================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 10-Q
(Mark one)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934. For the quarterly period ended June 30, 1998.
or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934. For the transition period from ___________ to
___________.
Commission File Number:
0-24814
-----------------------------
SUGEN, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3629196
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
351 Galveston Drive, Redwood City, California 94063
(address of principal executive offices)
(650) 306-7700
(Registrant's telephone number, including area code)
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock $.01 par value;
16,165,399 shares outstanding at July 31, 1998.
================================================================================
<PAGE>
SUGEN, Inc.
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
Condensed Balance Sheets - June 30, 1998
and December 31, 1997 3
Statements of Operations - for the three and six
months ended June 30, 1998 and 1997 4
Condensed Statements of Cash Flows - for the six
months ended June 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS AND NOTES
SUGEN, Inc.
CONDENSED BALANCE SHEETS
(In thousands)
June 30, December 31,
1998 1997
--------- ---------
ASSETS (unaudited) (1)
Current assets:
Cash and cash equivalents $ 15,792 $ 23,816
Short-term investments 46,694 51,479
Accounts receivable 204 237
Prepaid expenses and other current assets 778 754
--------- ---------
Total current assets 63,468 76,286
Property and equipment, net 4,757 4,601
Other assets 2,780 3,938
========= =========
$ 71,005 $ 84,825
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,578 $ 1,991
Accrued liabilities 12,704 10,267
Deferred contract revenue 625 625
Capital lease obligations - current portion 2,398 2,277
--------- ---------
Total current liabilities 18,305 15,160
Long-term liabilities:
Capital lease obligations - non-current portion 3,934 3,152
Senior custom convertible notes 9,273 17,500
--------- ---------
Total long-term liabilities 13,207 20,652
Stockholders' equity:
Common stock 152,340 141,579
Deferred compensation (952) (695)
Note receivable from stockholder (883) (883)
Accumulated deficit (111,012) (90,988)
--------- ---------
Total stockholders' equity 39,493 49,013
--------- ---------
$ 71,005 $ 84,825
========= =========
(1) Derived from audited financial statements at this date.
See accompanying notes.
3
<PAGE>
<TABLE>
SUGEN, Inc.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Contract revenue (includes amounts from
related party) $ 2,351 $ 1,484 $ 3,996 $ 2,971
Costs and expenses:
Research and development 11,711 8,570 21,143 16,576
General and administrative 1,999 1,512 3,844 2,990
-------- -------- -------- --------
Total costs and expenses 13,710 10,082 24,987 19,566
-------- -------- -------- --------
Operating loss (11,359) (8,598) (20,991) (16,595)
Other income and expenses:
Interest income 883 610 1,862 1,303
Interest expense (399) (174) (867) (344)
-------- -------- -------- --------
Other income, net 484 436 995 959
======== ======== ======== ========
Net loss $(10,875) $ (8,162) $(19,996) $(15,636)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.69) $ (0.62) $ (1.28) $ (1.20)
======== ======== ======== ========
Shares used in computing basic and diluted net loss
per share 15,721 13,079 15,533 13,050
======== ======== ======== ========
<FN>
See accompanying notes.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
SUGEN, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(In thousands)
(unaudited)
<CAPTION>
Six Months Ended
June 30,
------------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net loss $(19,996) $(15,636)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 1,919 1,500
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 9 (136)
Other assets (47) (206)
Accounts payable 587 1,706
Accrued liabilities 2,482 (617)
-------- --------
Net cash used in operating activities (15,046) (13,389)
-------- --------
Cash flows from investing activities
Sales/maturities (purchases) of short-term investments, net 4,757 (3,179)
Purchases of property and equipment, net (1,730) (1,255)
-------- --------
Net cash provided by (used in) investing activities 3,027 (4,434)
-------- --------
Cash flows from financing activities
Proceeds from issuance of common stock, net 3,092 580
Proceeds from lease financing of property and equipment 2,102 1,534
Payments under capital lease obligations (1,199) (958)
-------- --------
Net cash provided by financing activities 3,995 1,156
-------- --------
Net decrease in cash and cash equivalents (8,024) (16,667)
Cash and cash equivalents at beginning of period 23,816 24,852
-------- --------
Cash and cash equivalents at end of period $ 15,792 $ 8,185
======== ========
<FN>
See accompanying notes.
</FN>
</TABLE>
5
<PAGE>
SUGEN, Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The financial information at June 30, 1998 and for the six months ended
June 30, 1998 and 1997 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which SUGEN, Inc.
(the "Company") considers necessary for the fair presentation of the
financial position at such date and the operating results and cash
flows for those periods. The accompanying condensed financial
statements should be read in conjunction with the financial statements
and notes thereto for the year ended December 31, 1997 included in the
Company's Form 10-K filed with the Securities and Exchange Commission.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for a
full fiscal year.
First Quarter Adoption of Statement 130, Reporting Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"). SFAS 130 establishes new rules for the reporting
and display of comprehensive income and its components. SFAS 130
requires unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustment, which prior to
adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. The adoption by the Company of
SFAS 130 on January 1, 1998 had no material impact on the Company's net
income or stockholders' equity through June 30, 1998.
2. Accrued Liabilities
The components of accrued liabilities consist of the following:
June 30, December 31,
1998 1997
------- -------
(In thousands)
Accrued research & development services $ 7,128 $ 5,351
Accrued compensation 1,409 1,176
Accrued professional fees 967 859
Other 3,200 2,881
------- -------
$12,704 $10,267
======= =======
6
<PAGE>
SUGEN, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Research and Development Collaboration Agreements - ProChon Biotech
Limited
In June 1998, the Company entered into a collaboration with ProChon
Biotech Limited ("ProChon") to discover and develop small molecule
signal transduction inhibitors for the treatment of achondroplasia and
other growth disorders. In connection with this collaboration, the
Company received $3.0 million comprised of a $750,000 initial research
payment and $2.25 million for the purchase of 93,750 shares of SUGEN
Common Stock at $24.00 per share. In addition, the Company will receive
payments upon achievement of certain milestones and royalties with
respect to worldwide sales of collaboration products.
4. Senior Custom Convertible Notes
Through June 30, 1998, $8.2 million of principal and accrued and unpaid
interest relating to the Company's outstanding senior custom
convertible notes were converted into 657,660 shares of SUGEN Common
Stock at a weighted average price of $12.61 per share.
5. Subsequent Events
Allergan, Inc.
In July 1998, the first milestone in connection with the Company's
collaboration with Allergan, Inc. was achieved in the angiogenesis
program for the treatment of ophthalmic diseases. The $500,000 Allergan
milestone, before any royalties, will be reflected in contract revenue
for the quarter ended September 30, 1998.
Taiho Pharmaceutical Ltd.
In July 1998, the Company entered into an agreement with Taiho
Pharmaceutical Ltd. ("Taiho") for the development and commercialization
of the Company's angiogenesis inhibitors for the prevention and
treatment of cancer. In connection with this agreement, Taiho will
receive marketing rights in Japan, while the Company will retain
marketing rights for the rest of the world. The Company will also
receive an initial research payment, research and development funding,
and additional payments upon the achievement of certain milestones. The
Company has retained the rights to manufacture and supply products to
Taiho for sale in Japan.
7
<PAGE>
SUGEN, Inc.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to historical information contained herein, the following
discussion contains words such as "intends," "believes," "anticipates," "plans,"
"expects" and similar expressions which are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which are subject to the "safe harbor" created by those sections. The Company's
actual results could differ materially from the results discussed in these
forward-looking statements. Factors that could cause or contribute to such
differences include the factors discussed below as well as the factors discussed
in the Company's Form 10-K for the year ended December 31, 1997. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
release the results of any revision to these forward-looking statements which
may be made to reflect events or circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events.
Overview
SUGEN, Inc. ("SUGEN" or the "Company") was founded in July 1991 to
discover and develop new classes of small molecule drugs which target specific
cellular signal transduction pathways. These signalling pathways are involved in
a variety of chronic and acute pathological diseases, including cancer and
diabetes as well as in dermatologic, ophthalmic, neurologic and immune
disorders. The Company's most advanced product candidate is SU101, a PDGF TK
signalling antagonist. The Company initiated a Phase III clinical trial for use
of SU101 as a treatment for refractory malignant glioma during the first quarter
of 1998. Additionally, SUGEN currently has underway a Phase II study of SU101 in
combination with BCNU in front-line glioma and two Phase II studies of SU101
mono-therapy in ovarian and hormone refractory prostate cancer. To date,
approximately 248 patients, including patients with brain, ovarian, prostate and
non-small cell lung cancers, have been treated with SU101 in nine
Company-sponsored clinical trials. The Company's second cancer product
candidate, SU5416, is a Flk-1/KDR TK antagonist which inhibits angiogenesis (the
process by which blood vessels are formed). Currently the Company is conducting
initial Phase I clinical trials for SU5416 in Europe and the U.S. and a Phase
I/II study of SU5416 in Kaposi's Sarcoma. In addition, the Company is conducting
a Phase I clinical trial for SU5271, an EGF antagonist, for the treatment of
psoriasis. Through June 30, 1998, substantially all of the Company's revenue
apart from interest income has been earned pursuant to collaborations with
Zeneca Limited ("Zeneca"), ASTA Medica Aktiengesellschaft ("ASTA Medica") and
Vision Pharmaceuticals L.P., an affiliate of Allergan, Inc., and Allergan, Inc.
(collectively "Allergan"). The Company intends to pursue its cancer drug
discovery programs independently in North America and its programs in other
disease areas in collaboration with established pharmaceutical companies.
In July 1998, the Company entered into an agreement with Taiho
Pharmaceutical Ltd. ("Taiho") for the development and commercialization of the
Company's angiogenesis inhibitors for the prevention and treatment of cancer. In
accordance with the agreement, Taiho will receive marketing rights in Japan,
while the Company will retain marketing rights for the rest of the world. In
addition, the Company will receive an initial research payment, research and
development funding, and additional payments upon the achievement of certain
milestones. The Company has retained the rights to manufacture and supply
products to Taiho for sale in Japan.
8
<PAGE>
The Company has not been profitable since inception and expects to
incur substantial losses for the foreseeable future, primarily due to the
expansion of preclinical and clinical development activities as more of its
proprietary cancer-related programs progress into the clinic. The Company
expects that losses will fluctuate from quarter to quarter and that such
fluctuations may be substantial. As of June 30, 1998, the Company's accumulated
deficit was $111.0 million.
Results of Operations
The Company's revenues for the three and six months ended June 30, 1998
were $2.4 million and $4.0 million, respectively. These results compare to
revenues of $1.5 million and $3.0 million for the same periods last year.
Revenues for the three and six months ended June 30, 1998 included contract
revenue from the Allergan and Zeneca collaborations, milestone and some contract
services revenue (services rendered by ASTA Medica pursuant to the collaboration
but on non-collaboration programs) earned under the ASTA Medica collaboration
and recognition of the initial research payment received in connection with a
collaboration with ProChon Biotech Limited ("ProChon"). In 1997, revenue
included contract revenue from the Allergan and Zeneca collaborations and
contract services revenue earned under the ASTA Medica collaboration for
non-collaboration programs. The Company expects to fully utilize the remaining
available credit for contract services provided by ASTA Medica by the end of
1998, and thereafter will only recognize revenue under the ASTA Medica
collaboration upon the achievement of specified milestones.
Research and development expenses increased to $11.7 million and $21.1
million for the three and six months ended June 30, 1998, respectively, from
$8.6 million and $16.6 million for the same periods last year. The increase
during 1998 was primarily due to higher personnel related costs associated with
the expansion of clinical development activities, including expanded Phase II
studies and initiating a Phase III study of the Company's lead anti-cancer
compound, SU101. The initiation of Phase I and Phase I/II studies of the
Company's second cancer product candidate, SU5416, also contributed to higher
expenses during 1998. The Company expects that its research and development
expenses will continue to grow in future periods due to the hiring of personnel,
additional preclinical studies, the progression of SU101, SU5416 and additional
drug candidates in clinical trials, and research and development activities
pursuant to the Company's commitments under anticipated future collaborations.
General and administrative expenses for the three and six months ended
June 30, 1998 were $2.0 million and $3.8 million, respectively. These results
compare to expenses of $1.5 million and $3.0 million for the same periods last
year. The increase in 1998 was primarily due to higher headcount related costs
as well as additional expenses in the areas of corporate and business
development. The Company expects that its general and administrative expenses
will continue to increase in order to support the Company's expanding research
and development efforts.
Interest income for the three and six months ended June 30, 1998 was
$883,000 and $1.9 million, respectively, compared to $610,000 and $1.3 million
earned for the same periods last year. The increase from prior year was due to
higher investment balances arising primarily from issuances of the Company's
capital stock and senior custom convertible notes. Interest expense for the
three and six months ended June 30, 1998 was $399,000 and $867,000,
respectively, compared to $174,000 and $344,000 for the same periods last year.
This increase was primarily due to the Company's continued use of capital lease
financing for equipment and property improvements and expenses related to the
issuance of senior custom convertible notes.
9
<PAGE>
Liquidity and Capital Resources
At June 30, 1998, the Company had cash, cash equivalents and
short-term investments of approximately $62.5 million compared with
approximately $75.3 million at December 31, 1997. The decrease in cash and
investments during the six months ended June 30, 1998 was primarily due to
operating losses partially offset by the issuance of SUGEN Common Stock in
connection with the ProChon collaboration.
Through June 1998, the Company's principal sources of financing have
been its initial and follow-on public offerings of Common Stock, placements of
the Company's Preferred and Common Stock and senior custom convertible notes,
and funds received under the Company's corporate collaborations. The Company's
current principal sources of liquidity are its research and development
collaborations with Zeneca, Taiho, Allergan and ASTA Medica, its cash, cash
equivalents and short-term investments and capital lease financing. At June 30,
1998, the Company had combined capital lease lines of $4.3 million available for
the purchase of equipment and facility improvements.
The Company has entered into license and research agreements whereby
the Company funds research projects performed by others or in-licenses compounds
from third parties. Some of the agreements may require the Company to make
milestone and royalty payments. Under these programs, commitments for external
research funding are approximately $1.7 million, $1.6 million, $1.4 million and
$1.1 million in 1998, 1999, 2000 and 2001, respectively. Most of these
commitments are cancelable within a three-to-six month period and limit the
amounts payable by the Company for sponsored research under the programs after
notice of cancellation. The Company anticipates renewing certain contracts that
expired in 1997 which will increase future commitments beyond the levels
indicated above for 1998 through 2001.
From time to time, the Company evaluates potential investments in
complementary businesses, products or technologies. Currently, the Company is
considering modest investments in such complementary businesses during 1998. The
Company has no other present undertakings, commitments or agreements with
respect to investments in other businesses.
Net additions of equipment and leasehold improvements for the six
months ended June 30, 1998 were $1.7 million compared to $1.3 million spent
during the same period last year. Capital additions during the first half of
1998 primarily related to costs associated with the build-to-suit facility.
Capital additions during the first quarter of 1997 primarily included the costs
associated with the initial phases of a limited facility expansion and continued
investment in enhancing the Company's laboratory capabilities. The Company
expects that its capital additions for 1998 will continue to be higher than that
of the prior year primarily due to anticipated facility improvements in
connection with the build-to-suit facility lease agreement which was entered
into in June 1997. Construction of the new facility is targeted for completion
during the fourth quarter of 1998, which coincides with the expiration of the
Company's current facility leases. As building completion approaches, the
Company will continue to invest in facility improvements and incur move related
costs during the course of the year. The Company anticipates that substantially
all facility improvement costs associated with the build-out and equipping of
the new facility will be financed through a tenant improvements allowance
negotiated with the landlord as part of the long term lease agreement and
through additional financial facilities arranged with third parties. It is
expected that the Company's capital lease obligations, related interest expense,
and facility related expenses, will increase in future periods.
10
<PAGE>
The Company estimates that its existing capital resources together with
facility and equipment financing, expected revenues from current collaborations
and net income from investment activities, will be sufficient to fund its
planned operations into 2000. However, there can be no assurance that the
underlying assumed levels of revenue and expense will prove accurate. Whether or
not these assumptions prove to be accurate, the Company will need to raise
substantial additional capital to fund its operations. The Company intends to
seek such additional funding through collaborative arrangements, public or
private equity or debt financings and capital lease transactions; however, there
can be no assurance that additional financing will be available on acceptable
terms, or at all. If additional funds are raised by issuing equity securities,
further dilution to stockholders may result. In addition, in the event that
additional funds are obtained through arrangements with collaborative partners,
such arrangements may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would otherwise
seek to develop or commercialize itself. If adequate funds are not available,
the Company may be required to delay, reduce the scope of or eliminate one or
more of its research or development programs, which could have a material
adverse effect on the Company.
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, or engage in similar normal business activities. The Company has
reviewed its existing software programs to identify and address programs that
may require upgrading or reprogramming to address the Year 2000 Issue and
believes its internal applications systems are currently in compliance. The
Company is in the process of initiating formal communications with all of its
significant suppliers to determine the extent to which the Company is vulnerable
to those third parties' failure to remediate their own Year 2000 Issues. The
project is estimated to be completed early 1999, which is prior to any
anticipated impact on its operations. The Company does not expect the costs of
Year 2000 compliance to have a material impact on the Company's financial
results. However, there can be no assurance that all third parties, with whom
the Company works to achieve Year 2000 compliance on a timely basis for systems
related to their interactions with the Company, or that failure to achieve Year
2000 by such entities will not have a material adverse effect on the Company.
The Company is at an early stage of development and must be evaluated
in light of the uncertainties and complications present in a biotechnology
company. The Company has been in existence only since 1991 and to date three
drug candidates (SU101, SU5271 and SU5416) have entered clinical trials. To
achieve profitable operations on a continuing basis, the Company, alone or with
collaborative partners, must successfully develop, manufacture, introduce and
market its proposed products. Products, if any, resulting from the Company's
research and development programs are not expected to be commercially available
for several more years, even if they are developed successfully and proven to be
safe and effective. The Company has experienced significant operating losses
since its inception. The Company expects to incur significant operating losses
at least for the next several years and expects cumulative losses to increase as
the Company's research and development efforts, including preclinical and
clinical testing, are expanded. Substantially all of the Company's revenues to
date have been received pursuant to the Company's collaborations. Should the
Company or its collaborators fail to perform in accordance with the terms of any
of their agreements, any consequent loss of revenue under the agreements could
have a material adverse effect on the Company's results of operations. Some of
the Company's currently proposed products are subject to development and
licensing arrangements with the Company's collaborators. Therefore, the Company
is in part dependent on the research and development efforts of these
collaborators with respect to those products and is entitled only to a portion
of the revenues, if any, realized from the commercial sale of those products
covered by the collaborations in many jurisdictions. Before obtaining regulatory
clearance for the commercial sale of any of its products under development, the
11
<PAGE>
Company must demonstrate through preclinical studies and clinical trials that
the potential product is safe and efficacious for use in humans for each target
indication. The failure to adequately demonstrate the safety and efficacy of a
product under clinical development could delay or prevent regulatory clearance
of the potential product and could have a material adverse effect on the
Company. The foregoing risks reflect the Company's early stage of development
and the nature of the Company's industry and potential products. Also inherent
at the Company's stage of development are a range of additional risks, including
uncertainties regarding protection of patents and proprietary rights, government
regulation, competition, employee issues, manufacturing uncertainties, the
Company's lack of sales and marketing capabilities, uncertainty of market
acceptance of the Company's products, and uncertainties regarding pharmaceutical
pricing and reimbursement.
12
<PAGE>
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the ProChon collaboration, the Company entered into
a Common Stock Purchase Agreement, dated as of June 30, 1998, pursuant
to which an affiliate of ProChon purchased 93,750 shares of SUGEN
Common Stock at $24.00 per share for an aggregate purchase price of
$2.25 million in a private placement exempt from registration under
Rule 505 of Regulation D and Section 4(2) of the Securities Act of
1933, as amended.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 20, 1998, the Company held its 1998 Annual Meeting of
Stockholders. The following actions were taken at the meeting:
(a) The following two directors were each elected for a three-year term
expiring at the 2001 Annual Meeting of Stockholders:
1. 12,599,210 shares voted in favor of Stephen Evans-Freke and
370,170 shares withheld their vote;
2. 12,599,555 shares voted in favor of Axel Ullrich, Ph.D. and
369,825 shares withheld their vote;
The following individuals' terms of office as directors continued after
the meeting:
Jeremy L. Curnock Cook
Charles M. Hartman
Heinrich Kuhn
Donald E. Nickelson
Bruce R. Ross
Richard D. Sprizzirri
(b) 1. A proposal to approve an amendment to the Company's 1992 Stock
Option Plan, as amended, to increase the aggregate number of
shares of Common Stock available for issuance by 750,000 shares:
7,379,863 shares were voted in favor of the proposal, 1,316,455
shares were voted against the proposal, 414,627 shares abstained
and 3,858,435 shares were broker non-votes.
2. A proposal to approve an amendment to the Company's 1994
Non-Employee Directors' Stock Option Plan, as amended, to increase
the aggregate number of shares of Common Stock available for
issuance by 150,000 shares: 8,749,959 shares were voted in favor
of the proposal, 138,583 shares were voted against the proposal,
222,403 shares abstained and 3,858,435 shares were broker
non-votes.
3. The ratification of the selection of Ernst & Young LLP as the
Company's independent auditors: 12,742,349 shares were voted in
favor of the proposal, 13,975 shares were voted against the
proposal, 213,056 shares abstained and zero shares were broker
non-votes.
13
<PAGE>
Item 5. OTHER INFORMATION
Michael A. Wall resigned from the Company's Board of Directors
effective June 2, 1998 in order to cut back on his business
commitments during his retirement.
Pursuant to the Company's bylaws, stockholders who wish to bring
matters or propose nominees for director at the Company's 1999
annual meeting of stockholders must provide specified information
to the Company between February 18, 1999 and March 20, 1999
(unless such matters are included in the Company's proxy statement
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
as amended).
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
3.1 Restated Certificate of Incorporation (2)
3.2(ii) Bylaws of the Registrant (1)
3.3 Certificate of Designation of Series A Junior
Participating Preferred Stock of the Registrant (3)
10.72 Common Stock Purchase Agreement, dated June 30, 1998,
between the Registrant and Oceana Investment
Corporation PLC.
10.73+ Heads of Agreement, dated June 30, 1998, between the
Registrant and ProChon Biotech Limited.
27 Financial Data Schedule
- ----------------
+ The Registrant has requested confidential treatment
with respect to portions of this Exhibit.
(1) Incorporated by reference to identically numbered
exhibits filed in response to Item 16 "Exhibits" of
the Company's Registration Statement on Form S-1,
as amended (File Number 33-77074), which became
effective October 4, 1994.
(2) Incorporated by reference to identically numbered
exhibits filed in response to Item 14 "Exhibits" of
the Company's Annual Report of Form 10-K for the year
ended December 31, 1994.
(3) Filed as an exhibit to the Form 8-K Current Report
dated July 26, 1995 and incorporated herein by
reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June
30, 1998.
14
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<S> <C>
Date: August 12, 1998 SUGEN, Inc.
-------------------------------
By: /s/ Stephen Evans-Freke By: /s/ Susan M. Kanaya
--------------------------------- ----------------------------
Stephen Evans-Freke Susan M. Kanaya
Chairman of the Board and Treasurer
Principal Executive and Financial Principal Accounting Officer
Officer
</TABLE>
15
<PAGE>
SUGEN, Inc.
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
3.1 Restated Certificate of Incorporation (2)
3.2(ii) Bylaws of the Registrant (1)
3.3 Certificate of Designation of Series A Junior
Participating Preferred Stock of the Registrant (3)
10.72 Common Stock Purchase Agreement, dated June 30, 1998,
between the Registrant and Oceana Investment
Corporation PLC.
10.73+ Heads of Agreement, dated June 30, 1998, between
the Registrant and ProChon Biotech Limited.
27 Financial Data Schedule
- ---------------------
+ The Registrant has requested confidential treatment
with respect to portions of this Exhibit.
(1) Incorporated by reference to identically numbered
exhibits filed in response to Item 16 "Exhibits" of
the Company's Registration Statement on Form S-1,
as amended (File Number 33-77074), which became
effective October 4, 1994.
(2) Incorporated by reference to identically numbered
exhibits filed in response to Item 14 "Exhibits" of
the Company's Annual Report of Form 10-K
for the year ended December 31, 1994.
(3) Filed as an exhibit to the Form 8-K Current Report
dated July 26, 1995 and incorporated herein
by reference.
16
COMMON STOCK PURCHASE AGREEMENT
Dated As Of June 30, 1998
for the purchase of Common Stock of
SUGEN, INC.
by
OCEANA INVESTMENT CORPORATION PLC
<PAGE>
<TABLE>
TABLE OF CONTENTS
PAGE
<CAPTION>
<S> <C>
1. PURCHASE AND SALE OF COMMON STOCK........................................................................1
2. CLOSING; DELIVERY........................................................................................1
2.1 Closing.........................................................................................1
2.2 Payment and Delivery............................................................................2
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.................................................2
3.1 Organization....................................................................................3
3.2 Capitalization..................................................................................3
3.3 Authority.......................................................................................3
3.4 Financial Statements............................................................................3
3.5 Issuance of the Shares..........................................................................4
3.6 No Conflict with Law or Documents...............................................................4
3.7 Absence of Certain Developments.................................................................4
3.8 Litigation......................................................................................4
3.9 Registration Rights Covenant....................................................................4
3.10 Covenant to Keep Public Information Available...................................................9
3.11 SEC Reports....................................................................................10
3.12 Securities Law Compliance......................................................................10
3.13 Registration Rights............................................................................10
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER..................................................10
4.1 Legal Power....................................................................................10
4.2 Due Execution..................................................................................10
4.3 Investment Representations and Covenants.......................................................10
5. MISCELLANEOUS...........................................................................................11
5.1 Governing Law..................................................................................11
5.2 Successors and Assigns.........................................................................11
5.3 Entire Agreement...............................................................................12
5.4 Separability...................................................................................12
5.5 Amendment and Waiver...........................................................................12
5.6 Notices........................................................................................12
5.7 Fees and Expenses..............................................................................13
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
5.8 Titles and Subtitles...........................................................................13
5.9 Counterparts...................................................................................13
</TABLE>
ii.
<PAGE>
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement) is made as of
June 30, 1998 (the "Effective Date") by and between SUGEN, INC., a Delaware
corporation (the "Company"), and OCEANA INVESTMENT CORPORATION PLC, a
corporation organized under the laws of England and Wales (itself or one of its
wholly owned subsidiaries designated by it, "Purchaser"). In consideration of
the mutual promises, representations, warranties and conditions set forth in
this Agreement, the Company and Purchaser agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK. The Company has authorized the
issuance and sale to Purchaser of 93,750 shares (the "Shares") of its common
stock, $.01 par value (the "Common Stock"). In reliance upon Purchaser's
representations and warranties contained in Section 4 hereof and subject to the
terms and conditions set forth herein, the Company agrees to sell to Purchaser
the Shares, to be issued and sold at a price per share equal to $24.00. In
reliance upon the representations and warranties of the Company contained in
Section 3 hereof and subject to the terms and conditions set forth herein,
Purchaser hereby agrees to purchase the Shares at the per share purchase price
set forth above.
2. CLOSING; DELIVERY.
The closing of the sale and purchase of Shares under this
Agreement (the "Closing") shall take place at 10:00 a.m., California time, on
the date of satisfaction of the conditions set forth below (the "Closing Date"),
at the offices of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino
Real, Palo Alto, California, or at such other time and place as the Company and
Purchaser may agree. At the Closing, the Company will issue and sell, and
Purchaser will purchase, the Shares for an aggregate purchase price of
$2,250,000.
2.1 Closing. (a) The obligations of Purchaser to purchase the
Shares at the Closing are subject to the fulfillment on or before the Closing
Date of each of the following conditions, which may be waived only in writing,
on or before June 30, 1998:
(i) The representations and warranties of
the Company contained in Section 3 shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date.
(ii) The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
(iii) All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Shares at the Closing pursuant to this Agreement shall have been
obtained and shall be effective on and as of the Closing Date. No
1.
<PAGE>
stop order or other order enjoining the sale of the Shares shall have been
issued and no proceedings for such purpose shall be pending or, to the knowledge
of the Company, threatened by the SEC, or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares shall be legally
permitted by all laws and regulations to which Purchaser and the Company are
subject.
(iv) The Company and ProChon Biotech
Limited, an Israeli corporation ("ProChon"), shall have executed and delivered
to each other the Heads of Agreement by and between the Company and ProChon
dated as of the Closing Date (the "Heads of Agreement").
(b) The obligations of the Company are subject to
fulfillment on or before the Closing Date of each of the following conditions,
which may be waived only in writing, on or before June 30, 1998:
(i) The representations and warranties of
the Purchaser contained in Section 4 shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date.
(ii) The Purchaser shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.
(iii) All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Shares at the Closing pursuant to this Agreement shall have been
obtained and shall be effective on and as of the Closing Date. No stop order or
other order enjoining the sale of the Shares shall have been issued and no
proceedings for such purpose shall be pending or, to the knowledge of the
Company, threatened by the SEC, or any commissioner of corporations or similar
officer of any state having jurisdiction over this transaction. At the time of
the Closing, the sale and issuance of the Shares shall be legally permitted by
all laws and regulations to which Purchaser and the Company are subject.
(iv) The Company and ProChon shall have
executed and delivered to each other the Heads of Agreement dated as of the
Closing Date.
2.2 Payment and Delivery. At the Closing, subject to the terms
and conditions hereof, the Company will deliver to Purchaser a stock
certificate, registered in the name of Purchaser, representing the Shares to be
purchased by Purchaser from the Company, dated as of the Closing, against
payment of the purchase price therefor by wire transfer, unless other means of
payment shall have been agreed upon by Purchaser and the Company.
2.
<PAGE>
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Subject to and except as disclosed by the Company in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the
"Form 10-K"), quarterly report on Form 10-Q for the quarter ended March 31, 1998
(the "Form 10-Q") and Proxy Statement for the 1998 Annual Meeting of
Stockholders, dated as of April 17, 1998 (the "Proxy Statement"), each
previously delivered to Purchaser, or in the Schedule of Exceptions attached
hereto as Exhibit A (the "Schedule of Exceptions"), the Company hereby
represents and warrants to Purchaser as follows as of the date hereof and as of
the Closing Date, and all such representations and warranties shall survive the
Closing:
3.1 Organization. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company has all requisite power and
authority to own or lease its properties and to conduct its business as now
conducted. The Company holds all licenses and permits required for the conduct
of its business as now conducted, which, if not obtained, would have a material
adverse effect on the business, financial condition or results of operations of
the Company taken as a whole. The Company is qualified as a foreign corporation
and is in good standing in all states where the conduct of its business or its
ownership or leasing of property requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the business,
financial condition or results of operations of the Company taken as a whole.
3.2 Capitalization. The authorized, issued and outstanding
capital stock of the Company and a description of the Company's stock option and
stock purchase plans is as set forth in the Proxy Statement. All of the issued
and outstanding shares of common stock have been duly authorized, validly issued
and are fully paid and nonassessable. Except for rights granted under the
Company's 1992 Stock Option Plan, 1994 Non-Employee Directors' Stock Option
Plan, Employee Stock Purchase Plan, Long-Term Objectives Stock Option Plan for
Senior Management and Preferred Share Purchase Rights Plan and the outstanding
warrants and 8% Senior Custom Convertible Notes described in the Form 10-K
(certain of which have been exercised or converted as described in Schedule
3.2), there are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion or other rights of any character (contingent
or otherwise) to purchase or otherwise acquire from the Company, at any time, or
upon the happening of any stated event, any shares of the capital stock of the
Company. On June 29, 1998, 16,058,126 shares of Common Stock were outstanding,
and no other shares of capital stock of the Company were outstanding.
3.3 Authority. The Company has all requisite power and
authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, and upon execution
and delivery by the Company, this Agreement will constitute a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditor's rights from time
to time in effect, and subject to general equity principles.
3.
<PAGE>
3.4 Financial Statements. The financial statements of the
Company included in the Form 10-K and Form 10-Q fairly presented in all material
respects the financial position and results of operations of the Company at
their respective dates and for the respective periods to which they apply; and
such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as otherwise stated therein.
3.5 Issuance of the Shares. The Shares, when issued pursuant
to the terms of this Agreement, will be duly and validly authorized and issued,
fully paid and nonassessable.
3.6 No Conflict with Law or Documents. The execution, delivery
and consummation of this Agreement and the transactions contemplated hereby will
not (a) conflict with any provisions of the Certificate of Incorporation or the
Bylaws of the Company; (b) result in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under or conflict
with (in each case, upon the giving of notice, the passage of time, or both) any
mortgage, indenture, lease, agreement or other instrument, permit, franchise
license, judgment, order, decree, law, ordinance, rule or regulation applicable
to the Company or its respective properties.
3.7 Absence of Certain Developments. Since March 31, 1998, the
Company has not (a) incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business, consistent
with past practices; (b) mortgaged, pledged or subjected to lien, charge or any
other encumbrance any material assets, tangible or intangible except in the
ordinary course of business, consistent with past practices; (c) sold, assigned
or transferred any material assets or canceled any material debts or obligations
except in the ordinary course of business, consistent with past practices; (d)
suffered any extraordinary losses, or waived any rights of substantial value;
(e) entered into any material transaction other than in the ordinary course of
business, consistent with past practices; or (f) otherwise had any change in its
condition, financial or otherwise, except for changes in the ordinary course of
business, consistent with past practices, none of which individually or in the
aggregate has been materially adverse to the Company.
3.8 Litigation. To the Company's knowledge, there are no
actions, suits, proceedings or investigations pending or threatened against or
affecting the Company that in the aggregate could reasonably be anticipated to
result in any material adverse effect on the Company.
3.9 Registration Rights Covenant.
(a) At any time during the 180-day period immediately
following the earlier of (i) the expiration of the Term of the Collaboration (as
defined in the Heads of Agreement), without giving effect to any extensions
thereof or (ii) the earlier termination of the Term of the Collaboration
pursuant to terms set forth in the Heads of Agreement or the Collaboration
Agreement contemplated by the Heads of Agreement (the "Collaboration
Agreement"), Purchaser shall have the right to cause the Company to file a
registration statement under the Securities Act for a public offering of all or
part of the Shares, but in no event less than
4.
<PAGE>
75,000 Shares, beneficially owned by Purchaser by delivering written notice
thereof to the Company specifying the number of Shares to be included in such
registration and the intended method of distribution thereof (the "Registration
Request"). Upon receipt of the Registration Request, the Company shall, as
expeditiously as possible, use its best efforts to promptly effect the
registration under the Securities Act, and all applicable state securities laws,
to the extent necessary to permit the sale or other disposition by Purchaser of
the Shares to be so registered in accordance with such notice.
(b) The demand registration rights granted in Section
3.9(a) are subject to the following limitations: (i) the Company shall not be
obligated to effect more than one registration pursuant to Section 3.9(a), (ii)
the Company shall not be obligated to effect such registration for a period of
60 days following the closing of an underwritten public offering of the
Company's equity securities that is in registration at the time of the receipt
of the Registration Request (provided that the period within which Purchaser may
demand registration hereunder will be extended by the number of days by which
the registration requested by Purchaser is delayed pursuant to this sentence);
and (iii) if the Company shall furnish to Purchaser a certificate signed by the
Chairman of the Board of Directors of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration to be
effected at such time, then the Company shall have the right to defer the filing
of the registration for a period of not more than 180 days after receipt of the
Registration Request (provided that the period within which Purchaser may demand
registration hereunder will be extended by the number of days by which the
registration requested by Purchaser is delayed pursuant to this sentence).
(c) If and when the Company is required by the
provisions of Section 3.9(a) to include any of the Shares in a registration
under the Securities Act, Purchaser will furnish in writing such information as
is reasonably requested by the Company for inclusion in the registration
statement relating to such offering and such other information and documentation
as the Company shall reasonably request, and the Company will, as expeditiously
as possible:
(i) Prepare and file with the Securities and
Exchange Commission ("SEC") a registration statement with respect to such
securities and use its best efforts to cause such registration to become and
remain effective for such period as may be necessary to permit the successful
marketing of such securities, but not exceeding 120 days (excluding any period
during which a stop order is in effect).
(ii) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act and to keep such registration statement effective for that
period of time specified in paragraph (i) of this section.
(iii) Furnish to Purchaser such number of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as such Purchaser may reasonably
request in order to facilitate the public sale or other disposition of the
Shares registered hereunder.
5.
<PAGE>
(iv) Use its best efforts to register or
qualify the Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Purchaser shall reasonably
request and do any and all other acts and things which may be necessary or
desirable to enable Purchaser to consummate the public sale or other disposition
in such jurisdictions of the Shares covered by such registration statement,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(d) In the event of a registration of any of the
Shares under the Securities Act pursuant to Section 3.9(a) in connection with an
underwritten public offering, the Company will enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriters of such offering, including without limitation
providing usual and customary indemnification. In the event Purchaser proposes
to sell Shares in accordance with this Section pursuant to an underwritten
offering, the Company shall have the right to approve the managing underwriters
for such offering; provided, however, that such approval shall not be
unreasonably withheld.
(e) At any time or from time to time following the
earlier of (i) the expiration of the Term of the Collaboration (as defined in
the Heads of Agreement), without giving effect to any extensions thereof or (ii)
the earlier termination of the Term of the Collaboration pursuant to terms set
forth in the Heads of Agreement or the Collaboration Agreement, if the Company
shall determine to register any of its securities under the Securities Act
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction, or a registration on any registration
form that does not permit secondary sales, then the Company will:
(i) promptly give to Purchaser a written
notice thereof; and
(ii) use its best efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 3.9(f) below, and in any
underwriting involved therein, all of the Shares specified in a written request
or requests made by Purchaser and received by the Company within twenty (20)
days after the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify all or a
part of the Shares.
(f) If the registration of which the Company gives
notice to Purchaser is for a registered public offering involving an
underwriting, the Company shall so advise Purchaser as a part of the written
notice given pursuant to Section 3.9(e)(i). In such event, the right of
Purchaser to registration pursuant to Section 3.9(e) shall be conditioned upon
Purchaser's participation in such underwriting and the inclusion of all or any
part of the Shares specified in Purchaser's notice in the underwriting to the
extent provided herein. Purchaser shall (together with the Company and the other
holders of securities of the Company with registration rights to participate
therein distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
6.
<PAGE>
Notwithstanding any other provision of Sections 3.9(e) or (f), if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all of
the Shares from, or limit the number of Shares to be included in, the
registration and underwriting. The Company shall so advise Purchaser and other
holders of securities requesting registration, and the number of shares that are
entitled to be included in the registration and underwriting shall be allocated
first to the Company for securities being sold for its own account and
thereafter the number of shares that are entitled to be included in the
registration shall be allocated among Purchaser and other holders requesting
inclusion of shares on a pro rata basis, subject to any prior agreements among
the Company and its other stockholders, but only to the extent that such other
agreements provide for additional limitations on the number of shares such other
stockholders or the Company will be entitled to include in the registration,
which agreements are in effect as of the Effective Date. If Purchaser or any
other person does not agree to the terms of any such underwriting, Purchaser and
any other such person shall be excluded therefrom by written notice from the
Company or the underwriter. Any Shares or other securities excluded or withdrawn
from such underwriting shall also be withdrawn from such registration.
(g) As used herein, "Registration Expenses" shall
mean all expenses incurred by the Company in complying with this Section 3.9,
including, without limitation, all registration, qualification and filing fees;
printing expenses; fees and disbursements of counsel for the Company (and the
fees and disbursements of counsel for the Company in its capacity as counsel to
the Purchaser hereunder; if Company counsel does not make itself available for
this purpose, the Company will pay the reasonable fees and disbursements of one
counsel for the Purchaser as selected by Purchaser) and of the Company's
independent accounting firm; blue sky fees and expenses; underwriting discounts
and commissions and the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company). Purchaser will pay
all Registration Expenses in connection with a registration pursuant to Section
3.9(a) hereof; provided, however, that in the event Purchaser withdraws its
demand for registration after having learned of a material adverse change in the
condition, business, or prospects of the Company from that known to Purchaser at
the time of its demand (in which case Purchaser shall retain its rights pursuant
to Section 3.9(a)), all Registration Expenses shall be borne by the Company. All
Registration Expenses in connection with any registration pursuant to Section
3.9(e) hereof shall be borne by the Company; provided, however, that any
incremental filing fees or other expenses incurred by the Company solely by
reason of Purchaser's exercise of registration rights pursuant to Section 3.9(e)
shall be borne by the Purchaser.
(h) The rights conferred upon Purchaser under this
Section 3.9 may be assigned by Purchaser to any permitted transferee of the
Shares, provided that each such transfer complies with Section 4.5, and
provided, further, that only Purchaser shall be authorized to give notice to the
Company of any request for registration under Section 3.9(a).
(i) In the event any Shares are included in a
registration statement under Sections 3.9(a) or (e):
7.
<PAGE>
(i) To the extent permitted by law, the
Company will indemnify and hold harmless Purchaser, the partners, officers,
directors and legal counsel of Purchaser, any underwriter (as defined in the
Securities Act) for Purchaser and each person, if any, who controls Purchaser or
such underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (a) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (b) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(c) any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse Purchaser and each partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 3.9(i)(i) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by Purchaser or such partner, officer, director,
underwriter or controlling person of Purchaser.
(ii) To the extent permitted by law,
Purchaser will indemnify and hold harmless the Company, each of its directors,
its officers and legal counsel and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other person
selling securities under such registration statement or any of such other
person's partners, directors or officers or any person who controls such person,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such person, or partner, director, officer or controlling person of such
person may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by Purchaser
under an instrument duly executed by Purchaser and stated to be specifically for
use in connection with such registration; and Purchaser will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other person, or partner, officer,
director or controlling person of such other person in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided,
8.
<PAGE>
however, that the indemnity agreement contained in this Section 3.9(i)(ii) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of
Purchaser, which consent shall not be unreasonably withheld; provided further,
that in no event shall any indemnity under this Section 3.9(i)(ii) exceed the
net proceeds from the offering received by such Purchaser
(iii) Promptly after receipt by an
indemnified party under this Section 3.9(i) of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 3.9(i), deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
3.9(i), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 3.9(i).
(iv) If the indemnification provided for in
this Section 3.9(i) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any losses, claims, damages
or liabilities referred to herein, the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall to the extent permitted by
applicable law contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
shall any contribution by Purchaser hereunder exceed the proceeds from the
offering received by Purchaser.
(v) The obligations of the Company and
Purchaser under this Section 3.9(i) shall survive completion of any offering of
securities in a registration statement pursuant to Section 3.9. No indemnifying
party, in the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by
9.
<PAGE>
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(j) The right of Purchaser to exercise any right
provided under Section 3.9 shall terminate at such time as all of the Shares may
immediately be sold under Rule 144 under the Securities Act or any successor
provision during any 90-day period.
3.10 Covenant to Keep Public Information Available. The
Company covenants and agrees that it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder as such may be amended from time to
time (the "Rules"), and will take such further actions as Purchaser may
reasonably request, all to the extent required from time to time to enable
Purchaser to sell Shares at such times as are permitted by this Agreement
without registration under the Securities Act within the limitations of Rule 144
of the Rules or any similar rule or regulation hereafter adopted by the SEC.
Upon the request of Purchaser, the Company will supply Purchaser with a
certificate certifying compliance with this provision.
3.11 SEC Reports. All of the reports filed by the Company
under the Exchange Act prior to the date of this Agreement (the "SEC Reports")
comply in all material respects with the requirements of the Exchange Act. None
of the SEC Reports contains, as of the respective dates thereof, any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made.
3.12 Securities Law Compliance. Assuming the accuracy of the
representations and warranties of Purchaser contained in Section 4, the offer,
issuance, sale and delivery of the Shares constitute an exempt transaction under
the Securities Act.
3.13 Registration Rights. Except as set forth in the Schedule
of Exceptions, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
Purchaser hereby represents, warrants and covenants with the Company as
follows:
4.1 Legal Power. Purchaser has the requisite corporate power
and is authorized to enter into this Agreement, to purchase the Shares hereunder
and to carry out and perform its obligations under the terms of this Agreement.
4.2 Due Execution. This Agreement has been duly authorized
executed and delivered by Purchaser, and upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of Purchaser.
4.3 Investment Representations and Covenants. Purchaser is
acquiring the Shares for its own account, not as nominee or agent, for
investment and not with a view to or for resale in connection with, any
distribution or public offering thereof within the meaning of
10.
<PAGE>
the Securities Act. Purchaser understands that the Shares have not been
registered under the Securities Act, but are instead being offered and sold to
Purchaser pursuant to an exemption from registration contained in the Securities
Act based in part upon the following representations and warranties:
(a) Purchaser is capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect its own
interests. Purchaser must bear the economic risk of this investment unless the
Shares are registered pursuant to the Securities Act, or an exemption from
registration is available. Purchaser understands that the Company has no present
intention of registering the Shares. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow such
Purchaser to transfer all or any portion of the Shares under the circumstances,
in the amounts or at the times Purchaser might propose.
(b) Purchaser is acquiring the Shares for such
Purchaser's own account for investment only, and not with a view towards their
distribution.
(c) Purchaser represents that by reason of its, or of
its management's, business or financial experience, Purchaser has the capacity
to protect its own interests in connection with the transactions contemplated in
this Agreement.
(d) Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with directors, officers
and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(e) Purchaser acknowledges and agrees that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things: the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being through an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Exchange Act) and the number of shares being sold
during any three-month period not exceeding specified limitations. Each
certificate representing the Shares shall be stamped or otherwise imprinted with
a legend substantially similar to the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL THEY ARE REGISTERED UNDER THE ACT OR UNLESS (A) THE COMPANY HAS
RECEIVED AN
11.
<PAGE>
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED OR (B) SUCH SALE IS MADE
PURSUANT TO RULE 144 UNDER THE ACT.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California, without regard to principles of conflict of laws.
5.2 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto. It is acknowledged and agreed that Oceana Investment
Corporation PLC may assign its rights and obligations under this Agreement to
one or more of its wholly owned subsidiaries.
5.3 Entire Agreement. This Agreement and the Exhibits hereto,
and the other documents delivered pursuant hereto, constitute the full and
entire understanding and agreement among the parties with regard to the subjects
hereof and no party shall be liable or bound to any other party in any manner by
any representations, warranties, covenants, or agreements except as specifically
set forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
5.4 Separability. In case any provision of this Agreement
shall be invalid, illegal, or unenforceable, it shall to the extent practicable,
be modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
5.5 Amendment and Waiver. Except as otherwise provided herein,
any term of this Agreement may be amended, and the observance of any term of
this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely), with the written consent of the Company and Purchaser. Any
amendment or waiver effected in accordance with this section shall be binding
upon any holder of any security purchased under this Agreement (including
securities into which such securities have been converted), each future holder
of all such securities, and the Company.
5.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery, on the first business day following mailing by overnight
courier, or on the fifth day following mailing by registered or certified mail,
return receipt requested, postage prepaid, addressed to the Company and
Purchaser at the addresses included herein.
12.
<PAGE>
5.7 Fees and Expenses. Except as set forth in Section 3.9(g),
the Company and Purchaser shall bear their own expenses and legal fees with
respect to this Agreement and the transactions contemplated hereby.
5.8 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
5.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
13.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement as of the date set forth in the first paragraph hereof.
SUGEN, INC.
By: /s/ K. Peter Hirth, Ph.D.
-------------------------------------
Name: K. Peter Hirth, Ph.D.
Title: Executive Vice President
Address: 351 Galveston Drive
Redwood City, CA 94063-4720
OCEANA INVESTMENT CORPORATION PLC
By: /s/ Michael Lewis
-------------------------------------
Name: Michael Lewis
Title: Director
Address: Park Lorne
111 Park Road
London NW87SL England
14.
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS PURSUANT TO SECTION 3
This Schedule of Exceptions is made and given pursuant to Section 3 of
the Agreement. The paragraph numbers in this Schedule of Exceptions correspond
to the paragraph numbers in the Agreement; however, any information disclosed
herein under any paragraph number shall be deemed to be disclosed and
incorporated into any other paragraph number under the Agreement where such
disclosure would be appropriate. Any terms defined in the Agreement shall have
the same meaning when used in this Schedule of Exceptions as when used in the
Agreement unless the context otherwise requires.
<TABLE>
3.2 Capitalization. On June 30, 1998, 136,511 shares of Common Stock
were issued under the Company's Employee Stock Purchase Plan.
<CAPTION>
Note Conversions Since March 31, 1998
Convertible Note Holder Number of Shares Date of Conversion
- ----------------------- ---------------- ------------------
<S> <C> <C>
Omicron Partners 270,460 5/12/98
Delta Opportunity Fund 207,000 5/22/98
Overbrook Fund 8,300 5/22/98
ACI/DA Investors 70,300 5/22/98
Omicron Partners 20,100 5/27/98
OTATO 41,500 5/28/98
</TABLE>
<TABLE>
3.13 Registration Rights. The Company has granted registration rights
to the following security holders with respect to the number of shares
indicated:
<CAPTION>
Security Holder Number of Shares
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Asta Medica Aktiengesellschaft 449,802
Zeneca Limited 1,071,016
AMGEN, Inc. 200,000
Sanwa Business Credit Corp. 2,666
Dr. Heinrich Kuhn 15,000
Financing for Science International, Inc. 20,798
Genentech, Inc. 133,333
Comdisco 76,847
Vision Pharmaceuticals L.P. 191,571
Convertible Noteholders 1,780,000
</TABLE>
Exhibit 10.73
***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SS.SS.200.80(B)(4),
200.83 AND 240.24B-2
THIS HEADS OF AGREEMENT entered into as of the 30th day of June 1998
("Date of the Heads") by and between SUGEN INC., a Delaware corporation
("SUGEN") with offices at 351 Galveston Drive, Redwood City, CA 94063-4720 and
PROCHON BIOTECH LIMITED, an Israeli corporation ("PROCHON") with its registered
office at Building 12, Kiryat Weizmann, Science Park, P.O. 1482, Rehovot 76114,
Israel.
RECITALS
WHEREAS, SUGEN is a leader in the research and development of small
molecule drugs which modulate tyrosine kinase and tyrosine phosphotase signaling
pathways; and
WHEREAS, PROCHON is a leader in the research and development of
treatments for skeletal disorders and bone- and cartilage-related diseases; and
WHEREAS, SUGEN and PROCHON desire to enter into a definitive agreement
establishing a collaborative relationship in order to research, develop,
manufacture and market products for the treatment of achondroplasia and other
growth disorders; and
WHEREAS, SUGEN and PROCHON desire in the interim to enter into these
binding Heads of Agreement which set forth the principal terms of such
collaborative relationship;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained in this Heads of Agreement, the parties agree as follows;
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Affiliate" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include
without limitation any company fifty percent (50%) or more of whose voting stock
or participating profit interest is owned or controlled, directly or indirectly,
by a party, and any company which owns or controls, directly or indirectly,
fifty percent (50%) of more of the voting stock of a party; "Affiliate" shall
specifically include, in the case of SUGEN, [...***...].
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
1
<PAGE>
1.2 "Closely Related Compounds" shall mean a compound identified in the
Collaboration which is [...***...]* of the Collaboration Compound and which
[...***...] as Collaboration Compound.
1.3 "Collaboration" shall mean the program of collaborative research
and development described in Article 3.
1.4 "Collaboration Agreement" shall mean the definitive collaboration
agreement to be entered by the parties on terms including (but not limited to)
the terms herein provided.
1.5 "Collaboration Compound" the compound identified in the
Collaboration and selected by the RMC for development by PROCHON.
1.6 "Confidential Information" shall mean each party's confidential
information, inventions, know-how or data disclosed pursuant to this Heads of
Agreement or Collaboration Agreement and shall include manufacturing, marketing,
financial, personnel and other business information and plans, whether in oral,
written, graphic or electronic form.
1.7 "Effective Date" shall mean the effective date of the Collaboration
Agreement.
1.8 "Field of Collaboration" shall mean the discovery and development
of [...***...].
1.9 "Field of Commercialization" shall mean the treatment of
[...***...] in humans.
1.10 "FTE" shall mean a full-time equivalent scientific person year of
scientific and/or technical work, on or directly related to the Collaboration,
carried out by one or more employees or consultants of SUGEN, each of whom
devotes a portion of his or her time to the Collaboration; provided, however,
that PROCHON understands and agrees that SUGEN retains complete discretion to
change the identity, the frequency and time which any individual employee
devotes to the Collaboration. Scientific work on or directly related to the
Collaboration to be performed by SUGEN employees or consultants can include, but
is not limited to, experimental laboratory work, recording and writing up
results, reviewing literature and references, holding scientific discussions,
managing and leading scientific staff, and carrying out Collaboration management
duties (including service on the Research Management Committee as defined
below).
1.11 "License Agreement" shall mean an agreement pursuant to which
SUGEN grants PROCHON a worldwide exclusive license to develop, make, have made,
use and sell a Licensed Product, substantially in the form to be attached as an
Exhibit to the Collaboration Agreement.
1.12 "Licensed Product" shall mean any pharmaceutical product which
contains the Collaboration Compound or a Closely Related Compound substituted as
provided in Section 5.4, including all formulations, line extensions or modes of
administration thereof, for use within the Field of Commercialization.
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE>
1.13 "Net Sales" shall mean all revenues recognized in accordance with
generally accepted accounting principles from the sale of the Licensed Product
or Retained Products, less transportation charges, commissions, discounts,
credits allowed for defective or returned goods and other allowances (actually
paid or allowed, including but not limited to, prompt payment and volume
discounts, charge backs from wholesalers and other allowances granted to the end
commercial customer of the Licensed Product or Retained Product, whether in cash
or trade), insurance and sales and other taxes based on sales prices when
included in gross sales, but not including taxes assessed on income derived from
such sales.
1.14 "Phase I" means those clinical trials on sufficient numbers of
normal volunteers and patients that are designed to establish that a drug is
safe for its intended use, and to support its continued testing in Phase II
Clinical Trials.
1.15 "Phase II" means those clinical trials on sufficient numbers of
patients that are designed to establish the safety and biological activity of a
drug for its intended use, and to define warnings, precautions and adverse
reactions that are associated with the drug in the dosage range to be
prescribed.
1.16 "Program Know-How" shall mean all tangible or intangible know-how,
trade secrets, inventions (whether or not patentable), data, clinical and
preclinical results, information, and any physical, chemical or biological
material any replication or any part of such material all of which is in any way
derived from or developed pursuant to activities undertaken in the conduct of
the Collaboration by either party or its consultants or collaborators.
1.17 "Program Technology" shall mean the Program Patents and the
Program Know-How.
1.18 "Program Patents" shall mean all patents, both foreign and
domestic, including without limitation, all substitutions, extensions, reissues,
renewals and inventors certificates covering inventions made in the conduct of
the Collaboration by a party or its consultants or collaborators.
1.19 "Regulatory Approval" shall mean any approval licenses,
registrations, or authorisations of any federal, state or local regulatory
agency, department, bureau or other government entity, necessary for the
manufacture, use, storage, import, transport or sale of Licensed Product in a
country.
1.20 "Research Management Committee" or "RMC" shall mean that committee
to be formed pursuant to Section 3.2.
1.21 "Retained Products" shall mean products containing compounds to
which SUGEN retains rights as provided in Section 5.6.
1.22 "Term of the Collaboration" shall have the meaning assigned to it
in Section 3.6.
1.23 "Valid Claim" shall mean a patent claim contained in a patent
application which has been filed for not more than five (5) years or in an
issued and unexpired patent which has not
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE>
lapsed or been declared invalid or unenforceable by a court in a decision which
is unappealable or is not appealed.
1.24 "Workplan" shall have the meaning assigned to it in Section 4.1.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of SUGEN
(a) Corporate Power. SUGEN is duly organized and validly
existing under the laws of Delaware and has full corporate power and authority
to enter into this Heads of Agreement and to carry out the provisions hereof.
(b) Due Authorization. SUGEN is duly authorised to execute and
deliver this Heads of Agreement and to perform its obligations hereunder. The
person executing this Heads of Agreement on SUGEN's behalf has been duly
authorized to do so by all requisite corporate action.
(c) Binding Agreement. This Heads of Agreement is a legal and
valid obligation binding upon SUGEN and enforceable in accordance with its
terms. The execution, delivery and performance of this Heads of Agreement by
SUGEN does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a party or by which it may be bound, nor violate any
material law or regulation of any court, governmental body or administrative or
other agency having jurisdiction over it.
(d) Grant of Rights. SUGEN has not, and will not during the
term of this Heads of Agreement, grant any right to any third party which would
conflict with the rights granted to PROCHON hereunder.
(e) Validity. SUGEN is aware of no action, suit or inquiry or
investigation instituted by any governmental agency which questions or threatens
the validity of this Heads of Agreement.
2.2 Representations and Warranties of PROCHON
(a) Corporate Power. PROCHON is duly organized and validly
existing under the laws of Israel and has full corporate power and authority to
enter into this Heads of Agreement and to carry out the provisions hereof.
(b) Due Authorization. PROCHON is duly authorized to execute
and deliver this Heads of Agreement and to perform its obligations hereunder.
The person executing this Heads of Agreement on PROCHON's behalf has been duly
authorized to do so by all requisite corporate action.
(c) Binding Agreement. This Heads of Agreement is a legal and
valid obligation binding upon PROCHON and enforceable in accordance with its
terms. The
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE>
execution, delivery and performance of this Heads of Agreement by PROCHON does
not conflict with any agreement, instrument or understanding, oral or written,
to which it is a party or by which it may be bound, nor violate any material law
or regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.
(d) Grant of Rights. PROCHON has not, and will not during the
term of this Heads of Agreement, grant any right to any third party which would
conflict with the rights granted to SUGEN hereunder.
(e) Validity. PROCHON is aware of no action, suit, or inquiry
or investigation instituted by any governmental agency which questions or
threatens the validity of this Heads of Agreement.
ARTICLE 3
COLLABORATION SCOPE AND GOVERNANCE
3.1 Objective of the Research Collaboration. The parties agree to a
worldwide cooperative arrangement within the Field of Collaboration as provided
in this Article 3.
3.2 Research Management Committee. The goals of the Collaboration shall
be determined by, and progress of the Collaboration monitored by, a Research
Management Committee comprised of two (2) representatives each from PROCHON and
SUGEN. All decisions of the Research Management Committee shall be unanimous.
The Committee will agree the time and place of meetings, substitutions,
qualifications and other similar matters.
3.3 Functions and Powers of the Research Management Committee. The
Research Management Committee shall make recommendations to the parties with
respect to:
(i) establishing plans designed to accomplish the
goals of the Collaboration;
(ii) allocating tasks and coordinating activities
required to carry out the Collaboration;
(iii) periodically reviewing and revising the
Collaboration;
(iv) determining efficacy criteria for first in vivo
lead compound;
(v) monitoring progress of the Collaboration and the
parties' diligence in carrying out their responsibilities thereunder;
(vi) encouraging and facilitating ongoing cooperation
between the parties; and
(vii) such other matters as shall be expressly
directed to the RMC for decision, determination or selection by the terms of
this Agreement.
5
<PAGE>
3.4 Disagreements. In the event the Research Management Committee shall
be unable to agree the matter shall be referred to the respective Chairman of
the Board of each party, unless otherwise stated in the Collaboration Agreement.
3.5 Exclusivity. SUGEN and PROCHON, including their Affiliates and
consultants, will collaborate with one another exclusively with respect to the
Field of Collaboration during the Term of the Collaboration.
3.6 Term of Collaboration. The Collaboration shall commence on the Date
of the Heads and continue for a period of [...***...]*, subject to renewal upon
terms mutually agreeable to the parties and subject to earlier termination of
this Head of Agreement as provided in Articles 11 ("Term of the Collaboration").
ARTICLE 4
COLLABORATIVE RESEARCH PROGRAM
4.1 Collaboration Activities
Commencing promptly after the Date of the Heads, and
continuing, subject to Section 11.3 hereof, until achievement of the milestone
event referred to in Section 6.2, each party shall diligently carry out the
activities in the Field of Collaboration specified to be performed by it in the
outline of activities set forth in the workplan to be attached as an exhibit to
the Collaboration Agreement (the "Workplan"). After achievement of that event,
each party shall conduct such additional activities in the Field of
Collaboration as they shall agree. In the event the parties are unable to so
agree within [...***...] after achievement of such event, then (i) SUGEN shall
be obligated to provide [...***...] until the expiration of the Term of the
Collaboration, commencing on the first business day after such [...***...], and
PROCHON shall be obligated to pay SUGEN $[...***...] per FTE and (ii) the tasks
and activities of such FTEs shall be determined by the RMC. The parties
contemplate that the primary responsibility in the Collaboration shall be, in
the case of SUGEN, to identify the Collaboration Compound and, in the case of
PROCHON, to clinically develop the Collaboration Compound.
4.2 Free Exchange of Information
Insofar as each party is legally permitted, SUGEN and PROCHON
shall freely exchange information relating to the Collaboration during the Term
of the Collaboration.
4.3 Research Support. During the first year of the Collaboration or
until achievement of the milestone event described in Section 6.2, if earlier,
SUGEN shall provide at least [...***...] to support collaborative research and
development activities and such additional FTEs as shall be determined by the
RMC to be necessary. Thereafter during the Collaboration, SUGEN and PROCHON
shall provide such research and development support as they shall agree as
provided in the second sentence of Section 4.1.
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
6
<PAGE>
ARTICLE 5
PRODUCT DEVELOPMENT; LICENSES
5.1 Selection of Collaboration Compound. On or before the end of the
Term of the Collaboration, the RMC shall select the Collaboration Compound. The
RMC shall begin meeting as promptly as practicable after the Date of the Heads
and shall select and agree on the criteria for the selection of the
Collaboration Compound.
5.2 Commercial License of PROCHON. Upon the selection of the
Collaboration Compound, SUGEN and PROCHON shall enter into a License Agreement
granting PROCHON an exclusive worldwide license of the commercial rights to the
Collaboration Compound as a Licensed Product within the Field of
Commercialization. Such License Agreement shall require PROCHON to pay SUGEN
royalties on annual worldwide Net Sales of the Licensed Product at a rate equal
to [...***...] of Net Sales of Licensed Product, and at a rate equal to
[...***...] of sub-licensing payments received.
5.3 Development of Collaboration Compound. PROCHON shall be responsible
for all clinical testing of the Licensed Product at its own expense. The License
Agreement shall obligate PROCHON or its sublicensee to diligently pursue
commercialization of the Licensed Product; provided, however, that if PROCHON or
its sublicensee fails to commence Phase I Clinical Trials within one year after
the filing of an IND for the Licensed Product (unless such failure is due to
PROCHON's or its sublicensee's difficulty in enrolling patients in such Phase I
Clinical Trials) or to diligently continue thereafter, all commercialization
rights shall revert, after notice and opportunity to cure, to SUGEN subject to
the payment of royalties equal to [...***...] of Net Sales if the Licensed
Product has not completed Phase 1 clinical testing, [...***...] if it has
completed Phase 1 but has not completed Phase II clinical testing and
[...***...] if it has completed Phase II clinical testing. In the event SUGEN
shall desire to use clinical data obtained by PROCHON, it will reimburse PROCHON
its reasonable actual costs therefor.
5.4 Back-up Compounds
(a) During a period of [...***...] after the effective date of
the License Agreement, SUGEN will reserve up to [...***...] Closely Related
Compounds identified by the RMC as back up compounds for the Collaboration
Compound. SUGEN will not develop or license others to develop for any purpose
either of such Closely Related Compounds during such period prior to the date,
if any, PROCHON elects to substitute as hereinafter provided. PROCHON may during
such period elect to substitute a Closely Related Compound for the Collaboration
Compound. Upon written notice to SUGEN identifying the Closely Related Compound
to be so substituted the License Agreement will be amended as may be necessary
so that such Closely Related Compound shall become the Licensed Product for all
purposes and all rights to the Collaboration Compound shall revert to SUGEN,
subject to Section 5.6. After any such substitution, PROCHON may during such
period elect to substitute the [...***...] Closely Related Compound for
[...***...] Closely Related Compound. Upon written notice to SUGEN identifying
the Closely Related Compound to be so substituted the License Agreement will be
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
7
<PAGE>
amended as may be necessary so that such Closely Related Compound shall become
the Licensed Product for all purposes and all rights to the Collaboration
Compound and [...***...]Closely Related Compound shall revert to SUGEN, subject
to Section 5.6.
(b) If by the [...***...] anniversary of the Date of the Heads
PROCHON obtains competent evidence that neither the Collaboration Compound nor
any Closely Related Compound is suitable for development within the Field of
Commercialization, then PROCHON may present such evidence in writing to SUGEN
and request SUGEN's assistance to develop one (1) or more additional compounds
for use within the Field of Commercialization. If PROCHON elects to do so, the
parties will negotiate in good faith to develop a modified Workplan and to
establish mutually acceptable funding to support SUGEN's performance of such
development activities. Any compounds with respect to which SUGEN has a prior
commitment to a third party or to an established internal development program
(to be defined in the Collaboration Agreement) shall not be available for use in
any development activities conducted pursuant to this Section 5.4(b).
5.5 Research License to PROCHON. During the Collaboration, SUGEN grants
to PROCHON such licenses or sublicenses as shall be necessary for PROCHON to
participate in the Collaboration.
5.6 SUGEN Retained Rights. SUGEN shall retain the exclusive worldwide
right outside of the Field of Commercialization to commercialize compounds
identified in the Collaboration not selected as the Collaboration Compound or
Closely Related Compound. With respect to (i) novel compounds (i.e., compounds
other than those that are claimed in issued patents or pending patent
applications owned or controlled by SUGEN as of the Effective Date or other
compounds disclosed in invention disclosures provided by SUGEN's patent counsel
to PROCHON's counsel as of the Effective Date) made in the course of the
Collaboration, and (ii) other compounds having activity previously known to
SUGEN that are determined during the course of the Collaboration to be active
with respect to [...***...], if PROCHON contributes intellectual property
valuable to the commercialization of such compounds outside the Field of
Commercialization, SUGEN shall pay PROCHON royalties on annual worldwide Net
Sales of such compounds at a rate equal to [...***...] of Net Sales, and at a
rate equal to [...***...] of sub-licensing revenues. SUGEN agrees it will not,
and will not license others to commercialize any compound for use in the Field
of Commercialization so long as PROCHON continues to develop the Licensed
Product as provided in Section 5.3 hereof and to commercialize the Licensed
Product as will be provided in the License Agreement.
5.7 Royalty Adjustments. In the event PROCHON shall be required to pay
a royalty to a third party because the sale of the Licensed Product infringes a
Valid Claim of an issued patent claiming a composition of matter, PROCHON may
offset [...***...] of such royalty amount against the royalties payable to SUGEN
under the License Agreement. During such period that the Licensed Product shall
not be the subject of a Valid Claim for the composition of matter, the royalty
rates specified in Section 5.2 shall be reduced by [...***...].
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
8
<PAGE>
5.8 Research License to SUGEN. During the Collaboration, PROCHON grants
to SUGEN such licenses or sublicenses as shall be necessary for SUGEN to
participate in the Collaboration.
5.9 PROCHON Option to Propose Joint Commercialization. The License
Agreement shall provide that, at PROCHON's option, the parties will enter into
negotiations relating to the possible joint commercialization of the Licensed
Product [...***...].
ARTICLE 6
FINANCIAL SUPPORT
6.1 Research Payments. PROCHON shall pay SUGEN concurrently with the
execution of the Heads of Agreement $750,000 in support of SUGEN's activities in
the Collaboration. After achievement of the milestone described in Section 6.2,
PROCHON shall pay SUGEN $[...***...] for [...***...] provided pursuant to
Section 4.1 or such other number of FTEs as the parties may mutually agree or as
the RMC may approve, quarterly in advance. PROCHON shall reimburse SUGEN for
[...***...] SUGEN provides to the Collaboration. PROCHON shall pay SUGEN for the
cost of services provided by third parties approved by the RMC, upon receipt of
invoice from SUGEN.
6.2 Milestone Payments. Except as otherwise hereinafter provided
PROCHON shall pay SUGEN a nonrefundable payment of $[...***...] within thirty
(30) days of the date the parties succeed in [...***...] which meets RMC
specified efficacy criteria, which criteria the RMC shall select and agree upon
promptly after the Date of the Heads.
6.3 Miscellaneous Payment Provisions. The Collaboration Agreement will
include terms concerning the method of making payments, late payments and
withholding on payments.
6.4 Cooperation Concerning BIRD Funding. SUGEN will provide such
reasonable assistance to PROCHON in submitting an application for BIRD funding
as it shall determine to be appropriate in light of the rules and regulations
governing such applications.
ARTICLE 7
INTELLECTUAL PROPERTY
7.1 Ownership of Program Technology. Subject to the licenses described
in Article 5, all Program Technology invented, discovered or developed solely by
the employees and agents of one party shall be owned by that party. Subject to
the licenses described in Article 5, all Program Technology invented, discovered
or developed jointly by the employees and agent of both parties shall be owned
solely by [...***...] if it relates to [...***...] within the Field of
Collaboration, solely owned by [...***...] if it relates to [...***...] and
jointly owned in all other cases.
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
9
<PAGE>
7.2 Patenting of Program Technology. Each party shall be responsible at
its own expense and with counsel of its choosing, for the filing, prosecution
and maintenance of patent applications and patents throughout the world for
Program Technology owned solely by it. The RMC shall determine the party so
responsible in the case of jointly owned Program Technology. The parties shall
consult from time to time concerning the countries in which patent applications
are filed as well as the scope of protection to be sought.
ARTICLE 8
TRADEMARK AND OTHER PROVISIONS
The Collaboration Agreement or License Agreement, as appropriate, will
contain such other provisions as the parties may agree concerning the Program
Technology, including without limitation, enforcement and defense against third
parties patents and will provide for terms and conditions concerning the use and
protection of trademarks approved by each party.
ARTICLE 9
INFORMATION AND REPORTS
The parties will make available and disclose to one another all results
of the work conducted in the Collaboration. All discoveries or inventions made
by either party hereunder will be promptly disclosed to the other party. The
parties will exchange, on a periodic basis, verbal or written reports of their
development work. The Collaboration Agreement will provide the frequency and
manner of information exchanged between the parties.
ARTICLE 10
CONFIDENTIALITY; PUBLICATION
10.1 Confidentiality. Except to the extent expressly authorized by this
Heads of Agreement or otherwise agreed in writing by the parties, the parties
agree that, for the term of this Heads of Agreement and the Collaboration
Agreement and for [...***...] thereafter, the receiving party shall keep
confidential and shall not publish or otherwise disclose and shall not use for
any purpose other than as provided for in such Agreements any Confidential
Information furnished to it by the other party pursuant to such Agreements
unless the receiving party can demonstrate by competent proof that such
Information:
(a) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
10
<PAGE>
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of such Agreements;
(d) was disclosed to the receiving party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing party not to disclose such information to others;
or
(e) was independently discovered or developed by the receiving
party without the use of Confidential Information belonging to the disclosing
party.
10.2 Authorized Disclosure. Each party may disclose Confidential
Information belonging to the other party to the extent such disclosure is
reasonably necessary in connection with:
(a) filing or prosecuting patents relating to Licensed
Products or Projects;
(b) regulatory filings;
(c) prosecuting or defending litigation;
(d) complying with applicable governmental regulations;
(e) conducting pre-clinical or clinical trials of Licensed
Products; or
(f) disclosure to Affiliates who agree to be bound by similar
terms of confidentiality.
Notwithstanding the foregoing, in the event a party is required to make
a disclosure of the other party's Confidential Information pursuant to this
Section 10.2 it will, except where impracticable, give reasonable advance notice
to the other party of such disclosure and use best efforts to secure
confidential treatment of such information. In any event, the parties agree to
take all reasonable action to avoid disclosure of Confidential Information
hereunder.
10.3 Publications. Each party primarily responsible for a proposed
publication, whether written or oral, shall at least thirty (30) days before
presentation or submission of the proposed publication to a third party, submit
such proposed publication to each member of the RMC for review in connection
with obtaining or preservation of patent rights and/or to determine whether
Confidential Information should be modified or deleted. The RMC shall have
thirty (30) days in which to review each proposed publication. The review period
may be extended for an additional thirty (30) days when the RMC provides a
reasonable need for such extension, including, but not limited to the
preparation and filing of pertinent patent applications.
10.4 Nondisclosure and Invention Assignment Agreements. Each employee
or consultant of SUGEN or PROCHON and each third party who is participating in
research or development of Licensed Products hereunder shall sign a
nondisclosure and invention assignment agreement in form and substance
satisfactory to both SUGEN and PROCHON.
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
11
<PAGE>
10.5 This Heads of Agreement. The parties agree that the material terms
of this Agreement shall be considered Confidential Information. The parties will
consult with one another and agree on the provisions of this Heads of Agreement
to be redacted in any filings made by the parties with the United States
Securities and Exchange Commission or as otherwise required by law.
ARTICLE 11
TERM AND TERMINATION OF AGREEMENT
11.1 Term. Unless earlier terminated in accordance with Section 11.2,
this Heads of Agreement shall expire upon the earlier of the execution of the
Collaboration Agreement or the expiration of the last to expire Program Patent
for which a license is granted hereby.
11.2 Termination for Material Breach. Each party shall have the right
to terminate this Heads of Agreement after appropriate written notice to the
other that the other is in material breach of this Heads of Agreement, unless
the other party cures the breach within thirty (30) days of the date notice
thereof was given, or, in the case breach cannot be cured in such period, the
party continues to use diligent efforts to cure such breach until actually
cured. Licenses granted to the non-breaching party under this Heads of Agreement
shall not be affected by termination for material breach. All licenses to the
breaching party shall automatically terminate upon such termination.
11.3 Termination for Failure to Achieve Milestone. Either party may
terminate this Heads of Agreement in the event the milestone event referred to
in Section 6.2 is not achieved within [...***...] after the Date of the Heads.
11.4 Accrued Rights, Surviving Obligations. Termination of this Heads
of Agreement shall not affect any accrued rights of either party. The terms of
Section 5.6, in the case of termination pursuant to Section 11.3, Section 11.4,
and Articles 7, 10, 14, and 16 shall survive termination of this Heads of
Agreement.
ARTICLE 12
INDEMNITY
The Collaboration Agreement shall provide that the parties shall
indemnify one another for their own negligent actions and shall prescribe a
method for notifying one another of any legal actions and allocating the primary
responsibility for defense of any claims.
ARTICLE 13
REPRESENTATIONS & WARRANTIES
In the Collaboration Agreement each party shall make various
representations and warranties regarding corporate power, due authorization and
the binding nature of the agreement.
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
12
<PAGE>
ARTICLE 14
GOVERNING LAW; DISPUTE RESOLUTION
14.1 Governing Law; Language. This Heads of Agreement shall be governed
by California law without regard to its principles of conflict of laws. This
Heads of Agreement has been prepared and shall be interpreted in the English
language.
14.2 Legal Compliance. Within thirty days of the date hereof, the
parties shall review in good faith and cooperate in taking such actions to
ensure compliance of this Heads of Agreement and the terms of the proposed
Collaboration Agreement with all applicable laws, including without limitation.
14.3 Dispute Resolution. In the event of any dispute, the parties shall
refer such dispute to the Chairman of the Board of SUGEN and the Chairman of the
Board of PROCHON for attempted resolution by good faith negotiations within
thirty (30) days after such referral is made. The Collaboration Agreement will
provide for such further dispute resolution mechanisms as the parties may agree.
ARTICLE 15
NEGOTIATION OF THE COLLABORATION AGREEMENT
15.1 Completion of Collaboration Agreement. Following the execution of
this Heads of Agreement both SUGEN and PROCHON agree to negotiate in good faith
and proceed expeditiously to complete the terms of the Collaboration Agreement,
within thirty (30) days of date hereof.
15.2 Provisions to be Included. The Collaboration Agreement shall
include the terms specified in this Heads of Agreement and shall also include
provisions those customary in agreements of the character between pharmaceutical
companies including, without limitation, those relating to: relationship of the
parties, arbitration or other alternative dispute resolution mechanism,
assignments, force majeure, notices, amendments, waiver, counterparts, headings,
governing law, language, entire agreement, severability, public announcements.
15.3 Mediation of Issues. If by the date specified in Section 15.1 or
any mutually agreed extension date the parties have not executed the
Collaboration Agreement then either party may give notice to the other that it
wants a mediator to be appointed to aid the parties in resolving any remaining
issues. If such notice is given the parties shall within the next thirty (30)
days agree upon a mediator failing which either party shall request the
International Chamber of Commerce to appoint a mediator having expertise in
agreements of the character of this Heads of Agreement among biopharmaceutical
companies. The parties shall meet with such mediator over a period of forty-five
(45) days in good faith to resolve any outstanding issues and to finalize the
Collaboration Agreement. If after such period the parties have still not
finalized the Collaboration Agreement the mediator shall set the terms of any
remaining issues, and such terms shall become part of the Collaboration
Agreement and shall be binding upon the parties.
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
13
<PAGE>
ARTICLE 16
PUBLIC ANNOUNCEMENTS
Each party agrees that, prior to the execution of the Collaboration
Agreement, except as may be required by law, it shall not disclose the
existence, substance or details of this Heads of Agreement without the prior
written consent of the other party, such consent not to be unreasonably
withheld. Nothing herein shall prevent either party from disclosing such
information as reasonably necessary to its Affiliates; provided however, each
party shall take such steps necessary to ensure that such Affiliates agree to be
bound to the provisions of this Article 16. In cases in which disclosure may be
required by law, the disclosing party, prior to such disclosure, shall notify
the non-disclosing party of the contents of the proposed disclosure. Consistent
with applicable law, the non-disclosing party shall have the right to make
reasonable changes to the disclosure to protect its interests. The disclosing
party shall not unreasonably refuse to include such changes in its disclosure.
ARTICLE 17
SEVERANCE
If any Article or part thereof of this Heads of Agreement is declared
invalid by any court of competent jurisdiction, or any government or other
agency having jurisdiction over either SUGEN or PROCHON deems any Article or
part thereof to be contrary to any anti-trust or competition laws then such
declaration shall not affect the remainder of the Article or other Articles. To
the extent possible the parties shall revise such invalidated Article or part
thereof in a manner that will render such provision valid without impairing the
parties original interest.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Heads of
Agreement.
SUGEN INC. PROCHON BIOTECH LIMITED
By: /s/ K. Peter Hirth, Ph.D. By: /s/ Michael Lewis
---------------------------------- --------------------------------
K. Peter Hirth, Ph.D. Michael Lewis
Executive Vice President Director
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains Summary Financial Information extraced from the
Company's Form 10-Q for the Six Months Ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 23,816
<SECURITIES> 51,479
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 76,286
<PP&E> 11,561
<DEPRECIATION> 6,960
<TOTAL-ASSETS> 84,825
<CURRENT-LIABILITIES> 15,160
<BONDS> 0
0
0
<COMMON> 141,579
<OTHER-SE> 92,566
<TOTAL-LIABILITY-AND-EQUITY> 84,825
<SALES> 0
<TOTAL-REVENUES> 2,351
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 399
<INCOME-PRETAX> (10,875)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,875)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,875)
<EPS-PRIMARY> (.69)
<EPS-DILUTED> (.69)
</TABLE>
