent application directed towards or claiming such Ribozyme
Product (the "Ribozyme Application") at least [ * ] prior to filing the Ribozyme
Application for review and comment by the other Party. The Filing Party shall
endeavor in good faith to incorporate such comments. If the other Party fails to
respond within such [ * ] time period, the Filing Party shall not be obligated
to delay the filing of such Ribozyme Application. In addition, the Filing shall
promptly provide the other Party with copies of all substantive communications
from the United States or any foreign patent office regarding such Ribozyme
Applications and resulting Patents, within [ * ] of receipt from the patent
office. The Filing Party will provide drafts of any response at least two (2)
weeks prior to filing.
8.3.3 Non-Ribozymes. The Party owning the Invention other than those relating
to Ribozymes, shall be responsible for Patent Management of such Patents, with
the Non-Filing Party having the right to pursue prosecution of those Inventions
the Filing Party chooses not to pursue at the Non-Filing party's expense.
8.4 Patent Costs. The Filing Party shall be responsible for all Patent Costs
for the Patent Rights unless and until transferred to the other Party.
8.5 Cooperation of the Parties. Each Party agrees to cooperate fully in the
Patent Management of any Patent Rights under this Agreement. Such cooperation
includes, but is not limited to: (i) turning over to the Filing Party all files,
papers and documents relating to such Patent; (ii) executing all papers and
instruments, or requiring its employees or agents, to execute such papers and
instruments, so as to effectuate the ownership of Patent Rights set forth in
Section 8.2 and to enable the other Party to apply for and to prosecute
Applications in any country; and (iii) promptly informing the other Party of any
matters coming to such Party's attention that may affect the Patent Management
of any such Application.
8.6 Product Trademark. LILLY shall own and be responsible for all Product
Trademark(s) and shall at its expense, file, maintain and enforce Product
Trademark for each such Ribozyme Product worldwide unless rights to such
Ribozyme Product revert to RPI under Sections 4.2.1, 4.2.2, 15.4.3 or 15.4.4.
8.7 Infringement by Third Parties. Each Party shall promptly notify the other
Party in writing of any alleged or threatened infringement by a Third Party of
any RPI Patent Rights or LILLY Patent Rights of which they become aware and
provide the other Party with all evidence in its possession supporting said
infringement. The Parties agree to cooperate in taking commercially reasonable
legal actions to protect the commercial interests of the Parties in a Ribozyme
Product against infringement by Third Parties. The Filing Party shall take the
lead in any such action. [ * ] If more than one Party wishes to participate in
taking action to protect the commercial interests of the Parties in the Ribozyme
Product against infringement, then an authorized representative of each Party
shall control such action; the costs of maintaining such action shall be shared
equally by the Parties,
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and the damages recovered from such action for the past infringement shall be
first used to pay all costs of each Party, compensatory damages for LILLY's lost
sales shall be treated as Net Sales and any other damages will be shared equally
by the both Parties. Each Party shall render such reasonable assistance as the
prosecuting Party may request.
8.8 Ribozyme Technology Patents. Notwithstanding the foregoing, RPI shall
handle in its sole discretion and expense any oppositions, interferences, or
litigation relating to the Ribozyme Technology/Cech Patents and shall keep LILLY
informed on a regular basis, but no less than quarterly, of the status of any
such oppositions, interferences, or litigation, and shall promptly provide LILLY
with copies of all substantive communications relating thereto. LILLY shall have
the option to join RPI in such proceedings by notifying RPI in writing and the
costs of maintaining such action shall be shared equally by the Parties.
8.9 Third Party Patent Rights. Each Party shall promptly notify the other if
it receives notice that activities involving the Research Collaboration or the
development or commercialization of Ribozyme Product allegedly infringe a Third
Party's proprietary rights. The Parties shall consult concerning the action(s)
to be taken. The Royalty Paying Party shall have the sole right and
responsibility for addressing such alleged infringement regarding Ribozyme
Products, and bearing the cost thereof. Notwithstanding the foregoing, if such
action relates to Ribozyme Technology, then RPI shall have the right and
responsibility for addressing such alleged infringement regarding Ribozyme
Products and LILLY shall have the option of joining with RPI in negotiation with
a Third Party.
8.10 Patent Term Extension. Upon receiving Regulatory Approval for a Ribozyme
Product, the parties agrees to coordinate the application for any patent term
extension which may be available under the Patent Rights in any country; however
the responsibility of applying for any such extension shall be the Party having
the right to make the extension application under the applicable law. The
responsible Party shall keep the other party fully informed of its efforts to
obtain such extension, with copies of any submission and correspondence relating
to such request for patent term extension and each party shall provide
reasonable assistance to obtain such extension. The responsible Party will pay
all expenses in this regard to obtaining the extension.
9. LICENSES AND OTHER COMMERCIAL RIGHTS
9.1 Ribozyme Technology License.
9.1.1 License. Subject to the royalty-free rights of RPI to make, use and
practice the Ribozyme Technology for research, purposes in the Field, if any,
RPI hereby grants LILLY a sole and exclusive, worldwide, royalty bearing license
under Ribozyme Technology, RPI Patent Rights, Non-Patented Technology and RPI
Inventions to make, have made (both subject to the provisions under
Manufacturing Section 10, hereunder), use, offer to sell, sell, export or import
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Ribozyme Products in the Field during the Term of this Agreement. The rights
granted to LILLY in this Agreement exclude any and all Inventions made outside
the R&D Plan.
9.1.2 Right to sub-license. [ * ]
9.2 LILLY Technology License. LILLY hereby grants RPI a sole and nonexclusive,
worldwide, royalty bearing (in accordance with Sections 4.2.1, 4.2.2, 15.4.3 or
15.4.4) license, with a right to sub-license, under LILLY Technology and LILLY
Inventions to make, have made, use, offer to sell, sell or import Ribozyme
Products in the Field during the Term, following the termination of this
Agreement or reversion of Product rights to RPI under this Agreement.
9.3 Covenant of Non-Use. Neither Party shall practice the Patent Rights and/or
Non-Patented Technology of the other Party other than as expressly licensed
herein.
10. MANUFACTURING AND PURCHASE OF RIBOZYME PRODUCTS
10.1 RPI Manufacture. Subject to the limitations hereunder, RPI has the
exclusive right to manufacture and/or have manufactured the Ribozyme component
of the Ribozyme Products ("bulk drug") and to manufacture Ribozymes for research
("Research Ribozymes") pursuant to the R&D Plan. RPI shall manufacture all of
the worldwide requirements for the bulk drug for the Ribozyme Products and sell
such bulk drug as stable bulk material to LILLY for final filling/finishing and
packaging. The bulk drug responsibilities will be described in a separate
Manufacturing Requirements Document ("MRD") for clinical and commercial
materials. The MRD will be included in a separate Ribozyme Manufacture and
Supply Agreement which shall be formalized at the recommendation of the JDT and
shall contain all terms and conditions of this Agreement and those that are
standard for a pharmaceutical manufacturing agreement (such terms and conditions
as outlined in Appendix E), including the obligation of RPI to comply with all
rules and regulations of the FDA or any other applicable regulatory agency. The
Term of the Ribozyme Manufacture and Supply Agreement shall be consistent with
the Royalty Term under this Agreement. The Ribozyme Manufacture and Supply
Agreement shall incorporate this Agreement by reference in its entirety and vice
versa.
10.2 Right to Inspect Manufacturing. LILLY shall have the right to audit and
approve all subcontractors selected by RPI to manufacture Ribozyme Product or
bulk products as provided and in addition to Section 7.3. LILLY quality
assurance shall have the right to audit all manufacturing facilities for
Ribozyme Product for clinical studies and commercial sale. Such reviews shall
occur as soon as reasonably practical. RPI will assure compliance with
regulatory commitments and will correct any deficiencies prior to manufacturing
of any Ribozyme Product. RPI will promptly notify LILLY of any regulatory
inspections and inquiry/communications which involve Ribozyme Product and give
LILLY an opportunity to assist RPI in responding to any such inquires.
10.3 LILLY's Option to Manufacture. Notwithstanding the foregoing, after
Product Launch, LILLY shall have the option to manufacture up to [ * ] of the
requirement
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of stable Ribozyme bulk drug required for the sale of the Ribozyme Product. In
consideration of this option, and in the event LILLY manufactures the Ribozyme
Product provided herein, LILLY shall increase the Royalty due RPI under Section
6.5.1 by up to [ * ], provided such manufacture by LILLY is not due to a failure
by RPI to provide the required quantity of the bulk drug. Failure by RPI shall
mean failure to provide required bulk drug in the required quantities to LILLY
as described in the R&D Plan. The increase in the Royalty due RPI shall be
determined using the following formula:
[ * ]
10.4 Purchase of Ribozyme Product.
10.4.1 Purchase Price. [ * ]
10.4.2 Low Cost Provider. [ * ]
10.4.3 COPS. [ * ]
10.4.4 Excess Capacity. [ * ]
11. DISCOUNT
[ * ]
12. CONFIDENTIALITY
12.1 Nondisclosure. During the term of this Agreement and for a period of [ * ]
years after termination hereof, neither Party shall disclose any Confidential
Information received from the other Party to any Third Party, or use any such
Confidential Information for any purpose other than accomplishing the purposes
of this Agreement, except as expressly authorized by this Agreement or as
required by any regulatory agency or by any governmental rule, regulation, law
or court order. Each Party may disclose such Confidential Information to its
Affiliates, employees, agents, consultants, collaborators, and other
representatives with a need to know such Confidential Information to accomplish
the purposes of this Agreement. Each Party shall promptly notify the other upon
discovery of any unauthorized use or disclosure of such Confidential
Information. Upon termination of this Agreement, each Party shall return to the
other Party promptly upon request any tangible embodiment of such Confidential
Information provided by the other Party; provided, however, that one copy shall
be kept by the receiver Party's legal department for purposes of interpreting
this Agreement.
12.2 Exceptions. Confidential Information shall not include any information
which the receiving Party can prove by competent evidence:
12.2.1 is now, or hereafter becomes, through no act or failure to act on the
part of the receiving Party, generally known or available;
12.2.2 is known by the receiving Party at the time of receiving such
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information, as evidenced by its records;
12.2.3 is hereafter furnished to the receiving Party by a Third Party, as a
matter of right and without restriction on disclosure;
12.2.4 is independently developed by the receiving Party without the aid,
application or use of Confidential Information;
12.2.5 is the subject of a written permission to disclose provided by the
disclosing Party, where such a permission shall not be unreasonably withheld.
12.3 Publications. Each Party to this Agreement recognizes that the publication
of papers regarding results of the Research Collaboration, including oral
presentations and abstracts, may be beneficial to both Parties provided such
publications are subject to reasonable controls to protect Confidential
Information. In particular, it is the intent of the Parties to maintain the
confidentiality of any information regarding the Ribozyme Products included in
any patent application until such patent application has been filed in the
patent office. Accordingly, each Party shall have the right to review and
approve any paper proposed for publication by the other Party regarding results
of the Research Collaboration hereunder, including oral presentations and
abstracts, which utilizes data generated from the Research Collaboration or
includes Confidential Information of the other Party. Before any such paper is
submitted for publication, the Party proposing publication shall deliver a
complete copy to the JDT at [ * ] prior to submitting the paper to a publisher.
The JDT shall review any such paper and give its comments to the publishing
Party [ * ] of the delivery of such paper to the JDT. With respect to oral
presentation materials, the JDT shall make reasonable efforts to expedite review
of such materials, and shall return such items as soon as practicable to the
disclosing Party with appropriate comments, if any, but in no event later than [
* ] from the date of delivery to the receiving Party. The disclosing Party shall
comply with the other Party's request to delete references to Confidential
Information in any such paper and agrees to withhold publication of same for an
[ * ] (or longer if necessary) in order to permit the Parties to obtain patent
protection, if either of the Parties deem it necessary, in accordance with the
terms of this Agreement. If there is a dispute regarding publications, such
dispute shall be resolved by the Joint Steering Committee.
13. REPRESENTATIONS, WARRANTIES AND COVENANT BY BOTH PARTIES
13.1 Duly Organized. Each Party hereby represents and warrants that such Party
is duly organized and validly existing under the laws of the state of its
incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof
13.2 Due Authorization. Each Party hereby represents and warrants that such
Party is duly authorized to execute and deliver this Agreement and to perform
its
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obligations hereunder.
13.3 Binding Agreement. Each Party hereby represents and warrants that this
Agreement is a legal and valid obligation binding upon it and is enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by such Party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a Party or by which it may be
bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having authority over it.
13.4 Personnel. [ * ]
13.5 Representations and Warranties by RPI.
13.5.1 Patent Infringement. To the best of RPI's knowledge, as of the
Effective Date and except as disclosed to LILLY as of the Effective Date it is
not aware of any patent or other intellectual property right of any other person
that would be infringed by the research contemplated under the R&D Plan.
13.5.2 Sufficient Rights. RPI owns or possesses adequate licenses or other
rights to use all Patents, Patent Rights, Inventions, and Know-How including an
exclusive license to the Cech Patents and Ribozyme Technology to conduct
research, to grant rights and licenses granted herein to LILLY, and to fulfill
its other duties and obligations pursuant to this Agreement.
13.5.3 Debarrment. RPI warrants and represents that it is not debarred under
subsection 306 (a) or (b) of the Federal Food, Drug and Cosmetics Act (U.S.
Generic Drug Enforcement Act of 1992: 21 USC 335a(a) or (b)) and that to the
best of its knowledge and belief it will not use in a capacity the services of
any person debarred under such law with respect to services performed under this
Agreement and that it will amend certification in light of new information.
13.5.4 Licenses to the Cech Patents and Ribozyme Technology. RPI has fully
complied, and will use its best efforts to remain in material compliance with,
and is not in breach of, and this Agreement will not materially breach, any
terms, conditions or obligations of all the RPI licenses to the Cech Patents and
Ribozyme Technology.
13.5.5 Key Personnel. [ * ]
13.5.6 Change of Control. In the event RPI becomes aware of a process that
will likely cause the Change of Control of RPI, LILLY will be promptly notified.
In any such case, RPI must, prior to the execution of any Change of Control
document, provide assurances to LILLY of all performance under this Agreement.
13.5.7 Other. RPI covenants that at no time during the term of this Agreement
shall RPI assign, transfer, encumber or grant rights in or with respect to
Ribozyme Products inconsistent with the grants and other rights reserved to
LILLY under this Agreement. Provided, however, this covenant shall not affect
the
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absolute right of RPI to transfer title to its exclusively owned Patents or
Know-How to any successor to all or substantially all of that portion of RPI's
business. Additionally, RPI agrees not to grant license and rights to a Third
Party, to develop and commercialize a Ribozyme product for the treatment of HCV
infection as a primary indication.
14. INDEMNIFICATION
14.1 LILLY's Indemnification. LILLY will indemnify (subject to 14.3), defend
and hold RPI harmless against any and all actions, suits, claims, demands,
prosecutions, liabilities, costs, and expenses based on or arising out of this
Agreement, the manufacturing, packaging, use or sale of Ribozyme Products, or
use of licensed technical information or Ribozyme Products by LILLY, its
Affiliates, its Sublicensees or its (or their) customers and any representation
made or warranty given by LILLY, its Affiliates or Sublicensees with respect to
Licensed Products; except for those activities that can be directly related to
------
RPI's negligence in the Manufacture of Ribozymes.
14.2 RPI's Indemnification. RPI will indemnify (subject to 14.3), defend and
hold LILLY harmless against any and all actions, suits, claims, demands,
prosecutions, liabilities, costs, and expenses based on or arising out of this
Agreement, resulting from RPI's activities under this Agreement and activities
related to the manufacture of Ribozymes, limited to the amount RPI has been paid
by LILLY under this Agreement as of such claims of indemnification.
14.3 Conditions of Indemnification. If either party proposes to seek
indemnification from the other under 14.1 or 14.2, it shall notify the other
party within fifteen (15) days of receipt of notice of any such claim or suits
and shall cooperate fully with the other party in the defense of all such claims
or suits. No settlement or compromise shall be binding on a party hereto
without its prior written consent, which consent shall not be unreasonably
withheld.
14.4 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.
14.5 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY
NATURE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF NON-
INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
14.6 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,
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acts of aggression, acts of God, energy or other conservation measures, failure
of utilities, mechanical breakdowns, material shortages, disease or similar
occurrences. Each Party will notify the other immediately should any such
contingencies occur.
15. TERM AND TERMINATION
15.1 Term. The Term of this Agreement shall begin on the Effective Date and
terminate at the end of the Royalty Term for the last Ribozyme Product in the
country with the last to expire royalty obligation, unless terminated earlier in
accordance with the provisions of Sections 15.2 or 15.3. Thereafter, LILLY will
have a fully paid-up, exclusive license to Ribozyme Product in such country.
15.2 Termination Without Cause. [ * ]
15.3 Termination for Cause. [ * ]
15.3.1 Upon or after the bankruptcy, dissolution or winding up of the other
Party (other than dissolution or winding up for the purposes of reconstruction
or amalgamation);
15.3.2 Upon or after the material breach of this Agreement by the other Party
if the breaching Party has not cured such breach within the sixty (60) days
following written notice of such termination by the other Party.
15.4 Effect of Expiration or Termination.
15.4.1 Survival. Expiration or termination of this Agreement shall not relieve
the Parties of any obligation accruing prior to such expiration or termination.
Except as otherwise specifically set forth in this Section 0 or elsewhere in
this Agreement, the obligations and rights of the Parties under Sections 12, 14,
15 and 19 shall survive termination or expiration of this Agreement.
15.4.2 LILLY Terminates For Cause. [ * ]
15.4.3 RPI Terminates For Cause. [ * ]
15.4.4 LILLY Terminates.
a) [ * ]
15.4.5 RPI Terminates for bankruptcy. If RPI becomes subject to a voluntary or
involuntary bankruptcy not discharged within one hundred and eighty (180) days
after commencement, RPI will use its best efforts to transfer its interests in
assets related to the development and commercialization of a Ribozyme Product,
including the employment contracts (if any) with the scientists involved in the
Research Collaboration to LILLY.
15.4.6 LILLY Terminates for bankruptcy. If LILLY becomes subject to a
voluntary or involuntary bankruptcy not discharged within one hundred and eighty
(180) days
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after commencement, LILLY will use its best efforts to transfer its interests in
assets related to the development and commercialization of a Ribozyme Product,
including the employment contracts (if any) with the scientists involved in the
Research Collaboration to RPI.
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15.5 Rights in Law or Equity. Except as otherwise expressly provided herein,
termination by either Party pursuant to this Sections 15.3shall not prejudice
any other remedy that a Party might have in law or equity, except that neither
Party may claim compensation for lost opportunity or like consequential damages
arising out of the fact of such termination
16. PUBLICITY
16.1 Publicity Review. LILLY and RPI shall jointly discuss and agree, based on
the principles of Section 12, on any statement to the public regarding the
execution and the subject matter of this Agreement or any other aspect of this
Agreement, except with respect to disclosures required by law or regulation.
Within [ * ] following the Effective Date, the Parties shall issue a joint press
release covering the field of collaboration as well as total deal value amount
to be mutually agreed to by the Parties (a copy of the press release is attached
to this Agreement as Appendix D). In no event shall specific payment amounts be
announced (i.e. license fee, Patent Reimbursement, Pre-clinical Reimbursement,
royalties). Except with respect to information disclosed in the joint press
release, neither Party shall (i) disclose the material terms of this Agreement,
or (ii) use the name of the other Party, in any public statement, prospectus,
annual report, or press release without the prior written approval of the other
Party, which may not be unreasonably withheld or delayed, provided, however,
that both parties shall endeavor in good faith to give the other Party a minimum
of five business days to review such press release, prospectus, annual report,
or other public statement; provided, further, that either Party may (i) disclose
the material terms of this Agreement or (ii) use the name of the other Party in
any public statement, prospectus, annual report, or press release without the
prior written approval of the other Party, if such Party is advised by counsel
that such disclosure is required to comply with applicable law.
16.2 Standards. In the discussion and agreement referred to in Section 16.1,
the principles observed by LILLY and RPI will be accuracy, the requirements for
confidentiality under Article 12, the advantage a competitor of LILLY or RPI may
gain from any public or Third Party statements under Section 16.1, the
requirements of disclosure under any securities laws or regulations of the
United States, including those associated with public offerings, or companies
whose stock is registered under or subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, and the standards and customs in
the pharmaceutical industry for such disclosures by companies comparable to
LILLY and RPI. RPI will give LILLY the opportunity to redact any SEC or other
regulatory or administrative filings and RPI will not unreasonably refuse any
such redactions provided they are within the scope of the law.
17. DISPUTE RESOLUTION
17.1 Disputes. The Parties recognize that disputes as to certain matters may
from time to time arise during the term of this Agreement which relate to either
Party's rights and/or obligations hereunder. It is the objective of the Parties
to establish procedures to facilitate the resolution of disputes arising under
this Agreement in an expedient manner by mutual cooperation and without resort
to litigation. To
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accomplish this objective, the Parties agree to follow the procedures set forth
in this Section 17.1 if and when a dispute arises under this Agreement between
the Parties. Notwithstanding the foregoing, the Parties recognize that disputes
relating to the R&D Plan, and particularly matters within the authority of the
JDT and issues to be resolved by the Joint Steering Committee shall first be
attempted to be resolved in accordance with the decision making process
provisions set forth in Sections 3.3.4.
17.2 Dispute Resolution Procedures. If the Parties cannot resolve the dispute
within [ * ] of formal request by either Party to the other, any Party may, by
written notice to the other, have such dispute referred to their respective
officers designated below or their successors, for attempted resolution by good
faith negotiations within [ * ] after such notice is received. Said designated
officers (or such equivalent level officer at such time) are as follows:
For LILLY: [ * ]
For RPI: [ * ]
18. ASSIGNMENT AND DELEGATION
18.1 Third Parties. Neither Party may assign or delegate any or all of its
rights or obligations under this Agreement to any Third Party without the prior
written permission of the other Party, except pursuant to Section 18.3.
18.2 Affiliates. Neither Party may assign or delegate any or all of its rights
or obligations under this Agreement without the prior written consent of the
other Party; provided, however, that either Party may assign or delegate any or
all of its rights or obligations under this Agreement to any Affiliate without
the consent of the other Party.
18.3 Merger. Either Party may also assign all of its rights or obligations
under this Agreement (but not a portion thereof) in connection with the sale of
all or substantially all of its assets relating to the subject matter hereof, or
may otherwise assign all of its rights or obligations under this Agreement (but
not a portion thereof) with the prior written consent of the other Party. This
Agreement shall survive any merger of either Party with or into another Party
and no consent for a merger or similar reorganization shall be required
hereunder; provided, that in the event of such merger or in the event of a sale
of all assets, no intellectual property rights of the acquiring corporation
shall be included in the technology licensed hereunder.
18.4 Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties; provided,
however, that any such permitted assignment or delegation shall not relieve the
assigning Party of its responsibilities for performance of its obligations under
this Agreement. Any assignment not in accordance with this Agreement shall be
void.
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19. ADDITIONAL TERMS
19.1 Notices. Any notices or communications provided for in this Agreement to
be made by either of the Parties to the other shall be in writing, in English,
and shall be made by prepaid air mail with return receipt or overnight courier
or facsimile addressed to the other at its address set forth below. Any such
notice or communication may also be given by hand, or facsimile to the
appropriate designation. Either Party may by like notice specify an address to
which notices and communications shall thereafter be sent. Notices sent by
mail, facsimile or courier shall be effective upon receipt and notices given by
hand shall be effective when delivered.
If to RPI: Ribozyme Pharmaceuticals Inc.
2950 Wilderness Place
Boulder, Colorado, 80301
Fax: 303/449-6995
Attention: Vice President, Business Development
If to LILLY: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: Vice President, Infectious Diseases,
Drug Discovery Research and Clinical Investigation
with a copy to: Eli Lilly and Company
LILLY Corporate Center
Indianapolis, IN 46285
Fax: 317-276-4152
Attention: V.P. General Counsel
--------------------------
19.2 Waiver. Except as specifically provided for herein, the waiver from time
to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
19.3 Severability. If any term, covenant or condition of this Agreement or the
application thereof to any Party or circumstance shall, to any extent, be held
to be invalid or unenforceable, then (i) the remainder of this Agreement, or the
application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law; and (ii) the
Parties hereto covenant and agree to re-negotiate any such term, covenant or
application thereof in good faith in order to provide a reasonably acceptable
alternative to the term, covenant or condition of this Agreement or the
application thereof that is invalid or
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unenforceable, it being the intent of the Parties that the basic purposes of
this Agreement are to be effectuated.
19.4 Governing Law. This Agreement shall be governed by, construed, and
interpreted in accordance with the laws of the [ * ], utilizing the courts of [
* ] as the preferred venue for the Parties, 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.
19.5 Non-use of Names. Except as expressly granted in this Agreement, nothing
herein shall confer on any Party any right, title or interest in or to any name,
trademark, trade name or logo of the other Party. Neither Party shall use the
name, trademark, trade name or logo of the other Party nor refer to this
Agreement in any press release, advertising, promotional or sales literature, or
otherwise for commercial purposes, without the prior written consent of such
Party.
19.6 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.
19.7 Independent Contractors. It is expressly agreed that RPI and LILLY shall
be independent contractors and that the relationship between the two Parties
shall not constitute a partnership or agency of any kind. Neither RPI nor LILLY
shall have the authority to make any statements, representations or commitments
of any kind, or to take any action, which shall be binding on the other, without
the prior written authorization of such other Party to do so
19.8 Survival. In the event that a court of competent jurisdiction holds that a
particular provision or requirement of this Agreement is in violation of any
law, such provision or requirement shall not be enforced except to the extent
that it is not in violation of such law and all other provisions and
requirements of this Agreement shall remain in full force and effect. The
parties shall replace such invalidated or unenforceable provision or requirement
by valid and enforceable provision or requirement which will achieve, to the
extent possible, the economic, business and other purposes of the replaced
provision.
19.9 Further Assurances. At any time or from time to time on and after the
Effective Date, LILLY 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.
19.10 Representation by Counsel. The Parties acknowledge that each of them has
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been represented by counsel in connection with the negotiation and drafting of
this Agreement and that no rule of strict construction should be applied to
either of them as the drafter of all or any part of this Agreement.
19.11 Entire Agreement. This Agreement, together with its exhibits and each
R&D Plan when approved by the JDT, sets forth all of the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the Parties hereto and supersedes and terminates all prior agreements and
understanding between the Parties, including any Confidentiality Agreement
previously entered into between the Parties. Information disclosed under the
Confidentiality Agreement shall be treated as "Confidential Information" of the
disclosing Party subject to this Agreement. There are no covenants, promises,
agreements, warranties, representations conditions or understandings, either
oral or written, between the Parties other than as set forth herein and therein.
No subsequent alteration, amendment, change or addition to this Agreement shall
be binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties. In the event of any
inconsistencies or conflicts between the terms of this Agreement and any
exhibits or Appendix referred to herein, the terms of the Agreement shall
govern.
19.12 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Effective Date.
ELI LILLY COMPANY RIBOZYME PHARMACEUTICALS INC.
By: /s/ August M. Watanabe By: /s/ Ralph E. Christoffersen
------------------------------- ----------------------------
Name: August M. Watanabe, M.D. Ralph E. Christoffersen
-------------------------- President & CEO
Title: Vice President
-------------------------
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APPENDIX A
[ * ]
APPENDIX B
EXPENSE FOR COGS
[ * ]
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APPENDIX C
RESEARCH & DEVELOPMENT PLAN
[ * ]
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APPENDIX D
DRAFT PRESS RELEASE
FOR IMMEDIATE RELEASE:
- ----------------------
Contacts:
Ribozyme Pharmaceuticals Inc. Eli Lilly and Company
Ralph E. Christoffersen, Ph.D. James P. Kappel
CEO and President
(303) 449-6500 (317) 276-5795
Daniel McCue
Freeman McCue
(714) 557-3663
Lilly and Ribozyme Pharmaceuticals To Collaborate on
New and Promising Hepatitis C Treatment
Eli Lilly and Company (NYSE: LLY) and Ribozyme Pharmaceuticals Inc. (RPI)
(NASDAQ: RYZM) announced today that they have signed an agreement to collaborate
on the research, development and commercialization of ribozymes for the
treatment of hepatitis C virus (HCV) infection.
Under the terms of the agreement, RPI will receive $9.2 million in 1999, which
includes initial fees, funding for research, clinical trial materials and an
equity investment. RPI could eventually receive up to $38 million principally
made up of contingent milestone payments, not including royalties on sales. RPI
could also realize increased revenues from product manufacturing and research.
Lilly will receive the exclusive worldwide commercialization rights to products
that result from this collaboration.
Infection with hepatitis C virus (HCV), an RNA virus, can lead to cirrhosis,
hepatocellular carcinoma, liver failure and death. Currently, 175 million
people worldwide are afflicted with the virus. HCV, like many other viruses,
mutates quite rapidly and makes developing therapeutic candidates challenging.
RPI has developed a lead ribozyme candidate called HEPTAZYME(TM) that
specifically targets the conserved region of the HCV RNA.
-more-
Ribozymes are based on a Nobel-Prize-winning technology and have the unique
ability to act as molecular scissors. Because present approved drug therapies
are not always effective and are associated with significant adverse side
effects, HEPTAZYME potentially offers an advantage.
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Recently, at the American Association for the Study of Liver Diseases Conference
(AASLD), RPI announced encouraging efficacy data in surrogate cell culture
experiments for HEPTAZYME.
"HEPTAZYME therapy offers a new and promising treatment for the more than 4.5
million chronically infected Hepatitis C patients in the United States. The
activity of HEPTAZYME in cell culture is impressive and warrants further
investigation. Undoubtedly, there are many chronic Hepatitis C patients who
will not respond to currently available therapies and therefore could benefit
from this exciting new therapy," said Dr. Willis C. Maddrey, MD, hepatologist,
executive vice president of clinical affairs and professor of medicine,
University of Texas Southwestern Medical Center, Dallas Texas.
"We believe RPI has developed novel technology that may offer a potential
breakthrough for the treatment of Hepatitis C," said Gail H. Cassell, Ph.D.,vice
president of infectious diseases discovery research and clinical investigation
for Lilly. "Our collaboration with RPI gives us an opportunity to further
expand our efforts in this important medical area."
"We look forward to collaborating with Lilly in the development of novel
therapeutics to treat HCV. The recent results with HEPTAZYME are very
encouraging and take us one step closer to providing an effective treatment for
the HCV," said Dr. Ralph Christoffersen, Ph.D., Chief Executive Officer and
President of RPI.
Lilly is a global research-based pharmaceutical corporation headquartered in
Indianapolis, Indiana, that is dedicated to creating and delivering innovative
pharmaceutical-based health care solutions which enable people to live longer,
healthier, and more active lives.
RPI, located in Boulder, Colorado, was founded to capitalize on the broad
potential of ribozymes for use as human therapeutics and other areas, including
the identification of gene function and therapeutic target validation. RPI is
also developing an anti-angiogenesis compound ANGIOZYME(TM) in collaboration
with Chiron Corporation. ANGIOZYME is in Phase I clinical trials.
This release may contain forward-looking statements that reflect management's
current views of future events and operations. The information is based on
management's current expectations but actual results may differ materially due
to various factors, including those mentioned in this release, risks and
uncertainties, including market conditions, competitive pricing, the successful
outcome of clinical trials, the timely receipt of regulatory approvals and those
outlined in Lilly and RPI filings with the SEC.
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APPENDIX E
MANUFACTURING RESPONSIBILITIES DOCUMENT (MRD)
TABLE OF CONTENTS GUIDELINE
(Bulk Drug Substance)
[ * ]
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Appendix F
ATTACHMENTS / APPENDIX
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