<PAGE>
As filed with the Securities and Exchange Commission on March 14, 2000
Registration No. 333-31734
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------
MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0494517
(State or other (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or --------------
organization)
320 Wakara Way
Salt Lake City, UT 84108
(801) 584-3600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Peter D. Meldrum
President and Chief Executive Officer
Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, UT 84108
(801) 584-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
With a copy to:
Jonathan L. Kravetz, Esquire David J. Segre, Esquire
Edward P. Gonzales, Esquire Issac J. Vaughn, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky Wilson Sonsini Goodrich &
and Popeo, P.C. Rosati
One Financial Center 650 Page Mill Road
Boston, Massachusetts 02111 Palo Alto, California 94304
(617) 542-6000 (650) 493-9300
Approximate date of commencement of proposed sale to the public: As soon as
practical after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
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 other than securities offered only in connection with dividend or
interest reinvestment, 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
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 Commission, acting pursuant to said
Section 8(a), may determine.
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<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 it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued March 14, 2000
2,000,000 Shares
[Logo of Myriad Genetics Appears Here]
COMMON STOCK
-----------
Myriad Genetics, Inc. is offering 2,000,000 shares of its common stock.
-----------
Our common stock is listed on the Nasdaq National Market under the symbol
"MYGN." On March 13, 2000, the last reported sale price of our common stock on
the Nasdaq National Market was $164 per share.
-----------
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 6.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Myriad Genetics
-------- ------------- ---------------
<S> <C> <C> <C>
Per Share.................. $ $ $
Total...................... $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to an additional
300,000 shares of common stock to cover any over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 2000.
-----------
MORGAN STANLEY DEAN WITTER CIBC WORLD MARKETS
DAIN RAUSCHER WESSELS
TUCKER ANTHONY CLEARY GULL
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Cautionary Note on Forward-Looking Statements............................ 5
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 14
Price Range of Common Stock.............................................. 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 25
Management............................................................... 42
Principal Stockholders................................................... 45
Underwriters............................................................. 47
Legal Matters............................................................ 48
Experts.................................................................. 49
Where to Find More Information........................................... 49
Index to Financial Statements............................................ F-1
</TABLE>
----------------
You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any jurisdiction where the offer or sale is
not permitted. The information contained in this prospectus is correct only as
of the date of this prospectus, regardless of the time of the delivery of this
prospectus or any sale of these securities.
<PAGE>
PROSPECTUS SUMMARY
This summary contains basic information about us and this offering. Because
it is a summary, it does not contain all of the information that you should
consider before investing. You should read the entire prospectus carefully,
including the section entitled "Risk Factors" and our financial statements and
the related notes before making an investment decision. Except as otherwise
noted, all information in this prospectus assumes no exercise of the
underwriters' over-allotment option. See "Underwriters."
Myriad Genetics, Inc.
Introduction
We are a leader in the use of gene-based medicine to develop therapeutic and
diagnostic products. We focus on the emerging fields of genomics, which
involves establishing the relationship between gene activity and particular
diseases, and proteomics, which involves identifying disease-specific proteins.
We have developed a proprietary suite of genomics technologies to discover
important disease genes and proteomic technologies to understand the role these
genes and their related proteins play in disease. We have integrated these
technologies using powerful bioinformatics and robotics systems to conduct our
research efforts on a high-throughput basis. This integrated genomics platform
enables us to identify numerous proteins as promising targets for new
proprietary drugs and molecular diagnostic tests.
Using our proprietary technologies, we have identified 19 drug targets to
date. We have delivered ten of these drug targets to our strategic partners
based on our discovery of genes involved in breast cancer, ovarian cancer,
brain cancer, prostate cancer, heart disease and dementia. We have received
total payments from our seven current strategic partners in excess of $100
million. We will receive additional milestone and royalty payments if our
strategic partners develop and commercialize drugs from the ten targets we have
delivered to them. Our current partners include Bayer Corporation, Eli Lilly
and Company, Hoffmann-LaRoche Inc., Monsanto Company, Novartis Corporation,
Schering-Plough Corporation and Schering AG. We have also established a
portfolio of nine new drug targets that we have retained for our own small
molecule drug development program. We expect to enter into future partnerships
for the clinical development of many of these targets. We may seek to
independently develop, test and commercialize small molecule therapeutics from
drug targets selected from our internal portfolio, particularly in the area of
cancer.
We also focus on developing, marketing and selling molecular diagnostic
products for predictive medicine and personalized medicine. We have developed
and commercialized two innovative molecular diagnostic tests, one of which is
used for analyzing breast and ovarian cancer susceptibility and the other for
therapeutic management of hypertensive patients. Revenues from these
proprietary tests have grown over 100% per year to $5.2 million in the fiscal
year ended June 30, 1999.
Our Business Strategy
Our business strategy is to understand the relationship between genes and
diseases in order to develop the next generation of therapeutic and diagnostic
products and includes the following key elements:
. Expand our proprietary genomic and proteomic databases. We will continue
to expand our existing proprietary genomic databases in Utah, Quebec and
Sardinia, which accelerate our gene discovery efforts and are useful in
target validation, pharmacogenomics and disease association studies. We
will also expand ProNet(R), our proprietary proteomic database, which is
used to discover disease pathways, understand protein function and
identify high quality drug targets.
. Discover important disease genes, understand their function and identify
lead compounds. We will continue to use our proprietary genomic and
proteomic databases and our bioinformatics and robotics
1
<PAGE>
technologies to discover important genes and understand their role in
human disease. We will also continue to employ our ProTrap(TM) technology
for high-throughput screening for lead compound identification.
. Capitalize on our strategic alliances with major pharmaceutical
companies. We expect to maintain and expand our strategic alliances. As
we identify and develop lead compounds, we plan to enter into strategic
alliances with major pharmaceutical companies to diversify the risk of
clinical stage drug development and to benefit from our potential
partners' development expertise and marketing strength.
. Selectively develop and commercialize therapeutic products. We intend to
take selected compounds, particularly in the area of cancer, through the
clinical development process. We are focusing on cancer due to the large
unmet need for effective, less toxic drugs, the potential for fast track
status that the FDA has typically afforded cancer drugs and our ability
to leverage the expertise of our existing oncology sales force. We may
also reduce our clinical trial costs by entering into collaborative
arrangements with government organizations.
. Grow and expand our molecular diagnostic business. We will continue to
increase the domestic and foreign market penetration of our existing
diagnostic tests and create additional tests to capitalize on the
emergence of predictive and personalized medicine.
----------------
We are a Delaware corporation. Our principal executive offices are located
at 320 Wakara Way, Salt Lake City, Utah 84108. Our telephone number is (801)
584-3600. Our website is http://www.myriad.com. The information found on our
website is not intended to be a part of this prospectus.
Myriad(R), our graphical logo device, BRACAnalysis(R), CardiaRisk(R),
ProNet(R) and ProTrap(TM) are trademarks of Myriad Genetics, Inc. Other
trademarks used in this prospectus are the property of their respective owners.
The domain names and website addresses "www.myriad.com" and "www.myriad-
pronet.com," and all rights thereto, are registered in the name of and owned by
Myriad Genetics, Inc.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered........... 2,000,000 shares
Common stock to be outstanding
after the offering............ 12,340,956 shares
Over-allotment option.......... 300,000 shares
Use of proceeds................ We anticipate using the net proceeds from this
offering for drug discovery and development,
research and development, working capital and
general corporate purposes.
Nasdaq National Market symbol.. MYGN
</TABLE>
The number of shares of common stock to be outstanding after the offering
does not include, as of February 29, 2000, a total of 2,958,741 shares of
common stock, consisting of the following:
. 1,671,703 shares of common stock underlying options outstanding as of
February 29, 2000 at a weighted average exercise price of $13.70 per
share;
. 1,120,336 shares of common stock available for issuance under our 1992
Employee, Director and Consultant Stock Option Plan;
. 148,952 shares of common stock available for issuance under our Employee
Stock Purchase Plan; and
. 17,750 shares of common stock underlying warrants outstanding as of
February 29, 2000 at an exercise price of $15.45 per share.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following is a summary of financial data included elsewhere in the
prospectus. You should read the following data with the more detailed
information contained in "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
Six months ended
December 31, Year ended June 30,
------------------ ---------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
-------- -------- --------- --------- --------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Total revenues.......... $ 15,142 $ 11,307 $ 25,313 $ 23,211 $ 15,236 $ 6,629 $ 1,295
Total costs and
expenses............... 20,160 18,197 37,624 36,201 27,675 15,517 6,950
-------- -------- --------- --------- --------- -------- --------
Operating loss.......... (5,018) (6,890) (12,311) (12,990) (12,439) (8,888) (5,655)
Net loss................ $ (4,068) $ (5,553) $ (9,995) $ (9,797) $ (9,206) $ (5,897) $ (5,268)
======== ======== ========= ========= ========= ======== ========
Basic and diluted net
loss per share......... $ ( 0.42) $ (0.59) $ (1.06) $ (1.05) $ (1.03) $ (0.78) $ (1.19)
Basic and diluted
weighted average shares
outstanding............ 9,778 9,367 9,391 9,289 8,904 7,609 4,427
</TABLE>
The as adjusted column in the consolidated balance sheet data below gives
effect to the sale of 2,000,000 shares of common stock at an assumed public
offering price of $164.00 per share after deducting underwriting discounts and
estimated offering expenses payable by us. See "Use of Proceeds" and
"Capitalization."
<TABLE>
<CAPTION>
December 31, 1999
----------------------
Actual As adjusted
---------- -----------
(in thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable investment
securities............................................ $ 60,043 $ 367,763
Working capital........................................ 29,071 336,791
Total assets........................................... 73,862 381,582
Stockholders' equity................................... 55,489 363,209
</TABLE>
4
<PAGE>
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Some of the matters discussed 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 include forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements include, but are not limited
to, statements concerning payments to be received under agreements with our
collaborative partners, as well as our plans to:
. continue development of our current products under development;
. conduct clinical trials with respect to our products under development;
. utilize our capital resources and the net proceeds from this offering
and the time periods related thereto;
. engage third-party manufacturers to supply our clinical trials and
commercial requirements;
. seek regulatory approvals;
. establish a marketing and distribution capability for future therapeutic
products that we independently develop; and
. evaluate additional products under development for subsequent clinical
and commercial development.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates" and similar
expressions. These statements are based on our current beliefs, expectations
and assumptions and are subject to a number of risks and uncertainties. Actual
results and events may vary significantly from those discussed in the forward-
looking statements. A description of certain risks that could cause our
results to vary appears under the caption "Risk Factors" and elsewhere in this
prospectus. These forward-looking statements are made as of the date of this
prospectus, and we assume no obligation to update them or to explain the
reasons why actual results may differ. In light of these assumptions, risks
and uncertainties, the results and events discussed in the forward-looking
statements contained in this prospectus might not occur.
5
<PAGE>
RISK FACTORS
An investment in our shares is extremely risky. You should carefully
consider the following risks, in addition to the other information presented
in this prospectus, in evaluating us and our business. Any of the following
risks, as well as other risks not mentioned here, could seriously harm our
business and prospects and cause the price of our common stock to decline,
which in turn could cause you to lose all or part of your investment.
We are a company in the early stages of development and commercialization and
may never achieve the goals of our business plan
We may be unable to continue to successfully develop or commercialize our
technologies. Our technologies are still in the early stages of development
and we have only recently begun to incorporate them into commercialized
products.
We began operations in 1991 and have been engaged primarily in research
directed toward the discovery and sequencing of genes that predispose people
to common diseases and the development of molecular diagnostic tests and
therapeutic products. In October 1996 we introduced for commercial use
BRACAnalysis(R), our first diagnostic test. In January 1998 we introduced for
commercial use CardiaRisk(R), our second diagnostic test.
We are beginning early stage preclinical development of therapeutic
products for cancer and have delivered several drug targets to our
collaborators for further development by them. Any therapeutic products under
development by us or our collaborators will take several more years to develop
and undergo extensive preclinical and clinical testing. Additionally,
therapeutic products are subject to substantial regulatory review. We or any
of our collaborators may be unable to discover or develop any therapeutic or
additional diagnostic products through the utilization of our technologies.
Even if we or our collaborators develop products for commercial use, we or
they may not, however, be able to develop products that:
. meet applicable regulatory standards, in a timely manner or at all;
. successfully compete with other technologies and products;
. avoid infringing the proprietary rights of others;
. are manufacturable in sufficient quantities or at reasonable cost; or
. are successfully marketed.
We have a history of operating losses and expect to continue to incur losses
in the future
We have a limited operating history and have experienced operating losses
since our inception. We expect these losses to continue for the next several
years and we may never be profitable or achieve significant revenues. For
example, we experienced net losses of $9,995,453 during the year ended June
30, 1999, $9,797,035 during the year ended June 30, 1998 and $9,206,280 during
the year ended June 30, 1997. We had a net loss of $4,068,242 for the six
months ended December 31, 1999 and an accumulated deficit of $48,008,122 as of
December 31, 1999. In order to develop and commercialize our technologies, we
expect to incur significant increases in our expenses over the next several
years. In addition, we expect significant increases in expenses in connection
with our internal research programs and any therapeutic product that we
independenty seek to develop, test and commercialize. As a result, we expect
to incur operating losses at least for the foreseeable future. Our ability to
achieve significant revenues or profitability will depend upon numerous
factors, including, our ability to:
. obtain and maintain strategic collaborations;
. identify drug targets and lead compounds that may lead to future
therapeutic products; and
. create and introduce additional marketable molecular diagnostic tests.
6
<PAGE>
Because of financial and regulatory obstacles, we may never be able to develop
commercially viable therapeutic products
We are currently initiating the development of potential therapeutic
products, which will require significant research and development
expenditures, extensive preclinical and clinical testing and regulatory
approvals. Preclinical and clinical testing will require the expenditure of
significant funds. We may not be able to develop or successfully commercialize
any potential therapeutic products.
Our potential therapeutic products will be subject to the risks of failure
inherent in the development of therapeutic products based on new technologies.
These risks include the possibilities that:
. our potential therapeutic products will be found to be unsafe or
ineffective or otherwise fail to receive necessary regulatory
clearances;
. the products, if safe and effective, will be difficult to manufacture on
a large scale or uneconomical to market;
. proprietary rights of third parties will preclude us or our partners
from marketing our products; or
. third parties will market superior or equivalent products.
In addition, before receiving all required FDA approvals to market any
product, we will have to demonstrate that the product is safe and effective on
the patient population and for the diseases that would be treated. The
clinical testing, manufacturing and marketing of products are subject to the
rigorous testing and approval process of the FDA and equivalent foreign
regulatory authorities. Clinical trials or marketing of any potential
therapeutic products may expose us to liability claims from the use of these
therapeutic products. We may not be able to obtain product liability insurance
or, if obtained, sufficient coverage may not be available at a reasonable
cost. In addition, as we develop therapeutic products internally, we will have
to make significant investments in therapeutic product development, marketing,
sales and regulatory compliance resources. We will also have to establish or
contract for the manufacture of products, including supplies of drugs used in
clinical trials, under the current good manufacturing practices of the FDA.
Our success depends on maintaining relationships with current collaborative
partners and entering into new collaborative arrangements
We currently depend heavily and will depend heavily in the future on third
parties for support in product development, manufacturing, marketing and
distribution. Part of our current business strategy is to form collaborative
arrangements with strategic partners to develop and commercialize therapeutic
products based on our gene discoveries. We may not be able to maintain our
current collaborative arrangements or negotiate additional acceptable
collaborative arrangements in the future.
The research phase of our collaborations expire after a fixed term. In
particular, the research phase of our current collaborations with Schering-
Plough Corporation and with Novartis Corporation are each scheduled to end in
April 2000. Any current or future collaborative arrangement may not be
successful. Failure of any collaborative arrangement, or termination by any of
our collaborative partners of their respective agreements, could have a
material adverse effect on our business. Further, additional milestone
payments and future potential royalty payments from our collaborators are
dependent upon their continuing to develop products based on the potential
therapeutic targets we delivered to them. These partners may decide not to
develop any products based on these targets. Even if these partners commence
such development, they could decide to terminate it at any time.
In addition, our collaborative partners may pursue alternative technologies
or develop alternative products either on their own or in collaboration with
others, including our competitors, as a means of developing diagnostic
products or treatments for the diseases targeted by the collaborative
programs. Our interests may not continue to coincide with those of our
collaborative partners, and some of our collaborative partners may
7
<PAGE>
develop, independently or with third parties, therapeutic or diagnostic
products that could compete with those developed in collaboration with our
partners or independently. Additionally, disputes over rights or technology or
other proprietary interests may arise. Such disputes or disagreements between
us and our collaborative partners could lead to delays in collaborative
research projects, or could result in litigation or arbitration, any of which
could have a material adverse effect on our business. In addition, there have
been a significant number of recent consolidations among pharmaceutical
companies. These consolidations among the companies with which we are
collaborating could result in the diminution or termination of, or delays in,
the development or commercialization of the products or research programs
under one or more of our collaborative agreements.
BRACAnalysis(R), CardiaRisk(R) and any other molecular diagnostic tests or
therapeutic products that we may develop may never achieve commercial market
acceptance
We may not succeed in achieving commercial market acceptance of any of our
products. Physicians, patients, payors and the medical community in general
may be unwilling to accept, utilize or recommend any of our products. The
commercial success of BRACAnalysis(R), CardiaRisk(R) and other molecular
diagnostic tests or therapeutic products that we may develop will depend, in
part, upon our ability to convince the medical community of the safety and
clinical efficacy of our products and their potential advantages over existing
therapeutic products and diagnostic techniques. We will have to expend
substantial financial resources to promote the benefits of our BRACAnalysis(R)
and CardiaRisk(R) tests and any future molecular diagnostic tests or
therapeutic products we may develop, to conduct clinical trials to demonstrate
the utility of these tests and to educate physicians, patients, payors and the
medical community in general regarding these tests. Our failure to achieve
market acceptance for any or all of our tests would have a material adverse
effect on our business.
Failure of patients to obtain adequate reimbursement from third-party payors
could limit market acceptance of our diagnostic tests and therapeutic
products, which would materially adversely affect our business
Third-party payors may not provide full reimbursement coverage for our
diagnostic tests or therapeutic products, if at all. Government and private
third-party payors are increasingly attempting to contain health care costs by
limiting both the extent of coverage and the reimbursement rate for new
diagnostic and therapeutic products and services. For example, to date no
third-party payors have been willing to reimburse patients for CardiaRisk(R).
If adequate reimbursement coverage is not available from third-party payors,
patients may not be willing or able to pay directly for our tests and products
and their market acceptance will likely be adversely impacted, which would
have a material adverse effect on our business. The scope and extent of
coverage by third-party payors are likely to heavily influence physicians'
decisions to recommend our diagnostic tests and therapeutic products.
Molecular diagnostic test results are difficult to interpret and may make
molecular diagnostic tests difficult or less desirable to perform, which would
limit their commercial success
A defective gene may malfunction in many different ways, and the many
mutated versions of the gene may make a molecular diagnostic test difficult to
perform and interpret. Accordingly, physicians and their patients may not use
our current or prospective diagnostic products, which would limit the
commercial success of these products. For example, genes such as the BRCA1 and
BRCA2 breast and ovarian cancer genes, which form the basis for the
BRACAnalysis(R) test, are complex and may have numerous mutations.
Approximately 500 mutations of the BRCA1 and BRCA2 genes have been identified
to date. Until a mutation has been characterized, researchers cannot state
with certainty the risk it poses for an individual. Further, even when a
molecular diagnostic test identifies the existence of a mutation in a
particular individual, the interpretation of the molecular diagnostic test
results is limited to the identification of a statistical probability, but in
no event a certainty, that the tested individual will develop the disease for
which the test has been completed.
8
<PAGE>
We are subject to intense scientific and commercial competition, which may
impair our ability to successfully commercialize our products
Research in the field of genomics and proteomics is intense and highly
competitive. This research is characterized by rapid technological change. Our
competitors in the United States and abroad are numerous and include, among
others, major pharmaceutical and diagnostic companies, biotechnology firms,
universities and other research institutions, including those receiving
funding from the Human Genome Project. Many of our potential competitors have
considerably greater financial, technical, marketing and other resources than
we do, which may allow these competitors to discover important genes and
determine their function before we do. We could be adversely affected if we do
not discover genes, characterize their function, develop therapeutic and
diagnostic products based on these discoveries, obtain regulatory and other
approvals and launch these products and their related services before our
competitors. We also expect to encounter significant competition with respect
to any therapeutic or diagnostic products that we may develop or
commercialize. Those companies that complete clinical trials, obtain required
regulatory approvals and commence commercial sales of therapeutic products
before we do may achieve a significant competitive advantage in marketing and
commercializing their products. We or our collaborative partners may not be
able to develop therapeutic or diagnostic products successfully and may not
obtain patents covering these products that provide protection against our
competitors. Moreover, our competitors may succeed in developing therapeutic
or diagnostic products that circumvent our technologies or products. Or, our
competitors may succeed in developing technologies or products that are more
effective than those developed by us and our collaborative partners or that
would render technology or products of us and our collaborators less
competitive or obsolete. We expect competition to intensify in the fields in
which we are involved as technical advances in these fields occur and become
more widely known.
Our ability to discover genes and commercialize therapeutic and diagnostic
products could be adversely affected if our current collaborators or
scientific advisors terminate their relationships with us or develop
relationships with a competitor
We have relationships with collaborators at academic and other institutions
who conduct research at our request. These collaborators are not our
employees. As a result, we have limited control over their activities and,
except as otherwise required by our collaboration agreements, can expect only
limited amounts of their time to be dedicated to our activities. We have
established collaborations with the University of Utah, Intermountain Health
Care, the Hospital for Sick Children, the University of Texas M.D. Anderson
Cancer Center, Galileo Genomics, Inc. and Biotecne to pursue the discovery of
genes involved in cancer, cardiovascular disease, obesity, osteoporosis,
asthma, and certain central nervous system disorders. Our ability to discover
genes involved in human disease and commercialize therapeutic and diagnostic
products will depend in part on the continuation of these collaborations. If
any of these collaborations are terminated, we may not be able to enter into
other acceptable collaborations. In addition, our existing collaborations may
not be successful.
Our research collaborators and scientific advisors may have relationships
with other commercial entities, some or all of which could compete with us.
Our research collaborators and scientific advisors sign agreements which
provide for the confidentiality of our proprietary information and the results
of studies conducted at our request. We may not, however, be able to maintain
the confidentiality of our technology and other confidential information in
connection with every collaboration. The dissemination of our confidential
information could have a material adverse effect on our business.
The termination of one or more license agreements that are important in our
research and development activities would harm our business
We are a party to various license agreements under which we have rights to
use certain technologies owned by other companies in our proprietary research,
development and testing processes. One of these agreements, with Roche
Molecular Systems, Inc., is of material importance to us and is renewable on
an annual basis at the option of both parties. We may not be able to continue
to license this technology or, if the license were terminated, find suitable
alternatives to this technology on timely or commercially reasonable terms, if
at all. The loss of the right to use this technology that we have licensed
would harm our business.
9
<PAGE>
We may need to raise additional funding to expand our business, which funding
may not be available
We have incurred, and will continue to incur, significant costs in the
discovery, development and marketing of current and prospective therapeutic
and diagnostic products. Our ongoing gene discovery programs and our efforts
to develop therapeutic products and molecular diagnostic tests will require
substantial additional cash resources. If adequate funds are not available, we
may be required to scale down research and development programs, curtail
capital expenditures and reduce marketing and other operating expenses. We
have funded our operations to date primarily through equity and lease
financings and corporate collaborations. In order to grow and expand our
business, we may need to raise additional funds. Our future capital
requirements will depend on many factors, including, but not limited to:
. the continued scientific progress in our research and development
programs;
. the cost and timing of preclinical studies, clinical trials and
regulatory approvals;
. our ability to maintain current, and establish additional, collaborative
relationships;
. competing technological and market developments;
. effective commercialization activities and expansion of facilities, as
required; and
. the costs and timing of patent prosecutions.
Because of our potential long-term capital requirements, we may access the
public or private equity markets whenever conditions are favorable, even if we
do not have an immediate need for additional capital at that time. If
additional funds are raised by issuing equity securities, existing
shareholders may suffer significant dilution. This additional funding may not
be available to us or, if available, it may not be on reasonable terms. Some
of our currently targeted gene discovery research programs will be dependent
on funding from collaborative partners. If we are not successful in finding,
entering into and maintaining arrangements with collaborative partners, our
development efforts could be delayed, scaled down or terminated.
If we are unable to comply with applicable governmental regulations, we may
not be able to continue our operations
The establishment and operation of our molecular diagnostic laboratory and
the production and marketing of services and products developed through our
technologies, as well as our ongoing research and development activities, are
subject to regulation by numerous federal, state and local governmental
authorities in the United States and by comparable regulatory agencies in
other countries where we or any collaborative partner might seek to market
services and products that may be developed. On the state level, only New York
has implemented regulations concerning molecular diagnostic testing and we
have been accredited under the Clinical Laboratory Evaluation Program by the
Department of Health of the State of New York for both BRACAnalysis(R) and
CardiaRisk(R). Failure to maintain state regulatory compliance, or changes in
state regulatory schemes, could result in a substantial curtailment or even
prohibition of Myriad Laboratories' clinical activities and could have a
material adverse effect on our business. We have received federal
accreditation from the Department of Health and Human Services under the
Clinical Laboratory Improvement Amendments, or CLIA, to operate our molecular
diagnostic laboratory. However, our accreditation may subsequently be revoked,
suspended or limited, or our accreditation may not be renewed on an annual
basis as required. Furthermore, while the U.S. Food and Drug Administration
has elected not to substantially regulate the activities or diagnostic tests
performed by laboratories like our clinical laboratory, the FDA has stated
that it has the right to do so, and the FDA may seek to regulate or require
clearance or approval of our tests in the future. If the FDA should require
that these tests receive FDA approval prior to their use in our laboratory,
this approval may not be received on a timely basis, if at all.
Commercialization of therapeutic products developed by us or our collaborative
partners is dependent upon regulatory approval
In addition, prior to marketing in the United States any therapeutic
product developed by us or our collaborative partners, such product would have
to undergo an extensive regulatory approval process governed by the FDA,
including extensive preclinical and clinical trials. The regulatory process,
which includes preclinical
10
<PAGE>
testing and clinical trials of each therapeutic product and each indication in
order to establish its safety and efficacy, can take many years and requires
the expenditure of substantial financial and other resources. We and our
collaborative partners have not begun clinical testing of any collaborative
therapeutic products, and such testing may not begin for many years. The data
obtained from preclinical and clinical activities is susceptible to varying
interpretations, which could delay, limit or prevent regulatory agency
approval. In addition, delays or rejections may be encountered during the
period of therapeutic development, including delays during the period of
review of any application. Delays in obtaining regulatory approvals could
adversely affect the marketing of any therapeutics developed by us or our
collaborative partners, impose costly procedures upon us and our collaborative
partners' activities, diminish any competitive advantages that we or our
collaborative partners may attain and adversely affect our ability to receive
royalties. We or our collaborative partners may never obtain regulatory
approvals for any products that we develop. Moreover, if regulatory approval
of a product is granted, this approval may impose limitations on the indicated
uses for which it may be marketed. Further, even if such regulatory approval
is obtained, a marketed product and its manufacturer are subject to continuing
review, and the discovery of previously unknown problems with a product or
manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market. Any applicable federal,
state or local licensure requirements may not be met or any such regulations
may be modified and we may not be able to comply with any new or modified
regulation. Failure to comply with any material governmental regulation could
have a material adverse effect on our business.
Ethical, legal and social implications of molecular diagnostic testing are
currently being widely discussed and may be unfavorably resolved
The prospect of broadly available molecular diagnostic testing has raised
issues that are currently being widely discussed by the medical and scientific
communities, as well as by other interested groups and organizations,
regarding the appropriate utilization and the confidentiality of information
provided by this testing. It is possible that discrimination by insurance
companies against patients shown to have a genetic predisposition to a
particular disease could occur through the raising of premiums by insurers to
prohibitive levels, outright cancellation of insurance or unwillingness to
provide coverage. We could experience a delay in market penetration or a
reduction in the size of our potential serviceable market, which would
adversely affect future revenue, if insurance discrimination were to become a
significant barrier to testing acceptance. Similarly, employers could
discriminate against employees with a genetic predisposition to a disease due
to the increased risk for disease resulting in possible cost increases for
health insurance and the potential for lost employment time. For these
reasons, we could experience a delay or reduction in test acceptance, which
could materially adversely affect our business.
We may not be able to protect our proprietary technology, which may limit or
eliminate our rights to our products
Our success will depend, in part, on our ability to obtain patent
protection, both in the United States and in other countries, for genes we
discover, for the function of the protein produced by the genes and related
technologies, processes, methods and other inventions that we believe are
patentable. Our ability to preserve our trade secrets and other intellectual
property is also critical to our long-term success. The patent position of
biotechnology firms generally is highly uncertain and involves complex legal
and factual questions. To date there has not emerged from the United States
Patent and Trademark Office, or PTO, or the courts a consistent policy
regarding the breadth of claims allowed in biotechnology patents. Our or our
licensors' patent applications may never issue as patents, and the claims of
any issued patents may not afford meaningful protection for our technology or
products. In addition, any patents issued to us or our licensors may be
challenged, and subsequently narrowed, invalidated or circumvented.
Our products may also conflict with patents that have been or may be
granted to others. As the biotechnology industry expands and more patent
applications are filed and patents are issued, the risk increases that our
products may give rise to a declaration of interference by the PTO, or to
claims of patent infringement
11
<PAGE>
by other companies, institutions or individuals. These entities or persons
could bring legal proceedings against us seeking damages or seeking to enjoin
us from testing, manufacturing or marketing our products. Patent litigation is
costly, and even if we prevail, the cost of such litigation could have a
material adverse effect on us. If the other parties in any such actions are
successful, in addition to any liability for damages, we could be required to
cease the infringing activity or obtain a license. Any license required may
not be available to us on acceptable terms, if at all. Our failure to obtain a
license to any technology that we may require to commercialize our products
could have a material adverse effect on our business. In addition, there is
considerable pressure on academic institutions to publish discoveries in the
genetic field. Such a publication by an academic collaborator of ours, prior
to the filing of a patent application on this discovery, may compromise our
ability to obtain U.S. and foreign patent protection for the discovery.
If a third party files a patent application with claims to a gene or
protein we have discovered, the PTO may declare an interference between
competing patent applications. If an interference is declared, we may not
prevail in the interference. If the other party prevails in the interference,
we may be precluded from commercializing services or products based on the
gene or protein, or may be required to seek a license. A license may not be
available to us on commercially acceptable terms, if at all. At present we are
involved in a series of patent interference proceedings with two other parties
relating to the p16 gene, which we believe plays a role in the onset of
melanoma.
We also rely upon unpatented proprietary technologies. We may not be able
to adequately protect our rights in such unpatented proprietary technologies,
which could have a material adverse effect on our business. For example,
others may independently develop substantially equivalent proprietary
information or techniques or otherwise gain access to our proprietary
technologies or disclose our technologies to our competitors.
We may be subject to patent infringement actions by third parties that could
result in significant costs and delays in product introduction
Our industry includes many organizations seeking to rapidly identify and
characterize genes through the use of gene expression analysis and other
technologies. To the extent any patents are issued to those organizations on
partial or full-length genes or uses for such genes, the risk increases that
the sale of our diagnostic products currently being marketed or under
development, and any sales of therapeutic drugs developed by us or our
collaborators, may give rise to claims of patent infringement. Others may have
filed and in the future are likely to file patent applications covering genes
or gene products that are similar or identical to our products. Any of these
patent applications may have priority over our patent applications. Any legal
action against us or our collaborators claiming damages and seeking to enjoin
commercial activities relating to the affected products and processes could,
in addition to subjecting us to potential liability for damages, require us or
our collaborators to obtain a license in order to continue to manufacture or
market the affected products and processes or could enjoin us from continuing
to manufacture or market the affected products and processes, thereby
significantly increasing our costs associated with, and significantly
delaying, product introduction and marketing. We or our collaborators may not
prevail in any of these actions and any license required under any of these
patents may not be available on commercially acceptable terms, if at all. We
believe that there may be significant litigation in the industry regarding
patent and other intellectual property rights. If we become involved in this
litigation, it could consume a substantial portion of our managerial and
financial resources.
We depend on attracting and retaining key personnel and consultants and we
have no post-employment non-competition agreements
Because of the specialized scientific nature of our business, we are highly
dependent upon our ability to attract and retain qualified management,
scientific and technical personnel. We are currently recruiting additional
qualified management, scientific and technical personnel. Competition for such
personnel is intense. Loss of the services of or failure to recruit additional
key management, scientific and technical personnel would adversely affect our
research and development programs and molecular diagnostic testing and
information business and may have a material adverse effect on our business.
12
<PAGE>
Our agreements with our employees generally provide for employment that can
be terminated by either party without cause at any time, subject to specified
notice requirements. Further, the non-competition provision to which each
employee is subject expires on the applicable date of termination of
employment.
We depend on a limited number of third parties for our supplies of sequencing
machines and reagents, which would adversely affect our ability to identify
genes if these supplies become unavailable
We currently rely on two suppliers to provide our gene sequencing machines
and reagents required in connection with our research. We believe that
currently there are limited alternative suppliers of gene sequencing machines
and reagents. The gene sequencing machines or the reagents may not remain
available in commercial quantities at acceptable costs. If we are unable to
obtain when needed additional gene sequencing machines or an adequate supply of
reagents or other ingredients at commercially reasonable rates, our ability to
continue to identify genes and perform molecular diagnostic testing would be
adversely affected.
Our business exposes us to potential liability claims that may exceed our
financial resources, including our insurance coverage, and may lead to the
curtailment or termination of our operations
Our business exposes us to potential liability risks inherent in the
testing, marketing and processing of molecular diagnostic products, including
possible misdiagnoses. Although we are insured against such risks up to a
$13,000,000 annual aggregate limit in connection with the use of our products,
our present product liability insurance may be inadequate. A successful product
liability claim in excess of our insurance coverage could have a material
adverse effect on our business. Any successful product liability claim may
prevent us from obtaining adequate product liability insurance in the future on
commercially desirable or reasonable terms. An inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or inhibit the
commercialization of our products. Our business also may expose us to liability
inherent in the testing, manufacturing and marketing of prospective therapeutic
products. Liability claims may be asserted against us. We have obtained product
liability and other related insurance, but we may not be able to maintain this
insurance on acceptable terms.
Our business involves environmental risks that may result in liability for us
In connection with our research and development activities, we are subject
to federal, state and local laws, rules, regulations and policies governing the
use, generation, manufacture, storage, air emission, effluent discharge,
handling and disposal of certain materials, biological specimens and wastes.
Although we believe that we have complied with the applicable laws, regulations
and policies in all material respects and have not been required to correct any
material noncompliance, we may be required to incur significant costs to comply
with environmental and health and safety regulations in the future. Although we
believe that our safety procedures for handling and disposing of controlled
materials comply with the standards prescribed by state and federal
regulations, accidental contamination or injury from these materials may occur.
In the event of such an occurrence, we could be held liable for any damages
that result and any such liability could exceed our resources.
Our stock price is highly volatile and our stock may lose all or a significant
part of its value after this offering
The market prices for securities of biotechnology and genomic companies have
been volatile. This volatility has significantly affected the market prices for
these securities for reasons frequently unrelated to the operating performance
of the specific companies. These broad market fluctuations may adversely affect
the market price of our common stock. The market price for our common stock has
fluctuated significantly since public trading commenced in October 1995, and it
is likely that the market price will continue to fluctuate in the future. In
addition, the stock market has experienced extreme price and volume
fluctuations. Events or factors that may have a significant impact on our
business and on the market price of our common stock include the following:
. quarterly fluctuations in operating results;
. announcements by us, our collaborative partners or our present or
potential competitors;
. technological innovations or new commercial products or services;
. regulatory approval developments;
. developments or disputes concerning patent or proprietary rights; or
. public concern regarding the safety, efficacy or other implications of
the products or services developed or to be developed by us or our
collaborators.
13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of 2,000,000 shares of
common stock in this offering at an assumed offering price of $164.00 per
share will be $307,720,000 after deducting estimated underwriters' discounts
and commissions and estimated offering expenses payable by us. If the
underwriters' over-allotment option is exercised in full, we estimate that the
net proceeds will be $353,968,000.
We anticipate using the net proceeds from this offering for drug discovery
and development, research and development, working capital and general
corporate purposes. We will retain broad discretion over the use of the net
proceeds of this offering. The amounts and timing of the expenditures may vary
significantly depending on numerous factors, such as the progress of our
research and development efforts, technological advances and the competitive
environment for our products. We also might use a portion of the net proceeds
to acquire or invest in complementary businesses, products and technologies.
We are not currently planning any acquisition, and no portion of the net
proceeds has been allocated for any specific acquisition.
We believe that the net proceeds of this offering, existing cash and cash
equivalents, marketable investment securities and cash flow from sales will be
sufficient to meet our capital requirements for at least two years. Pending
the use of the net proceeds, we intend to invest the net proceeds in short-
term, interest-bearing, investment-grade securities. See Risk Factors "--We
have a history of operating losses and expect to continue to incur losses in
the future" and "--We may need to raise additional funding to expand our
business, which funding may not be available."
14
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock began trading on the Nasdaq National Market on October 6,
1995 and is traded under the symbol "MYGN." Prior to that date, there was no
public market for our common stock. The following table sets forth for the
periods indicated the high and low sales prices for our common stock:
<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal Year Ended June 30, 1998
First Quarter............................................. $ 28 1/8 $ 22 3/4
Second Quarter............................................ 30 21 1/2
Third Quarter............................................. 25 5/8 18 3/16
Fourth Quarter............................................ 23 5/8 14
Fiscal Year Ended June 30, 1999
First Quarter............................................. $ 16 $ 5 3/4
Second Quarter............................................ 12 1/2 7 7/8
Third Quarter............................................. 11 1/2 8 1/2
Fourth Quarter............................................ 12 3/8 8 3/4
Fiscal Year Ended June 30, 2000
First Quarter............................................. $ 19 1/2 $ 8 5/8
Second Quarter............................................ 50 3/4 16 1/2
Third Quarter (through March 13, 2000).................... 232 1/8 44
</TABLE>
As of March 1, 2000, there were approximately 159 stockholders of record of
our common stock.
DIVIDEND POLICY
We have never declared or paid dividends on our common stock. We currently
anticipate that we will retain all future earnings to support the research and
development activities of our business and do not anticipate paying dividends
in the foreseeable future.
15
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization, and as adjusted,
as of December 31, 1999, to give effect to the sale of 2,000,000 shares of
common stock in this offering at the assumed public offering price of $164.00
per share and the application of the estimated net proceeds from this
offering. The information below should be read in conjunction with our
financial statements and notes to those statements, and other financial
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------
Actual As adjusted
------------ ------------
<S> <C> <C>
Stockholders' equity:
Common stock, $.01 par value; 15,000,000 shares
authorized; 10,284,349 shares issued and
outstanding actual; 12,284,349 shares issued and
outstanding as adjusted (1)..................... $ 102,843 $ 122,843
Additional paid-in-capital....................... 103,592,079 411,292,079
Accumulated other comprehensive loss............. (85,715) (85,715)
Deferred compensation............................ (111,945) (111,945)
Accumulated deficit.............................. (48,008,122) (48,008,122)
------------ ------------
Total stockholders' equity.................... 55,489,140 363,209,140
------------ ------------
Total capitalization.......................... $ 55,489,140 $363,209,140
============ ============
</TABLE>
- --------
(1)Based on the number of shares outstanding as of December 31, 1999.
Excludes:
. 1,691,701 shares of common stock underlying options outstanding as of
December 31, 1999 at a weighted average exercise price of $12.99 per
share;
. 1,133,366 shares of common stock available for issuance under our 1992
Employee, Director and Consultant Stock Option Plan;
. 148,952 shares of common stock available for issuance under our Employee
Stock Purchase Plan; and
. 42,339 shares of common stock underlying warrants outstanding as of
December 31, 1999 at a weighted average exercise price of $15.42 per
share.
Subsequent to December 31, 1999, we granted additional options to purchase
16,250 shares of common stock at a weighted average exercise price of $84.79
per share.
16
<PAGE>
DILUTION
Our net tangible book value at December 31, 1999 was approximately $55.2
million, or $5.37 per share. Net tangible book value per share is determined
by dividing our tangible net worth (total tangible assets less total
liabilities) by the number of shares of common stock outstanding. After giving
effect to our sale of the 2,000,000 shares of common stock offered by this
prospectus at an assumed public offering price of $164.00 per share and after
deducting underwriting discounts and estimated offering expenses, our net
tangible book value at December 31, 1999 would have been approximately $362.9
million, or $29.54 per share. This represents an immediate increase in net
tangible book value of $24.17 per share to existing stockholders and an
immediate dilution in net tangible book value of $134.46 per share to new
investors purchasing shares at the assumed public offering price. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share....................... $164.00
Net tangible book value per share before the offering....... $ 5.37
Increase per share attributable to new investors............ 24.17
Net tangible book value per share after the offering........ 29.54
-------
Dilution per share to new investors........................... $134.46
=======
</TABLE>
The information in the table above is based upon the assumed public
offering price of $164.00 per share before deducting underwriting discounts
and commissions and estimated offering expenses payable by us. The information
concerning existing stockholders is based on the number of shares of common
stock outstanding as of December 31, 1999 and excludes:
. 1,691,701 shares of common stock underlying options outstanding as of
December 31, 1999 at a weighted average exercise price of $12.99 per
share;
. 1,133,366 shares of common stock available for issuance under our 1992
Employee, Director and Consultant Stock Option Plan;
. 148,952 shares of common stock available for issuance under our Employee
Stock Purchase Plan; and
. 42,339 shares of common stock underlying warrants outstanding as of
December 31, 1999 at a weighted average exercise price of $15.42 per
share.
Subsequent to December 31, 1999, we granted additional options to purchase
16,250 shares of common stock at a weighted average exercise price of $84.79
per share.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data as
of and for each of the five years ended June 30, 1999 and the six month
periods ended December 31, 1999 and December 31, 1998. The selected
consolidated statement of operations data for the years ended June 30, 1999,
1998 and 1997, and the selected consolidated balance sheet data as of June 30,
1999 and 1998, are derived from, and are qualified by reference to our audited
financial statements appearing elsewhere in this prospectus. The selected
consolidated statement of operations data for the six month periods ended
December 31, 1999 and 1998, and the selected consolidated balance sheet data
as of December 31, 1999 are derived from, and are qualified by reference to,
our unaudited interim financial statements appearing elsewhere in this
prospectus. The selected consolidated statements of operations data for the
years ended June 30, 1996 and 1995, and selected consolidated balance sheet
data as of June 30, 1997, 1996 and 1995, are derived from our audited
consolidated financial statements not included herein. The information below
should be read in conjunction with the consolidated financial statements (and
related notes) and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Six months
ended
December 31, Year ended June 30,
------------------ ------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Research revenue........ $ 11,504 $ 9,183 $ 20,093 $ 21,000 $ 14,732 $ 6,629 $ 1,295
Molecular diagnostic
revenue................ 3,638 2,124 5,220 2,211 504 -- --
-------- -------- -------- -------- -------- -------- --------
Total revenues......... 15,142 11,307 25,313 23,211 15,236 6,629 1,295
Costs and expenses:
Molecular diagnostic
cost of revenue........ 1,792 1,382 3,066 1,392 340 -- --
Research and
development............ 11,992 11,499 23,452 23,002 18,580 12,991 5,162
Selling, general and
administrative......... 6,376 5,316 11,106 11,807 8,755 2,526 1,788
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses.............. 20,160 18,197 37,624 36,201 27,675 15,517 6,950
-------- -------- -------- -------- -------- -------- --------
Operating loss.......... (5,018) (6,890) (12,311) (12,990) (12,439) (8,888) (5,655)
Other income (expense):
Interest income......... 1,310 1,276 2,349 3,224 3,414 3,174 458
Interest expense........ -- (6) (6) (33) (67) (97) (71)
Other................... (360) (67) (27) 2 (114) (86) --
-------- -------- -------- -------- -------- -------- --------
Net loss................ $ (4,068) $ (5,553) $ (9,995) $ (9,797) $ (9,206) $ (5,897) $ (5,268)
======== ======== ======== ======== ======== ======== ========
Basic and diluted net
loss per share......... $ (0.42) $ (0.59) $ (1.06) $ (1.05) $ (1.03) $ (0.78) $ (1.19)
Basic and diluted
weighted average shares
outstanding............ 9,778 9,367 9,391 9,289 8,904 7,609 4,427
</TABLE>
<TABLE>
<CAPTION>
June 30,
December 31, --------------------------------------------
1999 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash, cash equivalents
and marketable
investment securities.. $ 60,043 $ 38,926 $ 53,109 $ 63,077 $ 70,003 $ 16,141
Working capital......... 29,071 8,348 21,806 38,797 41,666 13,784
Total assets............ 73,862 53,551 67,392 76,063 79,607 19,744
Notes payable less
current portion........ -- -- -- 129 472 780
Stockholders' equity.... 55,489 48,216 57,481 66,179 70,186 16,256
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with "Selected Consolidated
Financial Data" and our financial statements and the related notes to our
financial statements included elsewhere in this prospectus. Our fiscal year
ends on June 30.
Overview
We are a leader in the emerging field of genomics, proteomics and gene-
based medicine focusing on the development of therapeutic and diagnostic
products. We have developed, and will continue to expand upon, a number of
proprietary genomic and proteomic databases which permit us, through the use
of our bioinformatics and robotics technologies, to identify human genes and
related proteins that may play a role in the onset or progression of major
human diseases. We formed two wholly owned subsidiaries, Myriad
Pharmaceuticals, Inc. and Myriad Genetic Laboratories, Inc., to commercialize
our therapeutic and diagnostic discoveries. Myriad Pharmaceuticals, Inc.
independently and in conjunction with our collaborative partners, focuses on
the discovery and development of therapeutic products. Myriad Genetic
Laboratories, Inc. focuses on the development of diagnostic products that
analyze a person's genetic makeup to determine whether that person has certain
genes and related proteins that we have discovered are involved in major human
diseases. This analysis allows us to predict that person's risk of developing
a specific disease and permits physicians and their patients to take
appropriate therapeutic measures to reduce the risk.
We have devoted substantially all of our resources to maintaining our
research and development programs, supporting collaborative research
agreements, operating a molecular diagnostic laboratory, establishing genomic
sequencing, high-throughput screening, and drug discovery and development. Our
revenues have consisted primarily of payments received pursuant to
collaborative research agreements, upfront fees, milestone payments, and sales
of molecular diagnostic products. We have yet to attain profitability and, for
the quarter ended December 31, 1999, we had a net loss of $1,877,150 and as of
December 31, 1999 had an accumulated deficit of $48,008,122.
In April 1995, we commenced a five-year collaborative research and
development arrangement with Novartis Corporation. The total equity
investment, research funding and potential milestone payments under this
collaboration may provide us with up to $60,000,000. The research phase of the
Novartis collaboration will be concluded successfully on schedule in April
2000. We are entitled to receive royalties from sales of therapeutic products
commercialized by Novartis.
In September 1995, we commenced a five-year collaborative research and
development arrangement with Bayer Corporation. The total equity investment,
research funding and potential milestone payments under this collaboration may
provide us with up to $71,000,000. In November 1997 and again in December
1998, we announced expansions of our collaborative research and development
arrangement with Bayer. The expanded collaboration may provide us with
additional research funding and potential milestone payments of up to
$137,000,000. We are entitled to receive royalties from sales of therapeutic
products commercialized by Bayer.
In October 1996, we announced the introduction of BRACAnalysis(R), a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. In January 1998, we announced the introduction of
CardiaRisk(R), which may assist physicians both in identifying which
hypertensive patients are at a significantly increased risk of developing
cardiovascular disease and identifying which patients are likely to respond to
low salt diet therapy and antihypertensive drug therapy. We, through our
wholly owned subsidiary Myriad Genetic Laboratories, Inc., recognized
molecular diagnostic revenues, primarily from BRACAnalysis(R), of $2,023,871
for the quarter ended December 31, 1999.
In April 1997, we commenced a three-year collaborative research and
development arrangement with Schering-Plough Corporation. The total equity
investment, research funding, license fees and potential milestone
19
<PAGE>
payments under this collaboration may provide us with up to $60,000,000. The
research phase of the Schering-Plough collaboration will be concluded
successfully on schedule in April 2000. We are entitled to receive royalties
from sales of therapeutic products commercialized by Schering-Plough.
In October 1998, we entered into a five-year collaboration with Schering AG
to utilize our protein interaction technology, ProNet(R), for drug discovery
and development. Under the agreement, we will have an option to co-promote all
new therapeutic products in North America and receive 50% of the profits from
North American sales of all new drugs discovered with ProNet(R). The total
research funding, license fees, subscription fees, option payments and
potential milestone payments under this collaboration may provide us with up
to $51,000,000. If we choose to co-promote a drug developed by Schering AG as
a 50% partner, we may be required to pay funds to Schering AG to establish
equal ownership.
In November 1998, we entered into a 15 month collaboration with Monsanto
Company to utilize ProNet(R) for drug discovery and development. In December
1999, Monsanto exercised its option to extend the research term for an
additional 12 months and exercised its option to expand the research funding.
The total research funding, option payments, license fees and potential
milestone payments under this collaboration may provide us with up to
$28,000,000. We are entitled to receive royalties from sales of therapeutic
products commercialized by Monsanto.
In July 1999, we entered into a two-year collaboration and license
agreement with the Novartis Agricultural Discovery Institute, Inc. The genomic
collaboration will focus on the discovery of the genetic structure of cereal
crops. The total upfront payment and research funding under this collaboration
may provide us with up to $33,500,000. Upon completion, we intend to jointly
offer with NADII commercial access to the genomic databases and share equally
in any resulting proceeds.
In October 1999, we announced the expansion of our collaboration with
Schering AG to include research in the field of cardiovascular disease. We
also entered into a Securities Purchase Agreement and a Standstill Agreement
with Schering Berlin Venture Corporation to sell to Schering Berlin 303,030
shares of our common stock for an aggregate purchase price of $5,000,000.
In December 1999, we entered into a 12 month collaboration with Hoffmann-
LaRoche Inc. to utilize ProNet(R) for drug discovery and development in the
area of cardiovascular disease. The total research funding, license fees and
potential milestone payments under this collaboration may provide us with up
to $13,000,000. We are entitled to receive royalties from sales of therapeutic
products commercialized by Roche.
We intend to enter into additional collaborative relationships to locate
and sequence genes and discover protein networks associated with other common
diseases as well as to continue to fund internal research projects. We may be
unable to enter into additional collaborative relationships on terms
acceptable to us. See Risk Factors "--Our success depends on maintaining
relationships with current collaborative partners and entering into new
collaborative arrangements" and "--Our ability to discover genes and
commercialize therapeutic and diagnostic products could be adversely affected
if our current collaborators or scientific advisors terminate their
relationships with us or develop relationships with a competitor." We expect
to incur losses for at least the next several years, primarily due to
expansion of our research and development programs, expansion of our drug
discovery and development efforts, increased staffing costs and expansion of
our facilities. Additionally, we expect to incur substantial sales, marketing
and other expenses in connection with building our molecular diagnostic
business. We expect that losses will fluctuate from quarter to quarter and
that such fluctuations may be substantial. See Risk Factors "--We have a
history of operating losses and expect to continue to incur losses in the
future."
Results of Operations for the Six Months Ended December 31, 1999 and 1998
Research revenues for the six months ended December 31, 1999 were
$11,503,517 as compared to $9,183,028 for the same period of 1998. The
increase in research revenue is primarily attributable to revenue recognized
from the NADII collaboration that began in July 1999. Research revenue from
the research
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collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase or decrease,
revenues increase or decrease proportionately.
Molecular diagnostic revenues of $3,638,157 were recognized in the six
months ended December 31, 1999, an increase of $1,513,728 over the same six
month period of 1998. Molecular diagnostic revenue is comprised of sales of
diagnostic tests. Our sales and marketing efforts have given rise to the
increased revenues for the six months ended December 1999. There can be no
assurance, however that molecular diagnostic revenues will continue to
increase at the historical rate.
Research and development expenses for the six months ended December 31,
1999 were $11,992,270 as compared to $11,499,295 for the prior year. This
increase was primarily due to an increase in research activities as a result
of our recent collaboration with NADII. The increased level of research
spending also includes the ongoing drug discovery efforts of Myriad
Pharmaceuticals, our wholly-owned subsidiary, continuing development and
utilization of ProNet(R), and third-party sponsored research programs. We
expect our research and development expenses to continue to increase in
absolute dollars as we continue our drug discovery efforts.
Selling, general and administrative expenses for the six months ended
December 31, 1999 were $6,375,930 as compared to $5,315,717 for the prior
year. The increase was primarily attributable to costs associated with
expansion of our sales force and start-up expenses for the sales staff
including recruiting, training, and sales supplies. We have also incurred
increased expenses for our ongoing promotion of our molecular diagnostic
business and the filing of patent applications both domestically and abroad.
During the six months ended December 31, 1999, we also wrote off an intangible
asset resulting in a one-time expense of $344,531. We expect our selling,
general and administrative expenses will continue to fluctuate as needed in
support of our molecular diagnostic business and our research and drug
development efforts.
Cash, cash equivalents, and marketable investment securities were
$60,042,507 at December 31, 1999 as compared to $47,410,710 at December 31,
1998. This increase in cash, cash equivalents and marketable investment
securities is primarily attributable to the private sale of approximately
$10,000,000 of our common stock, as well as advance payments we received from
our collaborators. These cash receipts were offset by expenditures incurred in
the ordinary course of business. As a result of our increased cash position,
our interest income for the six months ended December 31, 1999 was $1,310,453
as compared to $1,275,690 for the six months ended December 31, 1998. Interest
expense for the six months ended December 31, 1998, amounting to $6,279, was
due entirely to borrowings under our equipment financing facility. The loss on
disposition of assets of $313,038 in the six months ended December 31, 1999 is
primarily the result of our retiring an unproductive asset.
Results of Operations for the Years Ended June 30, 1999 and 1998
Research revenues for our fiscal year ended June 30, 1999 were $20,093,057
as compared to $20,999,598 for the fiscal year ended June 30, 1998. Greater
research revenue recognized during the fiscal year ended June 30, 1998 versus
the current fiscal year is the result of $3,950,000 in research milestones and
contract expansion payments we received in 1998. Excluding the milestone and
contract expansion payments, our ongoing research revenue increased $3,043,459
for the fiscal year ended June 30, 1999 versus fiscal 1998. Research revenue
from the research collaboration agreements is generally recognized as related
costs are incurred. Consequently, as these programs progress and costs
increase or decrease, revenues increase or decrease proportionately.
Molecular diagnostic revenues of $5,220,349 were recognized in the fiscal
year ended June 30, 1999, an increase of 136% or $3,009,366 over the prior
year. Molecular diagnostic revenue is comprised of sales of diagnostic tests
resulting from our discovery of disease genes. We launched the test for
genetic predisposition to breast and ovarian cancer in October 1996 and we
launched the test for heart disease and hypertension risk in January 1998.
Sales and marketing efforts since that time have given rise to the increased
revenues for the fiscal year ended June 30, 1999. There can be no assurance,
however that molecular diagnostic revenues will continue to increase at the
historical rate.
Research and development expenses for the year ended June 30, 1999
increased to $23,452,220 from $23,002,340 for the prior year. This increase
was primarily due to an increase in research activities as a result of
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our collaborations with Novartis, Bayer, Schering-Plough, Schering AG, and
Monsanto, as well as those programs we funded. The increased level of research
spending includes ongoing development of our ProNet(R) and mutation screening
technologies, third-party sponsored research programs, and the formation of
Myriad Pharmaceuticals, Inc., or Myriad Pharmaceuticals. Myriad
Pharmaceuticals, our wholly-owned subsidiary, was created to develop
therapeutic lead compounds for selected common diseases with large potential
markets that are under-served by current therapeutic options.
Selling, general and administrative expenses for the fiscal year ended June
30, 1999 decreased $701,503 from the fiscal year ended June 30, 1998. During
the fiscal year ended June 30, 1998, we were pursuing a plan to dramatically
increase our sales force. Start-up expenses for the sales staff included
training, relocation, and sales supplies. For the fiscal year ended June 30,
1999, we maintained a steady, well-trained sales force which resulted in fewer
selling expenses. In addition, during the fiscal year ended June 30, 1998, we
incurred significant expenses in defense of our intellectual property. Such
expenses were drastically reduced during the fiscal year ended June 30, 1999.
We expect our selling, general and administrative expenses will continue to
fluctuate as needed in support of our molecular diagnostic business and our
research and development efforts.
Interest income for the fiscal year ended June 30, 1999 decreased to
$2,348,827 from $3,223,683 for the prior year. Cash, cash equivalents, and
marketable investment securities were $38,926,459 at June 30, 1999 as compared
to $53,109,493 at June 30, 1998. This decrease in cash, cash equivalents and
marketable investment securities was attributable to expenditures incurred in
the ordinary course of business and has resulted in reduced interest income.
Interest expense for the year ended June 30, 1999, amounting to $6,278, was
due entirely to borrowings under our equipment financing facility.
Results of Operations for the Years Ended June 30, 1998 and 1997
Research revenues for our fiscal year ended June 30, 1998 increased
$6,267,544 from the prior year to $20,999,598. The increase was attributable
primarily to the achievement of certain research milestones with Novartis and
Schering-Plough and our new and expanded corporate research collaboration
agreements with Schering-Plough and Bayer. During the fiscal year ended June
30, 1998, we recognized $3,000,000 in research milestones consisting of
$500,000 from Novartis and $2,500,000 from Schering-Plough. During the same
period, we recognized $3,000,000 in research funding from Schering-Plough
under an agreement initiated in April 1997. Research revenue from the research
collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase, revenues increase
proportionately.
Molecular diagnostic revenues of $2,210,983 were recognized in the fiscal
year ended June 30, 1998, an increase of 339% or $1,706,938 over the prior
year. We launched the test for genetic predisposition to breast and ovarian
cancer in October 1996 and we launched the test for heart disease and
hypertension risk in January 1998. Sales and marketing efforts since that time
have given rise to the increased revenues for the fiscal year ended June 30,
1998. There can be no assurance, however that molecular diagnostic revenues
will continue to increase at the historical rate.
Research and development expenses for the fiscal year ended June 30, 1998
increased to $23,002,340 from $18,580,229 for the prior year. This increase
was primarily due to an increase in research activities as a result of
progress in our collaborations with Novartis, Bayer and Schering-Plough as
well as those programs we funded. The increased level of research spending
includes third-party research programs, increased depreciation charges related
to purchasing of additional research equipment, the hiring of additional
research personnel and the associated increase in use of laboratory supplies
and reagents. We also incurred expenses related to milestones achieved by our
academic collaborators. Such expenses will likely increase to the extent that
we enter into additional research agreements with third parties.
Selling, general and administrative expenses for the fiscal year ended June
30, 1998 increased $3,051,806 from the fiscal year ended June 30, 1997. The
increase was primarily attributable to costs associated with the ongoing
promotion of BRACAnalysis(R) and the launch of CardiaRisk(R), including the
expansion of our internal
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sales staff from 8 to 33 employees. Additionally, we expended significant
amounts in the defense of our intellectual property. The increase is also a
result of additional administrative, marketing and education personnel, market
research activities, educational material development, and facilities-related
costs. We expects our selling, general and administrative expenses will
continue to increase in support of our molecular diagnostic testing business
and our research and development efforts.
Interest income for the fiscal year ended June 30, 1998 decreased to
$3,223,683 from $3,414,379 or 5.6% for the prior year. We have been able to
maintain our cash reserves at a relatively constant level as a result of our
ongoing collaborative research agreements, entering into new collaborative
agreements, achieving research milestones, and sales of our molecular
diagnostic tests. As a result, interest income has not changed significantly
from the prior year. Interest expense for the fiscal year ended June 30, 1998,
amounting to $32,681, was due entirely to borrowings under our equipment
financing facility.
Liquidity and Capital Resources
Net cash provided by operating activities was $11,540,202 during the six
months ended December 31, 1999 as compared to net cash used by operating
activities of $7,570,474 during the same six months of 1998. Trade receivables
for the six months ended December 31, 1999 increased by $510,936, from
$1,396,389 to $1,907,325. This increase is primarily attributable to the
increase in molecular diagnostic revenue for the six months ended December 31,
1999. Other receivables decreased $1,742,247, from $1,855,696 to $113,449, for
the six months ended December 31, 1999 primarily as a result of the receipt of
collaborative partner payments for research work performed in prior periods.
Prepaid expenses decreased by $289,079 during the six months ended December
31, 1999. The decrease is primarily due to advance royalties and insurance
premiums being expensed during the six-month period. Accounts payable and
accrued liabilities increased by $1,071,169 between June 30, 1999 and December
31, 1999 primarily as a result of a large order of laboratory supplies which
we received in December 1999 but did not pay for until after December 31,
1999. Deferred revenue, representing the difference in collaborative payments
received and research revenue recognized, increased by $11,966,662, from
$662,760 to $12,629,422, during the six months ended December 31, 1999 in
large part due to an upfront payment by NADII.
Our investing activities used cash in the amount of $487,836 in the six
months ended December 31, 1999. Investing activities were comprised primarily
of capital expenditures for research equipment, office furniture, and facility
improvements and marketable investment securities. During the six month period
ended December 31, 1999, we shifted a portion of our investment in marketable
securities from longer term investments to cash and cash equivalents in order
to take advantage of more favorable interest rates.
Financing activities provided cash in the amount of $11,222,686 during the
six months ended December 31, 1999. Proceeds were recognized from two separate
financings during the period. In September 1999, we entered into a
Subscription Agreement pursuant to which we sold 355,000 shares of our
unregistered common stock for a purchase price of $4,987,750. We have no
obligation to register these shares with the Securities and Exchange
Commission. In conjunction with the Subscription Agreement, we issued a three-
year warrant to purchase an additional 17,750 shares of common stock. In
October 1999, we entered into a Securities Purchase Agreement and a Standstill
Agreement with Schering Berlin Venture Corporation to sell to Schering Berlin
303,030 shares of common stock for an aggregate purchase price of $5,000,000.
Additional cash was provided from the exercise of stock options during the six
months ended December 31, 1999.
We believe that with the net proceeds from this offering, together with our
existing capital resources, we will have adequate funds to maintain our
current and planned operations for at least the next two years, although no
assurance can be given that changes will not occur that would consume
available capital resources before such time. Our future capital requirements
will be substantial and will depend on many factors, including:
.the progress of our research and development programs;
.the progress of our drug discovery and drug development programs;
.the cost of developing and launching additional molecular diagnostic
tests;
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.the results and costs of clinical correlation testing of our molecular
diagnostic tests;
.the costs of filing, prosecuting and enforcing patent claims;
.the costs associated with competing technological and market developments;
. the payments received under collaborative agreements and changes in
collaborative research relationships;
. the costs associated with potential commercialization of our gene
discoveries, if any, including the development of manufacturing,
marketing and sales capabilities; and
. the cost and availability of third-party financing for capital
expenditures and administrative and legal expenses.
Because of our significant long-term capital requirements, we intend to
raise funds when conditions are favorable, even if we do not have an immediate
need for additional capital at such time.
Impact of the Year 2000 Issue
The Year 2000 Issue arose because many computer programs use a two-digit
format, as opposed to four digits, to indicate the year. Any of our computer
programs or other information systems may recognize a date using "00" as the
year 1900 rather than the year 2000, which could result in a system failure or
miscalculations causing disruptions of our operations. We completed our Year
2000 readiness testing during 1999. Testing was performed on all of our
critical systems and any necessary modifications have taken place. Where
possible, third-party certification of Year 2000 readiness was obtained on
systems we purchased. Third-party systems that were not certified by the
supplier were tested internally or upgraded to compliant versions. We have
received assurances from our significant suppliers and customers that they are
Year 2000 ready. We have not experienced any significant Year 2000 problems,
either before or after December 31, 1999.
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BUSINESS
Overview
We are a leader in the use of gene-based medicine to develop therapeutic
and diagnostic products. We focus on the emerging fields of genomics, which
involves establishing the relationship between gene activity and particular
diseases, and proteomics, which involves identifying disease-specific
proteins. We have developed a proprietary suite of genomics technologies to
discover important disease genes and proteomic technologies to understand the
role these genes and their related proteins play in disease. We have
integrated these technologies using powerful bioinformatics and robotics
systems to conduct our research efforts on a high-throughput basis. This
integrated genomics platform has enabled us to identify numerous proteins as
promising targets for new proprietary drugs and molecular diagnostic tests.
Using our proprietary technologies, we have identified 19 drug targets to
date. We have delivered ten of these drug targets to our strategic partners
based on our discovery of genes involved in breast cancer, ovarian cancer,
brain cancer, prostate cancer, heart disease and dementia. We have received
total payments from our seven current strategic partners in excess of $100
million. We will receive additional milestone and royalty payments if our
strategic partners develop and commercialize drugs from the ten targets we
have delivered to them. Our current partners include Bayer Corporation, Eli
Lilly and Company, Hoffmann-LaRoche Inc., Monsanto Company, Novartis
Corporation, Schering-Plough Corporation and Schering AG. We have also
established a portfolio of nine new drug targets that we have retained for our
own small molecule drug development program. We expect to enter into future
partnerships for the clinical development of many of these targets. We may
seek to independently develop, test and commercialize small molecule
therapeutics from drug targets selected from our internal portfolio,
particularly in the area of cancer.
We also focus on developing, marketing and selling products used for
predictive medicine and personalized medicine. We have developed and
commercialized two innovative molecular diagnostic tests, one of which is used
for analyzing breast and ovarian cancer susceptibility and the other for
therapeutic management of hypertensive patients. We market these products
using our own internal sales force in the United States and we have entered
into marketing collaborations with other organizations in the United Kingdom,
Ireland, Canada and Japan. Revenues from these proprietary tests, which we
analyze in our CLIA approved laboratory, have grown over 100% per year to $5.2
million in the fiscal year ended June 30, 1999.
We employ a variety of proprietary genomic and proteomic technologies to
discover important genes and to understand the role these genes play in the
onset and progression of disease. Our integrated drug discovery and
development approach incorporates the following proprietary components:
. our exclusive access to extensive population and disease databases,
which include approximately 35 million diagnoses of important diseases;
. our ProNet(R) database, which is a database of proteins, the pattern of
interaction among these proteins, and the role these proteins play in
important disease pathways;
. our ProTrapTM technology, which enables us to perform rapid, cost-
effective, high-throughput drug screening; and
. our bioinformatics and robotics systems, which track experiments,
collect data and automate the analysis of data.
We believe that the future of medicine lies in the creation of new classes
of drugs that prevent disease from occurring or progressing by treating the
cause, not just the symptoms, of the disease. In addition, we believe that
advances in the emerging field of molecular diagnostics will improve our
ability to determine which patients are subject to a greater risk of
developing these diseases and who therefore should receive these new drugs.
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Industry Background
Genomics and Gene-Based Drug Development
Understanding the cause of a disease at the level of genes, proteins and
biological pathways can be very helpful in determining how best to treat the
disease. Historically, technologies used to discover treatments for the
symptoms of diseases have been less effective against complex diseases that
arise through a combination of genetic and environmental factors, such as
cancer and heart disease. In order to treat complex diseases effectively, it
is imperative to understand how the body uses its genetic information, how
genetic mutations can lead to disease, and how drugs can be developed to halt
or reverse disease progression. As the scientific community learns more about
the genetic basis of disease, we believe that the current methods of drug
development will be revolutionized.
The majority of diseases are treated by modifying the activities of
biological pathways through drugs that interact with the proteins produced by
the genes in affected cells and tissues. The quest for safer and more
effective treatments for a wider range of diseases has led pharmaceutical
companies to employ genomics and proteomics in their drug discovery and
development programs.
Modern gene-based small molecule drug discovery and development programs
typically involve the following steps:
Gene Discovery. Gene discovery involves identifying genes related to
disease susceptibility, onset or progression. A better understanding of some
diseases has resulted from the identification of a number of disease-related
genes and the subsequent understanding of their function.
Gene Function and Biological Pathway Determination. Proteins control
virtually all cellular processes, including important disease processes. The
determination of gene function and biological pathways clarifies the role of a
gene and the interaction of its expressed protein in the biological pathway of
a disease.
Target Identification and Validation. After identifying a disease-related
gene, the decision must be made as to whether the protein produced by that
gene can be a drug target. If a protein is not qualified to serve as a target,
other proteins in the same biological pathway as the disease-related gene can
be examined as potential targets. A protein target that is identified must be
validated to confirm that the potential target is at a control point in a
disease-related pathway and that a drug which interacts with the target is
expected to have a beneficial effect.
Assay Development and High-Throughput Screening. A specific assay must be
developed for each validated target to identify compounds that inhibit its
function. An assay usually requires months to develop. To identify potential
drugs, a target is tested through high-throughput screening against a
chemically diverse library, usually comprised of thousands of different small
molecules. The screening process frequently produces numerous compounds that
interact with the identified protein.
Drug Development. Compounds that may be suitable for development into
potential drugs undergo selection and optimization. Once selected, the
compound is optimized by synthesizing and testing a series of closely related
compounds. Based on expected activity, safety and bioavailability, the most
promising leads are selected. Following optimization, lead compounds enter
into preclinical testing to establish their efficacy and safety in animals. If
preclinical tests are successful, candidate drugs enter clinical trials to
determine their efficacy and safety in humans. At this stage drug candidates
have a high attrition rate as a result of incomplete understanding of the
mechanism of action, inaccurate predictions of efficacy and unexpected adverse
side effects. Of those candidates that enter clinical trials, typically only
about one out of ten gains FDA approval.
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Predictive and Personalized Medicine
Predictive medicine refers to the ability to identify those individuals at
risk for the development of specific diseases, and the ability to guide the
healthcare management of those predisposed individuals to delay the onset or
prevent the occurrence of specific diseases. Once a predisposed individual is
identified by molecular diagnostic testing, that individual can make more
informed decisions in selecting the most appropriate therapy, surveillance and
measures for prevention. Personalized medicine involves establishing a profile
of genetic response to drug therapy for specific individuals. Knowing whether
a patient will likely respond to particular drugs may decrease the occurrence
of adverse side effects from medications while improving their effectiveness,
possibly leading to better outcomes and lower overall healthcare costs. Both
predictive and personalized medicine are of interest to healthcare payors who
seek to lower costs and improve the effectiveness of medical care.
Molecular Diagnostics. Molecular diagnostics is the analysis of genes and
their products to predict individuals' risks for developing diseases and their
responses to treatments. As drugs are developed and approved for use,
knowledge about side effects and efficacy in specific individuals emerges.
Using this knowledge in what is called "pharmacogenomics," personal genetic
profiles can then be used to predict responses of individuals to drugs.
Our Business Strategy
Our business strategy is to understand the relationship between genes and
diseases in order to develop the next generation of therapeutic and diagnostic
products. Through our proprietary technologies, we are uniquely positioned to
identify these genes and develop novel therapeutic and diagnostic products.
Our business strategy includes the following key elements:
. Expand our proprietary genomic and proteomic databases. We will continue
to expand our existing genomic databases in Utah, Quebec and Sardinia.
These proprietary databases not only enable us to accelerate our gene
discovery efforts, they are also useful in target validation,
pharmacogenomics and disease association studies. We will also expand
ProNet(R), our proprietary proteomic technology, to uncover additional
disease pathways, discover functions for many proteins and identify high
quality drug targets.
. Discover important disease genes, understand their function and identify
lead compounds. We will continue to use our proprietary genomic and
proteomic databases, combined with our bioinformatics and robotics
technologies, to efficiently discover important genes and to understand
their role in human disease. In addition, we will continue to employ our
ProTrapTM technology for high-throughput screening in order to rapidly
identify numerous lead compounds for potential drug development.
. Capitalize on our strategic alliances with major pharmaceutical
companies. We expect to maintain and expand our strategic alliances
focused on the discovery of novel drug targets. Moreover, as we identify
and develop lead compounds, we plan to partner many of these compounds
with major pharmaceutical companies prior to pursuing human clinical
trials. This will shift much of the financial risk associated with later
stage drug development to our partners, while permitting us to benefit
from our partners' drug development expertise and marketing strength.
. Selectively develop and commercialize therapeutic products. We intend to
take selected compounds, particularly in the area of cancer, through the
clinical development process. We are focusing on cancer due to the large
unmet need for effective and less toxic drugs, and the oftentimes
shorter and less expensive clinical trials resulting from the potential
for fast track status that the FDA has typically afforded cancer drugs.
We may also enter into collaborative preclinical and clinical
development arrangements with government organizations such as the
National Cancer Institute to reduce our clinical trial costs. Finally,
we will be able to leverage the expertise of our existing oncology sales
force in the marketing of these novel cancer therapies.
. Grow and expand our molecular diagnostic business. We will continue to
increase the domestic and foreign market penetration of our existing
diagnostic tests and create additional tests to capitalize on the
emerging areas of predictive and personalized medicine.
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Our Integrated Genomic and Proteomic Platform
We have developed and integrated a powerful set of genomic and proteomic
technologies and databases that enable us to discover genes of commercial
importance and understand their role in disease pathways. Our technology
platform provides the basis to develop therapeutic and molecular diagnostic
products, based on a vastly improved understanding of the genetic basis of
disease. Our genomic and proteomic platform consists of the following key
elements.
Genetic and Medical Databases
Our genetic databases, which are based on distinct populations, provide us
with a unique competitive advantage because they enable us to correlate the
inheritance of gene mutations through multiple generations with the occurrence
of disease. We have created an extensive computerized genealogical database of
over 14 million persons whose ancestries are centered on the pioneer families
of Utah. This population is valuable for genetic research because of its
Northern European ancestry, its large families, and its profound interest in
recording its genealogy. Information from this population, such as medical
records, DNA samples, genealogy and other health-related data, has been
identified by our researchers and collaborators and assembled into our
computerized genealogy database. This database has allowed us to discover
genes involved in breast cancer, ovarian cancer, melanoma, brain cancer,
prostate cancer and heart disease.
We have linked our database of Utah families to a disease registry from
Intermountain Health Care, which operates 40 hospitals and clinics in the
western United States. In total, approximately 35 million disease diagnoses
are recorded in the IHC disease registry covering most common diseases. This
information includes data such as laboratory tests, prescription medications,
drug allergies, surgical procedures and patient criteria. We expect to
continue to expand the diagnosis records as more than two million new patient
records are generated by the IHC each year.
We have recently augmented this genetic medical information of the Utah
population by developing databases of individuals with specific diseases in
Quebec and the island of Sardinia. These genetically isolated populations
complement the Utah population and further strengthen our ability to more
rapidly identify disease-causing genes. Medical information on large Utah
families that have a preponderance of the disease of interest enables us to
identify where the disease genes are located in the human genome. A database
of affected individuals from Quebec, a population that is twice as old as
Utah, allows us to narrow down the disease gene locations to a smaller region
on the chromosome. Sardinia is an isolated population dating back to the
Neolithic Age where the disease gene carriers will only have in common with
each other a small amount of DNA, which tightly surrounds and more clearly
identifies the disease gene. This integrated approach across diverse
populations allows us to quickly identify the disease-causing gene. We have
worldwide exclusive rights and access to the Utah, Quebec and Sardinia
databases.
With the information and samples provided through our population databases,
we use our high-throughput sequencing and mutation screening capabilities to
identify important disease-causing genes. Our sequencing and screening
facility uses a robotics platform and informatics control software custom
designed by our scientists and software engineers. This integrated system has
been expanded to incorporate the rapid introduction of a large number of genes
and research populations, permitting the rapid comparison of novel mutations
in candidate genes between individuals with common familial diseases and
healthy individuals drawn from the same population. This high-throughput,
automated system enables us to rapidly detect genes, which are highly
correlated with disease, and in many instances can be shown to be causal.
ProNet(R) Database
We believe that because virtually all cellular processes are controlled by
proteins, including important disease processes, knowledge of protein
interactions can be extremely valuable in the identification of novel drug
targets for therapeutic development. In order to determine the function of
genes and their role in disease pathways, we use our proprietary ProNet(R)
technology to develop our ProNet(R) database of human proteins, the
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proteins with which they interact and their involvement in important disease
pathways. Each protein and its interacting partners form a network, which
reads like a map, positioning the protein in the disease pathway and tracing
the protein's role in that pathway.
Using our ProNet(R) technology, we screen target proteins through our
proprietary libraries constructed from a variety of different tissues and
organs, such as heart, brain, kidney, liver, breast and prostate. We have
constructed over 15 proprietary libraries each containing approximately 10
million protein fragments. We apply our proprietary automation and robotic
capabilities to the protein search process to allow high-throughput processing
of protein interactions. Our current capacity allows us to identify over 100
protein interactions each day. Every new interaction is entered into our
ProNet(R) database.
As our efforts to identify protein interactions progress, the understanding
of an ever increasing number of these interactions may enable researchers to
identify proteins that are involved in disease progression. We believe that
ProNet(R) provides a significant opportunity to identify and develop novel
drug targets by:
. discovering new proteins in the disease pathways;
. discovering functions for many novel proteins;
. identifying new functions for known proteins;
. identifying proteins involved in critical interactions along the
pathway; and
. selecting high quality drug discovery targets from disease pathways.
Our clients access these data through secure Internet connections. We have
created the following three types of ProNet(R) databases:
. Proprietary ProNet(R) databases for specific pharmaceutical company
clients. These databases address specific diseases and disease pathways
of strategic importance to our pharmaceutical partners. Specific drug
targets are selected by our partners for their proprietary drug
discovery research.
. Main ProNet(R) database of proteins and biological pathways, which
contains proprietary interactions that we have discovered. These
interactions are distinct from those identified for client companies.
. ProNet(R) Online database of protein-protein interactions from the
public domain. We use this database as a marketing tool and it is freely
available to the public through the Internet at www.doubletwist.com.
ProTrap(TM) Technology
We have developed a new technology platform called ProTrap(TM). The
ProTrap(TM) technology allows us quickly and cost effectively to build high-
throughput drug screens using a yeast-based system. We believe that yeast-
based screens offer a number of distinct cost and time advantages in
comparison to the more commonly used mammalian or cell-free screens. Yeast are
inexpensive and easy to grow and yeast screens can be run on our liquid
handling robots. Our drug discovery screens have been built using the
ProTrapTM system. Typically, one of these screens takes only two months to
build, which we believe compares favorably with the industry average.
In the ProTrapTM system, yeast are manipulated genetically so that they
produce a human or viral protein. When the protein is produced in one of a
variety of proprietary yeast strains, it causes the strain to change in a way
that can be easily detected. Therefore, when a small molecular weight compound
activates or inhibits the protein, a further change in the characteristics of
the yeast strain is easily detectable. The drug discovery screens are designed
to be run in parallel, such that each screen controls for false positives in
other screens. The result is greater efficiency and a higher screening
throughput. We estimate our running costs for ProTrapTM screens to be $.02 to
$.03 per data point, which we believe compares favorably to the industry
average.
29
<PAGE>
Our ProTrapTM technology has a wide variety of potential applications and
can be extended to complement our other target validation technologies by
determining the functions of proteins. It complements ProNet(R) by determining
for two interacting proteins if the second inhibits or activates the first. It
can also quickly find a disease gene pathway. Finally, it can determine the
biological activity of a mutant protein that may have utility in
pharmacogenomics. We are applying for patents covering proprietary aspects of
this technology.
Bioinformatics and Robotics
The gene and drug discovery process generates vast amounts of information.
Accordingly, we have designed proprietary bioinformatics systems, which
provide significant analytical and data management capabilities. Our systems
are based on integrated, protocol-driven database management software, which
is used to track experiments and collect relevant data. The genetic marker
management system incorporates data on DNA samples, genetic markers, genetic
maps, DNA clones and DNA sequences that are generated during the gene
discovery process. Further, the system directs the genetic analysis, fine
structure mapping, generation of candidate genes and mutation screening. It
allows the automation of labor intensive steps in the analysis of DNA
sequences, and incorporates our expert system for detecting coding regions in
random DNA sequences.
In addition, we have developed a proprietary laboratory information
management system. This system has the advantages of simplicity of design,
ease of maintenance, and speed of development. To date, we have used our
information management system for our high-throughput systems for protein
analysis, genotyping, genomic sequencing, mutation screening and compound
screening. This has been of fundamental importance in sample tracking and
quality assessment and quality control. We believe our strength in
bioinformatics provides us with a substantial competitive advantage.
We employ state-of-the-art robotics platforms in all of our high-throughput
systems. We use the same robotics software and hardware development and
maintenance teams to ensure efficiency throughout our operations. We operate
flexible robotics systems in our research and diagnostics laboratories and
high-throughput robotics systems in our sequencing and screening laboratories.
Each of our robotics systems is connected continually in a real time interface
with our proprietary laboratory information management system to maintain a
high degree of precision in sample tracking. Our robotics systems have been
designed to ensure that the sample volumes used for each of the applications
are kept at minimum levels to maintain reagent cost savings in each of our
operations. The high level of automation as well as the concerted effort in
optimizing biochemistry and reducing reagent volumes allows us to produce data
at a very competitive cost in the industry.
Therapeutic Product Development
The pharmaceutical industry has been successful in identifying medicines to
treat the symptoms of disease. However, as the current generation of compounds
nears the end of its patent protection, the industry has begun to seek new
approaches to disease treatment. We believe that the future of medicine will
be in the creation of new drugs that either prevent disease from initially
developing or prevent disease from progressing by treating the cause, not just
the symptoms, of disease. We believe that we can capture a greater portion of
the potential value of drug targets that we discover by identifying and
developing lead compounds for licensing to pharmaceutical companies. In
selected cases, we intend to take some of these compounds through human
clinical trials.
We formed Myriad Pharmaceuticals, our wholly owned subsidiary, to use our
proprietary genomics and proteomics technologies to discover and develop novel
therapeutic products. We believe that our ProNet(R) database of important
disease pathways provides us with a significant advantage in drug discovery
because it enables us to generate a large number of potential drug targets.
Once these targets have been identified, our ProTrapTM technology enables us
to rapidly screen a large number of these drug targets against our library of
small molecule compounds. This integrated platform enables us to pursue a
rapid and cost effective approach to identifying potentially valuable drug
candidates. In contrast to the drug discovery model employed by much of the
biotechnology industry, which screens relatively few drug targets against
large libraries of compounds, we are able to screen large numbers of protein
targets against our relatively small, diverse library of compounds and
30
<PAGE>
rigorously select those candidates we believe to be the most promising. To
date, we have 19 drug targets in development. Of these 19, we have licensed
ten to our strategic partners for further development and we have retained
nine for independent development, as outlined in the table below. Our current
drug discovery efforts target cancer, AIDS and rheumatoid arthritis. In
addition, we are exploring the biology around genes that we believe are
involved in a variety of disease areas, including atherosclerosis, chronic
pain, chronic obstructive pulmonary disease and sleep disorders, and have
selected 110 proteins for further evaluation using our ProNet(R) technology.
- --------------------------------------------------------------------------------
DRUG TARGET ASSAY COMPOUND COMPOUNDS LEAD PRECLINICAL
TARGET IDENTIFIED COMPLETED SCREENED CONFIRMED COMPOUNDS STUDIES
- --------------------------------------------------------------------------------
| | | | | |
- --------------------------------------------------------------------------------
COLORECTAL CANCER ESTIMATED INCIDENCE IN U.S. IN 1999--130,000
- --------------------------------------------------------------------------------
| | | | | |
MPYS-847 |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX|
| | | | | |
- --------------------------------------------------------------------------------
OTHER SOLID TUMORS ESTIMATED INCIDENCE IN U.S. IN 1999--1,125,000
- --------------------------------------------------------------------------------
| | | | | |
MPYS-649 |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX| |
| | | | | |
MPYS-197 |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX| | |
| | | | | |
MPYS-001 |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX| | |
| | | | | |
MPYS-413 |XXXXXXXXXXXXXXXXXXXX| | | |
| | | | | |
- --------------------------------------------------------------------------------
RHEUMATOID ARTHRITIS ESTIMATED PREVALENCE IN U.S. IN 1999--2,100,000
- --------------------------------------------------------------------------------
| | | | | |
MPYS-333 |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX| | |
| | | | | |
MPYS-563 |XXXXXXXXXXXXXXXXXXXX| | | |
| | | | | |
- --------------------------------------------------------------------------------
HIV INFECTION ESTIMATED PREVALENCE IN U.S. IN 1999--700,000
- --------------------------------------------------------------------------------
| | | | | |
MPYS-900 |XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX| | |
| | | | | |
MPYS-174 |XXXXXXXXXXXXXXXXXXXX| | | |
- --------------------------------------------------------------------------------
High-Throughput Screening
Our high-throughput screening is highly automated using robot workstations
and a proprietary computerized management system that monitors each step of
the process, confirms that each step has been performed to eliminate operator
errors and automatically correlates results with compound identity and drug
target. Current capacity is approximately 12.5 million screening data points
per year, but we expect that this number will increase to approximately 50
million data points within the next six months as a result of our expected
acquisition of additional robot workstations and our ability to include a
greater number of compounds in each step of the screening process. We have
acquired a collection of approximately 50,000 small molecules of diverse
structure and we expect to expand that collection to approximately 200,000
compounds in the second quarter of 2000.
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We have built drug discovery screens for each of our nine proprietary drug
targets. Of the nine constructed screens, six have been run against all 50,000
compounds in our library. The remaining screens are in process and are
expected to be completed within the next three months. We have identified a
number of proprietary compounds from our first six drug discovery screens,
including a screen against a novel HIV target, which satisfy the initial
criteria of showing selectivity for one molecular target without obvious
toxicity or activity against the other drug discovery screens run in parallel.
Furthermore, the compounds have been shown to display a good dose response
curve, showing increased activity at higher concentrations and decreased
activity at lower concentrations. This is a prerequisite for further
development of a compound. We are conducting additional analyses of these
compounds in order to determine whether they are suitable for further chemical
optimization.
We have started to build mammalian cell secondary assays to evaluate the
initial compounds arising from the primary drug discovery screens. To date, we
have completed the construction of three of these assays for colon cancer,
other solid tumors and inflammatory diseases and have developed protocols to
evaluate the mammalian toxicity of all compounds found in our drug discovery
screens. We are currently working to build secondary screens for the remainder
of our drug targets.
Molecular Diagnostics
We are committed to the development and marketing of novel molecular
diagnostic products for the emerging market opportunities of predictive
medicine and personalized medicine. Predictive medicine refers to the ability
to determine which individuals are at risk for the development of specific
diseases, and to guide the healthcare management of those predisposed
individuals to delay the onset or prevent the occurrence of specific diseases.
This allows healthcare resources to be focused on individuals who have the
greatest need and may reduce waste in the healthcare system. The goal of
personalized medicine is to establish an individual's genetic response profile
to a specific drug. Knowing how individual patients are likely to respond to a
particular drug may lead to more effective choice of medication, reduced
adverse side effects and lower overall healthcare costs.
We believe that as more genes are added to our product portfolio through
our discoveries and licenses of genes discovered by others, we may be
positioned to offer a genetic risk profile for a larger number of major
diseases and therapeutic indications. The availability of broad molecular
diagnostic profiles may lead to expanded markets encompassing substantial
additional segments of the population who could benefit from knowing their
risk of developing a variety of major diseases and their predicted responses
to treatments. We believe that predictive and personalized medicine products
represent a significant market opportunity.
Through our wholly owned subsidiary, Myriad Genetic Laboratories, we have
established a central molecular diagnostics facility to provide genetic
information services worldwide to healthcare providers. We have also developed
a clinical database of information on genetic mutations of each gene
discovered, including the frequency of occurrence in different ethnic
population groups and the clinical effect of these mutations. From these
mutations we can identify an individual's genetic predisposition to disease.
Through our database of mutations we can provide healthcare professionals with
detailed genetic information regarding the risk profile of these different
ethnic groups. We also provide educational and support services to physicians
and healthcare professionals as part of our genetic information business. The
diagnostic products and services we have developed and currently market and
expect to develop and market are not subject to FDA approval. Our diagnostics
laboratory is subject to oversight and approval by CLIA and we have obtained
all approvals required by CLIA.
Our strategy is to first introduce diagnostic products and services in the
United States, and then to make them available worldwide through strategic
marketing partnerships abroad. We have developed two molecular diagnostic
products, BRACAnalysis(R) and CardiaRisk(R), that we are currently marketing
in the United States directly through our own sales force. We are in the
process of developing molecular diagnostic tests for genetic susceptibility to
colorectal cancer and melanoma.
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<PAGE>
BRACAnalysis(R): Predictive Medicine for Breast and Ovarian Cancer
Susceptibility
It is estimated that approximately 180,000 women in the United States are
diagnosed with breast cancer each year and approximately 25,000 women are
diagnosed with ovarian cancer annually. Each year in the United States, an
estimated 43,000 women will die from breast cancer, which has the second
highest cancer mortality rate among women, and an estimated 14,500 women will
die of ovarian cancer. In conjunction with our collaborators, we reported the
discovery of the BRCA1 breast and ovarian cancer predisposing gene in the
October 7, 1994, issue of the journal Science, and in December 1995, announced
the discovery of the complete sequence of BRCA2 breast cancer gene, as
reported in the journal Nature Genetics. BRCA1 and BRCA2 appear to be
responsible for approximately 84% of the early onset hereditary breast cancer
and approximately 90% of hereditary ovarian cancer. Hereditary breast cancer
is believed to account for approximately 10% of all cases of breast cancer. A
study of women in the United States published in the American Journal of Human
Genetics indicates that a woman with a BRCA1 mutation has an 86% risk of
developing breast cancer by age 80 as compared to a general population risk of
10%. Additionally, according to a study published in Lancet, the risk to a
woman with a BRCA1 mutation of developing ovarian cancer by age 70 is
approximately 44%, compared to a general population risk of approximately 1%.
Women with BRCA2 mutations have approximately the same risk of breast cancer
as BRCA1 mutation carriers. BRCA2 mutations also increase the risk of ovarian
cancer in women, although not as much as in those with BRCA1 mutations.
In late 1996, we introduced BRACAnalysis(R), a comprehensive analysis of
the BRCA1 and BRCA2 genes for determining a woman's susceptibility to breast
and ovarian cancer. BRACAnalysis(R) provides important information that we
believe will help the patient and her physician make better informed
lifestyle, surveillance, chemoprevention and treatment decisions. The cost per
test is currently $2,580 and is covered by the majority of health insurance
plans in the United States.
CardiaRisk(R): Personalized Medicine for Hypertension Management
Approximately 50 million people in the United States are hypertensive.
Hypertension has a significant genetic component and is a major risk factor
for cardiovascular disease, kidney failure and stroke. The angiotensinogen
gene, or AGT gene, is believed to be involved in the salt-dependent form of
hypertension, which accounts for approximately 50% of all hypertension.
Therapy for these patients includes the use of a low-salt diet, other dietary
regimens, and numerous drug therapies to control blood pressure. Results of a
recent study of 1,509 patients by the National Institutes of Health showed
that of all patients placed on a low-salt diet, only patients with the AGT
mutation achieved a significant reduction in blood pressure over the three-
year course of the study. Patients in this study with the variant form of the
AGT gene were also found to be 42% more likely to experience hypertension
earlier in life and more severely. Although a low-salt diet is frequently
recommended for hypertensive patients, either alone or in combination with
drug therapy, only an estimated 20% to 30% of patients actually receive any
benefit from a special low-salt diet. Additionally, only about 40% of
hypertension patients can adequately control their blood pressure without side
effects from any particular hypertension medication.
CardiaRisk(R) identifies individuals likely to respond to specific high
blood pressure therapies by screening for mutations of the AGT gene. Mutations
of this gene determine a patient's potential reaction to different courses of
therapy for hypertension. Using CardiaRisk(R) to help predict the specific
therapies and drugs to which a patient will respond may improve patient
compliance, reduce adverse side effects and decrease overall healthcare costs.
CardiaRisk(R) is a fully automated test that we perform through Myriad Genetic
Laboratories using DNA extracted from a patient's blood sample. The cost for
the test is $295 and it is not currently reimbursed by health insurance. We
believe CardiaRisk(R) is one of the first commercially available personalized
medicine products.
Predictive Medicine Tests under Development
Colorectal cancer. We are planning to introduce a molecular diagnostic test
for genetic susceptibility to colorectal cancer later this year. Colorectal
cancer is the second leading cause of cancer deaths in the United States, with
130,200 new cases expected to be diagnosed in the year 2000. Familial forms of
colorectal cancer
33
<PAGE>
were estimated in 1997 to account for 10% to 30% of all cases according to the
American Society of Clinical Oncologists. The molecular diagnostic
considerations in these hereditary syndromes are similar to those necessary
for breast and ovarian cancer at-risk individuals, which we have already
commercialized. To illustrate the predictive medicine value of molecular
testing in colorectal cancer syndromes, it has been shown that individuals who
carry gene mutations can lower their risk of developing cancer by more than
50% with appropriate surveillance activities.
Melanoma. We are planning to introduce a molecular diagnostic test for
genetic susceptibility to melanoma in calendar 2001. The incidence of
melanoma, a malignant form of skin cancer, has increased approximately 4% per
year since the early 1970's. In the year 2000, approximately 44,000 Americans
will be diagnosed with melanoma, according to the journal Science. We
discovered that mutations in the p16 gene are involved in cancer and can be
inherited and predispose individuals to melanoma, as reported in the September
1994 issue of the journal Nature Genetics. Melanoma is lethal within five
years in 86% of cases where it has spread to another site in the body.
However, when melanoma is diagnosed at an early stage, fewer than 10% of
patients die within five years. We believe that approximately 10% of melanoma
cases are hereditary. We have substantial expertise in the genetic analysis of
melanoma and have begun to identify important disease-predisposing p16
mutations. At present we are involved in a series of patent interference
proceedings with two other parties relating to the p16 gene. The outcome of
the interferences, and the impact of an adverse outcome, is uncertain, and we
cannot assure you that we will prevail in the interferences.
Sales and Marketing
We are currently marketing BRACAnalysis(R) and CardiaRisk(R), and we expect
to market other diagnostic products, in the United States directly through our
own 36 person sales force. If we develop therapeutic products in the area of
cancer, then given the concentrated nature of the oncology market, we would be
able to leverage the efforts of our existing oncology sales force.
The potential international market for our molecular diagnostic products is
estimated to be at least twice the size of the United States market. After
introducing molecular diagnostic products in the United States, we plan to
introduce our products in foreign markets primarily through strategic
marketing partners. We have recently completed marketing agreements with the
following foreign collaborators:
<TABLE>
<CAPTION>
Partner Territory
------- ---------
<S> <C>
Falco Biosystems, Ltd............................. Japan
MDS Laboratory Services........................... Canada
Rosgen Ltd........................................ United Kingdom and Ireland
</TABLE>
Strategic Alliances
In order to limit the financial risks associated with the development of
therapeutic products, including costs associated with related clinical trials
of such drugs, our strategy is to enter into alliances with corporate partners
who assume such risks and other assorted financial costs. In addition to our
current strategic alliances, we are actively pursuing other partners in areas
that we believe may enhance our ability to develop and exploit our technology.
The financial structure of our strategic alliances varies with each agreement
and may include research payments, equity investments, milestone payments,
upfront payments, license fees, subscription fees, option payments, and
royalty payments or profit sharing.
Events that trigger milestone payments to us may include:
. the discovery of a gene or protein;
. the determination of the function of a gene or protein;
. the identification of a lead compound;
. the filing of an investigational new drug application with the FDA;
. the commencement of Phase III clinical trials; and
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<PAGE>
. the submission of a new drug application with the FDA.
We are dependent on each strategic partner to commercialize the therapeutic
products identified during our collaboration. If our partner commercializes
the product, we will receive a royalty on sales of the product or share in the
profits derived from sales of the drug. If any of our strategic partners cease
efforts to commercialize any therapeutic products identified during our
collaboration, the rights to commercialize those products will revert back to
us.
The following table summarizes the material terms of our current and
historical strategic alliances, including the total potential payments to us
including amounts received to date:
<TABLE>
<CAPTION>
Research
Research Completion Potential
Partner Focus Term Date Payments
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Eli Lilly and Company Breast cancer 3 years August 1996 $ 4 million
- -------------------------------------------------------------------------------
Novartis Corporation Cardiovascular 5 years April 2000 $ 60 million
- -------------------------------------------------------------------------------
Bayer Corporation Obesity, 7 years September 2002 $102 million
osteoporosis, asthma
and depression
- -------------------------------------------------------------------------------
Bayer Corporation Dementia 3 years December 2000 $ 35 million
- -------------------------------------------------------------------------------
Schering-Plough Prostrate and brain 3 years April 2000 $ 60 million
Corporation cancer
- -------------------------------------------------------------------------------
Schering AG Major disease 5 years October 2003 $ 56 million
pathways including
cancer, expanded to
cardiovascular
- -------------------------------------------------------------------------------
Monsanto Company Initially two major 27 months February 2001 $ 28 million
disease pathways,
extended for a third
- -------------------------------------------------------------------------------
Novartis Agricultural Genetic structure of 2 years July 2001 $ 34 million
Discovery Institute, cereal crops
Inc.
- -------------------------------------------------------------------------------
Hoffmann-LaRoche Inc. Cardiovascular 3 years December 2002 $ 13 million
</TABLE>
Eli Lilly and Company. In August 1992, we entered into a Research
Collaboration and License Agreement with Eli Lilly and its former subsidiary,
Hybritech Incorporated, under which Eli Lilly and Hybritech made an equity
investment in us, and provided funding over a three-year period to support our
research and development program to discover the BRCA1 gene. The total equity
investment, research funding and potential milestone payments under this
collaboration may provide us with up to $4,000,000. We may also receive future
milestone payments and future royalty payments on therapeutic and diagnostic
product sales. We granted to Eli Lilly an exclusive, worldwide license to
develop, manufacture and sell therapeutic products derived from the BRCA1
gene, and granted to Hybritech an exclusive, worldwide license to develop,
manufacture and sell diagnostic kits derived from the BRCA1 gene. Royalties
with respect to therapeutic and diagnostic products which may in the future be
developed by Eli Lilly and Hybritech will be payable on product sales in each
country until the expiration of the last valid patent covering such products
in that country. Under the agreement, we retained the exclusive, worldwide
rights to provide molecular diagnostic services based on the BRCA1 gene. The
research portion of this collaboration has expired.
Novartis Corporation. In April 1995, we commenced a five-year collaborative
research and development arrangement with Novartis Corporation. The total
equity investment, research funding and potential milestone payments under
this collaboration may provide us with up to $60,000,000. The research effort
is focused on the discovery of genes and drug targets involved in the field of
cardiovascular disease. The research phase of the
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Novartis collaboration will be concluded successfully on schedule in April
2000. In March 1998, we announced that Novartis had licensed the therapeutic
rights to the CHD1 heart disease gene, triggering a milestone payment to us.
In addition, we may receive future royalty payments on therapeutic products
sold by Novartis.
Bayer Corporation. In September 1995, we commenced a five-year
collaborative research and development arrangement with Bayer Corporation. The
total equity investment, research funding and potential milestone payments
under this collaboration may provide us with up to $71,000,000. In November
1997 and again in December 1998, we announced expansions of our collaborative
research and development arrangement with Bayer. The expanded collaboration
may provide us with additional research funding and potential milestone
payments of up to $137,000,000. We are entitled to receive royalties from
sales of therapeutic products commercialized by Bayer.
Schering-Plough Corporation. In April 1997, we commenced a three-year
collaborative research and development arrangement with Schering-Plough
Corporation. The total equity investment, research funding, license fees and
potential milestone payments under this collaboration may provide us with up
to $60,000,000. The research phase of the Schering-Plough collaboration will
be concluded successfully on schedule in April 2000. In October 1997, we
announced that Schering had licensed the therapeutic rights to the MMAC1
cancer gene. In March 1998, we demonstrated the tumor-suppressor activity of
the MMAC1 gene. Each event triggered milestone payments from Schering to us.
In addition, we may receive future royalty payments on therapeutic products
sold by Schering-Plough.
Schering AG. In October 1998, we entered into a five-year collaboration
with Schering AG, to utilize ProNet(R) for drug discovery and development.
Under the agreement, we will have an option to co-promote all new therapeutic
products in North America and receive 50 percent of the profits from North
American sales of all new drugs discovered with ProNet(R). The total research
funding, license fees, subscription fees, option payments and potential
milestone payments under this collaboration may provide us with up to
$51,000,000. If we choose to co-promote a drug developed by Schering AG as a
50 percent partner, we may be required to pay funds to Schering AG to
establish equal ownership. In October 1999, we announced the expansion of our
collaboration with Schering AG to include research in the field of
cardiovascular disease.
Monsanto Company. In November 1998, we entered into a 15 month
collaboration with Monsanto Company to utilize ProNet(R) for drug discovery
and development. In December 1999, Monsanto exercised its option to extend the
research term for an additional 12 months and exercised its option to expand
the research funding. The total research funding, option payments, license
fees and potential milestone payments under this collaboration may provide us
with up to $28,000,000. We are entitled to receive royalties from sales of
therapeutic products commercialized by Monsanto.
Novartis Agricultural Discovery Institute, Inc. In July 1999, we entered
into a two-year collaboration and license agreement with the Novartis
Agricultural Discovery Institute, Inc. The genomic collaboration will focus on
the discovery of the genetic structure of cereal crops. The total upfront
payment and research funding under this collaboration may provide us with up
to $33,500,000. Upon completion, we and NADII intend to jointly offer
commercial access to the genomic databases and share equally in any resulting
proceeds.
Hoffmann-LaRoche Inc. In December 1999, we entered into a 12 month
collaboration with Hoffmann-LaRoche Inc. to utilize ProNet(R) for drug
discovery and development in the area of cardiovascular disease. The total
research funding, license fees and potential milestone payments under this
collaboration may provide us with up to $13,000,000. We are entitled to
receive royalties from sales of therapeutic products commercialized by Roche.
We intend to enter into additional collaborative relationships with other
corporate partners to locate and sequence genes, to discover protein networks
associated with other common diseases, and to identify lead compounds which
may be developed into commercial therapeutic products by those partners.
36
<PAGE>
Patents and Proprietary Rights
We intend to seek patent protection in the United States and major foreign
jurisdictions for the genes we discover, mutations and products of the genes
and related processes, transgenic animals, and other inventions which we
believe are patentable and where we believe our interests would be best served
by seeking patent protection. We also intend to seek patent protection or rely
upon trade secret rights to protect certain other technologies which may be
used in discovering and characterizing new genes and which may be used in the
development of novel diagnostic and therapeutic products. To protect our trade
secrets and other proprietary information, we require that our employees and
consultants enter into confidentiality and invention assignment agreements.
These confidentiality and invention assignment agreements may not provide us
with adequate protection. In addition, any such patents may not issue, and the
breadth or the degree of protection of any claims of such patents may not
afford us with significant protection.
We own or have licensed rights to 19 issued patents and numerous patent
applications in the United States as well as numerous foreign patent
applications relating to genes, proteins, and protein interactions associated
with cancer, heart disease, neurological disease and hypertension, processes
for identifying and sequencing genes, and other related gene discovery
technologies. However, any patent applications which we have filed or will
file or to which we have licensed or will license rights may not issue, and
patents that do issue may not contain commercially valuable claims. In
addition, any patents issued to us or our licensors may not afford meaningful
protection for our technology or products or may be subsequently circumvented,
invalidated or narrowed.
Our processes and potential products may also conflict with patents which
have been or may be granted to competitors, academic institutions or others.
As the biotechnology industry expands and more patents are issued, the risk
increases that our processes and potential products may give rise to
interferences in the U.S. Patent and Trademark Office, or to claims of patent
infringement by other companies, institutions or individuals. These entities
or persons could bring legal actions against us claiming damages and seeking
to enjoin clinical testing, manufacturing and marketing of the related product
or process. If any of these actions are successful, in addition to any
potential liability for damages, we could be required to cease the infringing
activity or obtain a license in order to continue to manufacture or market the
relevant product or process. We may not prevail in any such action and any
license required under any such patent may not be made available on acceptable
terms, if at all. At present we are involved in a series of patent
interference proceedings with two other parties relating to the p16 gene. The
outcome of the interferences, and the impact of an adverse outcome, is
uncertain, and we cannot assure you that we will prevail in the interferences.
Our failure to obtain a license to any technology that we may require to
commercialize our technologies or potential products could have a material
adverse effect on our business. There is also considerable pressure on
academic institutions to publish discoveries in the genetic field. Such a
publication by an academic collaborator of ours prior to the filing date of
our application, if it covers a gene claimed in the application, may preclude
the patent from issuing or the filing of foreign patent applications, or if a
patent was issued, may invalidate the patent.
We also rely upon unpatented proprietary technology, and in the future may
determine in some cases that our interests would be better served by reliance
on trade secrets or confidentiality agreements rather than patents or
licenses. These include our positional cloning, protein interaction, robotics
and bioinformatics technologies. We may not be able to protect our rights to
such unpatented proprietary technology and others may independently develop
substantially equivalent technologies. If we are unable to obtain strong
proprietary rights to our processes or products after obtaining regulatory
clearance, competitors may be able to market competing processes and products.
Others may obtain patents having claims which cover aspects of our products
or processes which are necessary for or useful to the development, use or
manufacture of our services or products. Should any other group obtain patent
protection with respect to our discoveries, our commercialization of molecular
diagnostic services and potential therapeutic products could be limited or
prohibited.
37
<PAGE>
In addition, we are a party to various license agreements which give us the
rights to use certain technology in our research, development and testing
processes. We may not be able to continue to license this technology on
commercially reasonable terms, if at all. Our failure to maintain rights to
this technology could have a material adverse effect on our business.
Competition
Competition is intense in our existing and potential markets. The
technologies for discovering genes that predispose persons to major diseases
and approaches for commercializing those discoveries are new and rapidly
evolving. Rapid technological developments could result in our potential
services, products, or processes becoming obsolete before we recover a
significant portion of our related research and development costs and
associated capital expenditures. Our competitors in the United States and
abroad are numerous and include, among others, major pharmaceutical and
diagnostic companies, specialized biotechnology firms, universities and other
research institutions, including those receiving funding from the Human Genome
Project. Many of our potential competitors have considerably greater financial,
technical, marketing and other resources than we do, which may allow these
competitors to discover important genes before we can. If we do not discover
disease-predisposing genes, characterize their functions, develop genetic tests
and related information services based on such discoveries, obtain regulatory
and other approvals, and launch such services or products before our
competitors, we could be adversely affected. Moreover, any molecular diagnostic
tests that we may develop, in addition to the BRACAnalysis(R) test and the
recently introduced CardiaRisk(R) test, could be made obsolete by less
expensive or more effective tests or methods that may be developed in the
future. We expect competition to intensify in the fields in which we are
involved as technical advances occur in these fields and become more widely
known.
We also expect to encounter significant competition with respect to any
drugs that may be developed using our technologies. Companies that complete
clinical trials, obtain required regulatory approvals and commence commercial
sales of therapeutic products prior to us or our collaborative partners may
achieve a significant competitive advantage. We and our collaborative partners
may not be able to develop such products successfully and we may not obtain
patents covering such products that provide protection against competitors.
Moreover, competitors may succeed in developing therapeutic products that
circumvent our products, our competitors may succeed in developing technologies
or products that are more effective than those developed by us and our
collaborative partners or that would render our and our competitors'
technologies or products less competitive or obsolete.
Governmental Regulation
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the development, manufacture and marketing
of our proposed products and services and in our ongoing research and
development activities. Our molecular diagnostic and information services, as
well as any therapeutic products which may be developed, will require
regulatory approval by governmental agencies prior to commercialization. The
establishment and operation of a genetic laboratory require regulatory approval
and periodic compliance reviews. Various federal statutes and regulations also
govern or influence the testing, manufacturing, safety, labeling, storage,
record keeping, and marketing of these therapeutic products. The process of
obtaining these approvals and the subsequent compliance with applicable
statutes and regulations require the expenditure of substantial time and
financial resources. Any failure by us or our collaborators, licensors or
licensees to obtain, or any delay in obtaining, regulatory approval could have
a material adverse effect on our business.
Therapeutics. Under our current strategic alliances, our partners have the
right to develop certain therapeutic products based on our gene discoveries. We
also intend to develop independently therapeutic products based on gene
discoveries that we have not licensed to partners. Such products will be
subject to regulation by the FDA and foreign regulatory authorities and require
approval before they may be clinically tested and commercially marketed for
human therapeutic use in the United States and other countries. The precise
38
<PAGE>
regulatory requirements with which we and our corporate partners will have to
comply are undergoing frequent revisions and refinement. It is also uncertain
whether the clinical data generated in such studies will be acceptable to the
FDA such that the FDA will approve the marketing of such products. In addition,
obtaining FDA approval for therapeutic products is a costly and time consuming
process.
The steps required before a pharmaceutical agent may be marketed in the
United States include:
. preclinical laboratory, in vivo and formulation studies;
. the submission to the FDA of an Investigational New Drug, or IND,
application, which must become effective before human clinical trials
may commence;
. adequate and well-controlled human clinical trials to establish the
safety and efficacy of the drug;
. the submission of a New Drug Application, or NDA, to the FDA; and
. FDA approval of the NDA, including approval of all product labeling and
advertising.
The testing and approval process requires substantial time, effort, and
financial resources and we cannot be certain that any approvals for any of our
products will be granted on a timely basis, if at all.
Human clinical trials are typically conducted in three sequential phases
which may overlap:
. PHASE I: The drug is initially introduced into healthy human subjects or
patients and tested for safety, dosage tolerance, absorption,
metabolism, distribution and excretion.
. PHASE II: Involves studies in a limited patient population to identify
possible adverse effects and safety risks, to determine the efficacy of
the product for specific targeted diseases and to determine dosage
tolerance and optimal dosage.
. PHASE III: When Phase II evaluations demonstrate that a dosage range of
the product is effective and has an acceptable safety profile, Phase III
trials are undertaken to further evaluate dosage and clinical efficacy
and to further test for safety in an expanded patient population at
geographically dispersed clinical study sites.
In the case of products for severe or life-threatening diseases such as
cancer, the initial human testing is often conducted in patients rather than in
healthy volunteers. Since these patients already have the target disease, these
studies may provide initial evidence of efficacy traditionally obtained in
Phase II trials and thus these trials are frequently referred to as Phase I/II
trials. We cannot be certain that we or any of our partners will successfully
complete Phase I, Phase II or Phase III testing of any compound within any
specific time period, if at all. Furthermore, the FDA or the sponsor may
suspend clinical trials at any time on various grounds, including a finding
that the subjects or patients are being exposed to an unacceptable health risk.
The results of product development, preclinical studies and clinical studies
are submitted to the FDA as part of a NDA. The FDA may deny a NDA if the
applicable regulatory criteria are not satisfied or may require additional
clinical data. Even if such data is submitted, the FDA may ultimately decide
that the NDA does not satisfy the criteria for approval. Once issued, the FDA
may withdraw product approval if compliance with regulatory standards is not
maintained or if problems occur after the product reaches the market. In
addition, the FDA may require testing and surveillance programs to monitor the
effect of approved products which have been commercialized, and the FDA has the
power to prevent or limit further marketing of a product based on the results
of these post-marketing programs.
On November 21, 1997, President Clinton signed into law the Food and Drug
Administration Modernization Act. That Act codified the FDA's policy of
granting "fast track" approval for therapies intended to treat severe or life-
threatening diseases. This new policy is intended to facilitate the study of
life saving therapies and shorten the total time for marketing approvals;
however, there can be no assurance that these fast track procedures will
shorten the time of approval for any of our products.
Satisfaction of the above FDA requirements or similar requirements of state,
local and foreign regulatory agencies typically takes several years and the
actual time required may vary substantially, based upon the type, complexity
and novelty of the product or indication. Government regulation may delay or
prevent marketing of
39
<PAGE>
potential products for a considerable period of time and impose costly
procedures upon our or our partners' activities. The FDA or any other
regulatory agency may not grant any approvals on a timely basis, if at all.
Success in early stage clinical trials does not assure success in later stage
clinical trials. Data obtained from clinical activities is not always
conclusive and may be susceptible to varying interpretations which could
delay, limit or prevent regulatory approval. Even if a product receives
regulatory approval, the approval may be significantly limited to specific
indications and dosages. Further, even after regulatory approval is obtained,
later discovery of previously unknown problems with a product may result in
restrictions on the product or even complete withdrawal of the product from
the market. Delays in obtaining, or failures to obtain regulatory approvals
may have a material adverse effect on our business. In addition, we cannot
predict what adverse governmental regulations may arise from future U.S. or
foreign governmental action.
Any products manufactured or distributed by us or our partners pursuant to
FDA approvals are subject to pervasive and continuing regulation by the FDA,
including record-keeping requirements and reporting of adverse experiences
with the drug. Drug manufacturers and their subcontractors are required to
register their establishments with the FDA and certain state agencies, and are
subject to periodic unannounced inspections by the FDA and certain state
agencies for compliance with current good manufacturing practices, or cGMP,
which impose certain procedural and documentation requirements upon us and our
third-party manufacturers. We cannot be certain that we or our present or
future suppliers will be able to comply with the cGMP regulations and other
FDA regulatory requirements.
Molecular Diagnostics. Myriad Genetic Laboratories is subject to
governmental regulation at the federal, state, and local levels as a clinical
laboratory. Myriad Genetic Laboratories has received CLIA certification from
the Department of Health and Human Services. On the state level, New York has
implemented regulations concerning molecular diagnostic testing and we have
received approval from the State of New York for both breast cancer
susceptibility and hypertension/heart disease risk. We are aware of several
other states that require licensing or registration of general clinical
laboratory activities. We believe that we have taken all steps required of us
in such jurisdictions in order for Myriad Genetic Laboratories to conduct
business in those jurisdictions. However, we may not be able to maintain state
level regulatory compliance in all states where Myriad Genetic Laboratories
may do business. Failure to maintain state regulatory compliance, or changes
in state regulatory schemes, could result in a substantial curtailment or even
prohibition of Myriad Laboratories' clinical activities and could have a
material adverse effect on our business.
CLIA authorizes the Department of Health and Human Services to regulate
clinical laboratories. These regulations, which affect us, mandate that all
clinical laboratories be certified to perform testing on human specimens and
provide specific conditions for certification. These regulations also contain
guidelines for the qualification, responsibilities, training, working
conditions and oversight of clinical laboratory employees. In addition,
specific standards are imposed for each type of test which is performed in a
laboratory. CLIA and the regulations promulgated thereunder are enforced
through quality inspections of test methods, equipment, instrumentation,
materials and supplies on a periodic basis. Any change in CLIA or these
regulations or in the interpretation thereof could have a material adverse
effect on our business.
Our business is also subject to regulation under state and federal laws
regarding environmental protection and hazardous substances control, including
the Occupational Safety and Health Act, the Environmental Protection Act, and
the Toxic Substance Control Act. We believe that we are in material compliance
with these and other applicable laws and that our ongoing compliance will not
have a material adverse effect on our business. However, statutes or
regulations applicable to our business may be adopted which impose substantial
additional costs to assure compliance or otherwise materially adversely affect
our operations.
Human Resources
As of February 29, 2000, we had 290 full-time equivalent employees,
including 37 persons holding doctoral degrees and three medical doctors. Most
of our employees are engaged directly in research, development, production and
marketing activities. We believe that the success of our business will depend,
in part, on our ability to attract and retain qualified personnel.
40
<PAGE>
Our employees are not covered by a collective bargaining agreement, and we
consider our relations with our employees to be good.
Facilities
Our headquarters and facilities are located in Salt Lake City, Utah. We
currently lease a 92,000 square foot building dedicated to research and
development, administration and laboratory space which has received federal
certification under CLIA to serve as a genetic predisposition testing
laboratory. Activity related to our research and molecular diagnostics
segments is performed at this location. Additionally, we lease 6,440 square
feet for various research support functions. The lease on our primary facility
has a term of ten years, and provides for a renewal option for a term of up to
ten additional years.
We believe that our existing facilities and equipment are well maintained
and in good working condition. We believe our current facilities will provide
adequate capacity for the foreseeable future. We continue to make investments
in capital equipment as needed to meet the research requirements of our
collaborative agreements, our lead compound development requirements, and the
anticipated demand for our molecular diagnostic tests.
Legal Proceedings
We are not a party to any material legal proceedings.
41
<PAGE>
MANAGEMENT
Executive Officers and Directors
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <S> <C>
John J. Horan (1)................... 79 Chairman of the Board of Directors
Walter Gilbert, Ph.D. (1)(2)........ 67 Vice Chairman of the Board of Directors
Peter D. Meldrum.................... 52 President, Chief Executive Officer, Director
Mark H. Skolnick, Ph.D.............. 54 Chief Scientific Officer, Executive Vice
President of Research and Development, Director
Gregory C. Critchfield, M.D......... 48 President, Myriad Genetic Laboratories, Inc.
Adrian N. Hobden, Ph.D.............. 47 President, Myriad Pharmaceuticals, Inc.
Jay M. Moyes........................ 46 Chief Financial Officer, Vice President of
Finance
Arnold Oliphant, Ph.D............... 40 Vice President Research, Functional Genomics
Christopher L. Wight................ 41 Vice President, General Counsel
Arthur H. Hayes, Jr., M.D. (2)...... 66 Director
Dale A. Stringfellow, Ph.D. (1)(2).. 55 Director
Alan J. Main, Ph.D.................. 46 Director
Michael J. Berendt, Ph.D............ 51 Director
Linda S. Wilson, Ph.D............... 63 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
John J. Horan. Mr. Horan has served as the Chairman of the Board of our
Board of Directors since joining it in November 1992. Mr. Horan also served as
the Chairman of the Board and Chief Executive Officer of Merck & Co., Inc.
from 1975 through 1985. Mr. Horan held a variety of positions with Merck from
1952 until his retirement from the Merck Board in 1993. He has also served on
the board of directors of General Motors Corporation, J.P. Morgan, Inc.,
Morgan Guaranty Bank, NCR Corporation, Burlington Mills, Celgene Corporation,
PathoGenesis Corporation, and as Chairman of Atrix Laboratories, Inc. Mr.
Horan is a past Chairman of the Pharmaceutical Manufacturers Association and a
Director of the Robert Wood Johnson Foundation.
Walter Gilbert, Ph.D. Dr. Gilbert has served as the Vice Chairman of the
Board of our Board of Directors since our inception. Dr. Gilbert joined us as
a founding scientist in March 1992. Dr. Gilbert won the Nobel Prize in
Chemistry in 1980 for his contributions to the development of DNA sequencing
technology. He was a founder of Biogen, Inc. and its Chairman of the Board and
Chief Executive Officer from 1981 to 1985. He has held professorships at
Harvard University in the Departments of Physics, Biophysics, Biology,
Biochemistry and Molecular Biology, and Molecular and Cellular Biology. He
presently holds the Carl M. Loeb University Professorship at Harvard
University.
Peter D. Meldrum. Mr. Meldrum has served as a director since our inception
in May 1991 and has served as our President and Chief Executive Officer since
November 1991. Prior to joining us he was President and Chief Executive
Officer of Founders Fund, Inc., a venture capital group specializing in the
biotechnology industry. He received his M.B.A. degree from the University of
Utah in 1974 and his B.S. degree in Chemical Engineering from the University
of Utah in 1970.
Mark H. Skolnick, Ph.D. Dr. Skolnick is one of our scientific founders. He
has served as a Director and as our Executive Vice President of Research and
Development since our inception in 1991, and has served as Chief Scientific
Officer since 1997. Dr. Skolnick and several colleagues were the first to
conceive of using restriction fragment length polymorphism technology as
genetic markers, a breakthrough that underpins the Human Genome Project. He
received his Ph.D. in Genetics from Stanford University in 1975, and his B.A.
degree in Economics from the University of California at Berkeley in 1968.
42
<PAGE>
Gregory C. Critchfield, M.D. Dr. Critchfield has served as President of
Myriad Genetic Laboratories, Inc., our wholly owned subsidiary, since he
joined us in July 1998. Dr. Critchfield previously served as Senior Vice
President, Chief Medical and Science Officer of Quest Diagnostics (formerly
Corning Clinical Laboratories). Prior to Quest Diagnostics, Dr. Critchfield
was Director of Clinical Pathology for Intermountain Health Care. Dr.
Critchfield received his M.D. from the University of Utah and his M.S. in
Biophysical Sciences from the University of Minnesota. He is Board Certified
in Clinical Pathology.
Adrian N. Hobden, Ph.D. Dr. Hobden has served as President of Myriad
Pharmaceuticals, Inc., our wholly owned subsidiary, since he joined us in
October 1998. Dr. Hobden previously served as Director, Global Biotechnology
Ventures with Glaxo Wellcome Inc. During Dr. Hobden's 17-year tenure with
Glaxo, he held several senior management positions, including heading the
Genetics, Molecular Science and Pharmacology research department before
undertaking the directorship. Dr. Hobden received his Ph.D. from Leicester
University in Microbiology/Molecular Biology and his B.A degree in
Biochemistry from Cambridge University.
Jay M. Moyes. Mr. Moyes has served as our Vice President of Finance since
July 1993 and as our Chief Financial Officer since June 1996. He served as
Vice President of Finance and Chief Financial Officer of Genmark, Inc. from
1991 through July 1993. Mr. Moyes held various positions with the accounting
firm of KPMG LLP from 1979 through 1991, most recently as a Senior Manager. He
holds an M.B.A. degree from the University of Utah, a B.A. degree in Economics
from Weber State University, and is a Certified Public Accountant.
Arnold Oliphant, Ph.D. Dr. Oliphant has served as our Vice President
Research, Functional Genomics since June 1996. He joined us in February 1995
and served as a Senior Scientist and later a Program Manager directing our
technology development program before being named to his current position.
Prior to joining us, Dr. Oliphant led the assay development team for Pioneer
Hi-Bred, a major agricultural genetics company. He received his Ph.D. in
Genetics from the Harvard Medical School and his B.S. degree in Biology from
the University of Utah.
Christopher L. Wight. Mr. Wight has served as Vice President, General
Counsel since November 1999. Mr. Wight joined us as General Counsel in August
1998. Prior to joining us, he was Director of Intellectual Property of Immunex
Corporation, where he worked for ten years. Mr. Wight received his J.D. degree
from the J. Reuben Clark Law School at Brigham Young University in 1985, and
his B.A. degree in Chemistry from Brigham Young University in 1982.
Arthur H. Hayes, Jr., M.D. Dr. Hayes has served as a Director since
November 1992. He served as Commissioner of the U.S. Food and Drug
Administration from 1981 to 1983. Since 1991 he has served as the President
and Chief Executive Officer of Mediscience Associates. From 1986 to 1991, Dr.
Hayes served as the President and Chief Executive Officer of EM
Pharmaceuticals, Inc., the United States affiliate of E. Merck of Darmstadt,
Germany. He also served as Provost and Dean of New York Medical College from
1983 to 1986. Dr. Hayes currently serves as the Vice Chairman and Medical
Director of Nelson Communications, Inc. Dr. Hayes serves on the board of
directors of the following publicly traded companies: Napro Biotherapeutics,
Inc., Celgene Corporation, and Premier Research Worldwide, Inc. He also serves
on the board of directors of the Macy Foundation and is the Chairman of the
Council on Family Health.
Dale A. Stringfellow, Ph.D. Dr. Stringfellow has served as a Director since
December 1991. He has been President of Berlex BioSciences, a wholly owned
subsidiary of Schering AG, since June 1995. Prior to that he was President,
Chief Executive Officer and a director of Celtrix Pharmaceuticals from July
1990 until April 1995. In addition, Dr. Stringfellow has held other positions,
including Vice President and Senior Director of Preclinical Cancer Research at
Bristol-Myers Squibb Co.; Research Head, Cancer Virology and Cellular Biology
Research at Upjohn Company; and Vice President, Research and Development at
Collagen Corporation.
Alan J. Main, Ph.D. Dr. Main has served as a Director since April 1995. He
is President and Chief Executive Officer of Coelacanth Corporation located in
East Windsor, New Jersey. Prior to this position, Dr.
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Main was Senior Vice-President of Research at Novartis Pharmaceuticals
Corporation from 1997 to 1999. He received his B.Sc. degree with honors in
Chemistry from the University of Aberdeen, Scotland in 1975 and his Ph.D. in
Organic Chemistry from the University of Liverpool, England in 1978. He is a
Fellow of the Royal Chemical Society and currently serves as Chairman of the
Research and Development Council of New Jersey.
Michael J. Berendt, Ph.D. Dr. Berendt has served as a Director since
February 1997. He is currently serving as Senior Vice President,
Pharmaceutical Research at Bayer Corporation, located in West Haven,
Connecticut. Dr. Berendt has been with Bayer since 1993 and has served as
Director and subsequently Vice President of Bayer's Institute for Bone & Joint
Disorders and Cancer. He received his Doctorate in Microbiology/Immunology at
Hahnemann Medical University. Dr. Berendt also serves on the board of
directors of Onyx Pharmaceuticals, Inc. and Waters Corporation.
Linda S. Wilson, Ph.D. Dr. Wilson has served as a Director since October
1999. She served as President of Radcliffe College, Cambridge, Massachusetts
from 1989 to 1999. Dr. Wilson has also served as Vice President for Research,
University of Michigan, and as Associate Vice Chancellor for Research and
Associate Dean of the Graduate College, University of Illinois. Dr. Wilson is
a member of the Institute of Medicine of the National Academy of Sciences.
After serving seven years as Trustee, she is now an Honorary Trustee of the
Massachusetts General Hospital. She currently serves on the board of directors
for Citizens Financial Group, Inc.; INACOM, Inc.; Value Line, Inc. and ICANN
(the Internet Corporation for assigned Names and Numbers). She is also a
Trustee of the Committee on Economic Development. Dr. Wilson received her
Ph.D. in Chemistry from the University of Wisconsin and her B.A. degree from
Newcomb College, Tulane University.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to Myriad Genetics
with respect to the beneficial ownership of our common stock as of February
29, 2000 by: (i) all persons known to Myriad Genetics to be beneficial owners
of five percent (5%) or more of our common stock, (ii) each of our Directors,
(iii) each of our executive officers, and (iv) all of our directors and
executive officers as a group. The number of shares beneficially owned by each
director or executive officer is determined under the rules of the Securities
and Exchange Commission and the information is not necessarily indicative of
beneficial ownership for any other purpose. Shares of common stock subject to
convertible securities that are currently exercisable or convertible or which
will become exercisable or convertible within 60 days of February 29, 2000 are
deemed to be beneficially owned by the person holding such options for
computing the percentage ownership of such person, but are not treated as
outstanding for computing the percentage of any other person. Except as
otherwise indicated, we believe that the beneficial owners of the common stock
listed below, based upon such information furnished by such owners, have sole
voting and investment power with respect to such shares, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
Percentage
of Shares
Beneficially
Number of Owned (1) (2)
Shares -----------------
Beneficially Prior to After
Beneficial Owner Owned (1) Offering Offering
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
Forstmann-Leff Associates, LLC (3)............. 791,781 7.7% 6.4%
Wanger Asset Management L.P. (4)............... 724,100 7.0% 5.9%
Bayer Corporation.............................. 588,235 5.7% 4.8%
Peter Friedli (5).............................. 648,750 6.3% 5.2%
Peter D. Meldrum (6)........................... 210,768 2.0% 1.7%
Mark H. Skolnick, Ph.D. (7).................... 529,442 5.1% 4.2%
Gregory C. Critchfield M.D. (8)................ 16,000 * *
Adrian N. Hobden Ph.D. (9)..................... 20,804 * *
Walter Gilbert, Ph.D. (10)..................... 190,970 1.8% 1.5%
John J. Horan (8).............................. 75,714 * *
Arthur H. Hayes, M.D. (8)...................... 44,000 * *
Dale A. Stringfellow, Ph.D. (8)................ 19,371 * *
Jay Moyes (11)................................. 43,172 * *
Arnold Oliphant (8)............................ 10,674 * *
Christopher L. Wight (8)....................... 16,000 * *
Alan J. Main, Ph.D............................. 0 -- --
Michael J. Berendt, Ph.D....................... 0 -- --
Linda S. Wilson, Ph.D.......................... 0 -- --
All executive officers and directors as a group
(14 persons)(12).............................. 1,176,915 10.9% 9.2%
</TABLE>
- --------
* Less than one percent.
(1) Percentage of beneficial ownership is calculated assuming 10,340,956
shares of common stock were outstanding as of February 29, 2000.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities.
(2) This table is based upon information supplied to Myriad Genetics by
executive officers, directors and principal stockholders. The address of
each officer and director identified in this table is that of Myriad
Genetics executive offices, 320 Wakara Way, Salt Lake City, UT 84108.
(3) This information is based solely on a Schedule 13F filed on February 3,
2000 with the Securities and Exchange Commission for the quarter ended
December 31, 1999. Consists of 213,231 shares of common
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<PAGE>
stock over which Forstmann-Leff Associates, LLC ("Forstmann") has sole
investment discretion and 578,550 shares of common stock over which
Forstmann shares investment discretion.
(4) This information is based solely on a Schedule 13F filed on February 1,
2000 with the Securities and Exchange Commission for the quarter ended
December 31, 1999. Wanger Asset Management L.P. has shared investment
discretion over all such shares.
(5) Includes shares held by Inventure, Inc., Joyce, Ltd., Pine, Inc., and
Spring Technology Corp., in each of which Mr. Friedli has a controlling
interest. Also includes a currently exercisable warrant to purchase
17,750 shares of common stock.
(6) Includes 48,000 shares of common stock subject to currently exercisable
options.
(7) Includes shares held directly by Dr. Skolnick and his wife, shares held
by a family limited partnership of which Dr. Skolnick is a general
partner, as well as shares held by certain family members. Also includes
128,371 shares of common stock subject to currently exercisable options.
(8) Consists of shares of common stock subject to currently exercisable
options.
(9) Includes 16,804 shares of common stock subject to currently exerciseable
options.
(10) Includes 76,485 shares of common stock owned by Dr. Gilbert's wife, as to
which Dr. Gilbert disclaims beneficial ownership. Also includes 38,000
shares of common stock subject to currently exercisable options.
(11) Includes shares held directly by Mr. Moyes and his children. Also
includes 41,014 shares of common stock subject to currently exercisable
options.
(12) Includes 461,750 shares of common stock subject to currently exercisable
options.
To our knowledge, each beneficial owner of more than 10% of our capital
stock filed all reports and reported all transactions on a timely basis with
the Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and us.
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<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, the Underwriters named below (the "Underwriters"), for whom Morgan
Stanley & Co. Incorporated, CIBC World Markets Corp., Dain Rauscher
Incorporated and Tucker Anthony Incorporated are serving as Representatives
(the "Representatives"), have severally agreed to purchase, and Myriad
Genetics has agreed to sell to the Underwriters, severally, the respective
numbers of shares of common stock set forth opposite the names of such
Underwriters below:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated................................
CIBC World Markets Corp. ........................................
Dain Rauscher Incorporated.......................................
Tucker Anthony Incorporated......................................
---------
Total.......................................................... 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of common stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of common stock offered hereby (other than
those covered by the Underwriters' over-allotment option described below) if
any such shares are taken.
The Underwriters initially propose to offer part of the shares of common
stock offered hereby directly to the public at the public offering price set
forth on the cover page hereof and part to certain dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. Any Underwriter may allow, and such dealers may reallow, a
concession not in excess of $ per share to other Underwriters or to certain
dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
Representatives.
Pursuant to the Underwriting Agreement, Myriad Genetics has granted to the
Underwriters an option, exercisable for 30 days from the date of this
prospectus, to purchase up to an aggregate of 300,000 additional shares of
common stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The Underwriters may exercise
such option solely for the purpose of covering over-allotments, if any,
incurred in connection with the offering of the shares of common stock offered
hereby. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
of common stock set forth next to the names of all Underwriters in the
preceding table.
Myriad Genetics and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
Myriad Genetics has agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated, it will not offer, sell, contract to sell,
or otherwise dispose of any shares of common stock, for a period of 90 days
after the date of this prospectus, other than any shares of common stock
issued upon the exercise of options or warrants, rights to acquire shares
issued pursuant to equipment or lease financing activities in the ordinary
course of Myriad Genetics' business. In addition, in connection with the
offering, Myriad Genetics (subject to certain exceptions) and its executive
officers and directors who will beneficially own an aggregate of approximately
shares of common stock after the offering, have agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, they will not (a) offer, pledge,
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<PAGE>
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock (whether such shares or any such securities are then owned by
such person or are thereafter acquired directly from Myriad Genetics) or (b)
enter into any swap or similar arrangement that transfers, in whole or in
part, the economic risk of ownership of the common stock, whether any such
transaction described in clause (a) or (b) of this paragraph is to be settled
by delivery of such common stock or such other securities, in cash or
otherwise, for a period of 90 days after the date of this prospectus, other
than (i) transactions relating to shares of common stock or other securities
acquired in open market transactions after the completion of this offering or
(ii) with the prior written consent of Morgan Stanley & Co. Incorporated.
In order to facilitate the offering of the common stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the Underwriters may bid for and purchase
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
The Underwriters and dealers may engage in passive market making
transactions in the common stock in accordance with Rule 103 of Regulation M
promulgated by the Commission. In general, a passive market maker may not bid
for, or purchase, the common stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive
market maker generally may not exceed 30% of its average daily trading volume
in the common stock during a specified two month prior period, or 200 shares,
whichever is greater. A passive market maker must identify passive market
making bids as such on the Nasdaq electronic inter-dealer reporting system.
Passive market making may stabilize or maintain the market price of the common
stock above independent market levels. Underwriters and dealers are not
required to engage in passive market making, and may end passive market making
activities at any time.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Myriad Genetics, Inc. by Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. of Boston, Massachusetts. Certain attorneys at Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C. beneficially own an aggregate of 1,500 shares
of common stock of Myriad Genetics, Inc. Certain legal matters will be passed
upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California.
48
<PAGE>
EXPERTS
The consolidated financial statements of Myriad Genetics, Inc. as of June
30, 1999 and 1998, and for each of the years in the three-year period ended
June 30, 1999 have been incorporated by reference and included herein and in
the registration statement from Myriad Genetic's Annual Report on Form 10-K
for the year ended June 30, 1999 in reliance on the report of KPMG LLP,
independent auditors, incorporated by reference and included herein, and upon
the authority of said firm, as experts in accounting and auditing.
WHERE TO FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any document we file at the public reference facilities of the SEC
located at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the SEC's public reference facilities by
calling the SEC at 1-800-SEC-0330. You can also access copies of such material
electronically on the SEC's home page on the World Wide Web at
http://www.sec.gov. Reports, proxy statements and other information concerning
us is also available for inspection at the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C., 20006.
This prospectus is part of a Registration Statement on Form S-3
(Registration No. 333-31734) we filed with the SEC. The SEC permits us to
"incorporate by reference" the information that we file with them, which means
that we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part
of this prospectus, and information that we file with the SEC after the date
of this prospectus will automatically update and supersede this information.
We incorporate by reference the following documents filed by us with the SEC
(File No. 0-26642). We also incorporate by reference any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, after the date of this prospectus until the termination
of this offering.
1. Annual Report on Form 10-K for the year ended June 30, 1999, filed on
September 28, 1999;
2. Definitive Proxy Statement, filed on October 15, 1999;
3. Quarterly Report on Form 10-Q, for the quarter ended September 30, 1999,
filed on November 15, 1999;
4. Quarterly Report on Form 10-Q, for the quarter ended December 31, 1999,
filed on February 14, 2000; and
5. The description of the common stock contained in our Registration
Statement on Form 8-A filed with the SEC on August 17, 1995, including any
amendments or reports filed for the purpose of updating such description.
If you request a copy of any or all of the documents incorporated by
reference, then we will send to you the copies requested at no charge.
However, we will not send exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. You should direct
requests for such copies to the Director of Corporate Communications, Myriad
Genetics, Inc., at our offices located at 320 Wakara Way, Salt Lake City, UT
84108, (801) 584-3600.
49
<PAGE>
MYRIAD GENETICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1999 (unaudited), and as
of June 30, 1999 and June 30, 1998...................................... F-3
Consolidated Statements of Operations for the six month periods ended
December 31, 1999 (unaudited) and December 31, 1998 (unaudited), and for
the years ended June 30, 1999, June 30, 1998 and June 30, 1997.......... F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Loss
for the six month period ended December 31, 1999 (unaudited), and for
the years ended June 30, 1999, June 30, 1998 and June 30, 1997.......... F-5
Consolidated Statements of Cash Flows for the six month periods ended
December 31, 1999 (unaudited) and December 31, 1998 (unaudited), and for
the years ended June 30, 1999, June 30, 1998 and June 30, 1997.......... F-7
Notes to Consolidated Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Myriad Genetics, Inc.:
We have audited the accompanying consolidated balance sheets of Myriad
Genetics, Inc. and subsidiaries, as of June 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss, and cash flows for each of the years in the three-year period ended June
30, 1999. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Myriad
Genetics, Inc. and subsidiaries as of June 30, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-
year period ended June 30, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
Salt Lake City, Utah
September 8, 1999
F-2
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
December 31, ------------------------
1999 1999 1998
------------ ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............ $ 27,679,996 5,404,944 14,595,034
Marketable investment securities
(note 2)............................ 16,940,184 4,477,138 16,267,156
Prepaid expenses..................... 911,778 622,700 266,679
Trade accounts receivable, less
allowance for doubtful accounts of
$108,847 at December 31, 1999
(unaudited), $73,439 at June 30,
1999 and $66,000 at June 30, 1998... 1,798,478 1,322,950 471,327
Other receivables.................... 113,449 1,855,696 117,053
------------ ----------- -----------
Total current assets............... 47,443,885 13,683,428 31,717,249
------------ ----------- -----------
Equipment and leasehold improvements:
Equipment............................ 14,129,785 13,351,229 16,049,721
Leasehold improvements............... 3,951,776 3,520,253 2,288,241
------------ ----------- -----------
18,081,561 16,871,482 18,337,962
Less accumulated depreciation and
amortization........................ 8,242,006 6,871,981 5,902,926
------------ ----------- -----------
Net equipment and leasehold
improvements...................... 9,839,555 9,999,501 12,435,036
Long-term marketable investment
securities (note 2)................... 15,422,327 29,044,377 22,247,303
Other assets........................... 1,156,408 823,634 992,384
------------ ----------- -----------
$ 73,862,175 53,550,940 67,391,972
============ =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable..................... $ 3,426,068 2,917,810 5,121,279
Accrued liabilities.................. 2,317,545 1,754,634 1,938,722
Deferred revenue..................... 12,629,422 662,760 2,722,115
Current portion of notes payable
(note 3)............................ -- -- 128,843
------------ ----------- -----------
18,373,035 5,335,204 9,910,959
------------ ----------- -----------
Commitments and contingencies (notes 4,
7, and 9)
Stockholders' equity (notes 2, 5, 6,
and 10):
Preferred stock, $0.01 par value.
Authorized 5,000,000 shares; No
shares issued and outstanding....... -- -- --
Common stock, $0.01 par value.
Authorized 15,000,000 shares; issued
and outstanding 10,284,349 at
December 31, 1999 (unaudited),
9,428,732 at June 30, 1999, and
9,337,501 shares at June 30, 1998... 102,843 94,287 93,375
Additional paid-in capital........... 103,592,079 92,377,949 91,907,034
Accumulated other comprehensive
income (loss)....................... (85,715) (68,846) 1,477
Deferred compensation................ (111,945) (247,774) (576,446)
Accumulated deficit.................. (48,008,122) (43,939,880) (33,944,427)
------------ ----------- -----------
Stockholders' equity................. 55,489,140 48,215,736 57,481,013
------------ ----------- -----------
$ 73,862,175 53,550,940 67,391,972
============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the six months ended
December 31, Years ended June 30,
-------------------------- -------------------------------------
1999 1998 1999 1998 1997
------------ ------------ ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Research revenue........ $ 11,503,517 9,183,028 20,093,057 20,999,598 14,732,054
Molecular diagnostic
revenue................ 3,638,157 2,124,429 5,220,349 2,210,983 504,045
------------ ----------- ----------- ----------- -----------
Total revenues...... 15,141,674 11,307,457 25,313,406 23,210,581 15,236,099
Costs and expenses:
Molecular diagnostic
cost of revenue...... 1,792,087 1,381,808 3,066,354 1,391,368 340,461
Research and
development expense.. 11,992,270 11,499,295 23,452,220 23,002,340 18,580,229
Selling, general, and
administrative
expenses............. 6,375,930 5,315,717 11,105,520 11,807,023 8,755,217
------------ ----------- ----------- ----------- -----------
Total cost and
expenses........... 20,160,287 18,196,820 37,624,094 36,200,731 27,675,907
------------ ----------- ----------- ----------- -----------
Operating loss.......... (5,018,613) (6,889,363) (12,310,688) (12,990,150) (12,439,808)
Other income (expense):
Interest income....... 1,310,453 1,275,690 2,348,827 3,223,683 3,414,379
Interest expense...... -- (6,278) (6,278) (32,681) (66,661)
Other................. (360,082) 67,190 (27,314) 2,113 (114,190)
------------ ----------- ----------- ----------- -----------
950,371 1,336,602 2,315,235 3,193,115 3,233,528
------------ ----------- ----------- ----------- -----------
Net loss................ $ (4,068,242) (5,552,761) (9,995,453) (9,797,035) (9,206,280)
============ =========== =========== =========== ===========
Basic and diluted loss
per common share....... $ (0.42) (0.59) (1.06) (1.05) (1.03)
============ =========== =========== =========== ===========
Basic and diluted
weighted average shares
outstanding............ 9,778,319 9,367,393 9,391,122 9,289,481 8,903,918
============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS
Years ended June 30, 1999, 1998, and 1997
and the six months ended December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Accumulated
other
Common stock Additional comprehensive
----------------- paid-in income Deferred Accumulated Comprehensive Stockholders'
Shares Amount capital (loss) compensation deficit income (loss) equity
--------- ------- ---------- ------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30,
1996.................. 8,702,215 $87,022 87,015,215 (67,865) (1,907,513) (14,941,112) -- 70,185,747
Issuance of Common
stock for Cash upon
exercise of options
and warrants.......... 386,007 3,860 625,802 -- -- -- -- 629,662
Issuance of common
Stock for cash........ 4,665 47 99,722 -- -- -- -- 99,769
Issuance of common
Stock for cash, net of
Issuance costs of
$133,703 (note 9)..... 129,665 1,297 3,865,000 -- -- -- -- 3,866,297
Amortization of
Deferred
compensation.......... -- -- -- -- 530,533 -- -- 530,533
Net loss............... -- -- -- -- -- (9,206,280) (9,206,280) (9,206,280)
Unrealized gains on
marketable Investment
securities:
Unrealized holding
gains arising during
period............... -- -- -- -- -- -- 27,819 --
Less: classification
adjustment for losses
included in net
loss................. -- -- -- -- -- -- 45,428 --
----------
Other comprehensive
income................ -- -- -- 73,247 -- -- 73,247 73,247
----------
Comprehensive loss..... -- -- -- -- -- -- (9,133,033) --
--------- ------- ---------- ------- ---------- ----------- ========== ----------
Balances at June 30,
1997.................. 9,222,552 $92,226 91,605,739 5,382 (1,376,980) (24,147,392) 66,178,975
Issuance of common
stock for cash upon
exercise of options
and warrants.......... 105,704 1,057 393,128 -- -- -- 394,185
Issuance of common
stock for cash........ 9,245 92 178,167 -- -- -- 178,259
Amortization of
deferred
compensation.......... -- -- -- -- 530,534 -- 530,534
Forfeiture of deferred
compensation.......... -- -- (270,000) -- 270,000 -- --
Net loss............... -- -- -- -- -- (9,797,035) (9,797,035) (9,797,035)
Unrealized gains
(losses) on marketable
investment securities:
Unrealized holding
gains arising during
period............... -- -- -- -- -- -- 13,064 --
Less: classification
adjustment for gains
included in net
loss................. -- -- -- -- -- -- (16,969) --
----------
Other comprehensive
loss.................. -- -- -- (3,905) -- -- (3,905) (3,905)
----------
Comprehensive loss..... -- -- -- -- -- -- (9,800,940) --
--------- ------- ---------- ------- ---------- ----------- ========== ----------
Balance at June 30,
1998.................. 9,337,501 $93,375 91,907,034 1,477 (576,446) (33,944,427) 57,481,013
Issuance of Common
stock for cash upon
exercise of options
and warrants.......... 68,827 688 365,607 -- -- -- 366,295
Issuance of common
stock for cash........ 22,404 224 203,370 -- -- -- 203,594
</TABLE>
F-5
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS (Continued)
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
AND THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
other
Common stock Additional comprehensive
------------------- paid-in income Deferred Accumulated Comprehensive Stockholders'
Shares Amount capital (loss) compensation deficit income (loss) equity
---------- -------- ----------- ------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amortization of
deferred
compensation....... -- -- -- -- 230,610 -- 230,610
Forfeiture of
deferred
compensation....... -- -- (98,062) -- 98,062 -- --
Net loss............ -- -- -- -- -- (9,995,453) (9,995,453) (9,995,453)
Unrealized losses on
marketable
Investment
securities:
Unrealized holding
losses arising
during period..... -- -- -- -- -- -- (115,287) --
Less:
classification
adjustment for
losses included in
net loss.......... -- -- -- -- -- -- 44,964 --
-----------
Other comprehensive
loss............... -- -- -- (70,323) -- -- (70,323) (70,323)
-----------
Comprehensive loss.. -- -- -- -- -- -- (10,065,776) --
---------- -------- ----------- ------- -------- ----------- =========== ----------
Balances at June 30,
1999............... 9,428,732 $ 94,287 92,377,949 (68,846) (247,774) (43,939,880) 48,215,736
Issuance of common
stock for cash upon
exercise of options
and warrants
(unaudited)........ 184,451 1,844 1,646,327 -- -- -- 1,648,171
Issuance of common
stock for cash, net
of issuance costs
of $526,287
(unaudited)........ 671,166 6,712 9,567,803 -- -- -- 9,574,515
Amortization of
deferred
compensation
(unaudited)........ -- -- -- -- 135,829 -- 135,829
Net loss for the six
months ended
December 31, 1999
(unaudited)........ -- -- -- -- -- (4,068,242) (4,068,242) (4,068,242)
Unrealized losses on
marketable
investment
securities:
Unrealized holding
losses arising
during period
(unaudited)....... -- -- -- -- -- -- (63,913) --
Less:
classification
adjustment for
losses included in
net loss
(unaudited)....... -- -- -- -- -- -- 47,044 --
-----------
Other comprehensive
loss (unaudited)... -- -- -- (16,869) -- -- (16,869) (16,869)
-----------
Comprehensive loss
(unaudited)........ -- -- -- -- -- -- (4,085,111) --
---------- -------- ----------- ------- -------- ----------- =========== ----------
Balance at December
31, 1999
(unaudited)........ 10,284,349 $102,843 103,592,079 (85,715) (111,945) (48,008,122) 55,489,140
========== ======== =========== ======= ======== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
December 31, Years ended June 30,
--------------------------- ----------------------------------------
1999 1998 1999 1998 1997
------------- ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $ (4,068,242) (5,552,761) (9,995,453) (9,797,035) (9,206,280)
Adjustments to
reconcile net loss to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization......... 1,565,663 1,750,082 3,223,779 3,272,936 2,505,479
Loss (gain) on sale of
equipment............ 313,038 91,993 (17,650) 14,856 68,762
Loss (gain) on sale of
investment
securities........... 47,044 (79,592) 44,964 (16,969) 45,428
Bad debt expense...... 35,410 21,000 7,439 66,000 --
Changes in operating
assets:
Trade receivables.... (510,936) (333,159) (859,062) (354,161) (183,166)
Prepaid expenses..... (289,079) (455,370) (356,021) 179,581 (357,837)
Other receivables.... 1,742,247 36,800 (1,738,643) 177,914 (215,901)
Other assets......... (332,774) 84,375 -- (941,405) (9,283)
Accounts payable and
accrued
liabilities......... 1,071,169 (2,146,413) (2,387,557) 3,346,712 733,213
Deferred revenue..... 11,966,662 (987,429) (2,059,355) (2,977,312) 38,051
------------- ------------ ------------ ------------ ------------
Net cash provided by
(used in) operating
activities......... 11,540,202 (7,570,474) (14,137,559) (7,028,883) (6,581,534)
------------- ------------ ------------ ------------ ------------
Cash flows from
investing activities:
Proceeds from sale of
equipment............ -- 3,554,379 3,604,579 4,133 68,424
Capital expenditures.. (1,582,927) (1,897,878) (3,975,813) (3,185,906) (4,727,121)
Purchase of investment
securities held-to-
maturity............. (2,126,628) (2,303,472) (17,462,407) (117,237,699) (111,098,966)
Maturities of
investment securities
held-to-maturity..... 4,647,118 11,319,431 20,001,804 117,100,138 127,713,265
Purchase of investment
securities available-
for-sale............. (177,681,140) (165,642,690) (274,244,194) (723,380,886) (471,745,972)
Sale of investment
securities available-
for-sale............. 176,255,741 164,997,319 276,582,454 724,018,727 472,924,917
------------- ------------ ------------ ------------ ------------
Net cash provided by
(used in) investing
activities......... (487,836) 10,027,089 4,506,423 (2,681,493) 13,134,547
------------- ------------ ------------ ------------ ------------
Cash flows from
financing activities:
Payments of notes
payable.............. -- (128,843) (128,843) (342,797) (308,658)
Net proceeds from
issuance of common
stock................ 11,222,686 380,039 569,889 572,444 4,595,728
------------- ------------ ------------ ------------ ------------
Net cash provided by
financing
activities......... 11,222,686 251,196 441,046 229,647 4,287,070
------------- ------------ ------------ ------------ ------------
Net increase (decrease)
in cash and cash
equivalents........... 22,275,052 2,707,811 (9,190,090) (9,480,729) 10,840,083
Cash and cash
equivalents at
beginning of period... 5,404,944 14,595,034 14,595,034 24,075,763 13,235,680
------------- ------------ ------------ ------------ ------------
Cash and cash
equivalents at end of
period................ $ 27,679,996 17,302,845 5,404,944 14,595,034 24,075,763
============= ============ ============ ============ ============
Supplemental disclosure
of cash flow
information--
Interest paid......... $ -- 6,278 6,278 32,681 66,678
Supplemental
disclosures of noncash
investing and
financing activities:
Decrease in additional
paid-in capital as a
result of forfeitures
of stock options..... $ -- (98,062) (98,062) (270,000) --
Fair value adjustment
on marketable
investment securities
(charged) credited to
stockholders'
equity............... (16,869) (36,007) (70,323) (3,905) 73,247
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND BUSINESS DESCRIPTION
Myriad Genetics, Inc. (the "Company") is a genomics company focused on the
development of therapeutic and diagnostic products based on the discovery of
major common human disease genes and their biological pathways. The Company
utilizes analyses of extensive family histories and genetic material, as well
as a number of proprietary technologies, to identify inherited gene mutations
which increase the risk to individuals of developing these diseases. The
discovery of disease-predisposing genes and their biochemical pathways
provides the Company with three significant commercial opportunities: (i) the
development and marketing of molecular diagnostic and information services,
(ii) the marketing of subscriptions to the ProNet(R) database of protein
interactions, and (iii) the development of therapeutic products for the
treatment and prevention of major diseases associated with these genes and
their biochemical pathways. The Company's operations are located in Salt Lake
City, Utah.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements presented herein include the accounts
of Myriad Genetics, Inc., and its wholly owned subsidiaries Myriad Genetic
Laboratories, Inc., Myriad Pharmaceuticals, Inc. and Myriad Financial, Inc.
All intercompany amounts have been eliminated in consolidation.
(c) CASH EQUIVALENTS
Cash equivalents of $1,595,446 and $9,979,106 at June 30, 1999 and 1998,
respectively, consist of short-term securities. The Company considers all
highly liquid debt instruments with maturities at date of purchase of 90 days
or less to be cash equivalents.
(d) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost. Depreciation and
amortization are computed using the straight-line method based on the lesser
of estimated useful lives of the related assets or lease terms. Equipment and
leasehold improvements have depreciable lives which range from five to seven
years.
(e) INCOME TAXES
Income taxes are recorded using the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
(f) REVENUE RECOGNITION
The Company recognizes revenue from research contracts in accordance with
the terms of the contract and the related research activities undertaken. This
includes recognizing research revenue from research contracts over time as
research is performed using the percentage-of-completion method based on costs
incurred relative
F-8
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1999, 1998, and 1997
(Information as of December 31, 1999 and for the six months ended December 31,
1999 and 1998 is unaudited)
to total estimated contract costs. Payments to the Company under these
agreements cover the Company's direct costs and an allocation for overhead and
general and administrative expenses. Payments received on uncompleted long-
term research contracts may be greater than or less than incurred costs and
estimated earnings and have been recorded as other receivables or deferred
revenues in the accompanying consolidated balance sheets. Molecular diagnostic
revenue is recognized upon completion of the test and communication of
results. Payments received in advance of molecular diagnostic work performed
are recorded as deferred revenue.
(g) Net Loss Per Common and Common Equivalent Share
Loss per common share is computed based on the weighted-average number of
common shares and, as appropriate, dilutive potential common shares
outstanding during the period. Stock options are considered to be potential
common shares.
Basic loss per common share is the amount of loss for the period available
to each share of common stock outstanding during the reporting period. Diluted
loss per share is the amount of loss for the period available to each share of
common stock outstanding during the reporting period and to each share that
would have been outstanding assuming the issuance of common shares for all
dilutive potential common shares outstanding during the period.
In calculating loss per common and common-equivalent share the net loss and
the weighted average common and common-equivalent shares outstanding were the
same for both the basic and diluted calculation.
For the years ended June 30, 1999, 1998, and 1997, there were antidilutive
potential common shares of 2,072,165, 2,068,720, and 1,390,917, respectively.
Accordingly, these potential common shares were not included in the
computation of diluted earnings per share, for the years presented, but may be
dilutive to future basic and diluted earnings per share.
(h) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(i) Marketable Investment Securities
The Company accounts for marketable investment securities by grouping them
into one of two categories: held-to-maturity or available-for-sale. Held-to-
maturity securities are those securities that the Company has the ability and
intent to hold until maturity. All other securities are classified as
available-for-sale.
Held-to-maturity securities are recorded at amortized cost, adjusted for
the amortization or accretion of premiums or discounts. Available-for-sale
securities are recorded at fair value. Unrealized holdings gains and losses,
net of the related tax effect, on available-for-sale securities are excluded
from earnings and are reported as a separate component of stockholders' equity
until realized.
Gains and losses on investment security transactions are reported on the
specific-identification method. Dividend and interest income are recognized
when earned. A decline in the market value of any available-for-sale or held-
to-maturity security below cost that is deemed other than temporary results in
a charge to earnings and
F-9
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 iS UNAUDITED)
establishes a new-cost basis for the security. Premiums and discounts are
amortized or accreted over the life of the related held-to-maturity security
as an adjustment to yield using the effective-interest method.
(j) FAIR VALUE DISCLOSURE
At June 30, 1999, the book value of the Company's financial instruments
approximates fair value except as disclosed in note 2.
(k) STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123). SFAS 123 permits entities to adopt a fair value based method of
accounting for stock options or similar equity instruments. However, it also
allows an entity to continue measuring compensation cost for stock based
compensation using the intrinsic-value method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees (APB 25). The Company has elected to continue to apply the
provisions of APB 25 and provide pro forma disclosures required by SFAS 123.
(l) OTHER ASSETS
Other assets are comprised of a purchased customer list, patent, and
security deposits. The customer list and patent were acquired in fiscal year
1998 and are stated at cost. Amortization of the customer list and patents are
computed using the straight-line method over the estimated useful lives of the
related assets, which range from four to nine years. Accumulated amortization
related to the patent and customer list totaled $189,844 and $21,094 at June
30, 1999 and 1998, respectively. On an ongoing basis, management reviews the
valuation of the customer list and patent to determine possible impairment by
comparing the carrying value to undiscounted estimated future cash flows from
the related assets.
(m) OTHER RECEIVABLES
At June 30, 1999, other receivables are comprised of costs in excess of
research payments received of $1,682,420 and nontrade receivables of $173,276.
At June 30, 1998 the entire balance was comprised of nontrade receivables.
(n) ACCRUED LIABILITIES
At June 30, 1999, accrued liabilities are comprised of accrued payroll of
$690,221, accrued vacation of $498,670, and other accrued liabilities of
$565,743. At June 30, 1998, the balance was comprised of accrued payroll of
$615,664, accrued vacation of $396,296, and other accrued liabilities of
$926,762.
F-10
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
(2) MARKETABLE INVESTMENT SECURITIES
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and fair value for available-for-sale and held-to-maturity
securities by major security type and class of security at June 30, 1999 and
1998, were as follows:
<TABLE>
<CAPTION>
Gross Gross
unrealized unrealized
Amortized holding holding
cost gains losses Fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
At June 30, 1999
Held-to-maturity:
U.S. government
obligations............ $15,079,412 -- (153,713) 14,925,699
Corporate bonds and
notes.................. 3,843,675 92 (1,266) 3,842,501
----------- ----- -------- ----------
$18,923,087 92 (154,979) 18,768,200
=========== ===== ======== ==========
Available-for-sale:
U.S. government
obligations............ $ 6,767,578 -- (20,233) 6,747,345
Mortgage-backed
securities............. 123,104 -- (607) 122,497
Corporate bonds and
notes.................. 7,590,354 561 (48,567) 7,542,348
Certificate of deposit.. 186,238 -- -- 186,238
----------- ----- -------- ----------
$14,667,274 561 (69,407) 14,598,428
=========== ===== ======== ==========
At June 30, 1998
Held-to-maturity:
U.S. government
obligations............ $13,605,683 1,140 (21,591) 13,585,232
Corporate bonds and
notes.................. 7,856,801 910 (10,113) 7,847,598
----------- ----- -------- ----------
$21,462,484 2,050 (31,704) 21,432,830
=========== ===== ======== ==========
Available-for-sale:
U.S. government
obligations............ $ 3,806,744 1,460 -- 3,808,204
Domestic bank
obligations............ 1,009,885 740 -- 1,010,625
Foreign bank
obligations............ 7,021,725 1,469 (602) 7,022,592
Mortgage-backed
securities............. 979,672 -- (3,577) 976,095
Corporate bonds and
notes.................. 4,050,440 3,157 (1,170) 4,052,427
Certificate of deposit.. 182,032 -- -- 182,032
----------- ----- -------- ----------
$17,050,498 6,826 (5,349) 17,051,975
=========== ===== ======== ==========
</TABLE>
F-11
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
Maturities of debt securities classified as available-for-sale and held-to-
maturity are as follows at June 30, 1999. (Maturities of mortgage backed
securities have been presented based upon estimated cash flows assuming no
change in the current interest rate environment):
<TABLE>
<CAPTION>
Amortized Fair
cost value
----------- ----------
<S> <C> <C>
Held-to-maturity:
Due within one year............................... $ 3,843,675 3,842,501
Due after one year through five years............. 15,079,412 14,925,699
----------- ----------
$18,923,087 18,768,200
=========== ==========
Available-for-sale:
Due within one year............................... $ 634,009 633,463
Due after one year through five years............. 12,138,793 12,077,243
Due after 10 years................................ 1,894,472 1,887,722
----------- ----------
$14,667,274 14,598,428
=========== ==========
</TABLE>
(3) NOTES PAYABLE
During 1995, the Company entered into equipment financing agreements with
two commercial financial institutions. Under the agreements, the Company
borrowed $1,232,292, at an interest rate of approximately 10.5%. Monthly
payments were made over 48 months. The term of the financing agreement ended
during fiscal 1999.
(4) LEASES
The Company leases office and laboratory space and equipment under three
noncancelable operating leases. Future minimum lease payments under these
leases as of June 30, 1999 are as follows:
<TABLE>
<S> <C>
Fiscal year ending:
2000......................................................... $ 2,851,580
2001......................................................... 2,818,308
2002......................................................... 2,818,308
2003......................................................... 2,322,600
2004......................................................... 1,826,891
Thereafter................................................... 6,582,136
-----------
$19,219,823
===========
</TABLE>
Rental expense was $1,855,679 in 1999, $1,282,308 in 1998, and $1,014,931
in 1997.
The Company sold certain fixed assets for $3,551,784 in December of 1998.
The assets were leased back from the purchaser over a period of four years.
There was no gain or loss on this transaction and the resulting lease is being
accounted for as an operating lease.
(5) STOCK-BASED COMPENSATION
Prior to 1992, the Company granted nonqualified stock options to directors,
employees, and other key individuals providing services to the Company. In
1992, the Company adopted the "1992 Employee, Director,
F-12
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
and Consultant Fixed Stock Option Plan" and has reserved 2,000,000 shares of
common stock for issuance upon the exercise of options that the Company plans
to grant from time to time under this plan. The exercise price of options is
equivalent to the estimated fair market value of the stock at the date of
grant. The number of shares, terms, and exercise period are determined by the
Board of Directors on an option-by-option basis. Options generally vest
ratably over five years and expire ten years from date of grant. As of June
30, 1999, 17,373 shares are reserved for future grant under the 1992 plan. For
financial statement presentation purposes, the Company has recorded as
deferred compensation the excess of the deemed value of the common stock at
the date of grant over the exercise price. The deferred compensation will be
amortized ratably over the vesting period. Amortization expense was $230,610,
$530,534, and $530,533 for the years ended June 30, 1999, 1998, and 1997,
respectively.
A summary of activity is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
Weighted- Weighted- Weighted-
Number average Number average Number average
of exercise of exercise of exercise
shares price shares price shares price
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year...... 1,642,477 $18.47 1,334,707 $17.08 1,288,925 $ 8.48
Plus options granted.... 1,077,593 10.62 492,600 19.82 486,156 28.82
Less:
Options exercised..... 68,827 6.27 81,740 3.91 373,329 1.69
Options canceled or
expired.............. 696,452 23.95 103,090 18.67 67,045 18.17
--------- --------- ---------
Options outstanding at
end of year............ 1,954,791 $12.64 1,642,477 $18.47 1,334,707 $17.08
========= ========= =========
Options exercisable at
end of year............ 722,480 $11.33 582,934 $12.24 438,784 $ 6.84
Weighted-average fair
value of options
granted during the
year................... 6.00 12.01 19.04
</TABLE>
The following table summarizes information about fixed stock options
outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------- ---------------------
Number Weighted- Number
outstanding average Weighted- exercisable Weighted-
at remaining average at average
June 30, contractual exercise June 30, exercise
Range of exercise prices 1999 life price 1999 price
------------------------ ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$.028--10.00............ 594,669 6.3 $ 6.25 364,517 $ 4.52
10.25--15.00........... 853,622 8.8 10.85 157,016 10.25
15.30--25.00........... 326,500 8.2 20.85 120,280 22.51
26.00--40.25........... 180,000 7.9 27.33 80,667 27.54
--------- -------
.028--40.25............ 1,954,791 7.8 12.64 722,480 11.33
========= =======
</TABLE>
F-13
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
The Company accounts for these plans under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for these
plans been determined consistent with SFAS 123, the Company's net loss and
loss per share would have been changed to the following pro forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net loss:
As reported........................... $ 9,995,453 $ 9,797,035 $ 9,206,280
Pro forma............................. 14,585,479 13,590,274 10,837,607
Basic and diluted loss per share:
As reported........................... 1.06 1.05 1.03
Pro forma............................. 1.55 1.46 1.22
</TABLE>
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1999, 1998, and 1997, respectively:
risk-free interest rates of 4.8%, 5.5%, and 6.4%; expected dividend yields of
0% for all years; expected lives of 4.3 years, 5.6 years, and 5.5 years; and
expected volatility of 69%, 63%, and 70%.
During the 1999 fiscal year, the Company issued options to purchase 223
shares of its wholly owned subsidiary Myriad Pharmaceuticals, Inc. to the
president of that subsidiary. The exercise price was equal to the fair market
value at the date of grant. The underlying shares are convertible to 75,024
shares of the Company's common stock.
On October 22, 1998, the Board of Directors authorized a stock option
repricing amendment. Option holders electing to participate in the repricing
of eligible options were required to surrender one option for every four
options held. Under the repricing amendment, 589,194 options were surrendered
in exchange for 441,962 repriced options. The exercise price of the repriced
options is equal to the fair market value of the Company's common stock on
October 22, 1998. Directors,' executive officers,' and outside consultants'
options were excluded from the repricing.
(6) COMMON AND PREFERRED STOCK
In February 1995, the Company completed a private placement wherein the
placement agents received warrants to purchase 31,572 shares of the Company's
common stock through the year 2002 at a price of $15.40 of which 26,243 are
still outstanding as of June 30, 1999.
(7) LICENSE AGREEMENTS
The Company has entered into license agreements with certain organizations
and academic institutions. The agreements granted the Company exclusive
worldwide licenses to certain technologies and patent applications that the
Company believes will be useful in the development of diagnostic and
therapeutic products. In consideration for the licenses, the Company has paid
$825,000, issued 28,416 shares of common stock, and granted 14,286 stock
options which were exercised in 1997. The Company is also required to make
future payments totaling $30,000 and may have to make milestone payments of
$965,000 upon achievement of certain events. The Company is also required to
make royalty payments based on net sales of products or services subject to a
minimum royalty upon commencement of sales.
F-14
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
(8) INCOME TAXES
There was no income tax expense in 1999, 1998, or 1997 due to net operating
losses. The difference between the expected tax benefit and the actual tax
benefit is primarily attributable to the effect of net operating losses being
offset by an increase in the Company's valuation allowance. The tax effects of
temporary differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities at June 30, 1999 and 1998, are
presented below:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.............. $ 21,288,000 16,737,000
Research and development credits.............. 604,000 905,000
Accrued expenses.............................. 408,000 366,000
Unearned revenue.............................. 247,000 1,015,000
------------ -----------
Total gross deferred tax assets............. 22,547,000 19,023,000
Less valuation allowance...................... (21,009,000) (17,545,000)
------------ -----------
Net deferred tax assets..................... 1,538,000 1,478,000
Deferred tax liability--equipment, principally
due to differences in depreciation............. 1,538,000 1,478,000
------------ -----------
Total gross deferred tax liability.......... 1,538,000 1,478,000
------------ -----------
Net deferred tax liability.................. $ -- --
============ ===========
</TABLE>
The net change in the total valuation allowance for the years ended June
30, 1999 and 1998, was an increase of $3,464,000 and $4,118,400, respectively.
Of the subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets as of June 30, 1999, approximately
$5,072,000 will be recognized as additional paid-in capital and the remainder
will be allocated as an income tax benefit to be reported in the consolidated
statement of operations.
At June 30, 1999, the Company had total tax net operating losses of
approximately $57,072,000 and total research and development credit
carryforwards of approximately $604,000, which can be carried forward to
reduce federal income taxes. If not utilized, the tax loss and research and
development credit carryforwards expire beginning in 2007.
Under the rules of the Tax Reform Act of 1986, the Company has undergone
changes of ownership and, consequently, the availability of the Company's net
operating loss and research and experimentation credit carryforwards in any
one year is limited. The maximum amount of carryforwards available in a given
year is limited to the product of the Company's value on the date of ownership
change and the federal long-term tax-exempt rate, plus any limited
carryforward not utilized in prior years. Management believes that these
limitations will not prevent these net operating losses from otherwise being
utilized.
(9) COLLABORATIVE RESEARCH AGREEMENTS
In October 1998, the Company entered into a five-year collaboration to
utilize the Company's protein interaction technology (ProNet(R)) for drug
discovery and development. Under the agreement, the Company will have an
option to co-promote all new therapeutic products in North America and receive
50% of the profits from North American sales of all new drug discovered with
ProNet(R). This collaboration may provide the Company
F-15
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
with licensing fees, subscription fees, option payments, and milestone fees of
up to $51,000,000. If the Company chooses to co-promote the drug as a 50%
partner, the Company may be required to pay funds to the collaboration partner
to establish equal ownership.
In November 1998, the Company entered into a 15 month collaboration to
utilize ProNet(R) for drug discovery and development. Under the agreement, the
collaborative partner has the option to extend the research term for an
additional twelve months. If the anticipated milestones, option payments,
license fees, and upfront payments are achieved, the value of the agreement
may reach up to $15,000,000. The Company will also receive royalties on
worldwide sales of drugs resulting from the discovery of novel targets found
through use of the ProNet(R) technology.
In April 1997, the Company entered into a three-year collaborative research
and license agreement and stock purchase agreement related to locating genes
associated with prostate cancer and other cancers. Under the agreements, the
Company may receive up to $60,000,000, excluding royalties. The Company
received an equity investment of $4,000,000 in exchange for common stock. The
Company also received a license fee of $4,000,000, which was recognized as
revenue in 1997. The Company will receive $3,000,000 in annual research
funding paid quarterly in advance for three years. The three-year term may be
extended for two additional one-year periods. The Company may also receive up
to $35,000,000 upon achievement of specified milestones, of which $2,500,000
was received and recognized as revenue in 1998. The Company retains all rights
to diagnostic products and genetic testing services using the developed
technology while licensing to the collaborator all rights to therapeutic
applications. The Company is entitled to receive royalties from sales of
therapeutic products made by the collaborator.
In September and April 1995, the Company entered into collaborative
research and license agreements and stock purchase agreements with two
pharmaceutical companies. In November 1997 and again in December 1998, the
Company expanded one of these agreements. Under the agreements, the Company
may receive up to $196,700,000. The Company received initial equity
investments of $17,000,000 in exchange for Series D and Series C preferred
stock, which were subsequently converted to common stock in conjunction with
the Company's initial public offering. The Company may also receive
$67,700,000 in annual research funding paid quarterly in advance for five
years of which $42,000,000 has been received. The Company may also receive up
to $112,300,000 upon achievement of specified milestones. The Company retains
all rights to diagnostic products and genetic testing services using the
developed technology while licensing to the collaborators all rights to
therapeutic applications. The Company is entitled to receive royalties from
sales of therapeutic products sold by the collaborators. The collaborations
may be terminated if a steering committee comprised of an equal number of
representatives of the Company and the collaborators determines that the
research programs will not achieve their objectives in all areas.
Because the Company has granted therapeutic rights to its collaborative
licensees as described above, the success of the programs is partially
dependent upon the efforts of the licensees. Each of the above agreements may
be terminated early. If any of the licenses terminates the above agreements,
such termination may have a material adverse effect on the Company's
operations.
(10) EMPLOYEE DEFERRED SAVINGS PLAN AND STOCK PURCHASE PLAN
The Company has a deferred savings plan which qualifies under Section
401(k) of the Internal Revenue Code. Substantially all of the Company's
employees are covered by the plan. The Company makes matching contributions of
50% of each employee's contribution with the employer's contribution not to
exceed four
F-16
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
percent of the employee's compensation. The Company's contribution to the plan
was $358,325, $273,851, and $205,866 in 1999, 1998, and 1997, respectively.
The Company has an Employee Stock Purchase Plan (the "Plan") which was
adopted and approved by the Board of Directors and stockholders in December
1994, under which a maximum of 200,000 shares of common stock may be purchased
by eligible employees. At June 30, 1999, 37,912 shares of common stock had
been purchased under the Plan. Because the discount allowed to employees under
the Plan approximates the Company's cost to issue equity instruments, the Plan
is not deemed to be compensatory and, therefore, is excluded from the pro
forma loss shown in note 5.
(11) SEGMENT AND RELATED INFORMATION
During fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information."
The Company's business units have been aggregated into two reportable
segments: (i) research and (ii) molecular diagnostics. The research segment is
focused on the discovery and sequencing of genes related to major common
diseases, marketing of subscriptions to proprietary database information, and
the development of therapeutic products for the treatment and prevention of
major diseases. The molecular diagnostics segment provides testing to
determine predisposition to common diseases.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (note 1). The Company evaluates
segment performance based on loss from operations before interest income and
expense and other income and expense. The Company's assets are not
identifiable by segment.
<TABLE>
<CAPTION>
Molecular
Research diagnostics Total
------------ ----------- -----------
<S> <C> <C> <C>
Year ended June 30, 1999:
Revenues......................... $ 20,093,057 5,220,349 25,313,406
Depreciation and amortization.... 2,262,503 961,276 3,223,779
Segment operating loss........... 6,315,948 5,994,740 12,310,688
Year ended June 30, 1998:
Revenues......................... 20,999,598 2,210,983 23,210,581
Depreciation and amortization.... 2,170,771 1,102,165 3,272,936
Segment operating loss........... 3,010,490 9,979,660 12,990,150
Year ended June 30, 1997:
Revenues......................... 14,732,054 504,045 15,236,099
Depreciation and amortization.... 1,623,018 882,461 2,505,479
Segment operating loss........... 3,196,058 9,243,750 12,439,808
<CAPTION>
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Total operating loss for reportable
segments.......................... $(12,310,688) (12,990,150) (12,439,808)
Unallocated amounts:
Interest income.................. 2,348,827 3,223,683 3,414,379
Interest expense................. (6,278) (32,681) (66,661)
Other............................ (27,314) 2,113 (114,190)
------------ ----------- -----------
Net loss........................... $ (9,995,453) (9,797,035) (9,206,280)
============ =========== ===========
</TABLE>
F-17
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
All of the Company's revenues are derived from research and testing
performed in the United States. Additionally, all of the Company's long lived
assets are located in the United States. All of the Company's research segment
revenue was generated from four collaborators in fiscal 1999 and three
collaborators in fiscal 1998 and 1997. Additionally, revenues from three of
the four collaborators was in excess of 10% of the Company's consolidated
revenues for each year presented. Costs in excess of research payments
totaling $1,682,420 at June 30, 1999, were due from one collaborator and have
been classified as an other receivable in the accompanying consolidated
balance sheet. No such concentrations of costs in excess of research payments
or receivables existed at June 30, 1998 and 1997.
(12) SUBSEQUENT EVENT
In July 1999, the Company entered into a $33,500,000 collaboration and
license agreement related to genomic research. Under the agreement, the
Company will receive an upfront payment of $11,500,000 and an additional
$22,000,000 over the two-year term. Upon completion of the project, the
Company will share any profits from the sale of the discovered information
equally with its collaborator.
(13) Note to Interim Financial Statements for the Six Months Ended December
31, 1999 and 1998 (Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and pursuant to the applicable
rules and regulations of the Securities and Exchange Commission. The unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of management,
contain all adjustments (consisting of normal and recurring accruals)
necessary to present fairly the financial information set forth therein in
accordance with generally accepted accounting principles. The unaudited
consolidated financial statements herein should be read in conjunction with
the Company's audited consolidated financial statements and notes thereto for
the fiscal year ended June 30, 1999. Operating results for the six month
period ended December 31, 1999 may not necessarily be indicative of the
results to be expected for any other interim period or for the full year.
LEASES
On October 25, 1999, the Company entered into a Master Lease Agreement with
Comdisco Laboratory and Scientific Group, a division of Comdisco Healthcare
Group, Inc., for a 48 month period. Under the Master Lease Agreement, the
Company is subject to certain financial covenants. As of December 31, 1999,
the Company was fully compliant with these covenants.
COLLABORATIVE RESEARCH AGREEMENTS
In December 1999, the Company entered into a 12 month collaboration with
Hoffmann-LaRoche Inc., to utilize the Company's protein interaction
technology, ProNet(R), for drug discovery and development in the area of
cardiovascular disease. This collaboration may provide the Company with
research funding, licensing fees, and milestone payments with a value of up to
$13,000,000.
F-18
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999, 1998, AND 1997
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE SIX MONTHS ENDED DECEMBER 31,
1999 AND 1998 IS UNAUDITED)
COMMON STOCK
In October 1999, the Company announced the expansion of its collaboration
with Schering AG, Germany to include research into the field of cardiovascular
disease. The Company also entered into a Securities Purchase Agreement and a
Standstill Agreement with Schering Berlin Venture Corporation ("Schering
Berlin") to sell to Schering Berlin 303,030 shares of the Company's
unregistered common stock for an aggregate purchase price of $5,000,000.
SEGMENT AND RELATED INFORMATION
The Company's business units have been aggregated into two reportable
segments: (i) research and (ii) molecular diagnostics. The research segment is
focused on the discovery and sequencing of genes related to major common
diseases, marketing of subscriptions to proprietary database information, and
the development of therapeutic products for the treatment and prevention of
major diseases. The molecular diagnostics segment provides testing to
determine predisposition to common diseases.
The accounting policies of the segments are the same as those described in
the basis of presentation (note 1). The Company evaluates segment performance
based on loss from operations before interest income and expense and other
income and expense. The Company's assets are not identifiable by segment.
<TABLE>
<CAPTION>
Molecular
Research diagnostics Total
----------- ----------- ----------
<S> <C> <C> <C>
Six months ended December 31, 1999:
Revenues............................... $11,503,517 3,638,157 15,141,674
Depreciation and amortization.......... 1,190,624 375,039 1,565,663
Segment operating loss................. 2,228,560 2,790,053 5,018,613
Six months ended December 31, 1998:
Revenues............................... 9,183,028 2,124,429 11,307,457
Depreciation and amortization.......... 1,344,242 405,840 1,750,082
Segment operating loss................. 3,742,649 3,146,714 6,889,363
</TABLE>
NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE
As of December 31, 1999 and December 31, 1998, there were antidilutive
potential common shares of 1,753,484 and 2,017,645, respectively. Accordingly,
these potential common shares were not included in the computation of diluted
loss per share for the periods presented, but may be dilutive to future basic
and diluted earnings per share.
RECENT ACCOUNTING PRONOUNCEMENTS
On December 3, 1999, the SEC staff issued Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements (SAB 101). SAB 101 summarizes
certain of the staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. The Company will
incorporate the guidance of SAB 101 in the first quarter of fiscal 2001.
Management has not yet determined the impact that SAB 101 will have on the
financial position or results of operations of the Company.
F-19
<PAGE>
[LOGO OF MYRIAD APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates (other than the SEC
and Nasdaq registration fees) of the expenses in connection with the issuance
and distribution of the shares of common stock being registered.
<TABLE>
<CAPTION>
Item Amount
---- --------
<S> <C>
SEC registration fee............................................... $ 89,069
Nasdaq additional listing fee...................................... 17,500
NASD filing fee.................................................... 30,500
Financial printing expenses........................................ 150,000
Legal fees and expenses............................................ 200,000
Accounting fees and expenses....................................... 70,000
Miscellaneous fees and expenses.................................... 42,931
--------
Total............................................................ $600,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may 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 he 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 or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he 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 cause to believe his conduct was
unlawful.
Section 145(b) provides that a Delaware corporation may 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 such
person acted in any of the capacities set forth above, against expenses
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may 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 in which such action
or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under such Section 145.
The Restated Certificate of Incorporation and Restated By-laws of the
Company provide for indemnification of the Company's directors and officers to
the fullest extent permitted by law. The Restated Certificate of
II-1
<PAGE>
Incorporation and the Restated By-laws also permit the Board of Directors to
authorize the Company to purchase and maintain insurance against any liability
asserted against any director, officer, employee or agent of the Company
arising out of his capacity as such. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors, officers,
or controlling persons of the Company pursuant to the Company's Restated
Certificate of Incorporation its Restated By-laws and the Delaware General
Corporation Law, the Company has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in such
Act and is therefore unenforceable.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
the Company's Restated Certificate of Incorporation provides that directors of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, relating to prohibited
dividends or distributions or the repurchase or redemption of stock or (iv)
for any transaction from which the director derives an improper personal
benefit. As a result of this provision, the Company and its stockholders may
be unable to obtain monetary damages from a director for breach of his or her
duty of care.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
(1.1) Form of Underwriting Agreement between the Company and Morgan Stanley
& Co. Incorporated
(4.1)** Restated Certificate of Incorporation of the Company
(4.2)** Restated By-laws of the Company
(4.3)+ Form of Common Stock Certificate
(5.1) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality
(23.1) Consent of KMPG LLP
(23.2) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
(24.1)* Power of Attorney (included on signature page)
</TABLE>
- --------
* Previously filed.
** Previously filed and incorporated herein by reference from the Company's
Form 10-Q for the period ending September 30, 1995.
+ Previously filed and incorporated herein by reference from the Company's
Registration Statement on Form S-1, File No. 33-95970.
Item 17. Undertakings.
(a) 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 any decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any derivation from the low end or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in
II-2
<PAGE>
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information 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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to the Commission
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference 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.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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 Act and will be governed by
the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement 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.
(d) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-3
<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 of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Salt Lake City, State of Utah on March 13, 2000.
Myriad Genetics, Inc.
/s/ Peter D. Meldrum
By: _________________________________
Peter D. Meldrum
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
/s/ Peter D. Meldrum President, Chief Executive March 13, 2000
______________________________________ Officer and Director
Peter D. Meldrum (principal executive
officer)
/s/ Jay M. Moyes Vice President of Finance March 13, 2000
______________________________________ and Chief Financial
Jay M. Moyes Officer (principal
financial and accounting
officer)
* Chairman of the Board March 13, 2000
______________________________________
John J. Horan
* Vice Chairman of the Board March 13, 2000
______________________________________
Walter Gilbert, Ph.D
* Chief Scientific Officer, March 13, 2000
______________________________________ Executive Vice President
Mark H. Skolnick, Ph.D. of Research and
Development and Director
* Director March 13, 2000
______________________________________
Arthur H. Hayes, Jr., M.D.
* Director March 13, 2000
______________________________________
Dale A. Stringfellow, Ph.D.
* Director March 13, 2000
______________________________________
Alan J. Main, Ph.D.
* Director March 13, 2000
______________________________________
Michael J. Berendt, Ph.D.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
* Director March 13, 2000
______________________________________
Linda S. Wilson, Ph.D.
*
--------------------------------
/s/ Jay M. Moyes
Jay M. Moyes
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
(1.1) Form of Underwriting Agreement between the Company and Morgan Stanley
& Co. Incorporated
(4.1)** Restated Certificate of Incorporation of the Company
(4.2)** Restated By-laws of the Company
(4.3)+ Form of Common Stock Certificate
(5.1) Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality
(23.1) Consent of KPMG LLP
(23.2) Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
(24.1)* Power of Attorney (included on signature page)
</TABLE>
- --------
* Previously filed.
** Previously filed and incorporated herein by reference from the Company's
Form 10-Q for the period ending September 30, 1995.
+ Previously filed and incorporated herein by reference from the Company's
Registration Statement on Form S-1, File No. 33-95970.
II-6
<PAGE>
EXHIBIT 1.1
2,000,000 Shares
MYRIAD GENETICS, INC.
Common Stock
$0.01 par value
UNDERWRITING AGREEMENT
___________, 2000
<PAGE>
________________, 2000
Morgan Stanley & Co. Incorporated
CIBC World Market Corp.
Tucker Anthony Cleary Gull
Dain Rauscher Wessels
as Representatives of the several Underwriters
named in Schedule I hereto
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Myriad Genetics, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters"), an aggregate of 2,000,000 shares of its common stock ($0.01 per
share par value) (the "Firm Shares").
The Company also proposes to issue and sell to the several Underwriters not
more than an additional 300,000 shares of its common stock ($0.01 per share par
value) (the "Additional Shares"), if and to the extent that you, as managers of
the offering, shall have determined to exercise, on behalf of the Underwriters,
the right to purchase such shares of common stock granted to the Underwriters in
Article II hereof. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares." The shares of common stock, ($0.01
per share par value), of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-______), including a
prospectus, relating to the Shares. The registration statement as amended at
the time it becomes effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Securities Act of 1933, as amended (the "Securities Act"), is
hereinafter referred to as the "Registration Statement;" the prospectus in the
form first used to confirm sales of Shares is hereinafter referred to as the
"Prospectus." If the Company has filed an abbreviated registration statement to
register a portion of the Shares pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement,") then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement. All references to the Registration Statement and the
Prospectus shall include all documents incorporated therein by reference.
I.
The Company represents and warrants to and agrees with each of the
Underwriters that:
<PAGE>
(a) The Registration Statement has become effective, no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(ii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply (as of the date of such amendment or
supplement, as applicable) in all material respects with the Securities Act and
the applicable rules and regulations of the Commission thereunder and (iii) the
Prospectus does not contain and, as amended or supplemented, if applicable, will
not contain (as of the date of such amendment or supplement, as applicable) any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations and
warranties set forth in this paragraph (b) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter, either directly or indirectly, through you expressly for use
therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its property and
to conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly by the Company, free
and clear of all liens, encumbrances, equities or claims.
(e) The Company and its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, taken as a whole, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to
2
<PAGE>
be made of such property by the Company and its subsidiaries, taken as a whole;
and any real property and buildings held under lease by the Company and its
subsidiaries are held by it under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries, taken as a whole, except as described in the Prospectus.
(f) The authorized capital stock of the Company conforms to the
description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of the
Shares to be sold by the Company have been duly authorized and are validly
issued, fully paid and non-assessable. Except as set forth in the Prospectus,
the Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations, other than non-material amounts of options granted pursuant to
the Company's 1992 Employee, Director and Consultant Stock Option Plan and share
purchase rights pursuant to the Company's Employee Stock Purchase Plan, each of
which plan is described in the Prospectus. All outstanding shares of capital
stock and options and other rights to acquire capital stock of the Company have
been issued in compliance with the registration and qualification provisions of
all applicable securities laws and were not issued in violation of any
preemptive rights, rights of first refusal or other similar rights.
(h) The Shares have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares will not be subject to any
preemptive rights, rights of first refusal or similar rights.
(i) This Agreement has been duly authorized, executed and delivered by the
Company.
(j) Each document, if any, filed or to be filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in the Prospectus complied or will comply when so filed in all
material respects with the Exchange Act and the applicable rules and regulations
of the Commission thereunder.
(k) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or bylaws of the
Company, or any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries, taken as
a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of or qualification with any governmental body
or agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.
3
<PAGE>
(l) There has not occurred any material adverse change, or any development
that could reasonably be expected to cause a material adverse change, in the
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereof, subsequent to
the date of this Agreement).
(m) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (ii) the Company and its subsidiaries have not purchased any of its
outstanding capital stock, other than pursuant to its right of repurchase for
unvested shares under the Company's and its subsidiaries' stock option plans,
nor declared, paid or otherwise made any dividend or distribution of any kind on
its capital stock other than ordinary and customary dividends; and (iii) there
has not been any material change in the capital stock, short-term debt or long-
term debt of the Company and its subsidiaries, except in each case as described
in or contemplated by the Prospectus.
(n) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(o) The Company and its subsidiaries have all necessary consents,
authorizations, approvals, orders, certificates and permits of and from, and
have made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, to own, lease, license and use their properties and assets and
to conduct their businesses in the manner described in the Prospectus, except to
the extent that the failure to obtain or file would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(p) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder.
(q) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
4
<PAGE>
(r) There is no owner of any securities of the Company who has any rights,
not effectively satisfied or waived, to require registration of any shares of
capital stock of the Company in connection with the filing of the Registration
Statement or the sale of any shares thereunder.
(s) The Company and its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which they are engaged; the
Company and its subsidiaries have not been refused any insurance coverage sought
or applied for; and the Company and its subsidiaries have no reason to believe
that they will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue their businesses at a cost that would not
materially and adversely affect the condition, financial or otherwise, or the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole, except as described in or contemplated by the Prospectus.
(t) The Company and its subsidiaries (i) are in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants (collectively,
"Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses, and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(u) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties) which would, singly or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(v) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the businesses now operated by them, and, except as described in
the Prospectus, the Company and its subsidiaries have not received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(w) The Company and its subsidiaries possess all consents, approvals,
orders, certificates, authorizations and permits issued by all appropriate
federal, state or foreign regulatory authorities
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necessary to conduct their businesses in the manner described in the Prospectus,
and the Company and its subsidiaries have not received any notice of proceedings
related to the revocation or modification of any such certificate, authorization
or permit which, singly or in the aggregate, if the subject of any unfavorable
decision, ruling or finding, would result in a material adverse change in the
condition, financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
(x) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) No material labor dispute with the employees of the Company and its
subsidiaries exist, except as described in the Prospectus, or, to the best
knowledge of the Company, is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company.
(z) Approximately ___________ shares outstanding as of the Effective Date
are subject to valid, binding and enforceable agreements (collectively, the
"Lock-up Agreements") that restrict the holders thereof from (1) offering,
pledging, selling, contracting to sell, selling any option or contract to
purchase, purchasing any option or contract to sell, granting any option, right,
or warrant for the purchase, lending or otherwise transferring or disposing of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, or (2) entering into any
swap or similar agreement that transfers, in whole or in part, the economic risk
of ownership of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, otherwise than (a) the sale of any Shares to
the Underwriters pursuant to this Agreement or (b) transactions relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the public offering, and further that such holders will
not make any demand for or exercise any right with respect to, the registration
of any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock prior to the expiration of 90 days after the date
of the Prospectus.
(aa) As of the date the Registration Statement becomes effective, the
Shares to be issued by the Company will be authorized for quotation on The
Nasdaq Stock Market upon official notice of issuance.
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(bb) The Company and its subsidiaries have complied with all provisions of
Section 517. 075, Florida Statutes (Chapter 92-198, Laws of Florida), relating
to issuers doing business with Cuba.
(cc) The Company has reviewed its operations to evaluate the extent to
which the business or operations of the Company were affected by the Year 2000
Problem (that is, any significant risk that computer hardware or software
applications used by the Company would not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000); as a result
of such review, (i) the Company has no reason to believe, and does not believe,
that (A) there are any issues related to the Company's address of the Year 2000
Problem that are of a character required to be described or referred to in the
Registration Statement or Prospectus which have not been accurately described in
the Registration Statement or Prospectus and (B) the Year 2000 Problem had or
will have a material adverse effect on the condition, financial or otherwise, or
on the earnings, business or operations of the Company or resulted or will
result in any material loss or interference with the business or operations of
the Company; and (ii) the Company reasonably believes, after inquiry as
described in the prospectus, that the suppliers, vendors, customers or other
material third parties used or served by the Company addressed the Year 2000
Problem in a timely manner, except to the extent that a failure to have
addressed the Year 2000 Problem by any supplier, vendor, customer or material
third party would not have a material adverse effect on the condition, financial
or otherwise, or on the earnings, business or operations of the Company.
II.
The Company hereby agrees to sell to the Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from the Company the respective number of Firm
Shares (subject to such adjustments to eliminate fractional shares as you may
determine) set forth in Schedule I hereto opposite the name of such Underwriter
at $_______ a share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company hereby agrees to
issue and sell to the Underwriters the Additional Shares, and the Underwriters
shall have a one-time right to purchase, severally and not jointly, up to
300,000 Additional Shares at the Purchase Price. If you, on behalf of the
Underwriters, elect to exercise such option, you shall so notify the Company in
writing not later than thirty (30) days after the date of this Agreement, which
notice shall specify the number of Additional Shares to be purchased by the
Underwriters and the date on which such shares are to be purchased. Such date
may be the same as the Closing Date (as defined below) but not earlier than the
Closing Date nor later than ten (10) business days after the date of such
notice. Additional Shares may be purchased as provided in Article IV hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. If any Additional Shares are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject
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to such adjustments to eliminate fractional shares as you may determine) that
bears the same proportion to the total number of Additional Shares to be
purchased as the number of Firm Shares set forth in Schedule I hereto opposite
the name of such Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 90 days after the date of the Prospectus, (1) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or similar arrangement that transfers,
in whole or in part, the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise, other than (i) the Shares to be sold hereunder and as otherwise
disclosed in the Prospectus (ii) any shares of Common Stock sold by the Company
upon the exercise of an option or warrant or other right to acquire shares of
the Company or the conversion of a security outstanding on the date hereof,
(iii) any options or other rights to purchase or acquire any shares of Common
Stock or any shares of Common Stock issuable upon exercise of such options or
other rights granted in connection with any compensatory arrangement with a
director, officer, employee, consultant or advisor, so long as each person or
entity acquiring shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock who, as of the date hereof, is
otherwise subject to a Lock-Up Agreement is subject to a Lock-up Agreement with
respect to such shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock.
III.
The Company is advised by you that the Underwriters propose to make a
public offering of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company
is further advised by you that the Shares are to be offered to the public
initially at $_______ per share (the "Public Offering Price") and to certain
dealers selected by you at a price that represents a concession not in excess of
$______ per share under the public offering price, and that any Underwriter may
allow, and such dealers may reallow, a concession, not in excess of $0.10 per
share, to any Underwriter or to certain other dealers.
IV.
Payment for the Firm Shares shall be made to the Company in Federal or
other funds immediately available in New York City against delivery of such Firm
Shares for the respective accounts of the several Underwriters, at 10:00 a.m.,
New York City time, on ___________, 2000, or at such other time on the same or
such other date, in any event not later than five (5) days after the date of
this Agreement, as shall be designated in writing by you. The time and date of
each such payment are hereinafter referred to as the Closing Date.
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Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters, at
10:00 a.m., New York City time, on or at such other time on the same or such
other date, in any event not later than thirty (30) days after the date of this
Agreement as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
V.
The obligations of the Company and the several obligations of the
Underwriters hereunder are subject to the condition that the Registration
Statement shall have become effective not later than 6:30 p.m. (New York City
time) the date hereof.
The several obligations of the Underwriters hereunder are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior
to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act, and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, of the Company from that
set forth in the Registration Statement that (exclusive of any amendments or
supplements thereto subsequent to the date hereof), in your judgment, is
material and adverse and that makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company, to the effect set forth in
clause (a) above, and to the effect that the representations and
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warranties of the Company contained in this Agreement are true and correct as of
the Closing Date and that the Company has complied with all of the agreements
and satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date.
The officers signing and delivering such certificate may rely upon the best
of their knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the Company, dated the
Closing Date, to the effect that
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock" and the authorized capital stock of the
Company is as set forth under the caption "Capitalization";
(iv) the shares of Common Stock outstanding prior to the
issuance of the Shares to be sold by the Company have been duly authorized and
validly issued, [to such counsel's knowledge, are non-assessable and], fully
paid;
(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(vi) the Shares have been duly authorized, and, when issued and
delivered in accordance with the terms of this Agreement, will be validly issued
and non-assessable, and to such counsel's knowledge, fully paid, and the
issuance of such Shares will not be subject to any preemptive rights arising
under the Company's Certificate of Incorporation or the Delaware General
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Corporate Law, or, to its knowledge, rights of first refusal or similar rights
that entitle or will entitle any person to acquire any shares of capital stock
of the Company upon the issuance and sale of the Shares by the Company;
(vii) the Company has corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to the
Underwriters. This Agreement has been duly authorized, executed and delivered by
the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law (other than applicable State
securities or Blue Sky laws, as to which such counsel need not express any
opinion) or the certificate of incorporation or bylaws of the Company or, to
such counsel's knowledge, any agreement or other instrument binding upon the
Company or any of its subsidiaries that is filed as an exhibit to the
Registration Statement, or, to such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court entered against the Company or
any of its subsidiaries, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except as
have been obtained under the Securities Act or the Exchange Act and except such
as may be required by the securities or Blue Sky laws of the various states and
jurisdictions in connection with the offer and sale of the Shares;
(ix) the information (1) in the Prospectus under the captions
"Business --Strategic Alliances" describing each of the agreements with Bayer
Corporation, Eli Lilly and Company, F. Hoffman - LaRoche, Ltd., Monsanto
Company, Novartis Agricultural Discovery Institute, Inc., Novartis Corporation,
Schering AG, and Schering - Plough Corporation, "Description of Capital Stock,"
and "Underwriters" (to the extent of the description of this Agreement) and (2)
in the Registration Statement in Item 15; in each case insofar as such
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein to the
extent required by the Act and rules and regulations promulgated thereunder;
(x) after due inquiry, such counsel does not know of any
legal, regulatory or governmental proceeding pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that is required to be
described in the Registration Statement or the Prospectus and is not so
described or of any contracts or other documents that are required to be filed
as exhibits to the Registration Statement that are not filed as required;
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
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(xii) to the knowledge of such counsel, there is no legal or
beneficial owner of any securities of the Company who has any rights, not
effectively satisfied or waived, to require registration of any shares of
capital stock of the Company in connection with the filing of the Registration
Statement;
(xiii) the Company and its subsidiaries are in compliance with
any and all applicable Environmental Laws, have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken as a
whole;
(xiv) (1) each document filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and the Prospectus
(except for the financial statements and schedules, related notes, other
financial data and statistical data, as to which such counsel need not express
any opinion) complied when so filed as to form in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder; (2) the Registration Statement has become effective under the
Securities Act, no stop order proceedings with respect thereto have been
instituted or are pending or threatened under the Securities Act and nothing has
come to such counsel's attention to lead it to believe that such proceedings are
contemplated; and (3) any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) under the Securities Act has been made in the
manner and within the time period required by such Rule 424(b);
(xv) the Shares to be sold under this Agreement to the
Underwriters are duly authorized for quotation on The Nasdaq Stock Market; and
(xvi) in addition, such counsel shall state that during the
course of the preparation of the Registration Statement, they participated in
conferences with you and with officers and other representatives of the Company,
its counsel and its independent public accountants at which the contents of the
Registration Statement and Prospectus were discussed. While they have not
independently verified the statements made in the Registration Statement and
Prospectus, except as set forth in paragraph (ii) above, on the basis of the
foregoing, no facts have come to their attention that have caused them to
believe that the Registration Statement, as of the time it became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus, as of its date or the date hereof,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that they
express no comment with respect to the financial statements and schedules,
related notes, other financial data and statistical data derived therefrom
included in the Registration Statement and Prospectus. Such
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counsel shall also state their opinion that the Registration Statement and
Prospectus (except for financial statements and schedules included therein and
financial and statistical data derived therefrom, as to which such counsel need
not express any opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder.
(d) You shall have received on the Closing Date an opinion of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters, dated the Closing Date, covering the matters referred to in
subparagraphs (iv), the last sentence of subparagraph (v), (vii) (but only as to
the statements in the Prospectus under "Description of Capital Stock"), stating
that such counsel has read the first five paragraphs of the portion of the
Registration Statement and the Prospectus entitled "Underwriters" (the
"Underwriter Portion"), and (xiii) of paragraph (c) above.
With respect to subparagraph (xiii) of paragraph (c) above, Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. and Wilson Sonsini Goodrich & Rosati,
Professional Corporation, may state that their belief is based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and documents incorporated therein by
reference and review and discussion of the contents thereof, but is without
independent check or verification, except as specified.
The opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
described in paragraph (c) above shall be rendered to the Representatives at the
request of the Company, and shall so state therein.
(e) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from KPMG LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained or incorporated
by reference in the Registration Statement and the Prospectus.
(f) The Underwriters shall have received an opinion, dated such Closing
Date, of Rothwell, Figg, Ernst & Kurz, Professional Corporation, patent counsel
for the Company, to the effect set forth in Exhibit A attached hereto.
---------
(g) The Lock-up Agreements between the Underwriters and certain
stockholders, officers and directors of the Company relating to sales of shares
of Common Stock of the Company or any securities convertible into or exercisable
or exchangeable for such Common Stock, delivered to Morgan Stanley & Co.
Incorporated on or before the date hereof, shall be in full force and effect on
the Closing Date.
(h) The shares of Common Stock of the Company shall have received approval
for listing, upon official notice of issuance, on The Nasdaq Stock Market.
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(i) The Company shall have complied with the provisions of paragraph (a)
of Section VI hereof with respect to the furnishing of Prospectuses on the
business day next succeeding the date of this Agreement in such quantities as
you may reasonably request.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed in compliance with the provisions
hereof only if Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Underwriters, shall be reasonably satisfied that they comply in
form and scope.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the delivery to you on the Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares, other
matters related to the issuance of the Additional Shares and an opinion or
opinions of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in form and
substance satisfactory to Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Underwriters.
VI.
In further consideration of the agreements of the Underwriters herein
contained, the Company covenants as follows:
(a) To furnish to you, without charge, four (4) signed copies of the
Registration Statement (including exhibits thereto and documents incorporated by
reference) and for delivery to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto but including documents
incorporated by reference) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. (New York City time) on the business day following
the date of this Agreement and during the period mentioned in paragraph 6(c)
below, as many copies of the Prospectus, any documents incorporated therein by
reference, and any supplements and amendments thereto or to the Registration
Statement as you may reasonably request. The terms "supplement" and "amendment"
or "amend" as used in this Agreement shall include all documents subsequently
filed by the Company with the Commission pursuant to the Securities Exchange Act
of 1934, as amended, that are deemed to be incorporated by reference in the
Prospectus.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering of
the Shares as in the opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Underwriters, the Prospectus is required by law to
be delivered in connection with sales by an Underwriter or dealer, any event
shall occur or condition exist as a result of which it is necessary to
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amend or supplement the Prospectus in order to make the statements therein, in
the light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare, file with the Commission and furnish, at its own expense,
to the Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on behalf of
the Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus,
as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request and to pay all expenses (including fees and disbursements of counsel) in
connection with such qualification and in connection with any review of the
offering of the Shares by the National Association of Securities Dealers, Inc.;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or take any action that would have
the effect of submitting the Company to such jurisdiction.
(e) To make generally available to the Company's security holders and to
you as soon as practicable an earnings statement covering the twelve-month
period ending March 31, 2001 that satisfies the provisions of Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder.
(f) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders and (ii) all reports, financial statements and proxy
or information statements filed by the Company with the Commission or any
national securities exchange.
(g) The Company will use its best efforts to obtain and maintain in effect
the quotation of the Shares on The Nasdaq Stock Market and will take all
necessary steps to cause the Shares to be included on The Nasdaq Stock Market as
promptly as practicable and to maintain such inclusion for a period of three
years after the date hereof or until such earlier date as the Shares shall be
listed for regular trading privileges on The Nasdaq Stock Market or another
national securities exchange.
(h) The Company will comply with all registration, filing and reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which may from time to time be applicable to the Company.
(i) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
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(j) Prior to the Closing Date or the Option Closing Date, as the case may
be, the Company will not, directly or indirectly, issue any press release or
other communication directly or indirectly and will not hold any press
conference with respect to the Company, or its financial condition, results of
operations, business, properties, assets or prospects, or this offering, without
your prior written consent (which shall not be unreasonably withheld); provided,
however, that such prior written consent will not be necessary if (i) such press
release would be issued in the ordinary course of the Company's business and
does not relate to the market for the Company's Common Stock or (ii) (A) Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. informs the Company that such press
release or press conference is legally advisable and (B) the Company uses
reasonable efforts to consult with you in regard to the proposed press release
or press conference.
(k) The Company agrees: (i) to issue stop-transfer instructions to the
transfer agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach of or default under any
applicable Lock-up Agreement, and (ii) upon written request of Morgan Stanley &
Co. Incorporated, to release from the Lock-up Agreements those shares of Common
Stock held by those holders set forth in such request. In addition, except with
the prior written consent of Morgan Stanley & Co. Incorporated, the Company
agrees (i) not to amend or terminate, or waive any right under, any Lock-up
Agreement or take any other action that would directly or indirectly have the
same effect as an amendment or termination, or waiver of any right under, any
Lock-up Agreement that would permit any holder of shares of Common Stock, or
securities convertible into or exercisable or exchangeable for Common Stock
subject to a Lock-Up Agreement, to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
make any short sale of, grant any option, right, or warrant for the purchase of,
enter into any swap or similar agreement that transfers, in whole or in part,
the economic risk of ownership of Common Stock, or otherwise transfer or dispose
of, directly or indirectly, any of such shares of Common Stock or other
securities prior to the expiration of 90 days after the date of the Prospectus,
(ii) not to release any such stop-transfer instruction as described in (i) above
prior to the expiration of 90 days after the date of the Prospectus, and (iii)
not to consent to any sale, short sale, grant of an option for the purchase of,
or other disposition or transfer of shares of Common Stock, or securities
convertible into or exercisable or exchangeable for Common Stock, subject to a
Lock-up Agreement.
(l) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Securities Act and all other fees or expenses in connection
with the preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of
16
<PAGE>
printing or producing any Blue Sky or Legal Investment memorandum in connection
with the offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer and sale
under state securities laws as provided in Section 6(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection with such qualification and in connection with the Blue Sky or
Legal Investment memorandum, (iv) all filing fees and the reasonable fees and
disbursements of counsel to the Underwriters incurred in connection with the
review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all costs and expenses incident to
listing the Shares on The Nasdaq Stock Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show and (ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise made
in this Section. It is understood, however, that except as provided in this
Section and Section VII, below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
VII.
The Company agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or is under common control with, or is
controlled by, any Underwriter from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement as of the effective
date and any closing date as defined in Section 4 or any amendment thereof (as
of the date of such amendment or supplement, as applicable), any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto (as of the date of such
amendment or supplement, as applicable)), or caused by any omission or alleged
omission to state therein (as of the effective date or closing date or, if
applicable, the date of such amendment or supplement) a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter either directly or indirectly through you expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
-------- -------
to any
17
<PAGE>
preliminary prospectus shall not inure to the benefit of any Underwriter or any
person controlling or controlled by such Underwriter, from whom the person
asserting any such losses, claims, damages or liabilities purchased Shares, if a
copy of the Prospectus (as then amended or supplemented, if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or
liability.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, the directors of the Company, the officers of the Company
who sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter either directly or indirectly through
you expressly for use in the Registration Statement, any preliminary prospectus,
the Prospectus or any amendments or supplements thereto.
In case any proceeding (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought
pursuant to any of the two preceding paragraphs, such person (the "Indemnified
Party") shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Party") in writing and the Indemnifying Party, upon
request of the Indemnified Party, shall retain counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel in writing or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Party shall not, in respect of the legal expenses of any
Indemnified Party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such Indemnified
Parties, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such
18
<PAGE>
control persons of Underwriters, such firm shall be designated in writing by
Morgan Stanley & Co. Incorporated. In the case of any such separate firm for the
Company, and such directors, officers and control persons of the Company, such
firm shall be designated in writing by the Company. The Indemnifying Party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Party
shall have requested an Indemnifying Party to reimburse the Indemnified Party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the Indemnifying Party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party
shall not have reimbursed the Indemnified Party in accordance with such request
prior to the date of such settlement. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such proceeding.
To the extent the indemnification provided for in the first or second
paragraphs of this Article VII is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each Indemnifying Party under such paragraph, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Indemnifying Party or parties on the one hand
and the Indemnified Party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Indemnifying Party or parties on the one hand and of the Indemnified Party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in connection
with the offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover of the Prospectus, bear to the aggregate public offering
price of the Shares. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Underwriters' respective obligations to contribute
pursuant to this
19
<PAGE>
Article VII are several in proportion to the respective number of Shares they
have purchased hereunder, and not joint.
The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Article VII were determined by pro
---
rata allocation (even if the Underwriters were treated as one entity for such
- ----
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article VII, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Article VII are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Party at law or in equity.
The indemnity and contribution provisions contained in this Article VII and
the representations and warranties of the Company contained in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter, or the Company, its
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Shares.
VIII.
This Agreement shall be subject to termination by notice given by you to
the Company, if (a) after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities, or
(iv) there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event singly or together with any other such
event makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
20
<PAGE>
IX.
This Agreement shall become effective upon execution and delivery hereof by
the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate number of the
Shares to be purchased on such date, the other Underwriters shall be obligated
severally in the proportions that the number of Firm Shares set forth opposite
their respective names in Schedule I bears to the aggregate number of Firm
Shares set forth opposite the names of all such non-defaulting Underwriters, or
in such other proportions as you may specify, to purchase the Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date; provided, however, that in no event shall the number of Shares
--------
that any Underwriter has agreed to purchase pursuant to Article II be increased
pursuant to this Article IX by an amount in excess of one-ninth of such number
of Shares without the written consent of such Underwriter. If, on the Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase Shares
and the aggregate number of Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Shares to be purchased on such
date, and arrangements satisfactory to you and the Company for the purchase of
such Shares are not made within 36 hours after such default, this Agreement
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company. In any such case either you or the Company shall have the right
to postpone the Closing Date or the Option Closing Date, as the case may be, but
in no event for longer than seven days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. If, on the Option Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Additional Shares
and the aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
21
<PAGE>
X.
This Agreement may be signed in two or more counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
XI.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York.
22
<PAGE>
Very truly yours,
Myriad Genetics, Inc.
By ______________________________________
Peter D. Meldrum
President and Chief Executive Officer
Accepted, ______________, 2000
Morgan Stanley & Co. Incorporated
CIBC World Market Corp.
Tucker Anthony Cleary Gull
Dain Rauscher Wessels
Acting severally on behalf of themselves and the
several Underwriters named herein.
By: Morgan Stanley & Co. Incorporated
By ______________________________________
David R. Horn
Vice President
<PAGE>
Schedule I
Name Number of Shares
- ---------------------------------------- ---------------------------------
Morgan Stanley & Co. Incorporated
CIBC World Market Corp.
Tucker Anthony Cleary Gull
Dain Rauscher Wessels
<PAGE>
EXHIBIT A
Opinion of Patent Counsel Referred
To in Section 5(f)
(i) Such counsel represents the Company in certain matters relating to
intellectual property, including patents, trade secrets and certain trademark
matters;
(ii) Such counsel is familiar with the Company's technology, and in
particular its BRACAnalysis and CardiaRisk products and therapeutic products and
diagnostic tests under development, used by the Company in its business and has
read the portions of the Registration Statement and the Prospectus entitled
"Risk Factors--We are uncertain of our ability to protect our proprietary
technology" and "Business--Patents and Proprietary Rights" (collectively, the
"Intellectual Property Portion");
(iii) The Intellectual Property Portion contains accurate descriptions of
the Company's patent applications, issued and allowed patents, and patents
licensed to it and fairly summarizes the legal matters, documents and
proceedings relating thereto;
(iv) Such counsel has reviewed the Company's patent applications filed
in the U.S. and outside the U.S. (the "Applications"), which Applications are
set forth on Schedule I attached hereto, and based upon such review, a review of
the prior art references made known to counsel and discussions with Company
scientific personnel, such counsel is aware of no valid United States or foreign
patent that is or would be infringed by the activities of the Company in the
manufacture, use or sale of any proposed product, drug or other material as
described in the Prospectus or made or used according to the Applications;
(v) The Applications have been properly prepared and filed on behalf of
the Company, and are being diligently pursued by the Company; the inventions
described in the Applications are assigned or licensed to the Company; to such
counsel's knowledge, no other entity or individual has any right or claim in any
of the inventions, Applications, or any patent to be issued therefrom, except as
noted in the Prospectus under "Business--Strategic Alliances" and "--Patents and
Proprietary Rights" and each of the Applications discloses patentable subject
matter;
(vi) Such counsel is aware of no pending or threatened judicial or
governmental proceedings relating to patents or proprietary information to which
the Company is a party or of which any property of the Company is subject and
such counsel is not aware of any pending or threatened action, suit or claim by
others that the Company is infringing or otherwise violating any patent rights
or others, nor is such counsel aware of any rights of third parties to any of
the Company's inventions described in the Applications, issued, approved or
licensed patents which could reasonably be expected materially to affect the
ability of the Company to conduct its business
<PAGE>
as described in the Prospectus, including the commercialization of its
BRACAnalysis and CardiaRisk products and diagnostic tests and therapeutic
products currently under development; and
(vii) Such counsel has no reason to believe that the information
contained in the Intellectual Property Portion of the Registration Statement or
the Prospectus at the time it became effective contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that, at
such Closing Date the information contained in the Intellectual Property Portion
of the Prospectus or any amendment or supplement to the Intellectual Property
Portion of the Prospectus contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>
EXHIBIT 5.1
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
617 542 6000
617 542 2241 fax
March 13, 2000
Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, UT 84108
Ladies and Gentlemen:
We have acted as counsel to Myriad Genetics, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement"), pursuant to which the Company is registering under
the Securities Act of 1933, as amended, a total of 2,300,000 shares (the
"Shares") of its common stock, par value $.01 per share (the "Common Stock"),
for a public offering of the Shares. This opinion is being rendered in
connection with the filing of the Registration Statement. All capitalized terms
used herein and not otherwise defined shall have the respective meanings given
to them in the Registration Statement.
In connection with this opinion, we have examined the Company's Restated
Certificate of Incorporation and Restated By-laws, both as currently in effect;
such other records of the corporate proceedings of the Company and certificates
of the Company's officers as we have deemed relevant; and the Registration
Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, photostatic or facsimile copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly and validly authorized by the Company and (ii) the Shares, when sold,
will be duly and validly issued, fully paid and non-assessable shares of Common
Stock.
Our opinion is limited to the Delaware General Corporation Law, the
applicable provisions of the Delaware Constitution and the reported judicial
decisions interpreting the laws and we express no opinion with respect to the
laws of any other jurisdiction. No opinion is expressed herein with respect to
the qualification of the Shares under the securities or blue sky laws of any
state or any foreign jurisdiction.
<PAGE>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
March 13, 2000
Page 2
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto. We hereby further
consent to the reference to us under the caption "Legal Matters" in the
prospectus included in the Registration Statement.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
-------------------------------------------------------
MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C.
Boston New York Reston Washington
<PAGE>
EXHIBIT 23.1
The Board of Directors
Myriad Genetics, Inc.:
We consent to the use of our report incorporated herein by reference and
included herein and to the reference to our firm under the heading "Experts"
in the prospectus.
/s/ KMPG LLP
- ----------------
Salt Lake City, Utah
March 13, 2000
