FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File No. 0-21990
OXiGENE, INC.
(Exact name of registrant as specified in its charter)
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Delaware 13-3679168
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(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
110 East 59th Street, New York, New York 10022
(Address of principal executive offices)
(212) 421-0001
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Warrant to purchase one share of Common Stock
Title of Each Class
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 such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 12, 1997 was $288,547,828, based on
the closing price of $33.50 on that date.
As of March 12, 1997, the aggregate number of outstanding shares of Common Stock
of the registrant was 9,259,868.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held on May 30, 1997 is incorporated by reference into Part III
(Items 10, 11, 12 and 13) of this Form 10-K.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
THE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, this Annual Report
on Form 10-K contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements involve known
and unknown risks and uncertainties that may cause the Company's actual results
or outcomes to be materially different from those anticipated and discussed
herein. Further, the Company operates in an industry sector where securities
values may be volatile and may be influenced by regulatory and other factors
beyond the Company's control. Important factors that the Company believes might
cause such differences are discussed in the "Risk Factors" section of this
Annual Report on Form 10-K and in the cautionary statements accompanying the
forward-looking statements in this Annual Report on Form 10-K. In assessing
forward-looking statements contained herein, readers are urged to read carefully
all Risk Factors and cautionary statements contained in this Annual Report on
Form 10-K.
PART I
1. BUSINESS.
Introduction
OXiGENE, Inc. ("OXiGENE" or the "Company") is engaged in the research
and development of products designed to enhance the clinical efficacy of
radiation and chemotherapy, the most common and traditional forms of
non-surgical cancer treatment. The Company's proprietary technology involves the
inhibition, measurement and stimulation of the cellular DNA repair process. When
administered in accordance with their prescribed regimens, the Company believes
that its principal products, Sensamide(TM) and Neu-Sensamide(TM), should make
cancerous tumor cells more sensitive to radiation by inhibiting DNA repair
activity, consequently increasing tumor damage from radiation therapy in those
cells. Accordingly, the Company expects that patient response to radiation
should be improved and result in increased tumor shrinkage, or reduced side
effects, or both.
Patient recruitment for the Company's 226-patient, European,
randomized, controlled Phase II/III clinical trial of Sensamide(TM) in
combination with radiation therapy in patients with inoperable non-small cell
lung cancer has been completed, with 218 patients enrolled in the trial. This
study was conducted pursuant to an Investigational New Drug ("IND") application
that was filed with the U.S. Food and Drug Administration ("FDA") in 1992.
Patients will be monitored for four months following the completion of their
treatment to determine tumor response, the primary endpoint of the study,
quality of life and survival time. The Company intends to announce the results
of this study at the 9th European Cancer Conference (ECCO9) to be held in
Hamburg, Germany, from September 14-18, 1997.
In the fourth quarter of 1996, OXiGENE commenced an additional
226-patient, randomized, controlled Phase III clinical trial in patients with
non-small cell lung cancer using Neu-Sensamide(TM), the Company's reformulated
version of Sensamide(TM). Based on preliminary preclinical studies and a Phase I
clinical trial, the Company believes that Neu-Sensamide(TM) is as effective a
radiation sensitizer as Sensamide(TM) is, with fewer side effects. In addition
to the 15 European centers that participated in the Phase II/III Sensamide(TM)
clinical trial, five centers in the United States and an additional five
European centers are expected to participate in the Phase III Neu-Sensamide(TM)
clinical trial. The combined results of the Sensamide(TM) and Neu-Sensamide(TM)
studies are intended to serve as the basis of the Company's New Drug Application
("NDA") for Neu-Sensamide(TM) as a radiation sensitizer for the treatment of
patients with non-small cell lung cancer.
In March 1996, the Company filed an additional protocol under its
existing IND application with the FDA to commence a 15-patient, open-label,
European Phase I/II study of Neu-Sensamide(TM) in patients with glioblastomas, a
highly malignant form of brain cancer. The FDA has indicated in a meeting with
the Company that if the Company is able to demonstrate the clinical efficacy of
Neu-Sensamide(TM) in conjunction with radiation therapy in two different forms
of cancer under controlled study conditions, and in two or three additional
forms of cancer under uncontrolled study conditions, OXiGENE may receive product
approval for Neu-Sensamide(TM) as a radiation sensitizer for all cancer
indications treated with radiation. Typically, uncontrolled studies are of
shorter duration because fewer patients have to be recruited and patient
inclusion criteria are less stringent.
OXiGENE has been testing Oxi-104, a new chemical compound, in its
laboratories for effectiveness, toxicity and other effects. Although classified
as an N-substituted benzamide, Oxi-104, unlike Sensamide(TM) and
Neu-Sensamide(TM), is not based on the N-substituted benzamide known as
metoclopramide. Oxi-104 has been designed with a molecular structure that, the
Company believes, may reduce side effects while maintaining the sensitizing
properties of other N-substituted benzamides. The Company currently anticipates
commencing a Phase I clinical test of Oxi-104 after the intended filing of an
IND with the FDA in the second quarter of 1997. Based on preliminary results,
OXiGENE believes that Oxi-104 alone may induce tumor growth-inhibiting and
tumor-killing effects.
In late December 1996, the Company entered into a clinical trial and
sponsored research agreement with Boston Medical Center ("BMC"), an affiliate of
Boston University Medical Center, pursuant to which BMC will conduct a Phase I
clinical study of 3'-deoxyadenosine (cordycepin) and 2'-deoxycoformycin
(pentostatin) in patients with refractory TdT-positive acute lymphoid leukemia.
The Phase I study commenced in the first quarter of 1997 in collaboration with
Boston University and the National Cancer Institute. In addition, BMC, together
with the Company, will conduct further research on the potential of the
Company's compounds Neu-Sensamide(TM) and Oxi-104 as chemosensitizers of
cordycepin.
The Company's proprietary technology is based on its knowledge of the
processes by which certain enzymes repair damaged DNA sites, a function
essential to a cell's survival. The cell's enzymes that normally repair DNA
damage to the tumor cell counter the cytotoxic (cell-killing) effects of
radiation therapy and chemotherapy by repairing the tumor cell's DNA that has
been damaged by either of those therapies. Specifically, the Company utilizes
its knowledge of how the DNA repair enzyme Poly (ADP Ribose) Polymerase
("PARP"), also known as Adenosine Diphosphate Ribosyl Transferase or ADPRT,
functions in connection with radiation and chemotherapy on cancerous cells.
Sensamide(TM) is a high-dosage form of metoclopramide. Metoclopramide is a
compound, used for more than 30 years for other clinical indications, that
inhibits PARP-modulated DNA repair. Neu-Sensamide(TM) is a conformationally
altered form of Sensamide(TM).
The Company has also developed proprietary assays (tests) that measure
levels of PARP in blood, thereby suggesting DNA repair activity that the Company
believes correlates to immune function and status, and has identified a mixture
of compounds that it believes may be capable of stimulating DNA repair. Based on
preclinical studies to date, OXiGENE is now planning the clinical development of
these product areas.
There can be no assurance that the Company's existing and planned
product development efforts and clinical trials for
Sensamide(TM)/Neu-Sensamide(TM), or any other compounds, will be successful or
completed within anticipated time frames, or at all; that regulatory approvals
will be obtained or will be as broad as sought; or that any products, if
introduced, will achieve market acceptance. In addition, there can be no
assurance that the Company's technology will prove effective, that the Company
will be able to enter into strategic alliances or joint ventures or that the
terms thereof will be favorable to the Company, or that the Company will be
profitable.
The Company was incorporated in New York in 1988, and subsequently was
re-incorporated in Delaware in 1992. The Company established a Swedish
subsidiary, OXiGENE Europe AB, in December 1994. The Company's principal
executive office is located at 110 East 59th Street, New York, New York 10022
(phone no.: 212-421-0001; fax no.: 212-421-0475), and in Sweden at Arsenalsgatan
6, S-111 47 Stockholm, Sweden (phone no.: 08-678 8720; fax no.: 08-678 8605) and
Scheelevagen 17, S-223 70 Lund, Sweden (telephone no.: 046-16 88 60; fax no.:
046-16 88 66). Any references in this Annual Report to "OXiGENE" or the
"Company" shall mean OXiGENE, Inc. and its wholly-owned Swedish subsidiary
OXiGENE Europe AB.
Product Development and Marketing Strategy
The Company's goal is to develop products that enhance the efficacy of
existing forms of cancer treatment, such as radiation and chemotherapy, and
improve a patient's quality of life, by reducing side effects and inhibiting the
DNA repair function of, and increasing DNA damage in, tumor cells that have been
subjected to treatment. The Company currently intends to continue and expand its
ongoing clinical trial program in Europe and further develop and broaden its
research and clinical trial activities in the United States. The Company does
not own or lease any laboratories or other research and development facilities.
In connection with the BMC agreement and in order to monitor the
recently-commenced clinical trials in the United States, the Company intends to
set up clinical trial and research monitoring facilities in Boston.
The Company's policy has been to establish relationships with
universities, research organizations and other institutions in the field of
oncology. The Company intends to further broaden these relationships, rather
than expand its in-house research, development and clinical staff. Although the
Company plans to market its products, if and when approved for marketing,
directly in certain European countries, it has had preliminary discussions with
unaffiliated pharmaceutical companies regarding the formation of possible
strategic alliances or joint ventures for the manufacturing and marketing of its
products in the United States, the Far East and elsewhere. To date, the Company
has not entered into any such alliances or ventures. While OXiGENE is likely to
explore license and development opportunities for its technologies with other
companies, there can be no assurance that the Company will be successful in
establishing and maintaining collaborative agreements or licensing arrangements;
that any collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that, if established, such future licensees will be successful in
commercializing products. Finally, if the Company's collaboration arrangements
are terminated prior to their expiration or if the other parties to such
arrangements fail to adequately perform, there can be no assurance that
submission of product candidates for regulatory approval will not be delayed.
See "--Research and Development and Collaborative Arrangements."
OXiGENE has selected Bioniche Teoranta, a Canadian pharmaceutical
company with cGMP (current Good Manufacturing Practice) standard facilities, for
the commercial batch manufacturing of Neu-Sensamide.(TM) The Bioniche agreement
will enable the Company to assemble and evaluate shelf-life and stability data
of Neu-Sensamide(TM) produced by Bioniche in connection with the Company's
ongoing Sensamide(TM)/Neu-Sensamide(TM) clinical trials in patients with
inoperable non-small cell lung cancer. Production of quantities sufficient to
conduct the Company's current and projected clinical trials commenced at
Bioniche's facilities in Ireland in January 1997.
Currently, the Company has collaborative arrangements with the
University of Lund in Lund, Sweden; Boston Medical Center in Boston,
Massachusetts; the Strang Cancer Prevention Center in New York, New York; New
York University in New York, New York; Gray Laboratory in Middlesex, United
Kingdom; Aarhus University in Aarhus, Denmark; Institut de Biologie Moleculaire
et Cellulaire in Strasbourg, France; and Georgetown University in Washington,
D.C. See "--Research and Development and Collaborative Arrangements."
In particular, the Company believes that its collaborations with the
University of Lund enable it to conduct clinical trials of its products in an
environment offering a more homogenous patient population at less cost and more
rapidly than the Company could achieve in the United States. The University of
Lund has historically provided, and continues to provide, the Company with
access to clinical trial facilities, patients and research facilities.
Additionally, the Company benefits indirectly from certain research grants
received by the University of Lund.
Technology Overview
OXiGENE's proprietary technology is based on the relationship between
DNA repair and DNA damage as affected by both the operation of Poly (ADP Ribose)
Polymerase ("PARP")(a DNA repair enzyme also known and formerly referred to as
Adenosine Diphosphate Ribosyl Transferase or ADPRT) and cell replication. Normal
cells in the human body are constantly subjected to external assault from
harmful environmental agents such as the sun's ultraviolet rays, toxic chemicals
in the diet and carcinogens such as smoke that are absorbed into the body, as
well as from internal assault from metabolic byproducts produced within the
cell. These assaults cause damage, or genetic lesions, to the DNA molecules,
which contain the genetic blueprint (instructions) for the cell. The cell's
structural integrity is dependent on its ability to read and translate those
blueprints. Repairing DNA damage is, therefore, essential to a cell's survival.
Consequently, the body attempts to counter this constant assault through its
genetic mechanisms that monitor genetic lesions to a cell's DNA molecules and to
repair them enzymatically.
Repair enzymes move constantly along the DNA molecule seeking out
genetic lesions and attempting to repair them through a process called "excision
repair." One of these enzymes is PARP. It identifies a genetic lesion, attaches
to the damaged site and engages other enzymes to help in the repair process. The
injured portion of the DNA molecule is then removed by enzymatic digestion and
additional enzymes repair the damage to that part of the molecule. As DNA is a
double helix composed of diametrically opposed strands, the repair enzymes can
use the unaffected strand of nucleotides (the class of nucleic acid compounds
from which genes are constructed) as a template for determining the correct
nucleotides to serve as replacement for the injured portion that has been
removed. The process is completed by the repair enzymes, which produce the
"complementary twin" and implant it in the previously removed damaged section.
[DRAWING OF BIOCHEMICAL PROCESS OF EXCISION REPAIR OF DAMAGED DNA]
The excision repair process is selective in that it concentrates on
active regions of the DNA helix, i.e., those containing the genes that are most
vital to the cell. Thus, when the rate of damage to a cell is more than the
repair system can handle, generally the repair mechanism first repairs lesions
in a cell that occur in frequently read genes, which are the genes that are
important to a cell's day-to-day survival. Damage occurring in inactive or
structural portions of the DNA that are not immediately important to a cell's
survival is repaired only as time permits, if at all. Therefore, OXiGENE
believes that cells become malignant or age by the accumulation of genetic
lesions that the DNA repair system has failed to correct properly or in a timely
manner.
[DRAWING OF THE DNA REPAIR PROCESS IN THE HUMAN BODY]
Throughout life, cells replicate by division. Cell division
(replication) occurs very quickly and defects are unavoidable. Genetic defects
constitute a serious threat to a cell's survival. A persistent genetic defect,
or mutation, increases the risk of disease and death. Cancer is a disease in
which a mutated tumor cell divides uninterruptedly and in an uncontrolled
manner. Normal cells die because tumor cells exhaust their nourishment,
inhibiting a normal cell's ability to survive and eventually leading to organic
malfunctions and possibly death.
Traditionally, cancer treatment has been based on the theory that
stopping uncontrolled cell division may halt or slow tumor growth. Both
radiation and chemotherapy increase DNA damage in tumorous cells, causing
toxicity and cell death. Tumorous cells are known to die by either of two
mechanisms, necrosis (death with cell replication) and apoptosis (death without
cell replication), or both. Based on recent scientific evidence, the Company
believes that lower doses of radiation or chemotherapy cause tumor cell death
primarily by apoptosis, whereas at higher doses necrotic death is
proportionately more prevalent. OXiGENE's main product line of DNA repair
inhibitors are based on N-substituted benzamides, which, the Company believes,
cause tumor toxicity primarily by apoptosis. Presented in biological terms,
apoptosis can be viewed as an enzymatic inhibition of the DNA repair enzyme
PARP, leading to the induction of massive DNA damage, blocking of cell
replication and eventually cell death. Necrosis on the other hand is influenced
by non-enzymatic DNA repair inhibition such as would be the case if oxidative
damage interacts directly with certain chemical groups in the PARP enzyme to
inhibit its function of removing DNA lesions introduced by radiation or
chemotherapy.
Apoptosis is initiated by cells as an alternative pathway to block
cell replication and induce death. Necrosis on the other hand causes cells to
die during replication (mitotic cell death) or permits cells to survive but with
mutation, potentially causing tumor disease. The advantage of apoptotic death is
that it allows normal living cells to absorb the various components that make up
the apoptotic, dying cells without further enzymatic digestion of the cellular
components as occurs with necrotic cell death. Accordingly, apoptosis causes
cell death without the many toxic side effects associated with necrosis and
enzymatic digestion. This is an important basis for OXiGENE's product research
and development since its goal is to create drugs to counteract cancer that are
also less hazardous to the individual than those used today.
[SCHEMATIC OVERVIEW OF MODE OF ACTION OF DNA REPAIR INHIBITION]
OXiGENE's products are in an early stage of development. In order to
achieve profitable operations on a continuing basis, the Company, alone or in
collaboration with others, must successfully develop, manufacture, introduce and
market its products. The time frame necessary to achieve market success for any
individual product is long and uncertain. See "--Product Development and
Regulatory Processes." The products currently under development by the Company
will require significant additional research and development and extensive
preclinical and clinical testing prior to application for commercial use. There
can be no assurance that the Company's research or product development efforts
or those of its collaborative partners will be successfully completed, that any
compounds currently under development by the Company will be successfully
developed into drugs, or that any products will receive regulatory approval on a
timely basis, if at all.
DNA Repair Inhibition. Cancer therapy typically involves either or
both of surgery, to remove the primary tumor, and the application of cytotoxic
(cell-killing) agents, such as radiation or chemotherapy, to destroy primary and
secondary tumors that are too small, diverse or broadly spread to be removed
surgically (called metastases). Nearly all available radiation and
chemotherapies work by increasing DNA damage to tumor cells, thus blocking
replication of those cells and inhibiting their growth by necrosis or apoptosis,
or both, and eventually leading to their death. As tumorous cells replicate
substantially more frequently than normal cells, the body's normal DNA repair
mechanism tends to counteract the effects of radiation and chemotherapy
treatment by promoting the replication, or "regrowth," of the very tumors that
have been treated. The Company believes that this process may be prevented by
inhibiting the body's normal repair mechanism. Further, the Company believes
that certain chemical compounds are capable of serving as "sensitizers," which
supplement the radiation or chemotherapy phase of cancer treatment by inhibiting
DNA repair of the tumor cell and increasing DNA damage, thereby increasing the
efficiency of the cytotoxic agents. Drugs that exhibit sensitizing properties
permit an oncologist to elect either to achieve greater results with a given
dose of radiation therapy or chemotherapy, or to reduce the level of the
cytotoxic agent needed to achieve the same result. Frequently, however,
oncologists must cut short therapy because side effects associated with certain
sensitizing agents become intolerable before effective tumor killing can occur.
The Company believes that its principal products are sensitizers that should be
capable of inhibiting DNA repair of the tumor cell and increasing DNA damage
without intolerable side effects when used in conjunction with traditional
cancer treatments. See "--OXiGENE's Clinical Trial Program."
DNA Repair Measurement and Stimulation. The PARP enzyme is an
important enzyme in the DNA repair process because it recognizes DNA damage and
alters certain proteins in the damaged site, enabling the other repair enzymes
to gain access to that site and to complete the excision repair process.
Therefore, the Company believes that if an individual's level of PARP is high,
DNA repair is being facilitated and DNA damage is being removed, and if an
individual's level of PARP is low, DNA repair is being inhibited and DNA damage
will accumulate. Consequently, by measuring individual levels of PARP, the
Company believes it is possible to determine how well the DNA repair process is
functioning in preventing accumulated DNA damage. OXiGENE believes that
knowledge of DNA repair activity may be useful for monitoring or screening
individuals for susceptibility to cancer, immune deficiencies, chemotherapeutic
drug resistance and the success or failure of chemopreventive treatment.
OXiGENE believes that knowledge of the body's metabolic function and
its related process known as "oxidative stress," in which a small number of
metabolic "mistakes" occur and cause the formation of certain intermediates that
damage DNA, and knowledge of the body's inflammatory response that causes a
decline in DNA repair, may lead to the development of drugs that may stimulate
DNA repair. Drugs of that type, the Company believes, could reduce a person's
susceptibility to cancer and certain diseases associated with the aging process
by increasing net DNA repair capacity.
Although the Company has conducted extensive preclinical cell and
animal research into each of the areas of DNA repair measurement and DNA repair
stimulation, and is currently planning the early stages of their clinical
development, there can be no assurance that any drugs related to either of these
areas can or will be developed by the Company. See "-- OXiGENE's Clinical Trial
Program."
OXiGENE's Clinical Trial Program
DNA Repair Inhibiting Products. OXiGENE has discovered certain
compounds in the family of N-substituted benzamides that it believes should be
capable of inhibiting PARP-modulated DNA repair and selectively reacting with
radiation to cause additional DNA damage preferentially in the treated area.
OXiGENE believes that this selectivity is due to tumor cells exhibiting
increased DNA repair activity as compared to normal cells, rendering them more
sensitive to DNA repair inhibition and death by apoptosis. The Company believes,
on the basis of its research activities to date, that its principal products,
Sensamide(TM) and Neu-Sensamide(TM), should act as selective, targeted
sensitizers of tumor tissue and sensitize radiation preferentially inside the
treated area without producing significant toxic side effects outside the
treated area.
The current emphasis of the Company's clinical trial program is on
evaluating the safety and efficacy of Sensamide(TM) and Neu-Sensamide(TM) as
sensitizing agents in combination with radiation therapy, with the goal of
obtaining approval for Neu-Sensamide(TM) as a radiation sensitizer not limited
to a specific form of cancer. In the middle of 1994, the Company commenced a
226-patient European, randomized, controlled Phase II/III clinical trial of
Sensamide(TM) in patients with inoperable non-small cell lung cancer ("NSCLC").
Patient recruitment for this study has been completed, with 218 patients
enrolled. The Company intends to announce the results of this study at the 9th
European Cancer Conference (ECCO9) to be held in Hamburg, Germany, from
September 14-18, 1997.
In the fourth quarter of 1996, the Company commenced an additional
226-patient, randomized, controlled Phase III clinical trial of
Neu-Sensamide(TM) in patients with NSCLC. The combined results of the
Sensamide(TM) and Neu-Sensamide(TM) studies are intended to serve as the basis
of the Company's NDA for Neu-Sensamide(TM) as a radiation sensitizer for NSCLC.
In August 1996, the Company commenced a 15-patient, open-label European Phase
I/II study of Neu-Sensamide(TM) in patients with glioblastomas, a highly
malignant form of brain cancer. The FDA has indicated in a meeting with the
Company that if the Company is able to demonstrate the clinical efficacy of
Neu-Sensamide(TM) in conjunction with radiation therapy in two different forms
of cancer under controlled study conditions, and in two or three additional
forms of cancer under uncontrolled study conditions, OXiGENE may receive product
approval for Neu-Sensamide(TM) as a radiation sensitizer for all cancer
indications treated with radiation.
Oxi-104, the Company's third generation sensitizer, is a new chemical
entity for which the Company filed a composition-of-matter patent application in
March 1996. Although classified as an N-substituted benzamide and, therefore,
covered by OXiGENE's use patent for all N-substituted benzamides as sensitizers
for chemotherapy and radiation, Oxi-104 is not based on metoclopramide like
Sensamide(TM) or Neu-Sensamide(TM). The Company believes that Oxi-104 alone may
induce tumor growth-inhibiting and tumor-killing effects. Oxi-104 has been
designed with a molecular structure that, the Company believes, may reduce side
effects while maintaining the sensitizing properties of other N-substituted
benzamides. The Company intends to develop Oxi-104 as a chemosensitizer. For the
Company's two radiation sensitizer products, Sensamide(TM) and
Neu-Sensamide(TM), currently the limiting doses are determined by their central
nervous system (CNS) side effects. By comparison, Oxi-104 has not yet any CNS
side effects in animal studies. The Company currently anticipates commencing a
Phase I clinical trial of Oxi-104 after the intended filing of an IND with the
FDA in the second quarter of 1997.
OXiGENE is collaborating with ILEX, a contract research organization
based in San Antonio, Texas, on the development of Oxi-104. ILEX will conduct
pre-clinical development work through the intended filing of an IND on a
contract basis. This work will include pharmacokinetics studies, toxicology
studies in accordance with cGLP standards, process development,
scale-up/manufacturing for anticipated clinical trial needs under FDA current
good manufacturing practice ("cGMP") standards, analytical development, and the
intended compilation and submission of an IND. OXiGENE anticipates having a
pre-IND meeting with the FDA regarding Oxi-104 in March 1997. This collaboration
agreement commenced in May 1996 and continues until the completion of services
thereunder as mutually agreed upon by the parties, provided that OXiGENE has the
right to terminate such agreement upon 30 days written notice. Generally,
OXiGENE has the option to acquire an exclusive, worldwide, royalty free license
and related know-how to any invention made by employees or agents of ILEX
arising out of work performed pursuant to the obligations under the agreement,
provided that OXiGENE pays all reasonable and appropriate costs and expenses
associated with patent and copyright filing, prosecution, issuance and
maintenance. If ILEX licenses rights to any invention to a third party, ILEX and
OXiGENE will negotiate to pay OXiGENE a reasonable royalty consistent with rates
found in the industry.
Cordycepin/Pentostatin. In late December 1996, the Company entered
into a clinical trial and sponsored research agreement with BMC, an affiliate of
Boston University Medical Center, pursuant to which BMC will conduct a Phase I
clinical study of 3'-deoxyadenosine (cordycepin) and 2'-deoxycoformycin
(pentostatin) in patients with refractory TdT-positive acute lymphoid leukemia.
The Phase I study commenced in the first quarter of 1997 in collaboration with
Boston University and the National Cancer Institute. In addition, BMC, together
with the Company, will conduct further research on the potential of the
Company's compounds Neu-Sensamide(TM) and Oxi-104 as chemosensitizers of
cordycepin. The BMC agreement grants OXiGENE an option to acquire an exclusive,
world-wide, royalty-bearing license with respect to the commercial rights to
cordycepin.
OXiGENE's products are in an early stage of development. In order to
achieve profitable operations on a continuing basis, the Company, alone or in
collaboration with others, must successfully develop, manufacture, introduce and
market its products. The time frame necessary to achieve market success for any
individual product is long and uncertain. See "--Product Development and
Regulatory Processes." The products currently under development by the Company
will require significant additional research and development and extensive
preclinical and clinical testing prior to application for commercial use. A
number of companies in the biotechnology and pharmaceutical industries have
suffered significant setbacks in clinical trials, even after showing promising
results in earlier studies or trials. Although the Company has obtained
favorable results to date in preclinical studies and clinical trials of certain
of its products, such results may not be indicative of results that will
ultimately be obtained in or throughout such clinical trials, and there can be
no assurance that clinical testing will show any of the Company's products to be
safe or efficacious. Additionally, there can be no assurance that the Company
will not encounter problems in its clinical trials that will cause the Company
to delay, suspend or terminate those clinical trials. There can also be no
assurance that the Company's research or product development efforts or those of
its collaborative partners will be successfully completed, that any compounds
currently under development by the Company will be successfully developed into
drugs, or that any products will receive regulatory approval on a timely basis,
if at all. If any such problems occur, the Company could be materially and
adversely affected.
A summary of the clinical trials related to the Company's products
that are currently under development is set forth in the following table:
<PAGE>
Summary of OXiGENE's Clinical Trial Program
<TABLE>
<CAPTION>
Study Code Total Treatment
Drug/Indication Phase and Design patients Assignment Country Status
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Lu-01 Sensamide(TM)in I/II; 23 All patients on Sweden Completed;
NSCLC uncontrolled, Sensamide(TM)(i.v.) Published
open-label with radiation 1995
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-01 Sensamide(TM) in II/III; 226 Sensamide(TM) (i.v.) Norway; Completed
NSCLC controlled, with radiation - 113; Denmark; with 218
randomized, Radiation only - 113 Sweden; patients;
open-label Germany; UK Report
scheduled
for
September
1997
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-02 Comparative I; placebo, 18 All patients receive UK Completed
study in controlled, one dose of placebo
healthy double-blind (i.m.), Sensamide(TM)
volunteers of cross-over (i.v.),
Placebo, Neu-Sensamide(TM)(i.m.)
Sensamide(TM)and and Neu-Sensamide(TM)
Neu-Sensamide(TM) (i.m.)
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-03 Neu-Sensamide(TM) III; controlled, 226 Neu-Sensamide(TM) (i.m.) Norway; Ongoing
in NSCLC randomized, with radiation - 113; Denmark;
open-label Radiation only - 113 Sweden;
Germany;
UK; USA
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-04 Neu-Sensamide(TM) I/II; 15 All patients on Sweden Ongoing
in glioblastomas uncontrolled, Neu-Sensamide(TM) (i.v.
dose escalation or i.m.)
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-05 Neu-Sensamide(TM) II; two-dose, t.b.d. Study design in USA Expected to
in NSCLC uncontrolled, planning stage start Q2/Q3
randomized, 1997
double-blind
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-06 Neu-Sensamide(TM) II; two dose, t.b.d. Study design in USA Expected to
in glioblastomas uncontrolled, planning stage start Q2/Q3
randomized, 1997
double blind
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-07 Neu-Sensamide(TM) I; single-dose, 10 Study design in Sweden Expected to
in NSCLC tumor uptake, planning stage start Q2 1997
pre-surgery
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-401 Oxi-104 I; 18 Study design in USA Expected to
pharmacokinetics planning stage start Q2 1997
and dose
escalation,
open-label
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
OXi-402 Oxi-104 in I/II; 18 Study design in USA Expected to
various cancers uncontrolled, planning stage start Q2 1997
dose escalation,
open-label
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
- -------------- ----------------- ------------------- --------- ----------------------- ------------ --------------
BU-01 Cordycepin in I; 30 Patient groups on USA Ongoing
leukemia pharmacokinetics, various doses to
dose escalation, determine maximum
open-label tolerated dosage
</TABLE>
Certain terms and abbreviations used in the foregoing table are explained in the
Glossary on page 25.
<PAGE>
DNA Repair Measuring Products
PARP Assay Products. The Company believes that its knowledge of DNA
repair activity may be applied to monitor or screen individuals for
susceptibility to cancer, immune deficiencies and chemotherapeutic drug
resistance. Studies have shown that DNA repair capacity may vary from one
individual to another. OXiGENE has quantified individual levels of PARP as a DNA
repair estimate. The Company holds an exclusive worldwide license, which expires
in 2011, to issued Canadian, U.S. and European patents and a pending Japanese
patent application covering a PARP diagnostic test that measures PARP levels in
white blood cells. The Company believes that a simple and inexpensive
serum-based test may give a reliable surrogate indication of the level of PARP
in white blood cells. OXiGENE has filed a U.S. patent application in October
1994, with respect to such a test.
The New York University Medical Center, Department of Environmental
Medicine and the Center of Aids Research have conducted an investigation using
OXiGENE's assay for measuring PARP levels (i.e., a serum thiol-based surrogate
test) on 133 patients who were intravenous narcotic drug users and were infected
with the HIV virus that causes AIDS. The Company believes that this repair assay
may assess DNA repair activity by measuring total serum thiol levels. The
Company believes that preliminary results of this investigation indicate that
this assay may be effective in monitoring the progression of HIV-related
diseases. The Company believes that measuring a person's immune function through
DNA repair activity may be a better indication of HIV-related disease
progression and, consequently, survival than more commonly used indicators such
as CD4 cell counts. The Company intends to pursue the development of a
more-cost-effective, easy-to-administer version of the assay for
commercialization.
DNA Repair Stimulating Products
Cancer, as well as the general deterioration of the body leading to
aging disorders connected to immunity, is generally recognized in medicine as a
mutational disease arising from the build-up of genetic damage in unrepaired
areas of DNA. By enhancing DNA repair in the inactive areas of the DNA
structure, genetic damage build-up may be reduced with a reduction in cell
mutation. OXiGENE research in this area has to date concentrated on identifying
compounds that, the Company believes, may slow the natural production of DNA
repair inhibitors produced by the body when inflammatory cells are activated as
an early defense against infections or cancer cells. The Company believes, based
on its research to date, that by blocking this natural production of DNA repair
inhibitors by inflammatory cells, a net increase in DNA repair capacity can be
achieved.
The Company has developed a screening method based on DNA repair
measurements of in vivo-exposed spleen and cells. The Company has identified a
new mixture of naturally-occurring compounds that it believes should be capable
of stimulating DNA repair, and which is currently under evaluation by the
Company in cell and animal models to improve enhancement of DNA repair. OXiGENE
has filed an international (PCT) patent application for this mixture of
potential DNA repair stimulators.
The Company believes that DNA repair enhanced compounds may be used to
supplement, or under certain circumstances replace, chemopreventive or cancer
retardant agents for cancer already in use, such as Tamoxifen(TM), as well as
chemopreventive agents in various stages of development. Any DNA repair enhancer
drugs currently being developed by OXiGENE are expected to be based on naturally
occurring compounds, rather than synthetic analogs. Consequently, the Company
believes that they may be less inherently toxic than newly-synthesized
chemopreventive agents already in clinical trials. However, there can be no
assurance that the Company will be able to develop any such drug, or if
developed, that such drug could be successfully marketed.
Product Development and Regulatory Processes
Research initially involves optimization of leading chemical
structures into leading compounds. Once a leading compound has been identified,
the preclinical phase commences. In that phase, certain selected compounds are
tested for therapeutic potential in a number of animal models and undergo
laboratory testing, with the objective of characterizing the investigated
compounds in relation to existing treatment and getting a first indication of
the compounds' development potential. Successful preclinical work may lead to
the filing of an IND, or a foreign equivalent, with the relevant national
regulatory authorities. The IND is a permission to administer the compound to
humans in clinical trials. Several years of research and testing generally are
necessary before an IND may be obtained and clinical development may commence.
There can be no certainty that submission of an IND will result in FDA
authorization to commence clinical trials or that authorization of a particular
phase of a clinical trial program will result in authorization of other phases
or that the completion of any clinical trials will result in FDA approval.
The clinical development of new drugs is subject to approval by the
health authorities in individual countries, which have broad discretionary
powers. For example, the FDA reviews the results of all clinical studies and can
discontinue a trial at any time if there is a significant safety issue, or if
there is convincing evidence that the therapy is not effective for the chosen
indication. The requirements regarding the duration of a clinical phase vary
considerably among countries. For life threatening and severely debilitating
conditions where products provide meaningful therapeutic benefit over existing
treatments or where no satisfactory treatment currently exists, however, it is
possible to accelerate the development process in the United States through the
"Accelerated Drug Approval Program." In other countries, the trial process for
drugs directed toward life threatening diseases is shortened by lower
requirements regarding the patient sample size required to be met in the trials.
The time periods mentioned below are indications only and may vary and
be materially longer. Upon successful completion of the development program, a
New Drug Application ("NDA"), or a foreign equivalent, may be submitted to the
authorities, and, if approved, the product may then be marketed upon the terms
and conditions of such approval. Submission of an NDA does not assure that the
FDA will approve a product for manufacturing and marketing. Clinical trials are
typically conducted in three sequential phases, but the phases may overlap.
Phase I. The purpose of a Phase I study is to evaluate the toxicity of
the tested compound and to establish how the tested compound is tolerated and
decomposed in the human body. A Phase I clinical trial traditionally tests the
compound for safety (adverse effects), dosage tolerance, metabolism,
distribution, excretion and pharmacodynamics in a small group of healthy
individuals. A Phase I may last up to one year.
Phase II. A Phase II study marks the beginning of clinical trials on a
limited number of patients to (i) determine the efficacy of the compound for
specific indications, (ii) determine dosage tolerance and optimal dosage and
(iii) identify possible adverse effects and safety risks. The trials also seek
to establish the most effective route of administration. Trials are conducted on
a larger, but still limited number of carefully monitored patients. A Phase II
may last up to two and one-half years.
Phase III. If preliminary evidence suggesting effectiveness has been
obtained during Phase II evaluations and the compound is found to have an
acceptable safety profile in Phase II evaluations, a Phase III trial is
undertaken. A Phase III is an extensive clinical trial in a large number of
patients. The number of patients in a Phase III trial program depends to a great
extent on the clinical indications that the drug addresses. Trials are often
double-blinded and involve a detailed statistical evaluation of test results.
The compound is tested against placebo and existing treatment, if such treatment
is available. The product is manufactured in commercial quantities and tested
for shelf life, or stability, and further evaluation of the clinical efficacy
and safety of the compound takes place. Phase III may last several years and is
the most time-consuming and expensive part of a clinical trial program. There
can be no assurance that Phase I, Phase II or Phase III testing will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's products.
OXiGENE, like other pharmaceutical companies, will be subject to
strict controls covering the manufacture, labeling, supply and marketing of any
products it may develop and market. The most important regulation is the
requirement to obtain and maintain regulatory approval of a product from the
relevant regulatory authority to enable that product to be marketed in a given
country. Further, OXiGENE is subject to strict controls over clinical trials of
its potential pharmaceutical products.
The regulatory authorities in each country may impose their own
requirements and may refuse to grant, or may require additional data before
granting, an approval even though the relevant product has been approved by
another authority. The United States and European Union ("EU") countries have
very high standards of technical appraisal and, consequently, in most cases a
lengthy approval process for pharmaceutical products. The time required to
obtain such approval in particular countries varies, but generally takes from
six months to several years, if at all, from the date of application, depending
upon the degree of control exercised by the regulatory authority, the duration
of its review procedures and the nature of the product. The trend in recent
years has been towards stricter regulation and higher standards.
In the United States, the primary regulatory authority is the FDA. In
addition to regulating clinical procedures and processes, the FDA investigates
and approves market applications for new pharmaceutical products and is
responsible for regulating the labeling, marketing and monitoring of all such
products, whether marketed or under investigation. Upon approval in the United
States, a drug may only be marketed for the approved indications in the approved
dosage forms and dosages. In addition to obtaining FDA approval for each
indication to be treated with each product, each domestic drug manufacturing
establishment must register with the FDA, list its drug products with the FDA,
comply with cGMP requirements and be subject to inspection by the FDA. Foreign
manufacturing establishments distributing drugs in the United States also must
comply with cGMP requirements and list their products and are subject to
periodic inspection by the FDA or by local authorities under agreement with the
FDA.
In Europe, the European Committee for Proprietary Medicinal Products
provides a mechanism for EU-member states to exchange information on all aspects
of product licensing and assesses license applications submitted under two
different procedures (the multistate and the high-tech concentration
procedures). The EU has established a European agency for the evaluation of
medical products, with both a centralized community procedure and a
decentralized procedure, the latter being based on the principle of mutual
recognition between the member states.
There can be no assurances that any of the Company's products will
ever obtain the governmental approvals necessary to permit commercial sales of
any of its products. Further, even if regulatory approval of a product is
obtained, such approval may entail limitations on the indicated uses for which
that product may be marketed.
Research and Development and Collaborative Arrangements
OXiGENE's research and development programs are generally pursued in
collaboration with academic and other institutions. Under current arrangements,
the Company is not required to pay any royalties or licensing fees for
technology and products developed with financial assistance from or at the
facilities of such agencies and institutions, except for a 5% gross royalty
payable in respect of an exclusive worldwide license of the patent covering the
PARP diagnostic assay and certain costs related to the filing, prosecuting and
maintaining of patents and copyrights. There can be no assurance that royalties
or fees, potentially material as to their amount, will not be required under any
future arrangements.
The Company incurred approximately $4.8 million, $2.8 million and $1.8
million in research and development expenses in the years ended December 31,
1996, 1995 and 1994, respectively. Substantially all of these amounts represent
external research and development expenditures.
University of Lund/Strang Cancer Prevention Center Agreement. In 1987,
the University of Lund entered into a research collaboration agreement with the
Strang Cancer Prevention Center in New York City. The purpose of the
collaboration is to develop biomarkers and to contribute to the basic knowledge
of DNA repair in relation to human diseases. The program is conducted primarily
in the Wallenberg Laboratory of the University of Lund. Dr. Pero was appointed
to head this international collaborative effort and was awarded professorial
privileges and laboratory space, which is currently being used by Dr. Pero and
his research colleagues. Initially, Dr. Pero's salary was paid by the Strang
Cancer Prevention Center, but in 1990 that responsibility was assumed by the
Company. The Wallenberg Laboratory specializes in providing research space to
selected research projects being developed within the academic community.
Currently, the program focuses its research efforts on immunology and tumor
biology, areas directly related to the Company's technology development. Most of
the Company's research, development, preclinical testing and clinical trials are
carried out at the Wallenberg Laboratory, financed by research grants and
contracts. The University of Lund has not claimed any proprietary interest in
the products developed by the Company there.
In April 1994, the Department of Oncology, Lund University Hospital
and the Company entered into an agreement with respect to the multicentered
clinical trial of 226 patients to evaluate Sensamide(TM) as a radiosensitizer.
This agreement provides that the Department of Oncology, Lund University
Hospital will provide all the clinical items necessary for the study in
accordance with the protocol approved by the Swedish Medical Drug Agency.
Boston Medical Center. In late December 1996, the Company entered into
a clinical trial and sponsored research agreement with Boston Medical Center
("BMC"), an affiliate of Boston University Medical Center, pursuant to which BMC
will conduct a Phase I clinical study of 3'-deoxyadenosine (cordycepin) and
2'-deoxycoformycin (pentostatin) in patients with refractory TdT-positive acute
lymphoid leukemia. The Phase I study commenced in the first quarter of 1997 in
collaboration with Boston University and the National Cancer Institute. In
addition, BMC, together with the Company, will conduct further research on the
potential of the Company's compounds Neu-Sensamide(TM) and Oxi-104 as
chemosensitizers of cordycepin. The budget for the research being conducted
pursuant to this agreement will be determined three months prior to the
beginning of the year to which the budget relates. The BMC agreement grants
OXiGENE an option to acquire an exclusive, world-wide, royalty-bearing license
with respect to any products resulting from the clinical trials and research
contemplated by that agreement.
Swedish Cancer Society. In 1992, the Swedish Cancer Society awarded
Dr. Ronald Pero, in his capacity as a faculty member of the University of Lund,
a three-year grant for a total of approximately $0.3 million to investigate
benzamide and nicotinamide analogs relating to Sensamide(TM) as
radiosensitizers. This grant was renewed in 1995 for a one year period totaling
approximately $0.2 million. The Company was not the recipient of any of these
funds. The study's principal objective was to determine what chemical features
give benzamide/nicotinamide compounds multiple forms of radiosensitizing action.
In 1992, Dr. Pero, in his capacity as a faculty member of the
University of Lund, was awarded another Swedish Cancer Society research grant
(principal investigator Professor Goran Berglund), for a total of approximately
$0.4 million over a three-year period, to direct the biological bank and
biomarker program portion of the Malmo Diet Study. This project has had its
funding renewed until October 1996, the anticipated date of completion of
patient enrollment. The Company was not the recipient of any of these funds. The
Malmo Diet Study, sponsored in part by the World Health Organization, involves a
large ongoing controlled case study in which individuals between the ages of 46
years and 64 years, living in the city of Malmo, Sweden, have been invited to
participate in a study designed to evaluate dietary factors as causative agents
for cancer. The city of Malmo was selected as the site of this study because of
the historically high incidence of cancer in its relatively homogeneous
population.
Preventive Medicine Institute. Pursuant to an agreement dated October
7, 1991 (the "PMI License Agreement"), between a predecessor of the Company and
Preventive Medicine Institute, a New York not-for-profit corporation affiliated
with the Strang Cancer Prevention Center in New York, New York, the Company
received an exclusive, worldwide license to patent rights and related know-how
covering the PARP diagnostic assay, which license expires on October 7, 2011.
The PMI License Agreement requires the Company to pay a royalty equal to 5% of
the total amount of any net revenues received by the Company in respect of the
PARP diagnostic assay. To date, the Company has made no royalty payments as this
product has not been commercially developed.
New York University Medical Center. In 1990, Dr. Pero was appointed as
adjunct professor at New York University Medical Center. In 1994, the Company
entered into a preclinical study agreement with New York University Medical
Center, pursuant to which the Company would sponsor a research study entitled
"Retrospective Trial of N-Cloroamine as a Prognostic Indicator of HIV Disease,"
which is related to the Company's diagnostic test. The Company paid New York
University approximately $25,000 in connection with this project. In addition,
the Company has agreed to sponsor two research projects of the Department of
Environmental Medicine, New York University Medical Center, which are to be
conducted by Dr. Krystyna Frenkel. The two projects are (i) the development of
an assay that can serve as a biomarker of risk, which is based on a
determination of the serum thiol status of human serum (plasma); and (ii) the
utilization of Malmo Diet and Cancer biological bank to assess the role of
oxidative stress in the regulation of individual susceptibility to cancer from
dietary factors. New York University Medical Center will receive a total of
approximately $82,000 for these projects.
Professor Myron K. Jacobson, The College of Pharmacy, University of
Kentucky. Professor Jacobson is the Chairman of the Division of Medicinal
Chemistry and Pharmaceuticals, College of Pharmacy, University of Kentucky,
Lexington, Kentucky. In November 1994, the Company entered into a consulting
agreement with Professor Jacobson, under which he will assist the Company's core
research and development efforts in the DNA repair area and ADP-ribosylation.
Dr. Jacobson is paid a $5,000 per annum consulting fee, and was granted options
to acquire 5,000 shares of the Company's Common Stock, at an exercise price of
$5.50 per share, that expire in November 2004.
Dr. Michael Horsman, The Danish Cancer Society, Aarhus, Denmark. Dr.
Horsman entered into a consulting agreement with the Company in November 1994,
under which he will assist the Company's research programs in determining
certain relationships between the Company's drugs and radiation. Dr. Horsman is
paid a $5,000 per annum consulting fee.
Dr. David J. Chaplin, the Gray Laboratory Cancer Research Trust Mount
Vernon Hospital, Middlesex, United Kingdom. Dr. Chaplin is Head of the Tumour
Microcirculation Group at the Gray Laboratory Cancer Research Trust, Mount
Vernon Hospital. Under an agreement signed in May 1995, Dr. Chaplin retains his
position at the Gray Laboratory but is also employed by OXiGENE as Vice
President for Basic Research, Sensitizer Program and serves as the Secretary of
the Company's Scientific Advisory Board. The term of such agreement has been
extended to April 30, 1997. Dr. Chaplin is responsible for planning, on behalf
of the Company, certain preclinical studies to evaluate certain of the Company's
proprietary compounds at the Gray Laboratory and, in conjunction with Dr. Pero,
defining and coordinating radio- and chemosensitizing studies of the Company's
proprietary compounds at other research centers. Dr. Chaplin is paid $30,000 per
annum and was granted options to purchase 30,000 shares of Common Stock, at an
exercise price of $5.375 per share, vesting in three installments, on June 1,
1995, 1996, and 1997. Gray Laboratory receives the equivalent of approximately
$42,000.
Dr. Sylviane Muller, Le Centre National de la Recherche Scientifique,
(Institut de Biologie Moleculaire et Cellulaire) Strasbourg, France. In November
1995, the Company entered into a one year research agreement with Le Centre
National de la Recherche Scientifique ("CNRS") pursuant to which OXiGENE and
CNRS will conduct a collaborative study, under the supervision of Dr. Muller, on
the "Preparation of Antibodies Reacting Selectively with the Oxidized Zinc
Finger Region of Poly-PARP." Although terminated by its terms, work continues
under this agreement because the contemplated study has not been finalized. The
Company will pay CNRS the equivalent of approximately $35,000 for this study.
Dr. Mark Smulson, Georgetown University, Washington D.C. Under a July
1996 research agreement with Georgetown University, Dr. Smulson will conduct
research to clarify the interference of N-substituted benzamides with the
functioning of PARP and related enzymes. New inventions or discoveries conceived
or reduced to practice during and as a part of the research performed pursuant
to such agreement solely by Georgetown University's principal investigator,
faculty, staff, employees or students are the sole property of the University;
if such inventions or discoveries are conceived or reduced to practice jointly
by such persons of Georgetown University and one or more employees of the
Company, then such inventions or discoveries are owned jointly by the Company
and Georgetown University. In either event, the Company has a right of first
offer to enter into a royalty bearing license agreement to practice such new
invention or discovery (such license shall be exclusive or nonexclusive and
worldwide except for those countries in which patents are valid and enforceable
and for which the Company does not reasonably assume responsibility for out of
pocket costs associated with obtaining and maintaining related patents). The
agreement terminates on June 30, 1997, provided that the agreement may be
terminated by either party upon thirty days' prior written notice or upon
certain other events. Georgetown University will receive a total of
approximately $72,000 for this study, of which approximately $36,000 has been
paid to date.
Patents and Trade Secrets
Certain of OXiGENE's current products are based on available compounds
that are produced by others. The Company anticipates that any products it
develops hereafter may include or be based on the same or other compounds owned
or produced by unaffiliated parties, as well as synthetic compounds it may
discover. Although the Company expects to seek patent protection for any
compounds it discovers, there is no assurance that any or all of them will be
subject to effective patent protection. Further, the development of regimens for
the administration of pharmaceuticals, which generally involve specifications
for the frequency, timing and amount of dosages, has been, and the Company
believes will continue to be, important to the Company's efforts, although those
processes, as such, may not be patentable.
Patent Protection. It is the Company's policy to seek patent
protection in the United States and in foreign countries. Primarily because of
differences among patent laws in various jurisdictions, the scope of, and hence
the protection afforded by, any patents OXiGENE may receive may vary from
jurisdiction to jurisdiction even though they relate essentially to the same
subject matter.
The patent position of firms in the Company's industry generally
involves highly complex legal and other issues, resulting in both an apparent
inconsistency regarding the breadth of claims allowed in United States patents
and general uncertainty as to their legal interpretation and enforceability.
Accordingly, there can be no assurance that patent applications owned by the
Company will result in patents being issued or that, if issued, the patents will
afford competitive protection.
Further, there can be no assurance that products or processes
developed by the Company will not be covered by third party patents, in which
case continued development and marketing of those products or processes could
require a license under such patents. There can be no assurance that if a legal
action were to be brought against the Company on the basis of any third party
patents, such action would be resolved in the Company's favor. Such an
unfavorable result against the Company could result in monetary damages and
injunctive relief. Further, even a favorable result could cause expenditure of
substantial monetary and other resources in connection with the Company's
defense against any such action.
Granted Patents and Pending Applications. The following is a brief
description of the Company's current patent position, both in the United States
and abroad. As U.S. patent applications are maintained in secrecy by the U.S.
Patent and Trademark Office until patents issue and because publication of
discoveries in the scientific or patent literature often lags behind actual
discoveries, OXiGENE cannot be certain that it was the first creator of
inventions covered by its pending applications or that it was the first to file
patent applications for those inventions.
As of March 8, 1997, the Company is the assignee of four granted U.S.
patents, four pending U.S. patent applications, and of granted patents and/or
pending applications in other countries (and/or international applications
designating other countries) corresponding to three of the granted U.S. patents
and three of the pending U.S. applications. Two of the U.S patents issued in
1996. Two of the pending U.S. applications were filed in 1996, of which one is a
U.S.-designating international application (also designating other countries)
based on a U.S. provisional application filed in 1995. One of the U.S.
applications was filed in 1997, based on a U.S. provisional application filed in
1996. In addition, the Company will be the assignee of another pending U.S.
patent application (and international and foreign counterparts) also filed in
1997.
Specifically, the Company is the assignee of a U.S. patent, granted
April 20, 1993, for glutathione-s-transferase mu (an inherited enzyme) as a
measure of drug resistance, covering a test for resistance to nitrosoureas (a
class of chemotherapeutic agents). In addition, the Company is the assignee of a
U.S. patent, granted August 23, 1994, for tumor or cancer cell-killing therapy
(covering methods of using N-substituted benzamides including Sensamide(TM) and
Neu-Sensamide(TM) as radio- and chemosensitizers), and of granted patents in
Australia, Canada, Europe (designating 13 countries), Ireland, Israel, Mexico
and South Africa and an allowed patent application in Russia (as well as pending
applications in Denmark and Japan) corresponding thereto. The Company is also
the assignee of two U.S. patents, both granted October 1, 1996, for methods of
administering and pharmaceutical formulations containing N-substituted
benzamides and/or acid addition salts thereof (covering, e.g.,
Neu-Sensamide(TM)) and for methods of administering phenothiazines and/or acid
addition salts thereof, and of a granted South African patent and pending
European and other foreign applications corresponding to these two U.S. patents.
The Company's pending U.S. applications and international counterparts cover
further methods of testing or treatment and compositions, including the Oxi-104
compound.
Moreover, the Company is the exclusive licensee of a U.S. patent,
granted January 9, 1996, for a diagnostic test involving measurements related to
the cellular process of DNA repair and drug resistance, and is the exclusive
licensee of corresponding granted Canadian and European patents and a
corresponding pending Japanese patent application. The owner of the licensed
patents and application is Preventive Medicine Institute, a New York
not-for-profit corporation affiliated with the Strang Cancer Prevention Center
in New York, New York.
Trade Secrets and Technological Know-How. While the Company generally
has and will continue to pursue a policy of seeking patent protection to
preserve its proprietary technology, it also has and will continue to rely on
trade secrets, unpatented proprietary information and continuing technological
innovation to develop and maintain its competitive position. There can be no
assurance, however, that others will not independently develop substantially
equivalent proprietary information and technology or otherwise gain access to
such or equivalent trade secrets, proprietary information or technology or that
OXiGENE can meaningfully protect its rights to such secrets, proprietary
information and technology.
OXiGENE generally requires its employees and Scientific Advisory Board
members to enter into confidentiality agreements with the Company. Those
agreements provide that all confidential information developed or made known to
the individual during the course of the relationship is to be kept confidential
and not to be disclosed to third parties, except in specific circumstances. In
the case of employees, the agreements also provide that all inventions conceived
by such employees shall be the exclusive property of OXiGENE. There can be no
assurance, however, that any such agreement will provide meaningful protection
for the Company's trade secrets, proprietary information or technology in the
event of unauthorized use or disclosure of such information. Moreover, although
the Company has confidentiality agreements with the institutions that perform
its research, development, preclinical tests and clinical trials, the Company
has no such agreements with the employees of such institutions, and there can be
no assurance that these employees will abide by the terms of such agreements.
Employees
The Company's policy has been, and continues to be, to maintain a
relatively small number of executives and other employees and to rely as much as
possible on consultants and independent contractors for its research,
development, preclinical tests and clinical trials. As of December 31, 1996, the
Company had eleven full-time employees, of which six were engaged in research
and development and monitoring of clinical trials. Most of the Company's
preclinical tests and clinical trials are subcontracted and performed at the
University of Lund, Sweden, and at other European centers, with the assistance
primarily of CATO Research, Ltd., an independent clinical research firm in
Durham, North Carolina, IPC Nordic A/S, a Danish pharmaceutical consulting firm,
and ILEX Oncology Inc., a contract research organization in San Antonio, Texas.
Scientific Advisory Board
In August 1992, the Company established a Scientific Advisory Board, which
currently consists of nine members. The Scientific Advisory Board discusses, and
meets annually to evaluate, the Company's research and development projects.
Members of the Scientific Advisory Board has received $500 per meeting actually
attended and are reimbursed for reasonable out-of-pocket expenses. In addition,
each member of the Scientific Advisory Board has received from time to time
warrants or options to purchase shares of Common Stock of the Company. Prior to
the establishment of the Scientific Advisory Board, certain of its members
advised the Company on certain projects. Certain members of the Scientific
Advisory Board also have other relationships with the Company. See "--Research
and Development and Collaborative Arrangements."
The members of the Company's Scientific Advisory Board are:
Hans Wigzell, M.D., Ph.D., serves as the Chairman of the Scientific
Advisory Board. Professor Wigzel is Professor and Chairman of the Department of
Immunology at the Karolinska Institute, Stockholm, Sweden, a well known medical
research institute in Europe. He is a member of the Nobel Committee for the
prize in medicine, of which he recently served as chairman. Professor Wigzell
currently is a member of the editorial board of several international medical
journals and has published more than 400 articles in the areas of tumor biology,
immunology, cell biology and infectious diseases. Professor Wigzell is also the
Chairman of the Company's Scientific Advisory Board.
David J. Chaplin, Ph.D., is Head of the Tumour Microcirculation Group
at the Gray Laboratory, the Mount Vernon Hospital, Middlesex, United Kingdom and
a consultant to the Company. The Gray Laboratory is a leading radiation biology
research laboratory. Dr. Chaplin has published more than 100 papers in the area
of chemical radiosensitizers and tumor biology.
Goran Berglund, M.D., Ph.D., is Professor of Medicine, Malmo General
Hospital, Vice Dean, Faculty of Medicine, Lund University, Sweden. Dr. Berglund
has published numerous articles, most recently on the biological bank and
biomarker program aspects of the Malmo Diet Study.
Michael Horsman, Ph.D., is Senior Scientist in the Danish Cancer
Societies' Department of Clinical Oncology in Aarhus, Denmark. Dr. Horsman has
published more than 100 papers on the chemical modification of radiation and
heat damage in tumors.
Myron Jacobson, Ph.D., is Professor and Chairman of the Division of
Medicinal Chemistry and Pharmaceuticals, College of Pharmacy, and a member of
the Lucille Parker Markey Cancer Center of the University of Kentucky. Dr.
Jacobson has published more than 100 papers in the area of biological responses
to DNA damage. Dr. Jacobson acts also as a consultant to the Company regarding
certain technical and clinical aspects of the Company's research and development
program.
Dick Killander, M.D., Ph.D., , is Professor and Chairman of the
Department of Oncology, University of Lund Hospital, Lund, Sweden. Dr. Killander
serves on the board of the Swedish Cancer Foundation, and has published more
than 100 articles in the areas of quantitative cytochemistry and clinical
oncology. Dr. Killander is the principal clinical investigator for the Company's
ongoing clinical trials.
Daniel G. Miller, M.D., is President of the Strang Cancer Prevention
Center, New York, New York, and has held several posts at Memorial
Sloan-Kettering Cancer Center and The New York Hospital-Cornell Medical Center
in New York, New York. Dr. Miller has been a cancer consultant to the World
Health Organization in Thailand and the Radiation Effects Research Foundation in
Hiroshima, Japan. He is the founder, and served as the first President, of the
American Society of Preventive Oncology.
Michael P. Osborne, M.D., is Director of Strang-Cornell Breast Center
and is an Attending Surgeon in the Department of Surgery at The New York
Hospital-Cornell Medical Center, both in New York, New York. Dr. Osborne has
published more than 100 articles on breast cancer.
Mark E. Smulson, Ph.D., is Professor of Biochemistry and Molecular
Biology, Georgetown University Medical Center, Washington, D.C., and heads that
University's Lombardi Cancer Center's Program of ADP-Ribosylation and DNA
Repair. Dr. Smulson has published a total of approximately 100 papers and
chapters on the molecular biology aspects of the ADPRT repair enzyme.
Competition
The industry in which the Company is engaged is characterized by
rapidly evolving technology and intense competition. The Company's competitors
include, among others, major pharmaceutical and biotechnology companies, many of
which have financial, technical and marketing resources significantly greater
than those of the Company. In addition, many of the small companies that compete
with the Company have also formed collaborative relationships with large,
established companies to support research, development, clinical trials and
commercialization of products that may be competitive with those of the Company.
Academic institutions, governmental agencies and other public and private
research organizations are also conducting research activities and seeking
patent protection and may commercialize products on their own or through joint
ventures or other collaborations.
The Company is aware of a number of companies engaged in the research,
development and testing of new cancer therapies or ways of increasing the
effectiveness of existing therapies. Such companies include, among others,
Bristol-Myers Squibb Company, Ciba-Geigy Ltd., Eli Lilly and Company, Glaxo
Wellcome PLC, Johnson & Johnson, Matrix Pharmaceuticals, Inc., NeoPharm, Inc.,
Pharmacyclics, Inc. and U.S. Bioscience Inc., some of whose products have
already received, or are in the process of receiving, regulatory approval or are
in later stages of clinical trials. The Company is also aware of companies
engaged in the research, development and testing of diagnostic assays for
cancer, including Introgen Therapeutics, Inc., AntiCancer Inc., Transgene S.A.
and Medarex Inc. There are other companies that have developed or are in the
process of developing technologies that are, or in the future may be, the basis
for competitive products in the field of cancer therapy or other products the
Company intends to develop. Some of those products may have an entirely
different approach or means of accomplishing the same desired effects as the
products being developed by the Company, such as gene transfer therapy,
immunotherapy and photodynamic therapy. There can be no assurance that the
Company's competitors will not succeed in developing technologies and products
that are more effective, safer or more affordable than those being developed by
the Company.
Radiation therapy has been increasingly accepted as a complement to
chemotherapy in a multi-modality treatment of NSCLC. Further, a number of
organizations have developed new chemotherapeutic regimens that are under study
in late-stage clinical trials. To the best knowledge of the Company, however,
none of those organizations is, and none of the new forms of non-surgical cancer
treatment currently under development and in clinical trials appears to be,
directly competitive with Sensamide(TM) or Neu-Sensamide(TM) as a sensitizer.
As the Company's existing products are intended to complement and
enhance radiation therapy and chemotherapy as applied to NSCLC, the Company
believes that enhancements in those treatments, particularly if they lead to
their successful application, could increase the potential market for the
Company's products, although there can be no assurance in this regard. Moreover,
if the Company's products also complement new cancer treating therapies, the use
of these new therapies might also expand the Company's potential market.
The Company expects that if any of its products gain regulatory
approval for sale they will compete primarily on the basis of product efficacy,
safety, patient convenience, reliability, price and patent position. The
Company's competitive position also will depend on its ability to attract and
retain qualified scientific and other personnel, develop effective proprietary
products and implement joint ventures or other alliances with large
pharmaceutical companies in order to jointly market and manufacture its
products.
Risk Factors
This Annual Report on Form 10-K contains, in addition to historical
information, forward-looking statements that involve known and unknown risks and
uncertainties that may cause the Company's actual results or outcomes to be
materially different from those anticipated and discussed herein. Factors that
could cause or contribute to such differences include those discussed below as
well as those discussed elsewhere in this Annual Report on Form 10-K.
History of Losses and Anticipated Future Financial Results;
Uncertainty of Future Profitability. The Company, as a development stage
enterprise, has experienced net losses every year since its inception and, as of
December 31, 1996, had a deficit accumulated during the development stage of
approximately $17.4 million. The Company anticipates incurring substantial
additional losses over at least the next several years due to, among other
factors, the need to expend substantial amounts on its continuing clinical
trials and anticipated research and development activities and the general and
administrative expenses associated with those activities. The Company has not
commercially introduced any product and its products are in varying stages of
development and testing. The Company's ability to attain profitability will
depend upon its ability to develop products that are effective and commercially
viable, to obtain regulatory approval for the manufacture and sale of its
products and to license or otherwise market its products successfully. There can
be no assurance that the Company will ever achieve profitability or that
profitability, if achieved, can be sustained on an ongoing basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Early Stage of Product Development; Uncertainties of Clinical Trials;
Unproven Safety and Efficacy. OXiGENE's products are in an early stage of
development. In order to achieve profitable operations on a continuing basis,
the Company, alone or in collaboration with others, must successfully develop,
manufacture, introduce and market its products. The time frame necessary to
achieve market success for any individual product is long and uncertain. See
"--Product Development and Regulatory Processes." The products currently under
development by the Company will require significant additional research and
development and extensive preclinical and clinical testing prior to application
for commercial use. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in clinical trials,
even after showing promising results in earlier studies or trials. Although the
Company has obtained favorable results to date in preclinical studies and
clinical trials of certain of its products, such results may not be indicative
of results that will ultimately be obtained in or throughout such clinical
trials, and there can be no assurance that clinical testing will show any of the
Company's products to be safe or efficacious. Additionally, there can be no
assurance that the Company will not encounter problems in its clinical trials
that will cause the Company to delay, suspend or terminate those clinical
trials. There can also be no assurance that the Company's research or product
development efforts or those of its collaborative partners will be successfully
completed, that any compounds currently under development by the Company will be
successfully developed into drugs, or that any products will receive regulatory
approval on a timely basis, if at all. If any such problems occur, the Company
could be materially and adversely affected.
Need for Additional Funds; Uncertainty of Future Funding. The
Company's operations to date have consumed substantial amounts of cash. Negative
cash flow from the Company's operations is expected to continue and even to
accelerate over at least the next several years. The Company's capital
requirements will depend on numerous factors, including: the progress of
preclinical testing and clinical trials; the progress of the Company's research
and development programs; the time and costs required to obtain regulatory
approvals; the resources devoted to manufacturing methods and advanced
technologies; the ability to obtain licensing arrangements; the cost of filing,
prosecuting and, if necessary, enforcing patent claims; the cost of
commercialization activities and arrangements; and the demand for the Company's
products if and when approved. The Company will have to raise substantial
additional funds to complete development of any product or bring products to
market. Issuance of additional equity securities by the Company, for these or
other purposes, could result in dilution to then existing stockholders. There
can be no assurance that additional financing will be available on acceptable
terms, if at all. If adequate funds are not available on acceptable terms, the
Company may be required to delay, scale back or eliminate one or more of its
product development programs or obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies or products that the Company would not
otherwise relinquish, which may have a material adverse effect on the Company.
Dependence on Others for Clinical Development and Manufacturing and
Marketing. The Company has limited experience in drug development, the
regulatory approval process, manufacturing and marketing. Other than Dr. Ronald
W. Pero, Ph.D., the Company's Chief Scientific Officer, and two other employees,
the Company does not directly employ any scientists or other laboratory
personnel and all of its preclinical tests and clinical trials are subcontracted
to and performed at the University of Lund, Sweden and at other European
centers, with the assistance of research and consulting firms. Accordingly,
OXiGENE has depended, and in the future is likely to continue to depend, on
others for assistance in many areas, including research, conducting preclinical
testing and clinical trials, the regulatory approval process, manufacturing and
marketing. Although the Company considers its relations with existing
collaborative partners to be satisfactory, all its current arrangements are
short term in nature. Funding requirements, competitive factors or
prioritization of other opportunities may lead the Company to seek additional
arrangements with third parties. While OXiGENE is likely to explore license and
development opportunities for its technologies with other companies, there can
be no assurance that the Company will be successful in establishing and
maintaining collaborative agreements or licensing arrangements; that any
collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that, if established, such future licensees will be successful in
commercializing products. Finally, if the Company's collaboration arrangements
are terminated prior to their expiration or if the other parties to such
arrangements fail to adequately perform, there can be no assurance that
submission of product candidates for regulatory approval will not be delayed.
See "--Research and Development and Collaborative Arrangements."
Clinical Trials; Government Regulation and Health Care Reform; Managed
Care. The Company's research and development activities, preclinical testing and
clinical trials, and the manufacturing and marketing of its products are subject
to extensive regulation by numerous governmental authorities in the United
States and other countries. Preclinical testing and clinical trials and
manufacturing and marketing of OXiGENE's products are and will continue to be
subject to the rigorous testing and approval processes of the U.S. Food and Drug
Administration ("FDA"), the Swedish Medical Products Agency and other
corresponding foreign regulatory authorities. Clinical testing and the
regulatory process generally take many years and require the expenditure of
substantial resources. In addition, delays or rejections may be encountered
during the period of product development, clinical testing and FDA regulatory
review of each submitted application. Similar delays may also be encountered in
foreign countries. There can be no assurance that, even after such time and
expenditures, regulatory approval will be obtained for any products developed by
OXiGENE or that a product, if approved in one country, will be approved in other
countries. See "--Product Development and Regulatory Processes." Moreover, if
regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which that product may be marketed.
Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections, and later discovery of previously unknown problems
(such as previously undiscovered side effects) with a product, manufacturer or
facility may result in restrictions on such product, manufacturer or facility,
including a possible withdrawal of the product from the market. Failure to
comply with the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product recalls, operating
restrictions, injunctions and criminal prosecution. Additionally, further
government regulation may be established which could prevent or delay regulatory
approval of the Company's products. Further, the U.S. Congress continues to
debate various health care reform proposals which, if adopted, may have a
material adverse effect on the Company. Moreover, continued cost control
initiatives by health care maintenance organizations and similar programs may
affect the financial ability and willingness of patients and their health care
providers to utilize certain therapies.
Competition and Risk of Technological Obsolescence. The Company is
engaged in a rapidly evolving field. Competition from other pharmaceutical
companies, biotechnology companies and research and academic institutions is
intense and expected to increase. Many of those companies and institutions have
substantially greater financial, technical and human resources than the Company.
Those companies and institutions also have substantially greater experience in
developing products, in conducting clinical trials, in obtaining regulatory
approval and in manufacturing and marketing pharmaceutical products.
Accordingly, competitors may succeed in obtaining regulatory approval for their
products more rapidly than the Company. The Company also competes with
universities and other research institutions in the development of products,
technologies and processes. Competitors have developed or are in the process of
developing technologies that are, or in the future may be, the basis for
competitive products. Some of those products may have an entirely different
approach or means of accomplishing the desired therapeutic effect than products
being developed by the Company. See "--Competition." There can be no assurance
that the Company's competitors will not succeed in developing technologies and
products that are more effective and/or cost competitive than those being
developed by the Company or that would render the Company's technology and
products less competitive or even obsolete. In addition, one or more of the
Company's competitors may achieve product commercialization or patent protection
earlier than the Company, which could materially adversely affect the Company.
Dependence on Patents and Proprietary Technology. To date, OXiGENE's
principal products, Sensamide(TM) and Neu-Sensamide(TM), have been based on
certain available compounds that are produced by others, and its newest
compound, Oxi-104, is a synthetic compound discovered by the Company. The
Company anticipates that products it develops hereafter may include or be based
on the same or other compounds owned or produced by unaffiliated parties, as
well as other synthetic compounds it may discover. Although the Company expects
to seek patent protection for any compounds it discovers and/or for the specific
use of any such compounds, there is no assurance that any or all of them will be
subject to effective patent protection. Further, the development of regimens for
the administration of pharmaceuticals, which generally involve specifications
for the frequency, timing and amount of dosages, has been, and the Company
believes may continue to be, important to the Company's efforts, although those
processes, as such, may not be patentable.
The Company's success will depend, in part, on its ability to obtain patents,
protect its trade secrets and operate without infringing on the proprietary
rights of others. As of March 8, 1997, the Company is the assignee of four
granted U.S. patents, four pending U.S. patent applications, and of granted
patents and/or pending applications in other countries (and/or international
applications designating other countries) corresponding to three of the granted
U.S. patents and three of the pending U.S. applications. The patent position of
pharmaceutical and biotechnology firms like OXiGENE generally is highly
uncertain and involves complex legal and factual questions, resulting in both an
apparent inconsistency regarding the breadth of claims allowed in U.S. patents
and general uncertainty as to their legal interpretation and enforceability.
Accordingly, there can be no assurance that the Company's patent applications
will result in patents being issued, that any issued patents will provide the
Company with competitive protection or will not be challenged by others, or that
the patents of others will not have an adverse effect on the ability of the
Company to do business. Moreover, since some of the basic research relating to
one or more of the Company's patent applications and/or patents was performed at
various universities and/or funded by grants, particularly in Sweden, there can
be no assurance that one or more universities, employees of such universities
and/or grantors will not assert that they have certain rights in such research
and any resulting products, although the Company is not aware of any such
assertions or any basis therefor. Furthermore, there can be no assurance that
others will not independently develop similar products, will not duplicate any
of the Company's products or, if patents are issued to the Company, will not
design around such patents. In addition, the Company may be required to obtain
licenses to patents or other proprietary rights of others. No assurance can be
given that any licenses required under any such patents or proprietary rights
would be made available on terms acceptable to the Company, if at all. If the
Company does not obtain such licenses, it could encounter delays in product
market introductions while it attempts to design around such patents, or could
find that the development, manufacture or sale of products requiring such
licenses is foreclosed. In addition, the Company could incur substantial costs
in defending itself in suits brought against it or in connection with patents to
which it holds a license or in bringing suit to protect the Company's own
patents against infringement. The Company generally requires employees,
Scientific Advisory Board members and the institutions that perform its
preclinical and clinical tests (though not the employees of such institutions)
to enter into confidentiality agreements with the Company. Those agreements
provide that all confidential information developed or made known to the
individual during the course of the relationship with the Company is to be kept
confidential and not to be disclosed to third parties, except in specific
circumstances. In the case of employees, the agreements also provide that all
inventions conceived by such employees shall be the exclusive property of the
Company. There can be no assurance, however, that any such agreement will
provide meaningful protection for the Company's trade secrets or other
confidential information in the event of unauthorized use or disclosure of such
information. See "--Patents and Trade Secrets."
Dependence on Certain Officers and Directors and Others. The Company
believes that its success is, and will likely continue to be, materially
dependent upon its ability to retain the services of certain of its current
officers and directors, particularly Dr. Bjorn Nordenvall, its Chief Executive
Officer, Dr. Claus M0ller, its Chief Medical Officer, and Dr. Ronald Pero, its
Chief Scientific Officer. The loss of the services of any of these individuals
could have a material adverse effect on the Company. In addition, the Company
has established relationships with universities, hospitals and research
institutions, particularly the University of Lund, Lund, Sweden, which have
historically provided, and continue to provide, the Company with access to
research laboratories, clinical trials, facilities and patients. Dr. Pero is a
Professor of Molecular Ecogenetics at the University of Lund. The Company
benefits indirectly from certain research grants received by Dr. Pero. The
Company is materially dependent on the research and development efforts of Dr.
Pero and his various relationships and affiliations, the loss of which could
have a material adverse effect on the Company's business. Additionally, the
Company believes that it may, at any time and from time to time, be materially
dependent on the services of consultants and other unaffiliated third parties.
Product Liability Exposure; No Insurance Coverage. The use of the
Company's products in clinical trials and for commercial applications, if any,
may expose the Company to liability claims, in the event such products cause
injury, disease or result in adverse effects. These claims could be made
directly by health care institutions, contract laboratories, patients or others
using such products. The Company has no liability insurance coverage for its
ongoing clinical trials, and there can be no assurance that such coverage will
be available at a reasonable cost and in amounts sufficient to protect the
Company against claims or recalls that could have a material adverse effect on
the financial condition and prospects of the Company. Further, adverse product
and similar liability claims could negatively impact the Company's ability to
obtain or maintain regulatory approvals for its technology and products.
Price Volatility of the Common Stock. The market price of the Common
Stock has been, and likely will continue to be, highly volatile as frequently is
the case with the publicly traded securities of pharmaceutical research and
development companies. See "Market For Registrant's Common Equity and Related
Stockholder Matters." Factors such as results of clinical trials, announcements
of research developments by the Company or its competitors and government
regulatory action affecting the Company's products in both the United States and
foreign countries may have a significant effect on the Company's business and on
the market price of the Common Stock. As of December 31, 1996, an aggregate of
67,000 SARs, with a weighted average exercise price of $7.09 per SAR, had been
granted to certain clinical investigators and consultants. The Company is not
required to make any cash payments upon exercise of any such SAR. If and when
the spread between the market price of the Company's Common Stock and the
exercise price of the SARs changes, the charge for financial reporting purposes
to research and development will be adjusted to reflect an increase or decrease,
as the case may be, in the market price of the Company's Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, substantially all of the shares of Common Stock
issuable upon exercise of outstanding options, SARs and warrants have been
registered and may be sold from time to time hereafter. Such sales, as well as
future sales of Common Stock by existing stockholders, or the perception that
sales could occur, could adversely affect the market price of the Common Stock.
The price and liquidity of the Common Stock may also be significantly affected
by trading activity and market factors related to the Nasdaq and Stockholm
Stock Exchange markets, which factors and the effects thereof may differ between
those markets.
No Dividends. The Company has not declared or paid dividends on its
Common Stock since its inception and does not intend to declare or pay any
dividends to its stockholders in the foreseeable future. See "Market For
Registrant's Common Equity and Related Stockholder Matters."
<PAGE>
GLOSSARY OF SCIENTIFIC TERMS
<TABLE>
<CAPTION>
<S> <C>
Anti-emetic A drug which controls nausea and vomiting
Apoptosis A natural programmed cell death not involving cell
replication
CD4 cell counts A sub-set of white blood cells directly involved in
the natural protection against diseases
CGLP standards Current good laboratory practice standards required
for regulatory affairs
Chemotherapy Drugs that control cancer growth
Cisplatin A chemotherapeutic compound
Control group A group of patients involved in a clinical trial
who are receiving placebos
Cross-over study A study in which each patient receives all
treatments singly, but at different times of the
study
Cytotoxic agent Tumor-killing agent
DNA Chemical building blocks of genetic material
Double-blind study A study in which neither the investigators
assessing the outcome of the trial nor the patients
know whether the patient is receiving the drug
being investigated or merely a placebo. The
outcome can only be determined when the results are
decoded
Enzyme A protein that carries out a metabolic function by
converting one substance to another
Genetic blueprint The code that tells cells what to do and how to
function
Genetic lesions Damage to the DNA or in the genetic blueprint
i.m. Intramuscular
Immune deficiencies Suppression of the cells that fight disease within
the body
IND An "Investigational New Drug" application filed
with the U.S. Food and Drug Administration
that permits the administration of compounds to
humans in clinical trials
In vivo-exposed spleen and cell Spleen cells are exposed in the animal then taken
out for testing
i.v. Intravenous
Malignant cell Cancer cell
Metabolic function Living process of growth and reproduction
NDA A "New Drug Application" filed with the U.S. Food
and Drug Administration, which, if approved, allows a
drug to be marketed in the U.S.
Necrosis Cell death by decomposition after replication
N-substituted benzamide Class of drugs believed by OXiGENE to sensitize
radiation and chemotherapy
Nucleotides A class of nucleic acid compounds from which genes
are constructed
Open-label clinical trial A non-blinded clinical trial
Oxidative stress Undesired natural metabolism of oxygen-derived
molecules by the body that can induce DNA damage
PARP Poly (ADP Ribose) Polymerase--an enzyme involved in
the DNA repair process. Also known as Adenosine
Diphosphate Ribosyl Transferase or ADPRT
Placebo A non-active substance given to a control group of
patients in a clinical trial to duplicate the
treatment method, but without the administration of
the active drug under investigation
Radiation Physical energy that splits molecules and induces
DNA damage
Randomized clinical trial A clinical trial in which the allocation of
patients to treatment groups is made on a random
basis
Sensitization The process that renders a tumor more susceptible
to damage by radiation or chemotherapy
Serum thiol level The level of compounds in serum that react with
oxidative stress
</TABLE>
<PAGE>
2. PROPERTIES.
The Company subleases its executive offices in New York, New York,
currently at an annual rent of approximately $35,000. The sublease has been
extended through March 31, 1998. The Company believes that it can readily find
alternate executive office space suitable to its needs and at a reasonable cost
should it be required to do so. Recently, the Company opened an executive office
in Stockholm, Sweden, in connection with the listing of its Common Stock on the
Stockholm Stock Exchange. The Stockholm office is subleased, at an annual rate
of approximately $26,000, under an arrangement that expires in September 1998.
The Stockholm office sublease may be terminated at any time upon nine months
written notice. The Company also leases an office at the Ideon Research Park in
Lund, Sweden. The lease expires on March 31, 2000, and the annual rent is
approximately $28,000. The Company does not own or lease any laboratories or
other research and development facilities, although, in connection with the BMC
agreement and in order to monitor the recently-commenced clinical trials in the
United States, the Company intends to set up clinical trial and research
monitoring facilities in Boston.
3. LEGAL PROCEEDINGS.
There are no material suits or claims pending or threatened against
the Company.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to the vote of security holders of the Company
during the fourth quarter of the year ended December 31, 1996.
Executive Officers of the Company
The executive officers of the Company and their ages at December 31,
1996, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
Bjorn Nordenvall, M.D., Ph.D. 44 Chief Executive Officer, President and
......................................... Chairman of the Board of Directors
Claus M0ller, M.D., Ph.D.................... 34 Chief Medical Officer and a Director
Ronald W. Pero, Ph.D........................ 56 Chief Scientific Officer and a Director
Bo Haglund.................................. 44 Chief Financial Officer
M. Andica Kunst............................. 35 Vice President and Corporate Secretary
</TABLE>
Bjorn Nordenvall, M.D., Ph.D. was appointed as a Director in March
1995, and became the Company's President and Chief Executive Officer in June
1995 and Chairman of the Board of Directors in June 1996. From March to August
1996, Dr. Nordenvall served as the Company's Chief Financial Officer. Dr.
Nordenvall serves as Chairman of the Company's Audit Committee. Dr. Nordenvall
is a specialist in general surgery and, from 1987 to September 1996, was
president of Sophiahemmet AB, a Stockholm-based hospital. During 1983 and 1984,
Dr. Nordenvall was president of Carnegie Medicine AB, Stockholm, Sweden, a
biotechnology company, and from 1977 through 1985, he practiced surgery at
Danderyd Hospital, Stockholm. From 1984 through 1986, Dr. Nordenvall served as a
consultant to Carnegie, a Swedish investment banking company, and, since 1984,
he has been a consultant to Skandia Insurance Company, a Swedish insurance
company.
Claus M0ller, M.D., Ph.D. was appointed as a Director in March 1995
and became the Company's Chief Medical Officer in March 1995. Since April 1,
1994, Dr. M0ller has served as a consultant to the Company, responsible for
coordinating the Company's European clinical trials. Dr. M0ller is the President
and a principal shareholder of IPC Nordic A/S, a Danish pharmaceutical
consulting firm. From 1989 to 1994, Dr. M0ller was medical director for
Synthelabo Scandinavia A/S, a Danish pharmaceutical company, and from 1983 to
1992, he was involved in cell biology and biomedical research at the University
of Copenhagen, Denmark.
Ronald W. Pero, Ph.D. is a co-founder of OXiGENE, and has been a
Director and the Company's Chief Scientific Officer since its inception. From
November 1993 to June 1995, Dr. Pero also served as President of the Company.
Dr. Pero specializes in the field of DNA repair and its relation to cancer
treatment, and directs and coordinates the Company's research and development
efforts. Dr. Pero has been a fellow of the National Institute of Environmental
Health Sciences in Research Triangle Park, North Carolina, a director of the
Division of Biochemical Epidemiology at the Strang Cancer Prevention Center in
New York City, and currently holds faculty positions at both New York University
Medical Center and the University of Lund in Lund, Sweden, where he is a
Professor of Molecular Ecogenetics. Dr. Pero is also a member of the American
Association of Science, New York Academy of Sciences, International Preventive
Oncology Society, European Society for Therapeutic Radiation Oncology and The
American Association of Cancer Research, as well as serving as Scientific
Director of the Board of Trustees of the Swedish American Research Foundation.
Dr. Pero has published more than 175 manuscripts related to his research.
Bo Haglund was appointed Chief Financial Officer in August 1996. From
January 1992 to August 1996, Mr. Haglund was employed by Carnegie in various
capacities, most recently heading its London operations, focusing on the
marketing of Nordic securities to U.K. investors. Prior to joining Carnegie,
from November 1990 to January 1992, Mr. Haglund was executive vice president and
chief financial officer of Swedish Exploration Consortium AB, a Swedish
publicly-traded company engaged in oil and gas exploration. From January 1988 to
October 1990, Mr. Haglund was vice president finance of Cool Carriers AB, a
shipping company, and from April 1982 to December 1987, he was chief financial
officer of Gulf Agency Group, a ship brokerage company.
M. Andica Kunst was appointed Vice President and Corporate Secretary
in July 1996. Ms. Kunst is responsible for the Company's legal and
administrative affairs. Prior to joining the Company, Ms. Kunst was an attorney
with the New York City law firm of Battle Fowler LLP, the Company's outside
general counsel in the United States. Ms. Kunst holds a LL.M. in Corporate Law
from New York University School of Law, a Masters in International Affairs from
The George Washington University and degrees in Dutch and International Law from
the University of Amsterdam, Amsterdam, The Netherlands.
<PAGE>
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Effective November 19, 1996, the Company's Common Stock and Warrants
commenced trading on the Nasdaq National Market under the symbols "OXGN" and
"OXGNW," respectively. Prior thereto, since the completion of the Company's
initial public offering in August 1993, the Company's securities had been listed
for quotation on the Nasdaq Small-Cap Market. The following table sets forth the
high and low per share and per warrant bid prices for the Company's Common Stock
and Warrants for each quarterly period within the two most recent fiscal years.
<TABLE>
<CAPTION>
Common Stock Warrants
Calendar Year High Low High Low
1995
<S> <C> <C> <C> <C>
First Quarter $ 7.25 $ 4.63 $ 2.00 $ 1.00
Second Quarter 7.38 5.13 2.13 1.44
Third Quarter 7.75 6.38 2.63 1.75
Fourth Quarter 11.75 5.75 3.63 1.75
1996
First Quarter $23.38 $ 9.25 $15.50 $ 2.88
Second Quarter 32.63 17.63 24.00 10.25
Third Quarter 27.00 17.00 18.00 8.63
Fourth Quarter 26.70 22.00 15.50 11.00
</TABLE>
As of March 12, 1997, there were 50 holders of record of the Company's
Common Stock and four holders of record of the Company's Warrants. The Company
believes, based on the number of proxy statements and related materials
distributed in connection with its 1996 Annual Meeting of Stockholders, that
there are more than 1,250 beneficial owners of its Common Stock.
The Company has not declared any cash dividends on its Common Stock
since its inception in 1988, and does not intend to pay cash dividends in the
foreseeable future. The Company presently intends to retain future earnings, if
any, to finance the growth and development of its business.
<PAGE>
6. SELECTED FINANCIAL DATA.
Summary Financial Information
OXiGENE, Inc.
(A development stage company)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Research income - - - - -
Interest income - 50,897 265,440 420,949 684,039
-------- ------ ------- ------- -------
Total revenues - 50,897 265,440 420,949 684,039
Operating Expenses:
Research and development 920,937 879,195 1,764,462 2,843,593 4,822,834
General and administrative 717,730 1,191,714 1,340,737 1,295,191 1,819,638
------- --------- --------- --------- ---------
Total operating expenses 1,628,667 2,070,909 3,105,199 4,138,784 6,642,472
--------- --------- --------- --------- ---------
Net loss (1,628,667) (2,020,012) (2,839,759) (3,717,835) (5,958,433)
========== ========== ========== ========== ==========
Net loss per common share(1) (0.45) (0.50) (0.56) (0.63) (0.80)
Weighted average number of
common shares outstanding
(in thousands)(1) 3,613 4,026 5,037 5,876 7,444
December 31,
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Balance Sheet Data:
Cash and cash equivalents 164,648 7,516,941 1,193,999 10,406,605 40,517,182
Securities available for sale 0 0 3,291,128 502,020 0
Working capital 29,031 7,207,265 4,447,080 10,510,024 40,418,846
Total assets 192,344 7,550,838 4,770,951 11,227,251 41,168,759
Total liabilities 163,313 309,970 290,969 670,077 650,001
Deficit accumulated during
the development stage (2,822,268) (4,842,280) (7,682,280) (11,399,874) (17,358,307)
Total stockholders' equity 29,031 7,240,866 4,479,982 10,557,174 40,518,758
</TABLE>
<PAGE>
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
OXiGENE is a development-stage pharmaceutical company engaged in the
research and development of products designed to enhance the clinical efficacy
of radiation and chemotherapy, the most common and traditional forms of
non-surgical cancer treatment. OXiGENE has devoted substantially all of its
efforts and resources to research and development conducted on its own behalf
and through strategic collaborations with clinical institutions and other
organizations, particularly the University of Lund in Lund, Sweden.
Consequently, OXiGENE believes that its research and development expenditures
have been somewhat lower than those of other comparable development-stage
companies. OXiGENE has generated a cumulative net loss of approximately $17.4
million for the period from its inception through December 31, 1996. OXiGENE
expects to incur significant additional operating losses over at least the next
several years, principally as a result of its continuing clinical trials and
anticipated research and development expenditures. The principal source of
OXiGENE's working capital has been the proceeds of private and public equity
financings. As of December 31, 1996, OXiGENE had no long-term debt or loans
payable. Since its inception, the Company has had no material amount of
licensing or other fee income, and does not anticipate any such income for the
foreseeable future.
Results of Operations
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
During the years ended December 31, 1996 and 1995, the Company had no revenues,
except for approximately $0.7 million and $0.4 million of interest income,
respectively. The increase in interest income is attributable to the investment
of the net proceeds of the Company's secondary offering in connection with its
listing on the Stockholm Stock Exchange ("SSE"), which was completed in November
1996, as well as cash received upon exercise of options and warrants throughout
the year. See "--Liquidity and Capital Resources." The Company's total operating
expenses for the year ended December 31, 1996 increased to approximately $6.6
million from approximately $4.1 million for the comparable 1995 period. Research
and development expenses for those years were approximately $4.8 million and
$2.8 million, respectively. The increase in reported research and development
expenses was partly attributable to an increase in the charge for financial
reporting purposes of approximately $0.8 million. This charge was recorded
because the market value per share of Common Stock on December 31, 1996 ($23.50)
exceeded the exercise price of stock appreciation rights previously granted by
the Company to certain clinical investigators and consultants. Without giving
effect to such charge, research and development expenses increased by
approximately $1.2 million compared to the comparable 1995 period. The increase
is primarily attributable to research and development expenditures related to
the Company's third-generation sensitizer Oxi-104. Generally, the Company makes
payments to its clinical investigators if and when certain predetermined
milestones in its clinical trials are reached, rather than on a fixed quarterly
or monthly basis. As a result of the foregoing and the existence of outstanding
stock appreciation rights, research and development expenses have fluctuated,
and are expected to continue to fluctuate, from year to year. General and
administrative expenses for the year ended December 31, 1996 increased to
approximately $1.8 million from approximately $1.3 million for the comparable
1995 period. The increase in general and administrative expenses is primarily
attributable to (i) investment banking fees paid to D. Carnegie AB ("Carnegie")
of Stockholm, Sweden, and (ii) expenses related to establishing an office in
Stockholm. In an effort to preserve cash and reduce cash flow requirements, the
Company's policy has been to minimize the number of employees and to use outside
consultants to the extent practicable. OXiGENE expects that its clinical trial
expenses will increase significantly as it proceeds with and expands the
Sensamide(TM)/Neu-Sensamide(TM) clinical trial program and it initiates research
and clinical trials on new compounds, including Oxi-104.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994.
OXiGENE had no revenues, except for approximately $0.4 million and $0.3 million
of interest income in the years ended December 31, 1995 and 1994, respectively.
The increase in interest income is attributable to the investment of the net
proceeds (after deducting underwriting commissions and other expenses of the
offering) received by the Company from a private placement financing completed
in July 1995. Total operating expenses for the year ended December 31, 1995
increased to approximately $4.1 million from approximately $3.1 million for the
comparable 1994 period. Research and development expenses for the year ended
December 31, 1995 increased to approximately $2.8 million from approximately
$1.8 million for the comparable 1994 period, while general and administrative
expenses remained virtually unchanged. The increase in operating expenses is
primarily due to (i) the costs and expenses associated with an expansion of the
clinical trial program, (ii) increases in research and development activities in
connection with OXiGENE's new compounds, and (iii) the expenses related to
OXiGENE's subsidiary in Sweden.
Liquidity and Capital Resources
OXiGENE has experienced net losses and negative cash flow from
operations each year since its inception and, as of December 31, 1996, had a
deficit during the development stage of approximately $17.4 million. The Company
expects to incur substantial additional expenses, resulting in significant
losses, over at least the next several years due to, among other factors, its
continuing clinical trials and anticipated research and development activities.
To date, the Company has financed its operations principally through the net
proceeds it has received from private and public equity financings.
In November 1996, in connection with the listing on the SSE, OXiGENE
completed an offering of 1,150,000 shares (including 150,000 shares issued upon
exercise by the underwriters of their over-allotment option) with net proceeds
to the Company of approximately $26.8 million. Carnegie and Nordberg Capital
Inc. were the underwriters of this offering. The Company has used, and
anticipates that it will continue to use, the proceeds from this offering for
current and expanded clinical trials and for research and development
activities. OXiGENE had cash, cash equivalents and marketable securities of
approximately $40.5 million and $10.9 million at December 31, 1996 and December
31, 1995, respectively. This increase is largely due to the receipt by OXiGENE
of approximately $26.8 million in net proceeds from its secondary offering in
November 1996. Without giving effect to this offering, cash and cash equivalents
as of December 31, 1996, would have been approximately $13.7 million, compared
to approximately $10.9 million as of December 31, 1995. The Company received
$7.7 from the exercise of outstanding options and warrants during the year ended
December 31, 1996, which amount exceeded net cash used in operating activities
during that year.
OXiGENE's policy is to contain its fixed expenditures by maintaining a
relatively small number of employees and relying as much as possible on outside
services for its research, development, preclinical testing and clinical trials.
Quarterly payments are being made to the University of Lund, Lund, Sweden, for
preclinical research and clinical trials. For the years ended December 31, 1996,
1995 and 1994, the amount of such retainer was approximately $0.3 million, $0.2
million and $0.4 million, respectively. In late 1991, OXiGENE engaged Cato
Research, Ltd., an independent clinical research firm in Durham, North Carolina
("Cato"), to, among other things, monitor OXiGENE's clinical trials. The amount
billed to OXiGENE by Cato during the years ended December 31, 1996, 1995 and
1994 was approximately $0.4 million, $0.7 million and $0.6 million,
respectively. The continuous increase in the amount billed by Cato prior to 1996
reflects the expenses associated with OXiGENE's Phase II/III clinical trial of
Sensamide(TM) and monitoring and supporting the development of
Neu-Sensamide(TM). With patient recruitment for the Phase II/III clinical trial
of Sensamide(TM) completed, the amounts billed by Cato are expected to decline
significantly. Further, in May 1996, in collaboration with ILEX(TM) Oncology
Inc. ("ILEX"), a contract research organization in San Antonio, Texas, the
Company established a large-scale synthesis of Oxi-104 in accordance with FDA
current U.S. Good Laboratory Practice standards ("cGLP"). In the year ended
December 31, 1996, the Company has paid ILEX approximately $0.9 million. As
research and development with respect to Oxi-104 continue and the Phase III
clinical trial of Neu-Sensamide(TM) in patients with NSCLC commences in the
United States, the Company expects that the amounts payable to ILEX from time to
time will increase significantly.
OXiGENE anticipates that the cash, cash equivalents, investment
securities and investment income it had available as of December 31, 1996,
should be sufficient to satisfy the Company's projected cash requirements for
approximately the next 30 months. However, working capital and capital
requirements may vary materially from those now planned due to numerous factors
including, but not limited to, the progress with preclinical testing and
clinical trials; progress of the Company's research and development programs;
the time and costs required to obtain regulatory approvals; the resources the
Company devotes to manufacturing methods and advanced technologies; the ability
of the Company to obtain collaborative or licensing arrangements; the cost of
filing, prosecuting and, if necessary, enforcing patent claims; the cost of
commercialization activities and arrangements; and the demand for its products
if and when approved. The Company anticipates that it will have to seek
substantial additional private or public financing or enter into a collaborative
arrangement with one or more third parties to complete the development of any
product or bring products to market. There can be no assurance that additional
financing will be available on acceptable terms, if at all.
OXiGENE had no material commitments for capital expenditures as of
December 31, 1996
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 for a list of the OXiGENE Financial Statements and
Schedules and Supplementary Information filed as part of this report.
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
<PAGE>
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item, insofar as it relates to
directors, is incorporated herein by reference to the Company's definitive Proxy
Statement with respect to the Company's Annual Meeting of Stockholders scheduled
to be held on May 30, 1997. The information regarding executive officers is
included in Part I hereof under the caption "Executive Officers of the
Registrant," and is incorporated by reference into this Item 10.
11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders scheduled to be held on May 30, 1997.
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders scheduled to be held on May 30, 1997.
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by
reference to the Company's definitive Proxy Statement with respect to the
Company's Annual Meeting of Stockholders scheduled to be held on May 30, 1997.
<PAGE>
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents Filed with this Report.
The following documents are filed as part of this report.
1. Financial Statements
The financial statements listed in the accompanying List of Financial
Statements covered by Report of Independent Auditors.
2. Financial Statement Schedules
None.
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant.*
3.2 By-Laws of the Registrant.*
3.3 Certificate of Amendment of Certificate of Incorporation.
4.1 Representatives' Warrant Agreement (including form of
Representatives' Warrant Certificate), dated August
26, 1993 between the Company and RAS Securities
Corp.*
4.2 Warrant Agreement (including form of Warrant Certificate), dated August 26, 1993
between the Company and America Stock Transfer & Trust Company.*
10.1 Retainer Agreement dated as of September 19, 1991 between Registrant and Cato
Research, Ltd.*
10.2 Patent License Agreement dated as of October 7, 1991 between Preventive Medicine
Institute and Bio-Screen, Inc.*
10.3 Sublease Agreement, dated as of June 30, 1992 between Raymond & Feldman and
Registrant.*
10.4 Letter Agreements, dated May 26, 1993 and October 1, 1993, amending the Sublease
Agreement, dated June 30, 1992.**
10.5 Letter Agreement, dated December 13, 1994, further amending the Sublease Agreement,
dated June 30, 1992, as amended.
10.6 Letter Agreement dated April 30, 1993, between Registrant and Lund Oncology
Department, Lund University Hospital, covering clinical trial to evaluate Sensamide(TM)
as a radiosensitizer.*
10.7 Amended and Restated Stock Incentive Plan of Registrant dated as of May 15, 1993.*
10.8 Employment Agreement dated as of May 20, 1993, between Registrant and Dr. Ronald W.
Pero.*
10.9 Form of Lock-up Agreement for Affiliates.*
10.10 Agreement dated December 23, 1994 with the Carnegie Fondkommission, AB.**
10.11 Executive Employment Agreement, dated as of October 9, 1993, between Registrant and
Bjorn Nordenvall, M.D., Ph.D.
10.12 Consulting Agreement, dated as of October 9, 1995, between OXiGENE (Europe) AB and
B. Omentum Consulting AB
10.13 Consulting Agreement, dated as of August 1, 1995, between Registrant and Claus M0ller.
10.14 OXiGENE 1996 Stock Incentive Plan.***
10.15 Clinical Trial and Sponsored Research Agreement, dated as of December 1, 1996, between
the Registrant and Boston Medical Center Corporation.
11.1 Computation of Net Loss per Share of Common Stock.
23.1 Consent of Ernst & Young, LLP.
27.1 Financial Data Schedule
99.1 U.S. Patent Number 5,204,241, issued April 20, 1994, registered to Ronald W. Pero,
regarding glutathione-s-transferase Mu as a measure of drug resistance. ***
99.2 U.S. Patent Number 5,340,565, issued August 23, 1994, registered to Ronald W. Pero,
regarding tumor or cancer cell killing therapy and agents useful therefor. ***
99.3 U.S. Patent Number 5,482,833, issued January 9, 1996, registered to Ronald W. Pero and
Daniel G. Miller, regarding a test to determine the predisposition or susceptibility
to DNA-associated diseases. ***
99.4 International Application Published under the Patent Cooperation Treaty (PCT) Number
WO96/14565, published May 17, 1996, registered to Ronald W. Pero, regarding a method
of testing immune competency. ***
-------------------------
* Incorporated by reference to the Registrant's Registration Statement on Form S-1 (file no.
33-64968) and any amendments thereto.
** Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
*** Incorporated by reference to the Registrant's Registration Statement on Form S-3 (file no.
333-12867) and any amendments thereto.
</TABLE>
(b) Reports on Form 8-K.
The registrant filed no reports on Form 8-K during the fourth
quarter of the year ended December 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OXiGENE, INC.
By:/S/ BJORN NORDENVALL
--------------------
Bjorn Nordenvall
President and Chief Executive
Officer
March 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/S/ BJORN NORDENVALL President, Chief Executive Officer March 14, 1997
- -------------------------------------------- and Director (principal executive
Bjorn Nordenvall officer)
/S/ BO HAGLUND Chief Financial Officer March 14, 1997
- --------------------------------------------
Bo Haglund
Director March 14, 1997
- --------------------------------------------
Marvin H. Caruthers
/S/ MICHAEL IONATA Director March 14, 1997
- --------------------------------------------
Michael Ionata
/S/ CLAUS M0LLER Director March 14, 1997
- --------------------------------------------
Claus M0ller
/S/ RONALD W. PERO Director March 14, 1997
- --------------------------------------------
Ronald W. Pero
</TABLE>
<PAGE>
Form 10-K Item 14(a)(1)
OXiGENE, Inc.
(A development stage company)
List of Consolidated Financial Statements
The following consolidated financial statements of OXiGENE, Inc. are included
in Item 8:
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets--December 31, 1996 and 1995................... F-3
Consolidated Statements of Operations--Years ended December 31, 1996, 1995,
1994 and the Period from February 22, 1988 (inception) through
December 31, 1996 (unaudited)............................................ F-4
Consolidated Statements of Stockholders' Equity (Deficit)--Years ended
December 31, 1996, 1995, 1994, 1993, 1992, 1991, 1990 (unaudited)
and the Period from February 22 (inception) through December 31, 1989
(unaudited)............................................................ F-5
Consolidated Statements of Cash Flows--Years ended December 31, 1996, 1995,
1994 and the Period from February 22, 1989 (inception) through
December 31, 1996 (unaudited)........................................... F-8
Notes to Consolidated Financial Statements............................... F-9
Schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
OXiGENE, Inc.
We have audited the accompanying consolidated balance sheets of OXiGENE, Inc.
(the "Company") (a development stage company) as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OXiGENE, Inc. (a
development stage company) at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
March 5, 1997
F-2
<PAGE>
OXiGENE, Inc.
(A development stage company)
Consolidated Balance Sheets
December 31
1995 1996
---------------------------------
Assets
Current assets:
Cash and cash equivalents $ 10,406,605 $ 40,517,182
Securities available-for-sale (Note 2) 502,020 -
Prepaid expenses 50,180 194,628
Interest receivable 202,164 280,411
Other 19,132 76,626
---------------------------------
---------------------------------
Total current assets 11,180,101 41,068,847
Furniture, fixtures and equipment, at cost 62,087 143,652
Accumulated depreciation 24,537 53,340
---------------------------------
---------------------------------
37,550 90,312
Deposits 9,600 9,600
---------------------------------
=================================
Total assets $ 11,227,251 $ 41,168,759
=================================
=================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses:
Due to CATO Research, Ltd. (Note 6) $ 133,734 $ 4,600
Accrued expenses 259,301 225,995
Other payables 277,042 419,406
----------------------------------
----------------------------------
Total current liabilities 670,077 650,001
Commitments (Note 5)
Stockholders' equity (Note 3):
Common stock, $.01 par value:
Authorized shares--
15,000,000 shares at December 31, 1995
60,000,000 shares at December 31, 1996
Issued and outstanding shares--
6,823,300 shares at December 31, 1995;
9,052,343 shares at December 31, 1996; 68,233 90,523
Common stock subscribed 50 -
Additional paid-in capital 21,864,364 57,673,667
Deficit accumulated during the development stage (11,399,874) (17,358,307)
Foreign currency translation adjustment 24,894 112,875
Unrealized losses on securities available-for-sale (493) -
--------------------------
--------------------------
Total stockholders' equity 10,557,174 40,518,758
--------------------------
==========================
Total liabilities and stockholders' equity $ 11,227,251 $ 41,168,759
===========================
See accompanying notes.
F-3
<PAGE>
OXiGENE, Inc.
(A development stage company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Period from February
22, 1988 (inception)
Year ended December 31 through
1994 1995 1996 December 31, 1996
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues
Research income $ - $ - $ - $ 31,000
Interest income 265,440 420,949 684,039 1,431,280
-------------------------------------------------------------------------
-------------------------------------------------------------------------
265,440 420,949 684,039 1,462,280
Operating expenses
Research and development:
CATO Research, Ltd. (Note 6) 608,337 739,994 318,210 2,783,433
Other 1,156,125 2,103,599 4,504,624 9,109,161
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total research and development 1,764,462 2,843,593 4,822,834 11,892,594
General and administrative
(including related party
transactions of approximately
$72,000 and $336,000 in 1995 and
1996) (Note 6) 1,340,737 1,295,191 1,819,638 6,927,993
-------------------------------------------------------------------------
Total operating expenses 3,105,199 4,138,784 6,642,472 18,820,587
-------------------------------------------------------------------------
=========================================================================
Net loss $ (2,839,759) $ (3,717,835) $ (5,958,433) $ (17,358,307)
=========================================================================
=========================================================================
Net loss per common share $ (.56) $ (.63) $ (.80)
Weighted average number of
common shares outstanding 5,037,278 5,876,295 7,439,616
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
OXiGENE, Inc.
(a development stage company)
Statements of Stockholders' Equity (Deficit)
(Note 3)
<CAPTION>
------------------------ ------------------------
Common Stock, Additional
$.01 Par Value Common Stock Subscribed Paid-In
Date Shares Amounts Shares Amount Capital
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock in exchange for
transfer of patent application
ownership to the Company by an
officer/director recorded at no value,
which reflects transferor's basis May 1988 380,000 $3,800 - $ - $ (3,800)
(unaudited)
Issuance of common stock at approximately
$0.74 per share (unaudited) June 1988 271,033 2,710 - - 197,290
Issuance of common stock in exchange for
the outstanding common stock of
Bio-Screen Inc. (unaudited) August 1988 100,000 1,000 - - (1,000)
Net loss for period from February 22,
1988 (inception) through December 31,
1988 (unaudited) - - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Balance at December 31, 1988 (unaudited) 751,033 7,510 - - 192,490
Issuance of common stock at approximately
$0.74 per share (unaudited) January 1989 271,033 2,710 - - 197,290
Net loss for 1989 (unaudited) - - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Balance at December 31, 1989 (unaudited) 1,022,066 10,220 - - 389,780
Issuance of common stock at approximately March 1990 to
$0.74 per share December 1990 257,487 2,575 - - 187,425
Common stock subscribed December 1990 - - 13,547 10,000 -
Net loss for 1990 - - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Balance at December 31, 1990 1,279,553 12,795 13,547 10,000 577,205
Issuance of common stock at approximately
$0.74 per share January 1991 13,547 136 (13,547) (10,000) 9,864
Issuance of common stock at $0.71 per February 1991 330,000 3,300 - - 230,033
share
Issuance of common stock at approximately
$1.50 per share August 1991 100,000 1,000 - - 149,000
Issuance of common stock at $1.95 per December 1991 220,000 2,200 - - 426,800
share
Net loss for 1991 - - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Balance at December 31, 1991 1,943,100 19,431 - - 1,392,902
Issuance of common stock at $1.95 per
share, net of issuance costs of December 1992 985,000 9,850 - - 1,789,866
approximately $121,000
Net loss for 1992 - - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Balance at December 31, 1992 2,928,100 29,281 - - 3,182,768
</TABLE>
<TABLE>
<CAPTION>
Deficit Unrealized
Accumulated Foreign Stock Losses on Total
During the Currency Subscription Securities Stockholders'
Development Translation and Notes Available Equity
for
Date Stage Adjustment Receivable Sale (Deficit)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock in exchange for
transfer of patent application
ownership to the Company by an
officer/director recorded at no value,
which reflects transferor's basis May 1988 $ - $ - $ - $ - $ -
(unaudited)
Issuance of common stock at approximately
$0.74 per share (unaudited) June 1988 - - - - 200,000
Issuance of common stock in exchange for
the outstanding common stock of -
Bio-Screen Inc. (unaudited) August 1988 - - - -
Net loss for period from February 22,
1988 (inception) through December 31, -
1988 (unaudited) (185,962) - - (185,962)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance at December 31, 1988 (unaudited) (185,962) - - - 14,038
Issuance of common stock at approximately
$0.74 per share (unaudited) January 1989 - - - - 200,000
Net loss for 1989 (unaudited) (179,119) - - - (179,119)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance at December 31, 1989 (unaudited) (365,081) - - - 34,919
Issuance of common stock at approximately March 1990 to
$0.74 per share December 1990 - - - - 190,000
Common stock subscribed December 1990 - - (10,000) - -
Net loss for 1990 (326,648) - - - (326,648)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance at December 31, 1990 (691,729) - (10,000) - (101,729)
Issuance of common stock at approximately
$0.74 per share January 1991 - - 10,000 - 10,000
Issuance of common stock at $0.71 per February 1991 - - - - 233,333
share
Issuance of common stock at approximately
$1.50 per share August 1991 - - - - 150,000
Issuance of common stock at $1.95 per December 1991 - - - - 429,000
share
Net loss for 1991 (501,872) - - - (501,872)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance at December 31, 1991 (1,193,601) - - - 218,732
Issuance of common stock at $1.95 per
share, net of issuance costs of December 1992 - - (360,750) - 1,438,966
approximately $121,000
Net loss for 1992 (1,628,667) - - - (1,628,667)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance at December 31, 1992 (2,822,268) - (360,750) - 29,031
</TABLE>
F-5
<PAGE>
<TABLE>
OXiGENE, Inc.
(a development stage company)
Statements of Stockholders'
Equity (Deficit)
(continued) (Note 3)
<CAPTION>
------------------------ ------------------------
Common Stock, Additional
$.01 Par Value Common Stock Subscribed Paid-In
Date Shares Amounts Shares Amount Capital
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock at $1.95 per January 1993
share, net of issuance costs of to 445,000 $4,450 - $ - $ 726,800
approximately $136,500 February 1993
Repayment of notes receivable January 1993 - - - - -
Issuance of warrants and options as
compensation to certain directors to
purchase 180,000 and 10,000 shares of
common stock, respectively, at $1.95 May 1993 - - - - 427,500
per share
Issuance of common stock at $6.00 per
share, net of issuance costs of September 1993 1,500,000 15,000 - - 7,149,247
approximately $1,836,000
Issuance of common stock at $6.00 per
share, net of issuance costs of October 1993 105,000 1,050 - - 547,050
approximately $82,000
Net loss for 1993 - - - - -
---------------------------------------------------------------
---------------------------------------------------------------
Balance at December 31, 1993 4,978,100 49,781 - - 12,033,365
Issuance of common stock at $1.95 per April 1994 80,000 800 - - 155,200
share
Net loss for 1994 - - - - -
Unrealized losses on securities - - - - -
available-for-sale
---------------------------------------------------------------
Balance at December 31, 1994 5,058,100 50,581 - - 12,188,565
Issuance of options as compensation to
consultants to purchase 165,000 shares
of common stock at $6.00 per share June 1995 - - - - 20,625
Issuance of common stock at $6.00 per
share, net of issuance costs of July 1995 1,666,700 16,667 - - 9,460,009
approximately $524,000
Issuance of common stock at $1.50 per July 1995 to
share (12,500) and $1.95 per share December 1995 98,500 985 - - 185,465
(86,000)
Subscriptions for 5,000 shares of common
stock December 1995 - - 5,000 50 9,700
at $1.95 per share
Foreign currency translation adjustment - - - - -
for 1995
Net loss for 1995 - - - - -
Unrealized gain on securities - - - - -
available-for-sale
---------------------------------------------------------------
Balance at December 31, 1995 6,823,300 68,233 5,000 50 21,864,364
</TABLE>
<TABLE>
<CAPTION>
Deficit Unrealized
Accumulated Foreign Stock Losses on Total
During the Currency Subscription Securities Stockholders'
Development Translation and Notes Available Equity
for
Date Stage Adjustment Receivable Sale (Deficit)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock at $1.95 per January 1993
share, net of issuance costs of to $ - $ - $ - $ - $ 731,250
approximately $136,500 February 1993
Repayment of notes receivable January 1993 - - 360,750 - 360,750
Issuance of warrants and options as
compensation to certain directors to
purchase 180,000 and 10,000 shares of
common stock, respectively, at $1.95 May 1993 - - - - 427,500
per share
Issuance of common stock at $6.00 per
share, net of issuance costs of September 1993 - - - - 7,164,247
approximately $1,836,000
Issuance of common stock at $6.00 per
share, net of issuance costs of October 1993 - - - - 548,100
approximately $82,000
Net loss for 1993 (2,020,012) - - - (2,020,012)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance at December 31, 1993 (4,842,280) - - - 7,240,866
Issuance of common stock at $1.95 per April 1994 - - - - 156,000
share
Net loss for 1994 (2,839,759) - - - (2,839,759)
Unrealized losses on securities - - - (77,125) (77,125)
available-for-sale
--------------------------------------------------------------------------
Balance at December 31, 1994 (7,682,039) - - (77,125) 4,479,982
Issuance of options as compensation to
consultants to purchase 165,000 shares
of common stock at $6.00 per share June 1995 - - - - 20,625
Issuance of common stock at $6.00 per
share, net of issuance costs of July 1995 - - - - 9,476,676
approximately $524,000
Issuance of common stock at $1.50 per July 1995 to
share (12,500) and $1.95 per share December 1995 - - - - 186,450
(86,000)
Subscriptions for 5,000 shares of common
stock December 1995 - - - - 9,750
at $1.95 per share
Foreign currency translation adjustment - 24,894 - - 24,894
for 1995
Net loss for 1995 (3,717,835) - - - (3,717,835)
Unrealized gain on securities - - - 76,632 76,632
available-for-sale
--------------------------------------------------------------------------
Balance at December 31, 1995 (11,399,874) 24,894 - (493) 10,557,174
</TABLE>
F-6
<PAGE>
<TABLE>
OXiGENE, Inc.
(a development stage company)
Statements of Stockholders' Equity (Deficit)
(Note 3)
<CAPTION>
------------------------ ------------------------
Common Stock, Additional
$.01 Par Value Common Stock Subscribed Paid-In
Date Shares Amounts Shares Amount Capital
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock upon
exercise of options, warrants or stock
appreciation rights:
At $1.95 per share January 1996 5,000 $ 50 (5,000) $(50) $ -
At $1.95 per share January 1996 50,000 500 - - 97,000
At $1.95 per share March 1996 95,000 950 - - 184,300
At $1.95 per share April 1996 50,000 500 - - 97,000
At $7.25 per share June 1996 2,500 25 - - 18,100
At $9.67 per share June 1996 120,482 1,206 - - 1,164,204
At $1.95 per share June 1996 75,000 750 - - 145,500
At $1.95 per share July 1996 50,000 500 - - 97,000
At $5.50 per share July 1996 5,000 50 - - 27,450
At $10.35 per share July 1996 49,755 498 - - 480,777
At $7.25 per share July 1996 10,000 100 - - 72,400
At $1.95 per share August 1996 31,500 315 - - 61,110
At $7.25 per share August 1996 2,500 25 - - 18,100
At $22.00 per share August 1996 5,129 51 - - 112,789
At $9.67 per share August 1996 270,342 2,702 - - 2,612,318
At $21.00 per share September 1996 1,910 19 - - 40,091
At $11.54 per share October 1996 8,560 86 - - 98,714
At $1.95 per share November 1996 5,000 50 - - 9,700
At $6.25 per share November 1996 50,000 500 - - 312,000
At $8.95 per share November 1996 27,250 272 - - 243,615
At $7.25 per share November 1996 42,150 422 - - 370,021
At $11.54 per share November 1996 52,965 529 - - 610,796
At $15.74 per share November 1996 69,000 690 - - 943,710
Capital contribution by officer June 1996 - - - - 53,170
Public offering of common stock at
$25.2732 per share, net issuance costs
of approximately $2,217,000 November 1996 1,150,000 11,500 - - 26,835,896
Foreign currency translation adjustment - - - - -
for 1996
Net loss for 1996 - - - - -
Accrued stock appreciation rights - - - - 1,103,542
Unrealized gain on securities - - - - -
available-for-sale
===============================================================
Balance at December 31, 1996 9,052,343 $90,523 - $ - $ 57,673,667
===============================================================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Deficit Unrealized
Accumulated Foreign Stock Losses on Total
During the Currency Subscription Securities Stockholders'
Development Translation and Notes Available Equity
for
Date Stage Adjustment Receivable Sale (Deficit)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock upon
exercise of options, warrants or stock
appreciation rights:
At $1.95 per share January 1996 $ - $ - $ - $ - $ -
At $1.95 per share January 1996 - - - - 97,500
At $1.95 per share March 1996 - - - - 185,250
At $1.95 per share April 1996 - - - - 97,500
At $7.25 per share June 1996 - - - - 18,125
At $9.67 per share June 1996 - - - - 1,165,410
At $1.95 per share June 1996 - - - - 146,250
At $1.95 per share July 1996 - - - - 97,500
At $5.50 per share July 1996 - - - - 27,500
At $10.35 per share July 1996 - - - - 481,275
At $7.25 per share July 1996 - - - - 72,500
At $1.95 per share August 1996 - - - - 61,425
At $7.25 per share August 1996 - - - - 18,125
At $22.00 per share August 1996 - - - - 112,840
At $9.67 per share August 1996 - - - - 2,615,020
At $21.00 per share September 1996 - - - - 40,110
At $11.54 per share October 1996 - - - - 98,800
At $1.95 per share November 1996 - - - - 9,750
At $6.25 per share November 1996 - - - - 312,500
At $8.95 per share November 1996 - - - - 243,887
At $7.25 per share November 1996 - - - - 370,443
At $11.54 per share November 1996 - - - - 611,325
At $15.74 per share November 1996 - - - - 944,400
Capital contribution by officer June 1996 - - - - 53,170
Public offering of common stock at
$25.2732 per share, net issuance costs
of approximately $2,217,000 November 1996 - - - - 26,847,396
Foreign currency translation adjustment - 87,981 - - 87,981
for 1996
Net loss for 1996 (5,958,433) - - - (5,958,433)
Accrued stock appreciation rights - - - - 1,103,542
Unrealized gain on securities - - - 493 493
available-for-sale
=======================================================================
Balance at December 31, 1996 $(17,358,307) $112,875 $ - $ - $40,518,758
=======================================================================
See accompanying notes.
</TABLE>
F-7
OXiGENE, Inc.
(A development stage company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Period from
February 22, 1988
Year ended December 31 (inception) through
December 31
1994 1995 1996 1996
-------------------------------------------------------------------
-------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net loss $ (2,839,759) $ (3,717,835) $ (5,958,433) $ (17,358,307)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Loss on securities
available-for-sale - 9,460 2,513 11,973
Depreciation 5,044 13,773 37,153 61,222
Abandonment of furniture,
fixture and equipment - - 9,041 9,041
Compensation related to
issuance of warrants,
options and stock - 243,720 1,035,270 1,706,490
appreciation rights
Changes in operating assets and liabilities:
Prepaid expenses and other
current assets (252,628) (14,740) (283,636) (551,298)
Accounts payable and
accrued expenses (19,001) 146,248 185,457 622,674
-------------------------------------------------------------------
-------------------------------------------------------------------
Net cash used in operating (3,106,344) (3,319,374) (4,972,635) (15,498,205)
activities
Financing activities
Proceeds from investor - - - 100,000
Repayment to investor - - - (100,000)
Proceeds from issuance and
subscription of common stock, net 156,000 9,672,876 34,521,881 56,006,403
Other capital contributions - - 53,170 53,170
-------------------------------------------------------------------
Net cash provided by financing
activities 156,000 9,672,876 34,575,051 56,059,573
Investing activities
Purchases of securities available-
for-sale (3,368,253) - - (3,368,253)
Proceeds from sale of securities
available-for-sale - 2,856,280 500,000 3,356,280
Deposits - - - (9,600)
Purchase of furniture, fixtures and
equipment (4,345) (26,922) (101,058) (161,578)
-------------------------------------------------------------------
Net cash (used in) provided by
investing activities (3,372,598) 2,829,358 398,942 (183,151)
Effect of exchange rate on changes
in cash - 29,746 109,219 138,965
-------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (6,322,942) 9,212,606 30,110,577 40,517,182
Cash and cash equivalents at
beginning of period 7,516,941 1,193,999 10,406,605 -
-------------------------------------------------------------------
===================================================================
Cash and cash equivalents at
end of period $ 1,193,999 $ 10,406,605 $ 40,517,182 $ 40,517,182
===================================================================
</TABLE>
See accompanying notes.
F-8
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements
December 31, 1996
1. Description of Business and Significant Accounting Policies
Description of Business
OXiGENE, Inc. (the "Company") is a development stage pharmaceutical company. The
Company was originally incorporated as Oxi-Gene, Inc. in the State of New York
on February 22, 1988 and subsequently recapitalized and incorporated in the
State of Delaware in December 1993.
The Company is in the research phase of its operations. Because operations
to-date have consisted of research activities only, no substantial income has
been generated to-date and the losses sustained result principally from outlays
for research and administrative expenses. The Company may need to obtain
additional funding from outside sources to fund operating expenses, pursue
regulatory approvals and build production, sales and marketing capabilities, as
necessary.
Principles of Consolidation
In December 1994, the Company established a wholly-owned subsidiary in Sweden,
OXiGENE (Europe) AB to manage and control the Company's research and development
work, and monitor European clinical trials. The accounts of the subsidiary have
been consolidated from the time the subsidiary commenced operations in January
1995. All material intercompany balances and transactions have been eliminated
in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-9
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Depreciation
Furniture, fixtures and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets
which is principally seven years.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents.
Substantially all cash and cash equivalents at December 31, 1996 are deposited
in one financial institution. Substantially all cash and cash equivalents at
December 31, 1995 were deposited in another financial institution.
Foreign Currency Translation
Assets and liabilities of the subsidiary are translated at year-end rates and
income and expenses are translated at average exchange rates prevailing during
the year. Translation adjustments arising from differences in exchange rates
from period to period are included in the accumulated foreign currency
translation adjustments account in stockholders' equity.
Investments
The Company accounts for marketable securities in accordance with the provisions
of Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the Company has the
positive intent and ability to hold the securities to maturity.
F-10
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Debt securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gains and losses reported in a separate component of
shareholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization or premiums and accretion of
discounts to maturity. Such amortization is included in interest income from
investments. Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
Patent and Patent Applications
The Company has filed applications for patents in connection with technologies
being developed. The patent applications and any patents issued as a result of
these applications are important to the protection of the Company's technologies
that may result from its research and development efforts. The pharmaceutical
industry is highly competitive and patents may be challenged from time to time.
The Company intends to vigorously defend its issued patents and may therefore
incur significant costs in the defense of the patents and related technologies.
Costs associated with the patent and patent applications are expensed as
incurred.
Income Taxes
The Company accounts for income taxes based upon the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, the liability method is used for accounting for income
taxes, and deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities.
Share Information
All outstanding share amounts included in the accompanying financial statements
have been adjusted to reflect the 10,000 for 1 stock split disclosed in Note 3.
F-11
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Unaudited Information
Information pertaining to the period from February 22, 1988 (inception) through
December 31, 1989 is unaudited.
Net Loss Per Share
Net loss per share is based upon the net loss divided by the weighted average
number of shares of common stock outstanding during the respective periods,
retroactively adjusted to reflect the stock split. All options and warrants were
antidilutive and, accordingly, excluded from the calculation of weighted average
shares.
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal years beginning
after December 31, 1995 and prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The Company has elected to continue to account for its stock based
compensation plans in accordance with the provisions of APB 25.
F-12
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
2. Investments
The following is a summary of securities available-for-sale:
Securities Available-for-Sale
Gross
Unrealized Estimated Fair
Cost Losses Value
---------------------------------------
December 31, 1995
U.S. corporate debt securities:
American Express Credit
Corporation $ 502,513 $ 493 $ 502,020
---------------------------------------
=======================================
$ 502,513 $ 493 $ 502,020
=======================================
The amortized cost and estimated fair value of debt securities at December 31,
1995, by contractual maturity are shown below.
Cost Fair Value
----------------------------------------
Available-for-Sale
Due in one year or less $ 502,513 $ 502,020
========================================
F-13
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity
Options and Warrants
The following is a summary of the Company's stock option, warrant and stock
appreciation rights activity.
<TABLE>
<CAPTION>
Number of Options, Warrants and Stock Appreciation Rights
Stock Incentive Stock
Nonqualified Options Appreciation Stock Warrants
Stock Options Rights
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 210,000 365,000 22,500 2,712,500
Granted during 1994 - - 52,500 -
Exercised during 1994 - (80,000) - -
Canceled during 1994 - (160,000) - -
-----------------------------------------------------------------
Balance at December 31, 1994 210,000 125,000 75,000 2,712,500
Granted during 1995 664,000 - 2,000 5,000
Exercised during 1995 (12,500) - - (86,000)
Canceled during 1995 (2,000) - - -
-----------------------------------------------------------------
-----------------------------------------------------------------
Balance at December 31, 1995 859,500 125,000 77,000 2,631,500
Granted during 1996 336,443 13,557 - 148,350
Exercised during 1996 (74,000) - (10,000) (998,004)
Canceled during 1996 (20,000) - - -
=================================================================
Balance at December 31, 1996 1,101,943 138,557 67,000 1,781,846
=================================================================
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Price of Options, Warrants and Stock Appreciation Rights
Stock Incentive Stock
Nonqualified Options Appreciation Stock Warrants
Stock Options Rights
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $6.91 3.86 7.25 5.93
Granted during 1994 - - 6.09 -
Exercised during 1994 - 1.95 - -
Canceled during 1994 - 1.95 - -
-----------------------------------------------------------------
Balance at December 31, 1994 6.91 7.52 6.99 7.11
Granted during 1995 5.90 - 5.38 6.00
Exercised during 1995 1.50 - - 1.95
Canceled during 1995 5.50 - - -
-----------------------------------------------------------------
-----------------------------------------------------------------
Balance at December 31, 1995 6.21 7.52 6.95 8.50
Granted during 1996 27.69 22.13 - 10.73
Exercised during 1996 6.46 - 6.41 7.22
Canceled during 1996 6.00 - - -
=================================================================
Balance at December 31, 1996 $12.75 8.95 $7.03 $9.60
=================================================================
</TABLE>
F-14
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity
Options and Warrants (continued)
<TABLE>
<CAPTION>
Options, Warrants and Stock Appreciation Rights Exercisable
Stock Incentive Stock
Nonqualified Options Appreciation Stock Warrants
Stock Options Rights
-----------------------------------------------------------------
<S> <C> <C>
December 31, 1993:
Exercisable 210,000 137,500 - 2,712,500
Weighted average exercise price $6.91 $1.95 - $5.29
December 31, 1994:
Exercisable 210,000 125,000 32,500 2,712,500
Weighted average exercise price $6.91 $7.52 $4.86 $7.11
December 31, 1995:
Exercisable 747,833 125,000 66,000 2,631,500
Weighted average exercise price $6.22 $7.52 $6.87 $8.50
December 31, 1996:
Exercisable 824,673 129,494 67,000 1,781,846
Weighted average exercise price $5.53 $7.01 $7,03 $9.60
</TABLE>
F-15
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity
Options and Warrants (continued)
<TABLE>
<CAPTION>
Options, Warrants and Stock Appreciation Rights Outstanding at December 31, 1996
<S> <C> <C> <C> <C>
Stock Incentive Stock
Nonqualified Options Appreciation Stock Warrants
Stock Options Rights
Exercise price of $1.95 per
share:
Outstanding - 10,000 - 350,000
Weighted average remaining
contractual life - 1 Year - 1Year
Exercisable - 10,000 - 350,000
Exercise prices ranging from $5.38 per share to $13.69 per share:
Outstanding 765,500 115,000 67,000 1,431,846
Weighted average exercise
price $6.19 $8.00 $7.03 $11.47
Weighted average remaining
contractual life 8.1 Years 1 Year 7.7 Years 1 Year
Exercisable 732,167 115,000 67,000 1,431,846
Weighted average exercise
price $4.43 $8.00 $7.03 $11.47
Exercise prices ranging from
$22.00 per share to $28.75 per
share:
Outstanding 336,518 13,482 - -
Weighted average exercise
price $27.93 $22.12 - -
Weighted average remaining
contractual life 9.5 Years 9.5 Years - -
Exercisable 92,506 4,494 - -
Weighted average exercise
price $27.92 $7.01 - -
</TABLE>
Nonqualified Stock Options
In August 1991, the Company's Board of Directors granted options to a former
officer of the Company to purchase 12,500 shares of the Company's common stock
at $1.50 per share exercisable at any time prior to August 7, 2001. During 1995,
such options to purchase 12,500 shares of the Company's common stock were
exercised.
F-16
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
Nonqualified Stock Options (continued)
In December 1993, under the Amended Plan, as defined below, the Company's Board
of Directors granted options to certain directors of the Company and other
individuals to purchase 197,500 shares of the Company's common stock at $7.25
per share. Such options vested at various dates over a period of one year from
the date of grant.
In November 1994, under the Amended Plan, the Company's Board of Directors
granted options, subsequently approved by stockholders in May 1995, to certain
director's of the Company and other individuals to purchase 252,000 shares of
the Company's common stock at market value ($5.50 per share). Such options vest
at various dates over a period of 28 months from the date of grant.
In 1995, under the Amended Plan, the Company's Board of Directors granted to
certain directors of the Company and other individuals options to purchase
412,000 shares of the Company's common stock at exercise prices ranging from
$5.375 per share to $7.00 per share. Options to purchase 247,000 shares were
granted at exercise prices equal to the market value of the shares on date of
grant. The remaining 165,000 shares are exercisable at $6.00 per share. Because
the market price of the Company's shares amounted to $6.125 per share on the
date these options were granted, the Company recorded a charge for financial
reporting purposes of approximately $20,625.
In 1996, the Company's stockholders approved the OXiGENE 1996 Stock Incentive
Plan (the "1996 Plan"). Certain directors, officers and employees of the Company
and its subsidiary and consultants and advisors thereto may be granted options
to purchase shares of common stock of the Company. Under the terms of the 1996
Plan, "incentive stock options" (ISO's) within the meaning of Section 422 of the
Internal Revenue Code, "nonqualified stock options" (NQSOs) and stock
appreciation rights may be granted. A maximum of 1,000,000 shares may be issued
under the plan.
F-17
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
In 1996, the Company's Board of Directors granted to certain officers of the
Company and other individuals options to purchase 336,443 shares of common stock
at exercise prices ranging from $22.00 per share to $28.75 per share. Options to
purchase 110,000 shares of common stock vest in equal installments over five
years. The remaining options vest in equal installments over three years.
Stock Incentive Options
During 1992, the Board of Directors implemented an Stock Incentive Option Plan
(the "Plan"). The Plan provided for the grant of options to purchase up to
250,000 shares of common stock to any officer, director and employee of the
Company upon the terms and conditions (including price, exercise date and number
of shares) determined by the Board of Directors or a committee selected by the
Board of Directors to administer the Plan.
In April 1992, under the Plan, the Company's Board of Directors granted stock
options to an officer of the Company for the purchase of 240,000 shares of the
Company's common stock at $1.95 per share. Such options vest at 80,000 per year
for a three-year period. During 1995, vested options to purchase 80,000 shares
of the Company's common stock were exercised. The remaining nonvested options to
purchase 160,000 shares of the Company's common stock were cancelled upon the
termination of the officer's services in 1994.
On May 15, 1993, under the Plan, the Board of Directors granted options as
compensation to certain directors of the Company, to purchase 10,000 shares of
common stock at $1.95 per share, exercisable at any time for a period of five
years.
During May 1993, the Company amended and restated its Stock Incentive Plan (the
"Amended Plan"). Under the Amended Plan, the Company has reserved for issuance
an additional 416,900 shares of Common Stock (subsequently increased by an
additional 500,000 shares). The Amended Plan provides for the issuance of stock
appreciation rights.
F-18
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
Stock Incentive Options (continued)
Under the Amended Plan, the exercise price determined by the Board of Directors
or committee must be at least 100% of the fair market value of the Company's
common stock as of the date of the grant. Upon termination of employment, any
granted option, vested or unvested, shall, to the extent not previously
exercised, terminate except under certain conditions as outlined in the Amended
Plan. The options granted under the Amended Plan are generally exercisable at
specific dates over a ten-year period.
In December 1993, under the Amended Plan, the Company's Board of Directors
granted stock options to a certain director of the Company to purchase 115,000
shares of common stock at $8.00 per share. Such options vested in equal
installments on December 14, 1993 and 1994.
In July 1996, the Board of Directors granted options to an officer of the
Company to purchase 13,557 shares of common stock at $22.125 per share. Such
options vest in equal installments over three years.
Stock Appreciation Rights
Under the Amended Plan, the Company's Board of Directors granted stock
appreciation rights to 22,500 shares of common stock at an exercise price of
$7.25 per share and stock appreciation rights to another 22,500 shares at an
exercise price of $5.875 per share to an employee, certain consultants and
clinical investigators on December 14, 1993 and April 4, 1994, respectively.
Such stock appreciation rights vested in equal installments on December 14, 1994
and 1995.
In September 1994, under the Amended Plan, a member of the scientific advisory
board received stock appreciation rights to 30,000 shares of common stock at
$7.63 per share. Such stock appreciation rights vested in equal installments in
September 1994, 1995 and 1996.
In July 1995, under the Amended Plan, a consultant received stock appreciation
rights to 2,000 shares of common stock at $5.38 per share. Such stock
appreciation rights vested in equal installments on July 13, 1995 and July 13,
1996.
F-19
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
F-20
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
Stock Appreciation Rights (continued)
In August and September 1996, stock appreciation rights to 7,000 shares at
$5.875 per share and 3,000 shares at $7.63 per share were exercised when the
market value of the Company's stock was $22.00 and $21.00, respectively. The
Company issued 7,039 shares of common stock upon the exercise of such stock
appreciation rights.
Because the market value per share of common stock exceeded the exercise price
of the stock appreciation rights ($10.25 on December 31, 1995 and $23.50 on
December 31, 1996) the Company recorded a charge for financial reporting
purposes of approximately $223,000 and $1,035,000 (including the value of stock
appreciation rights exercised in 1996). Because stock appreciation rights are
satisfied, upon exercise, only by the distribution of shares of common stock of
the Company, the charge related to unexercised stock appreciation rights was
credited to additional paid-in capital during the year ended December 31, 1996.
Stock appreciation rights expire ten years from the date of grant.
Stock Warrants
In November 1991, and January and June 1992, the Board of Directors granted
warrants to directors of the Company to purchase 50,000, 370,000 and 50,000
shares, respectively, of the Company's common stock at $1.95 per share
exercisable at any time for a period of five years. In connection with the sale
of stock during December 1992, the placement agents were granted warrants to
purchase 36,000 shares of the Company's stock at $1.95 per share exercisable for
a five-year period. In March 1995, the Board of Directors granted warrants to
purchase 5,000 shares of common stock at $6.00 per share. During 1995and 1996,
warrants to purchase 86,000 and 356,500 shares of the Company's common stock,
respectively, were exercised. In addition, as of December 31, 1995, $9,750 was
subscribed to exercise warrants to purchase 5,000 shares of common stock. Such
shares were issued in 1996.
From January 1, 1993 through February 26, 1993, the Company sold 445,000 shares
of common stock to investors for approximately $868,000 ($1.95 per share). In
connection with this issuance of stock, the placement agents were granted
warrants for the purchase of 66,500 shares of the Company's common stock at
$1.95 per share exercisable for a five-year period.
F-21
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
Stock Warrants (continued)
In January 1993, the Board of Directors granted warrants to the Company's
scientific advisory board to purchase 45,000 shares of the Company's common
stock at $1.95 per share exercisable at any time for a period of five years.
On May 15, 1993, the Board of Directors granted warrants as compensation to
certain directors of the Company, to purchase 180,000 shares of common stock at
$1.95 per share exercisable at any time for a period of five years. The Company
has recorded a charge of $427,500 for financial reporting purposes, representing
the estimated value of such options and warrants granted on May 15, 1993.
During 1993, the Company completed an initial public offering of 1,500,000 units
at $6.00 per unit and an over-allotment issuance of 105,000 units at $6.00 per
unit. Each unit consists of one share of the Company's common stock and one
warrant (the "Public Warrant"). Each warrant was exercisable for one share of
the Company's common stock at a price of $7 per share during the first year of
exercisability. Thereafter, the exercise price increased each year by $2. In
connection with this offering, the Company sold to the Underwriters, for nominal
consideration, 150,000 Warrants (the "Underwriters' Warrants"). The
Underwriters' Warrants were initially exercisable at a price of $9.90 per Unit
for a period of four years, commencing August 26, 1994. The shares of common
stock and warrants issuable upon the exercise of the Underwriters' Warrants are
identical to those included in the Units offered hereby except that the Warrants
contained in the Underwriters' Warrants were initially exercisable to purchase
one share of Common Stock at $11.55. In January 1996, to comply with
anti-dilution provisions, the number of shares issuable upon the exercise of the
Public Warrants and Underwriters Warrants were revised to 1,717,350 and 163,500,
respectively. The exercise prices of such warrants were also revised to $10.35
(subsequently increased to $12.35 per warrant) and $8.95 per share,
respectively. In addition, the total shares of common stock issuable upon the
exercise of the warrant contained in the Underwriters Warrants was increased to
172,500 and the exercise price was revised to $13.69 per share. During the year
ended December 31, 1996, Public Warrants to purchase 502,104 shares of common
stock and Underwrites Warrants to purchase 65,400 shares of common stock and
warrants contained in the underwriters warrants to purchase 69,000 shares were
exercised.
F-22
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
Stock Warrants (continued)
On December 14, 1993, the Board of Directors granted warrants to certain
individuals of the Company to purchase 10,000 shares of common stock at $7.25
per share. Such warrants vested immediately.
Private Placement
In July 1995, the Company completed a private placement of 1,666,700 common
shares at $6.00 per share, resulting in net proceeds (after deducting issuance
costs) of approximately $9.5 million.
Public Offering
In November 1996, the Company completed a public offering of 1,150,000 common
shares at $25.2732 per share, resulting in net proceeds (after deducting
issuance costs) of approximately $26.8 million.
Common Stock Reserved for Issuance
As of December 31, 1996, the Company has reserved approximately 4,263,000 shares
of its common stock for issuance in connection with stock options and warrants.
Recapitalization
During December 1992, in connection with the recapitalization (see Note 1), the
Company changed its authorized common stock from 1,000 shares at $1.00 par value
to 5,000,000 shares at $.01 par value. In addition, the Company declared a
10,000 for 1 stock split on the then issued and outstanding common shares.
In April 1993, the Company changed its authorized common stock from 5,000,000
shares at $.01 par value to 10,000,000 shares at $.01 par value.
F-23
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
3. Stockholders' Equity (continued)
Recapitalization (continued)
In May 1995, the Company changed its authorized common stock from 10,000,000
shares at $.01 par value to 15,000,000 shares at $.01 par value.
In November 1996, the Company changed it authorized common stock from 15,000,000
shares of $.01 par value to 60,000,000 shares at $.01 par value.
Merger
During February 1991, the Company issued 100,000 shares of its common stock to
an officer/director and a director for all the outstanding common stock of
Bio-Screen, Inc. The balance sheet and the cumulative results of operations of
Bio-Screen, Inc. were not material to the Company and, consequently, the
statements of operations of the Company have not been restated. The issuance of
the 100,000 shares, which has been recorded at par value, has been reflected as
of August 1988, the date of inception of Bio-Screen, Inc. (see Note 5
"Commitments").
Stock Based Compensation
Pro forma information regarding net income and earnings per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options and stock appreciation rights under the fair value method
of SFAS 123. The fair value for these options and stock appreciation rights was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1995 and 1996:
Assumption 1995 1996
------------------------- ----------- ---------
Risk-free rate 5.8% 5.9%
Dividend yield 0% 0%
Volatility factor of the expected market
price of the Company's common stock .744 .717
Average life 3 years 3 years
3. Stockholders' Equity (continued)
Stock Based Compensation (continued)
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options and stock appreciation rights have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options and stock appreciation rights.
For purposes of pro forma disclosures, the estimated fair value of the options
and stock appreciation rights is amortized to expense over the vesting period of
the options and stock appreciation rights. The Company's pro forma information
follows:
1995 1996
-------------------- ---------------------
Pro forma net loss $(4,685,000) $(6,836,000)
Pro forma net loss per share $(.80) $(.92)
The weighted average fair value of options granted during the years ended
December 31, 1995 and 1996 were $3.28 and $11.96, respectively.
4. Income Taxes
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $23,000,000 for U. S. and foreign income tax purposes, $17,000,000
expiring for U.S. purposes through 2011. For financial statement reporting
purposes, a valuation allowance has been recognized to offset entirely the
deferred tax assets related to the Company's net operating loss carryforwards
and the temporary difference related to compensatory stock options and warrants.
F-24
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Components of the Company's deferred tax asset at December 31, 1995 and 1996 are
as follows:
1995 1996
--------------------------
--------------------------
Net operating loss carryforwards $ 3,957,000 $ 8,200,000
Compensatory stock options, warrants and stock
appreciation rights
268,000 550,000
--------------------------
--------------------------
Total deferred tax asset 4,225,000 8,750,000
Valuation allowance (4,225,000) (8,750,000)
--------------------------
==========================
Net deferred tax asset $ - $ -
==========================
The change in valuation allowance amounted to approximately $1,120,000 and
$1,174,000, respectively, for the years ended December 31, 1994 and 1995.
Changes in stock ownership (see Note 3) may result in a limitation on the annual
utilization of U.S. net operating loss carryforwards.
5. Commitments and Contingencies
The Company subleases its office space at its facilities in New York and
Stockholm, Sweden. During 1995, the Company entered into a new lease for office
space in Lund, Sweden. Rent expense for years ended December 31, 1994, 1995 and
1996 was approximately $58,000, $50,000 and $80,000, respectively. In March
1996, the Company entered into a lease for additional space in Boston.
The minimum annual rent commitments for the above leases are as follows:
1997 $ 134,000
1998 123,000
1999 109,000
2000 69,000
-------------
$ 435,000
=============
F-25
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
5. Commitments and Contingencies (continued)
In connection with the merger with Bio-Screen, Inc. (see Note 3), the Company
obtained a license agreement to patent rights to a certain product. The
agreement requires the Company to pay royalties, as defined, based on revenues
received by the Company in respect to the specified product. The license expires
in October 2011. To date, the product has not been commercially developed.
From time-to-time the Company may be a party to litigation arising out of the
normal course of its business. The Company has and will continue to vigorously
defend the actions and claims against it. In the opinion of management, these
claims are either without merit or, based in part on opinions from legal
counsel, will not have a material adverse effect on the Company's financial
position.
6. Related Party Transactions
In September 1991, the Company entered into an agreement with CATO Research,
Ltd. ("CATO"), a North Carolina corporation, which is majority-owned by Dr.
Cato, a consultant to the Company's Scientific Advisory Board, pursuant to which
CATO performs preclinical and clinical planning, development and regulatory
services in connection with the Company's efforts to obtain FDA approval for its
technology. CATO is compensated by the Company on an hourly basis for services
actually rendered. For the years ended December 31, 1994, 1995 and 1996, the
Company incurred costs under this agreement totaling $608,337, $739,994 and
$318,210 , respectively.
The Company has consulting agreements with certain organizations whose principal
stockholders are officers of the Company. Consulting fees paid to such
organizations amounted to approximately $72,000 and $336,000 for the years ended
December 31, 1995 and 1996.
F-26
<PAGE>
OXiGENE, Inc.
(A development stage company)
Notes to Consolidated Financial Statements (continued)
7. Foreign Operations
Summary financial information for assets, liabilities at December 31, 1995 and
1996 and expenses for the years ended December 31, 1995 and 1996 related to
foreign operations are as follows:
December
1995 1996
---------------- ------------------
Assets $240,000 $40,414,000
Liabilities 178,000 478,000
Expenses 1,853,000 4,208,000
Net loss 1,835,000 4,162,000
Foreign exchange gains for the years ended December 31, 1995 and1996 were not
significant.
F-27
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OXiGENE, INC.
----------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
----------------------------------
I, M. Andica Kunst, Vice President of OXiGENE, INC., a corporation
existing under the laws of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is OXiGENE, INC. (hereinafter
called the "Corporation").
SECOND: The Restated Certificate of Incorporation of the Corporation
is hereby being amended as follows:
By striking out the whole of Article FOURTH thereof as it now exists
and inserting in lieu and instead thereof a new Article FOURTH to the
Certificate of Incorporation:
"FOURTH: The aggregate number of shares of
all classes of stock which the Corporation
is authorized to issue is Sixty Million
(60,000,000) shares, designated Common
Stock, of the par value of One Cent
($0.01) per share."
THIRD: This amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
affirmative vote of a majority of the stockholders entitled to vote in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
424480.1
<PAGE>
IN WITNESS WHEREOF, I have signed this certificate this ___th day of
November, 1996.
OXiGENE, INC.
By:
------------------------
M. Andica Kunst
Vice President
-2-
424480.1
Exhibit 11.1
<TABLE>
<CAPTION>
Date of Days o/s in Weighted year year year year year
Issuance For Number of each given Average ended ended ended ended ended
F/S Purposes Shares year shares 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5/23/88 380,000 313 380,000
6/3/88 271,033 313 271,033
8/8/88 100,000 146 46,645
---------------
--------------- ------------
751,033 697,678 751,033 751,033 751,033 751,033 751,033
1/23/89 180,600 343 169,715
1/25/89 90,433 341 84,487
---------------
--------------- ------------
271,033 254,202 271,033 271,033 271,033 271,033 271,033
3/2/90 33,800 305 28,244
4/6/90 13,550 270 10,023
5/1/90 61,000 245 40,945
7/10/90 2,700 175 1,295
7/11/90 17,600 174 8,390
7/18/90 9,500 136 3,540
9/6/90 27,100 117 8,687
10/1/90 61,000 92 15,375
12/1/90 17,600 31 1,495
12/19/90 13,637 13 486
---------------
--------------- ------------
257,487 118,480 257,487 257,487 257,487 257,487 257,487
1/4/91 13,547 362 13,436
2/21/91 330,000 314 283,890
8/8/91 50,000 146 20,000
8/8/91 50,000 146 20,000
12/1/91 10,000 31 849
12/10/91 100,000 22 6,027
12/26/91 100,000 6 1,644
12/27/91 10,000 5 137
---------------
--------------- ------------
663,547 345,983 663,547 663,547 663,547 663,547 663,547
1/3/92 10,000 363 9,945
1/3/92 10,000 363 9,945
1/23/92 20,000 343 18,795
2/7/92 50,000 328 44,932
4/24/92 50,000 252 34,521
7/31/92 170,000 * 365 170,000
7/31/92 65,000 * 365 65,000
7/31/92 60,000 * 365 60,000
7/31/92 20,000 * 365 20,000
7/31/92 20,000 * 365 20,000
7/31/92 20,000 * 365 20,000
12/1/92 20,000 * 365 20,000
12/10/92 20,000 * 365 20,000
12/15/92 25,000 * 365 25,000
12/15/92 10,000 * 365 10,000
12/15/92 20,000 * 365 20,000
12/15/92 20,000 * 365 20,000
12/15/92 20,000 * 365 20,000
12/15/92 10,000 * 365 10,000
12/15/92 10,000 * 365 10,000
12/15/92 10,000 * 365 10,000
12/15/92 20,000 * 365 20,000
12/15/92 10,000 * 365 10,000
12/15/92 10,000 * 365 10,000
12/15/92 20,000 * 365 20,000
12/15/92 70,000 * 365 70,000
12/15/92 10,000 * 365 10,000
12/15/92 70,000 * 365 70,000
12/15/92 10,000 * 365 10,000
12/15/92 5,000 * 365 5,000
12/15/92 10,000 * 365 10,000
12/15/92 10,000 * 365 10,000
12/15/92 10,000 * 365 10,000
12/15/92 60,000 * 365 60,000
12/15/92 10,000 * 365 10,000
---------------
--------------- ------------
985,000 963,138 963,138 985,000 985,000 985,000 985,000
Jan-93 10,000 * 365 10,000
10,000 * 365 10,000
20,000 * 365 20,000
135,000 * 365 135,000
65,000 * 365 65,000
10,000 * 365 10,000
155,000 * 365 155,000
10,000 * 365 10,000
30,000 * 365 30,000
---------------
--------------- ------------
445,000 445,000 445,000 445,000 445,000 445,000
9/2/93 1,500,000 121 497,260 497,260 1,500,000 1,500,000 1,500,000
10/5/93 105,000 88 25,315 25,315 105,000 105,000 105,000
4/6/94 80,000 270 59,178 59,178 80,000 80,000
7/10/95 1,666,700 174 794,536 794,536
7/19/95 6,500 165 2,938 2,938
9/19/95 12,500 103 3,527 3,527
9/20/95 7,000 102 1,956 1,956
9/20/95 19,500 102 5,449 5,449
10/16/95 25,000 76 5,205 5,205
10/16/95 5,000 76 1,041 1,041
10/16/95 5,000 76 1,041 1,041
10/16/95 9,000 76 1,874 1,874
11/30/95 4,000 31 340 340
12/13/95 5,000 18 247 247
12/28/95 5,000 3 41 41
---------------
1,770,200 1,770,200
Jan-96 50,000 11.5 47,917 47,917
Mar-96 95,000 9.5 75,208 75,208
Apr-96 50,000 8.5 35,417 35,417
Jun-96 197,982 6.5 107,240 107,240
Jul-96 114,755 5.5 52,596 52,596
Aug-96 309,471 4.5 116,052 116,052
Sep-96 1,910 3.5 557 557
Oct-96 8,560 2.5 1,783 1,783
Nov-96 1,396,365 1.5 174,546 174,546
---------------
2,224,043
--------------- -----------------------------------------------------------
Total 9,052,343 2,906,238 3,895,675 5,037,278 5,876,295 7,439,616
cheap shares (sum of *=1,290,000) 445,000
cheap options and warrants 261,563 130,781
------------------------------------------------------------
Total weighted average shares 3,612,801 4,026,456 5,037,278 5,876,295 7,439,616
Net loss (1,628,667) (2,020,012) (2,839,759) (3,717,835) (5,958,433)
EPS (0.45) (0.50) (0.56) (0.63) (0.80)
Cheap warrant and option calculation:
cheap warrants 377,500
cheap options 10,000
----------------------
387,500
(125,937)(387,500 cheap warrants x $1.95= $755,625/$6.00=125,938 shares)
----------------------
261,563
cheap warrants 377,500
cheap options 10,000
----------------------
387,500
x 1/2
----------------------
193750
(62,969) (193,750 cheap warrants x 1.95 = $377,813 / $6 = 62,969 shares)
----------------------
130781
</TABLE>
EXHIBIT 10.15
CLINICAL TRIAL AND SPONSORED RESEARCH AGREEMENT
This agreement ("AGREEMENT") is made as of December 1, 1996 ("EFFECTIVE
DATE"), by and between BOSTON MEDICAL CENTER CORPORATION (hereinafter referred
to as "BMCC"), a Massachusetts not-for-profit corporation with a principal place
of business at One Boston Medical Center Place, Boston, Massachusetts 02118,
which is a member institution of the Boston University Medical Center, and
OXiGENE EUROPE AB (hereinafter referred to as "SPONSOR"), a corporation
organized and existing under the laws of Sweden, with a principal place of
business at Ideon Research Park, Scheelevagen 17, S-223 70 Lund, Sweden.
WHEREAS, BMCC has developed certain technology involving cordycepin and
deoxycorformycin that it desires to test in clinical trials and develop for
commercial application;
WHEREAS, SPONSOR is engaged in the design and development of drugs that
enhance the clinical efficacy of radiation and chemotherapy in cancer treatment;
and
WHEREAS, the study and the research program contemplated by this
AGREEMENT are of mutual interest and benefit to BMCC and SPONSOR.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt of which
is acknowledged, the parties agree as follows:
ARTICLE I -CLINICAL TRIAL
1.1 BMCC hereby agrees to conduct a clinical trial (the "STUDY") in
accordance with the study protocol entitled "A Phase I Study of
Cordycepin Plus 2'-Deoxycorformycin in Refractory Patients with
TdT-Positive Leukemias," a copy of which is attached hereto as APPENDIX
A.
1.2 The STUDY will be conducted by Ronald P. McCaffrey, MD (the
"INVESTIGATOR"), a faculty member of the Boston University School of
Medicine at Boston Medical Center (location of STUDY). INVESTIGATOR
shall conduct the STUDY with the prior approval and under the
continuing supervisory review of all appropriate and necessary
regulatory and other governmental authorities and in accordance with
all applicable federal, state, foreign and local laws, statutes, rules
and regulations ("APPLICABLE LAW"). In addition, BMCC and INVESTIGATOR
shall provide SPONSOR with written evidence of review and approval of
the STUDY by the Boston University Medical Center Institutional Review
Board prior to initiation of the STUDY and of such Board's continuing
review and approval of the STUDY.
1.3 Within a reasonable time after completion of each case, INVESTIGATOR
shall furnish SPONSOR with signed case report forms containing the data
resulting from the STUDY, and SPONSOR shall have the right to use such
data for the purpose of seeking U.S. Food and Drug Administration
approval. SPONSOR shall datapreserve patient confidentiality at all
times. Any time and from time to time upon request of SPONSOR, BMCC and
INVESTIGATOR will make STUDY records available to SPONSOR for
comparison to case report forms. Such records will also be made
available for review to representatives of the U.S. Food and Drug
Administration and comparable foreign regulatory authorities. Records
of the STUDY, including either the original or a copy of all consent
forms, shall be retained in accordance with APPLICABLE LAW.
1.4 The STUDY shall be conducted during the period from December 1, 1996
through the later of (a) when the third patient has completed a
treatment cycle at the maximum tolerated dose (MTD) determined pursuant
to Section 6.1 of the STUDY protocol in EXHIBIT A; and (b) April 30,
1998 (the "COMPLETION DATE"). The STUDY may be terminated, at any time,
by either party upon thirty (30) days prior written notice to the other
party. Upon termination of the STUDY, the total funding amount provided
for in Section 3.1 hereof shall be prorated based on the number of
cycles of treatment that have been provided and the maximum number of
cycles of treatment contemplated in the STUDY protocol in EXHIBIT A.
Upon completion or early termination of the STUDY, an accounting will
be made of the clinical supplies provided for the STUDY by SPONSOR and
any such supplies remaining will be returned to SPONSOR.
ARTICLE II -- RESEARCH PROGRAM
2.1 BMCC hereby agrees to conduct the research program described in the
Statement of Work attached hereto as APPENDIX B (the "RESEARCH
PROGRAM"), and will furnish the facilities necessary to carry out such
RESEARCH PROGRAM. The RESEARCH PROGRAM will be conducted under the
direction of Drs. Ronald McCaffrey and Alan Sugar as principal
researchers (the "RESEARCHERS"). SPONSOR's technical/scientific
representatives shall be Drs. Hans Wigzell and Ronald Pero or such
other representative(s) as SPONSOR may designate from time to time in
writing (the "OXiGENE REPRESENTATIVES"). The RESEARCH PROGRAM shall be
conducted during the period from December 1, 1996 through November 30,
1999.
2.2 SPONSOR understands that BMCC's primary mission is education and
advancement of knowledge and that the RESEARCH PROGRAM will be
performed in a manner best suited to carry out that mission. The manner
of performance of the RESEARCH PROGRAM shall be determined by the
RESEARCHERS in consultation with the OXiGENE REPRESENTATIVES.
2.3 Upon the execution and delivery of this AGREEMENT, each of Drs. Ronald
McCaffrey and Alan Sugar will join the Scientific Advisory Board of
OXiGENE, Inc., a Delaware corportion and the parent company of SPONSOR.
2.4 BMCC shall promptly advise SPONSOR if for any reason either one of the
RESEARCHERS ceases to be available to work on the RESEARCH PROGRAM. If
BMCC and SPONSOR cannot agree on a qualified scientist as a replacement
RESEARCHER, SPONSOR may terminate the RESEARCH PROGRAM on sixty (60)
days written notice to BMCC.
ARTICLE III - COMPENSATION
3.1 In consideration of BMCC's agreement to conduct the STUDY as
described herein, SPONSOR agrees to pay BMCC the amount set forth
on Schedule 3.1.
3.2 In consideration of BMCC's agreement to conduct the RESEARCH
PROGRAM as described herein, SPONSOR agrees to pay BMCC the amount
set forth on Schedule 3.2. SPONSOR and RESEARCHERS shall agree on
a budget for each subsequent year no later than three (3) months
prior to the beginning of the year to which the budget relates.
BMCC shall retain title to all equipment purchased and/or
fabricated by it with funds provided by SPONSOR in connection with
the RESEARCH PROGRAM.
3.3 Payments to be made pursuant to Section 3.1 or 3.2 hereof shall
be made in the name of "Boston Medical Center Corporation," and
shall be sent to Boston Medical Center Corporation, Office of
Grants and Contracts, One Boston Medical Center Place, Suite
V412, Boston, MA 02118, Attn: Director.
ARTICLE IV - REVIEW, CONSULTATION AND ACCESS
4.1 From time to time during the performance of the STUDY and the
RESEARCH PROGRAM, the OXiGENE REPRESENTATIVES, upon reasonable
advance notice, shall have access to, and shall have the
opportunity to consult with, the INVESTIGATOR and the RESEARCHERS
regarding the STUDY and the RESEARCH PROGRAM, as the case may be.
INVESTIGATOR shall submit a written progress report every three
(3) months during the period of performance of the RESEARCH
PROGRAM and a full written report every twelve (12) months during
the period of performance of the RESEARCH PROGRAM. These reports
shall include an accounting for the disposition of funds provided
pursuant to Section 3.2 in the period being reported on and, if
requested by SPONSOR, a projection of budget requirements for the
next twelve (12) months.
4.2 BMCC and SPONSOR shall meet and review the progress of the
RESEARCH PROGRAM on or before September 1, 1997. If as a result
of this meeting, SPONSOR, in its sole and absolute discretion,
determines that (i) scientific progress has been inadequate, or
(ii) the results obtained pursuant to the STUDY indicate that
clinical use of cordycepin will not be economically viable within
a reasonable time, then SPONSOR may give notice to BMCC no later
than October 1, 1997 that it wishes to terminate the RESEARCH
PROGRAM or the STUDY, or both, effective November 30, 1997.
4.3 BMCC and SPONSOR shall again meet and review the progress of the
RESEARCH PROGRAM on or before September 1, 1998. If as a result
of this meeting, SPONSOR, in its sole and absolute discretion,
determines that (i) scientific progress has been inadequate, or
(ii) the results obtained pursuant to the STUDY indicate that
clinical use of cordycepin will not be economically viable within
a reasonable time, then SPONSOR may give notice to BMCC no later
than October 1, 1998 that it wishes to terminate the RESEARCH
PROGRAM or the STUDY, or both, effective November 30, 1998.
ARTICLE V -- PUBLICATION
5.1 Subject to the provisions of this AGREEMENT regarding
CONFIDENTIAL INFORMATION (as defined in Section 6.1 hereof),
BMCC, the INVESTIGATOR and the RESEARCHERS shall be free to
publish or to present at professional scientific conferences the
results of the STUDY and the RESEARCH PROGRAM conducted pursuant
to this AGREEMENT. In order to give SPONSOR an opportunity to
protect against loss of confidentiality or patent rights as a
result of publication, BMCC shall submit copies of drafts of any
article on the research written by RESEARCH PROGRAM personnel to
SPONSOR for review and comment at least thirty (30) days prior to
the anticipated date of submission of any article for
publication. If SPONSOR, in its reasonable judgment, determines
that it needs additional time to seek patent protection for the
information, then BMCC, the INVESTIGATOR and the RESEARCHERS, as
the case may be, agree to defer the submission for publication
for an additional thirty (30) days.
ARTICLE VI -- CONFIDENTIALITY OF SPONSOR'S INFORMATION
6.1 SPONSOR may wish, from time to time, in connection with work
contemplated by this AGREEMENT, to disclose confidential
information to BMCC, the INVESTIGATOR, the PRINCIPAL RESEARCHERS
or other STUDY or RESEARCH PROGRAM personnel. BMCC, the
INVESTIGATOR and the RESEARCHERS shall, and shall cause any STUDY
or RESEARCH PROGRAM personnel to, keep confidential any
proprietary information received from SPONSOR which is designated
in writing by SPONSOR as "Confidential" ("CONFIDENTIAL
INFORMATION"), for a period of five (5) years from the date of
receipt of such CONFIDENTIAL INFORMATION, provided that this
obligation shall not apply to any information which: (a) was
already known to the INVESTIGATOR or THE RESEARCHERS as evidenced
by the respective records;
(b) is or later becomes publicly known under circumstances not
involving a breach of this AGREEMENT by the INVESTIGATOR, the
RESEARCHERS or any other person subject to a CONFIDENTIALITY
AGREEMENT (as defined below);
(c) BMCC, the INVESTIGATOR or the RESEARCHERS are legally
compelled to disclose pursuant to a valid subpoena, court order
or requirement of applicable law, provided, however, that in such
event BMCC, the INVESTIGATOR or the RESEARCHERS, as the case may
be, shall give prompt notice to SPONSOR so that SPONSOR may seek
a protective order or other appropriate remedy.
6.1 INVESTIGATOR and the RESEARCHERS shall require any STUDY or
RESEARCH PROGRAM personnel to whom it is or becomes necessary to
disclose CONFIDENTIAL INFORMATION to sign a Confidentiality
Agreement in the form attached hereto as APPENDIX C (the
"CONFIDENTIALITY AGREEMENT").
6.2 Neither INVESTIGATOR and the RESEARCHERS, nor BMCC and its
trustees, officers, employees and agents shall be liable for any
claim or damage resulting from the disclosure of CONFIDENTIAL
INFORMATION, except to the extent the same result from negligence
or willful misconduct. In no event shall INVESTIGATOR, the
RESEARCHERS and BMCC and its trustees, officers, employees and
agents be liable for indirect, special or consequential damages
(including, but not limited to, lost profits). In no event shall
the liability of INVESTIGATOR, the RESEARCHERS and BMCC, and its
trustees, officers, employees and agents exceed the amounts
payable to BMCC under this AGREEMENT. The foregoing
notwithstanding, each of the INVESTIGATOR, the RESEARCHERS and
BMCC agree that the provisions regarding CONFIDENTIAL INFORMATION
contained in this AGREEMENT are fair and reasonable, that money
damages would not be a sufficient remedy for any breach of this
AGREEMENT by INVESTIGATOR, the RESEARCHERS, BMCC or STUDY or
RESEARCH PROGRAM personnel and that, in addition to all other
remedies, SPONSOR shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for such breach.
ARTICLE VII -- PUBLICITY
7.1 Neither party shall use the name of the other party or of any
INVESTIGATOR or RESEARCHER in any advertising or promotional
material without the prior written approval of the other party.
The foregoing notwithstanding, (i) BMCC shall acknowledge
SPONSOR's support of the STUDY and the RESEARCH PROGRAM in BMCC's
customary reports and publications, (ii) SPONSOR may disclose the
existence and describe the terms of, and may file a copy of this
AGREEMENT (redacted to the extent permitted by APPLICABLE LAW to
ensure confidentiality) as an exhibit to, its press releases,
reports and filings, including, but not limited to, releases,
reports and filings with the U.S. Securities and Exchange
Commission and relevant foreign government authorities; and (iii)
SPONSOR may make reference to technical publications by Drs.
McCaffrey and Sugar or their co-authors. Any publicity of this
AGREEMENT pursuant to this Article VII shall describe the
relationship of the parties accurately and appropriately.
ARTICLE VIII -- INVENTIONS AND PATENTS
8.1 BMCC shall own all rights to any inventions made by it which
arise out of the RESEARCH PROGRAM. "Inventions" shall include (a)
the pre-existing patents, patent applications and other
intellectual property rights listed in APPENDIX D hereto, and (b)
any patentable discovery or invention made in the course of the
RESEARCH PROGRAM and funded by SPONSOR, including, but not
limited to, processes, methods, formulas and techniques.
8.2 BMCC shall promptly notify SPONSOR in writing of its intention to
file a patent application relating to an Invention made by BMCC
in the course of the RESEARCH PROGRAM. BMCC shall consult with,
and provide SPONSOR with an opportunity to review and comments
upon, any patent application prior to the filing thereof.
8.3 SPONSOR shall have the option to acquire, substantially on the
terms and conditions set forth in APPENDIX E hereto, a
royalty-bearing, exclusive, worldwide license (the "LICENSE"),
including the right to sublicense, to make, have made, use,
lease, market and sell products embodying, or produced through
the use of, any Invention. With respect to Section 8.1.(a),
SPONSOR must exercise said option by written notice to BMCC prior
to the later of (x) November 1, 1997, and (y) three months after
the COMPLETION DATE (as defined in Section 1.4 hereof). With
respect to Section 8.1.(b), SPONSOR must exercise said option
within six (6) months after receiving written notice from BMCC of
the filing of a patent application. If SPONSOR elects to exercise
its option to acquire the LICENSE, both parties agree to
negotiate the specific items of such LICENSE in good faith. The
parties agree to use their reasonable best efforts to complete
all LICENSE negotiations, including the execution of an
agreement, within six (6) months of SPONSOR's written notice to
BMCC electing to exercise its option, provided, however, that if
BMCC and SPONSOR agree that reasonable progress has been made in
the negotiations of a LICENSE agreement, the six-month period
shall be extended to allow for the conclusion of such
negotiations and the execution of such LICENSE agreement. If no
agreement on the terms and conditions of a LICENSE agreement can
be reached within the period provided in the preceding sentence,
then BMCC shall be free to negotiate a license arrangement with a
third party. If the terms and conditions agreed with any third
party taken in total are materially more favorable to the third
party than those that were last offered to and not accepted by
SPONSOR, then BMCC shall give prompt written notice (the `THIRD
PARTY LICENSE NOTICE") to SPONSOR of the terms and conditions and
SPONSOR shall have a right of first refusal (exercisable by
written notice to BMCC within ten (10) days after receipt by
SPONSOR of the THIRD PARTY LICENSE NOTICE) to enter into a
license arrangement with BMCC on the terms and condictions
negotiated between BMCC and such third party.
ARTICLE IX -- LIABILITY
9.1 SPONSOR shall defend, indemnify and hold harmless BMCC, its
trustees, officers, employees and agents and their respective
successors, heirs and assigns (collectively, the "INDEMNITEES"),
against any and all liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) that may
be incurred by or imposed upon the INDEMNITEES, or any of them,
in connection with any claim, suit, demand, action or judgment
arising out of the following: (a) the design, production,
manufacture, sale, use in commerce, lease, or promotion by
SPONSOR or by an affiliate or sublicensee of SPONSOR of any
product, process or service relating to or developed pursuant to
this Agreement; or (b) any other activities to be carried out
pursuant to this Agreement.
9.2 SPONSOR's indemnification shall not apply to any liability,
damage, loss or expense to the extent the same is attributable
to: (i) the negligence or willful misconduct of any of the
INDEMNITEES; or (ii) if the RESEARCH PROGRAM involves a clinical
trial of an investigational drug, a failure of any of the
INDEMNITEES to adhere to the terms of the protocol or SPONSOR's
written instructions relative to use of the investigational drug;
or (iii)the loss by BMCC of its status as a not-for-profit
corporation under Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended.
9.3 BMCC MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE
RESEARCH OR ANY INVENTION(S) OR PRODUCT(S), WHETHER TANGIBLE,
CONCEIVED, DISCOVERED OR DEVELOPED UNDER THIS AGREEMENT; OR THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
RESEARCH OR ANY SUCH INVENTION OR PRODUCT. BMCC SHALL NOT BE
LIABLE FOR ANY DIRECT, CONSEQUENTIAL OR OTHER DAMAGES SUFFERED BY
SPONSOR, ANY LICENSEE OR ANY OTHERS RESULTING FROM THE USE OF THE
RESEARCH OR ANY SUCH INVENTION OR PRODUCT.
ARTICLE X -- INDEPENDENT CONTRACTOR
10.1 For the purpose of this AGREEMENT and all services to be provided
hereunder, the parties shall be, and shall be deemed to be,
independent contractors and not agents or employees of the other
party. Neither party shall have authority to make any statements,
representations or commitments of any kind, or to take any action
which shall be binding on the other party, except as may be
explicitly provided for herein or authorized in writing.
ARTICLE XI -- TERMS AND TERMINATION
11.1 BMCC may terminate the RESEARCH PROGRAM upon thirty (30) days
prior written notice to SPONSOR if circumstances beyond its
control reasonably preclude continuation of the RESEARCH PROGRAM.
11.2 In the event that either party shall be in default of any of its
obligations under this AGREEMENT and shall fail to remedy such
default within sixty (60) days after receipt of written notice
thereof, the party not in default shall have the right to
terminate this AGREEMENT by giving written notice thereof.
11.3 Termination or cancellation of this AGREEMENT shall not affect
the rights and obligations of the parties accrued prior to
termination. Upon any termination hereof, BMCC shall be entitled
to be compensated for all reasonable out-of-pocket expenses and
uncancellable commitments incurred as of the effective date of
termination in an amount not to exceed the total contract amount
stated in Article III above.
11.4 Articles VI and VIII and any other provisions of this AGREEMENT
which by their nature extend beyond the termination hereof shall
survive such termination.
ARTICLE XII -- MEDIATION/ARBITRATION
12.1 In the event a controversy or dispute arises between the parties
relating to any provision of this AGREEMENT, including, but not
limited to, the specific terms of any LICENSE agreement being
negotiated in connection with the exercise of SPONSOR'S option
pursuant to Section 8.3 hereof, or the breach of any provision of
this AGREEMENT, the parties agree to use the following procedure
prior to either party pursuing other available remedies. (a) The
parties shall promptly hold a meeting, such meeting to be
attended by individuals with decision-making authority regarding
the dispute, in an attempt to negotiate a resolution of the
dispute in good faith. (b) If within thirty (30) days after such
meeting the parties have not succeeded in negotiating a
resolution of the dispute, they agree to submit the dispute to
mediation by the American Arbitration Association (the "AAA"),
the cost of such mediation to be borne equally by both parties.
(c) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty
(30) days. If the parties are not successful in resolving the
dispute through mediation, then either party may submit the
dispute to arbitration, unless the parties mutually agree
otherwise.
12.2 Arbitration shall be subject to the following terms:
(a) The arbitration shall be held at a mutually agreeable
location in the Boston, Massachusetts metropolitan area.
(b) The arbitrator(s) shall be an independent, impartial third
party(ies) having no direct or indirect personal or
financial relationship to any of the parties to the dispute,
who has(have) agreed to accept the appointment as
arbitrator(s) on the terms set out in this ARTICLE XII.
(c) The arbitrator(s) shall be an active or retired attorney,
law professor or judicial officer with at least five (5)
years experience in commercial technology transfer matters
and a familiarity with the laws governing proprietary rights
in intellectual property.
(d) The arbitrator(s) shall be selected as follows: Each party
shall submit a description of the matter to be arbitrated
together with the terms of this ARTICLE XII to the AAA at
its Regional Office in Boston, Massachusetts. The AAA shall
submit to the parties a list of the qualified arbitrators
available to arbitrate the matter. The first arbitrator
acceptable to both parties shall be deemed the selected
arbitrator with respect to the dispute then at issue under
this AGREEMENT. In the event of a failure to select a
mutually agreeable arbitrator, the parties will each select
an arbitrator and the two arbitrators will select a third
arbitrator.
(e) Within sixty (60) days after selection of the arbitrator(s),
each party shall submit a description of the matter to be
arbitrated to said arbitrator(s).
(f) From the date the arbitrator(s) is in possession of both
parties' submitted material, the arbitrator(s) shall have
forty-five (45) days in which to hear oral testimony and
render a decision. Each party shall have a maximum of two
(2) working days during said forty-five day period in which
to present oral testimony.
(g) Time periods set forth in this ARTICLE XII may be altered
only by mutual consent of the parties.
(h) The arbitrator(s) shall announce the award in writing
accompanied by written findings explaining the facts
determined in support of the award and any relevant
conclusions of law.
(i) The fees of the arbitrator(s) and any other costs and fees
associated with the arbitration shall be paid in accordance
with the decision of the arbitrator(s), except that the
prevailing party shall pay no more than one-half of such
costs.
(j) Except as provided in Section 12.2 (i) the decision of the
arbitrator(s) shall be final and binding on all parties, and
judgment may be entered thereon in any court having
jurisdiction thereof.
ARTICLE XIII -- GENERAL
13.1 This AGREEMENT may not be assigned by either party without the
prior written consent of the other party, provided, however, that
SPONSOR may assign this AGREEMENT, in whole or in part, to any
person controlling, under common control with or controlled by
SPONSOR. The foregoing notwithstanding, the sale of all or
substantially all of SPONSOR's assets or the merger or
consolidation of SPONSOR with or into another entity shall not be
deemed an assignment by SPONSOR of this AGREEMENT.
13.2 This AGREEMENT constitutes the entire and only agreement between
the parties relating to the STUDY and the RESEARCH PROGRAM, and
all prior negotiations, representations, agreements and
understandings are superseded hereby. No representations and
warranties other than those expressly set forth herein shall be
deemed to have been made. No agreements altering or supplementing
the terms hereof may be made except by means of a written
document signed by the duly authorized representatives of the
parties.
13.3 Any notice required by this AGREEMENT shall be sufficiently given
if sent in writing by prepaid, first class, certified or
registered mail, return receipt requested, addressed in the case
of BMCC to:
Office of General Counsel
Boston Medical Center Corporation
One Boston Medical Center Place, Suite 217
Boston, MA 02118
Attn.: General Counsel
with a copy to:
Office of Technology Transfer
Community Technology Fund
Boston University
80 E. Concord Street, Suite L307C
Boston, MA 02118
Attn.: Director
or in the case of SPONSOR to:
OXiGENE Europe AB
Ideon Research Park
Scheelevagen 17
S-223 70 Lund,
SWEDEN
Attn.: Chief Operating Officer
with a copy to:
OXiGENE, Inc.
110 East 59th Street
29th Floor
New York, NY 10022
Attn.: Vice President
or at such other address as may be designated by notice given from time
to time pursuant to the terms of this provision.
13.4 This AGREEMENT shall be construed and enforced in accordance with
the laws of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed by their duly authorized representatives
OXiGENE EUROPE AB BOSTON MEDICAL CENTER
CORPORATION
By: /S/ BJORN NORDENVALL By: /S/ KEVIN WARD
-------------------- --------------
Name: Bjorn Nordenvall Name: Kevin Ward
Title: President and CEO Title: Director of Financial Planning
By: /S/ BO HAGLUND By: /S/ EDWARD J. CHRISTIANSEN
-------------- --------------------------
Name: Bo Haglund Name: Edward J. Christiansen
Title: Chief Financial Officer Title: Counsel
Each of the undersigned acknowledges to have read the foregoing AGREEMENT and
agrees to bound by, and comply with, the terms and conditions thereof.
By: /S/ RONALD MCCAFFREY By: /S/ ALAN M. SUGAR
Name: Ronald McCaffrey, MD Name: Alan M. Sugar, MD
Title: Investigator and Researcher Title: Researcher
Date: December 10, 1996 Date: December 11, 1996
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-95910, Form S-3 No. 33-64968, Form S-3 No. 333-15241 and Form
S-8 No. 333-05787) and related Prospectuses of OXiGENE, Inc. of our report dated
March 5, 1997, with respect to the consolidated financial statements of OXiGENE,
Inc. included in this Annual Report (Form 10-K) for the year ended December 31,
1996.
ERNST & YOUNG LLP
New York, New York
March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENT OF OXiGENE, INC. FOR THE TWELVE MONTH PERIOD
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 40,517,182
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,068,847
<PP&E> 143,652
<DEPRECIATION> 53,340
<TOTAL-ASSETS> 41,168,759
<CURRENT-LIABILITIES> 650,001
<BONDS> 0
0
0
<COMMON> 90,523
<OTHER-SE> 40,428,235
<TOTAL-LIABILITY-AND-EQUITY> 41,168,759
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,642,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,958,433)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,958,433)
<EPS-PRIMARY> (.80)
<EPS-DILUTED> 0
</TABLE>
