UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM_________ TO________.
Commission File Number 0-22570
Lynx Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3161073
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3832 Bay Center Place
Hayward, CA 94545
(Address of principal executive offices) (Zip Code)
(510) 670-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ------
The number of shares of Common Stock outstanding as of July 31, 1998 was
11,121,963. The aggregate market value of the common stock of the Registrant
held by non-affiliates as of July 31, 1998 was $106,908,592.
Page 1 of 11
<PAGE>
Lynx Therapeutics, Inc.
<TABLE>
INDEX
<CAPTION>
PART I FINANCIAL INFORMATION (unaudited) Page
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1998
and December 31, 1997............................................................... 3
Condensed Consolidated Statements of Operations - three and six months
ended June 30, 1998 and 1997....................................................... 4
Condensed Consolidated Statements of Cash Flows - six months
ended June 30, 1998 and 1997........................................................ 5
Notes to Condensed Consolidated Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................... 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings....................................................................... 10
Item 2. Changes in Securities................................................................... 10
Item 3. Defaults Upon Senior Securities......................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders..................................... 10
Item 5. Other Information...................................................................... 10
Item 6. Exhibits and Reports on Form 8-K....................................................... 10
Signatures ........................................................................................ 11
</TABLE>
Page 2 of 11
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Lynx Therapeutics, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, December 31,
1998 1997*
--------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,669 $ 8,798
Short-term investments 15,824 16,132
Accounts receivable 108 244
Other current assets 318 199
--------------------------------------------
Total current assets 21,919 25,373
Property and equipment:
Leasehold improvements 4,181 3,795
Laboratory and other equipment 3,023 3,562
--------------------------------------------
7,204 7,357
Less accumulated depreciation and amortization (3,007) (3,588)
--------------------------------------------
Net property and equipment 4,197 3,769
Notes receivable from employees 34 125
Long-term investments 883 ---
--------------------------------------------
$ 27,033 $ 29,267
============================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 583 $ 210
Accrued compensation 297 289
Accrued professional fees 138 179
Deferred revenue from related parties 917 2,292
Other accrued liabilities 419 528
--------------------------------------------
Total current liabilities 2,354 3,498
Other noncurrent liabilities 194 179
Stockholders' equity:
Preferred stock --- 27,189
Common stock 74,587 46,640
Notes receivable from stockholders (423) (460)
Deferred compensation (4,768) (5,394)
Accumulated other comprehensive income (loss) 2 (45)
Accumulated deficit (44,913) (42,340)
--------------------------------------------
Total stockholders' equity 24,485 25,590
--------------------------------------------
$ 27,033 $ 29,267
============================================
<FN>
*The Balance Sheet amounts at December 31, 1997 have been derived from audited
financial statements at that date but do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
</FN>
</TABLE>
Page 3 of 11
<PAGE>
<TABLE>
Lynx Therapeutics, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Revenues from collaborative arrangements
with related parties $ 687 $ 1,224 $ 1,375 $ 2,287
Other revenues 4 98 130 170
-------------------------------------------------------------------
Total revenues 691 1,322 1,505 2,457
Operating expenses:
Research and development 3,071 3,377 6,913 6,452
General and administrative 509 591 1,001 1,017
-------------------------------------------------------------------
Total operating expenses 3,580 3,968 7,914 7,469
-------------------------------------------------------------------
Loss from operations (2,889) (2,646) (6,409) (5,012)
Interest income 324 133 660 304
Gain on sale of Antisense Business --- --- 3,176 ---
-------------------------------------------------------------------
Net loss $ (2,565) $ (2,513) $ (2,573) $ (4,708)
===================================================================
Basic and diluted net loss per share $ (0.24) $ (0.89) $ (0.31) $ (1.69)
===================================================================
Shares used in per share computation 10,884 2,815 8,306 2,787
===================================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
Lynx Therapeutics, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $ (2,573) $ (4,708)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 653 631
Amortization of deferred compensation 626 293
Non-cash consideration received and costs incurred on the sale of the
Antisense Business, net (418) --
Changes in operating assets and liabilities:
Accounts receivable 136 (73)
Other current assets (119) 91
Accounts payable 373 (80)
Accrued liabilities (142) (153)
Deferred revenue from related party (1,375) (2,126)
Other noncurrent liabilities 15 16
------------------------------------
Net cash provided by (used in) operating activities (2,824) (6,109)
Cash flows from investing activities
Purchases of short-term investments (18,260) --
Maturities of short-term investments 18,615 1,968
Purchases of property and equipment (1,290) (1,243)
Other assets 5 (264)
------------------------------------
Net cash provided by (used in) investing activities (930) 461
Cash flows from financing activities
Issuance of common stock 625 257
------------------------------------
Net cash provided by (used in) financing activities 625 257
------------------------------------
Net increase (decrease) in cash and cash equivalents (3,129) (5,391)
Cash and cash equivalents at beginning of period 8,798 12,109
------------------------------------
Cash and cash equivalents at end of period $ 5,669 $ 6,718
Supplemental schedule of non-cash investing activities
Following are the effects of the non-cash transactions relating to the
sale of the Antisense Business
Assets sold, net of depreciation $ 210 --
====================================
Inex stock received $ 882 --
====================================
<FN>
See accompanying notes.
</FN>
</TABLE>
Page 5 of 11
<PAGE>
Lynx Therapeutics, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. Ownership and Nature of Business
Lynx Therapeutics, Inc. ("Lynx" or the "Company"), was incorporated in
February 1992 under the laws of the State of Delaware. Lynx is currently focused
on developing its proprietary, highly parallel technologies for the handling and
characterization of DNA molecules and fragments. The Company expects these
technologies will contribute to a number of applications including gene
discovery, characterization of gene function, identification of
disease-associated genomic sequences such as polymorphisms, and the study of
non-human genomes such as commercially important plants and animals.
2. Basis of Presentation
The accompanying condensed consolidated financial statements included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations promulgated by the Securities and Exchange Commission (the
"Commission"). Certain prior year amounts have been reclassified to conform with
current year presentation. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to Commission rules and
regulations; nevertheless, the Company believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
management, the financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows of the Company for the interim
periods presented. The results of operations for the quarter and six months
ended June 30, 1998, are not necessarily indicative of the results for the full
year.
The unaudited condensed consolidated financial statements include all
accounts of the Company and its wholly owned subsidiary, Lynx GmbH, formed under
the laws of the Federal Republic of Germany. All significant intercompany
balances have been eliminated.
These financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the Company's
year ended December 31, 1997, included in its annual report on Form 10-K filed
with the Commission.
3. Summary of Significant Accounting Policies
Net Loss Per Share
Basic loss per share is calculated by dividing net loss applicable to
common shareholders by the weighted average number of common shares outstanding,
net of certain common shares outstanding which are subject to continued vesting
and the Company's right of repurchase, while diluted EPS reflects the potential
dilution of securities that could share in the earnings of the Company, to the
extent such securities are dilutive. Basic and diluted loss per share are
equivalent for all periods presented herein due to the Company's net losses for
such periods. The Company has adopted SFAS 128 for annual and interim financial
statements issued after December 15, 1997, and has calculated and restated EPS
in accordance with SFAS 128 for each period in which an income statement is
reported. The following have been excluded from the calculation of loss per
share because the effect of inclusion would be antidilutive: approximately
212,000 common shares which are outstanding but are subject to the Company's
right of repurchase which expires ratably over 5 years, and options to purchase
approximately 1,378,000 shares of common stock at a weighted average price of
$5.11 per share. Additionally, all periods prior to March 31, 1998 exclude
approximately 500,000 shares of Series B, C, and D convertible preferred stock.
On March 31, 1998, the preferred stock converted to common stock on a
ten-for-one basis. The converted shares are included in the calculations of
basic EPS in all periods including, and subsequent to, March 31, 1998.
Page 6 of 11
<PAGE>
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards, No. 130 ("SFAS 130"), "Comprehensive Income." SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components. SFAS 130 requires unrealized gains or losses on the Company's
available-for-sale securities, which prior to adoption were reported separately
in shareholders' equity, to be included in other comprehensive income. Prior
year financial statements have been reclassified to conform to the requirements
of SFAS 130.
Total comprehensive loss during the quarters ended June 30, 1998 and
1997 was $2.6 and $2.5 million, respectively. During the first half of 1998 and
1997, total comprehensive loss amounted to $2.6 million and $4.7 million,
respectively.
4. Collaborative Arrangements
Effective May 1, 1998, the Company amended and restated the amendment,
dated September 1, 1997, to the Technology Development and Services Agreement,
dated October 2, 1995, between Lynx and Hoechst Marion Roussel, Inc. and its
affiliates (collectively, "Hoechst"). The restated amendment extends the term of
the agreement and will have no impact on the operations of the Company.
Page 7 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the Company's annual report (Form 10-K) filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1997.
Overview
Results of Operations
Revenue
Revenues for the second quarter and six-month period ending June 30,
1998, were $0.7 million and $1.5 million, respectively, as compared to $1.3
million and $2.5 million for the second quarter and six-month period ending June
30, 1997, respectively. Revenues for 1998 include $0.7 million in the second
quarter and $1.4 million in the six-month period earned under an agreement with
BASF AG ("BASF") for access to gene expression analysis services to be performed
by Lynx. The 1997 revenue includes $0.7 million from BASF and $0.4 million from
Hoechst in the second quarter and $1.4 million from BASF and $0.8 million from
Hoechst in the six-month period, earned under agreements for access to gene
expression analysis services.
Operating Expenses
Research and development expenses of $3.1 million in the three months
ended June 30, 1998, compared to $3.4 million in the same period of 1997, were
lower primarily due to the March 1998 sale of the Company's portfolio of
phosphorothioate antisense patents and licenses, and its therapeutic
oligonucleotide manufacturing facility (collectively, the "Antisense Business").
Research and development expenses in the six-month period ended June 30, 1998
were $6.9 million, compared to $6.5 million in the six months ended June 30,
1997, reflecting the Company's efforts to build its production capacity for the
anticipated commercial application of its technologies. Lynx expects to continue
to incur substantial research and development expenses due to planned spending
for ongoing technology development and implementation, and new research
applications.
General and administrative expenses were $0.5 million and $0.6 million
in the three months ended June 30, 1998 and 1997, respectively. The decrease was
the result of lower outside professional fees. General and administrative
expenses in the six-month period ended June 30, 1998 were $1.0 million,
unchanged from the six-month period ended June 30, 1997. Lynx expects to
continue to incur substantial administrative expenses in support of its research
and development efforts.
Interest Income
Interest income was $0.3 million and $0.7 million in the three and six
months ended June 30, 1998, compared to $0.1 million and $0.3 million in the
three and six months ended June 30, 1997. The increase was due to higher average
cash balances in 1998 than in the same periods in 1997.
Gain on Sale of Antisense Business
Other income of $3.2 million for the six months ended June 30, 1998,
was comprised of the gain on the sale of Lynx's Antisense Business to Inex
Pharmaceuticals Corporation ("Inex") in March 1998. As partial consideration in
this transaction, Lynx received $3 million in cash and will receive 1.2 million
shares of Inex common stock, in three equal installments, with the first 400,000
shares received on March 10, 1998, and the second and third installments of
stock to be received no later than two and three years, respectively, from the
closing date of the transaction. The Inex common stock received by Lynx is
subject to certain restrictions on trading for specific periods of time
following receipt by Lynx.
Page 8 of 11
<PAGE>
Liquidity and Capital Resources
Net cash used in operating activities of $2.8 million for the six
months ended June 30, 1998, differed from the net loss for the same period
primarily due to current period recognition of a portion of previously deferred
revenue, deferred compensation expense, depreciation and amortization, the
non-cash consideration received and costs incurred on the sale of the Antisense
Business, and changes in other current assets and liabilities. Net cash used in
investing activities related to purchases of capital equipment, partially offset
by maturities of short-term investments. Net cash provided by financing
activities related to the exercise of stock options by employees. Cash and
equivalents were $5.7 million at June 30, 1998.
Lynx plans to use available funds for the development and
implementation of its massively parallel technologies and to build capacity for
their early commercial uses. Pending such uses as described above, Lynx intends
to invest its excess cash in short-term, investment grade, interest-bearing
securities or certificates of deposit.
Since commencing operations as an independent company, Lynx has
obtained funding for its operations through sales of preferred and common stock
to venture capital investors, institutional investors, and collaborative
partners; revenue from collaborative research and development arrangements,
interest income, product sales, and government grants. The cost, timing, and
amount of funds required for specific uses by Lynx cannot be precisely
determined at this time and will be based upon Lynx's progress in its research
and development, administrative and legal costs, the establishment of corporate
collaborations and other arrangements, and the availability of alternate methods
of financing.
Lynx expects to incur substantial and increasing research and
development expenses and intends to seek additional financing, as needed,
through contractual arrangements with corporate partners and equity or debt
offerings. There can be no assurance that any additional financing required by
Lynx will be available or, if available, will be on terms favorable to Lynx. The
Company believes that, at current spending levels, its existing capital
resources and interest income thereon will enable it to maintain its current and
planned operations through mid-1999.
Impact of Year 2000
The Company has completed an assessment of its computer operating
systems and related software and, with only a few minor exceptions, has found
them to be Year 2000 compliant. The Company's exposure is limited due to the
fact that most of its computers and software were acquired within the past five
years and were Year 2000 compliant at purchase. The Company plans to replace the
operating systems on the few non-compliant computers before 2000 and expects
that the cost will be immaterial. The Company believes that even if such
modifications are not made, there will be no adverse impact on operations.
However, Year 2000 problems may affect the computer systems of the Company's
business partners, vendors, customers, and financial service organizations with
which the Company interacts. The Company is in the process of developing a plan
to determine the impact that third parties which are not Year 2000 compliant may
have on the operations of the Company. There can be no assurance that such plan
will be able to address fully, or at all, the "Year 2000 issue" which could have
a material adverse effect upon the Company's business, financial condition and
results of operations.
Page 9 of 11
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1998 annual meeting of stockholders held on
May 18, 1998, stockholders voted on the following:
Proposal I - Election of Directors:
Nominee For Withheld
------- --- --------
Sam Eletr 7,976,262 41,429
William K. Bowes 7,975,920 41,771
Sydney Brenner 8,013,392 4,299
James C. Kitch 7,970,360 47,331
Kathleen D. La Porte 7,975,882 41,809
Craig C. Taylor 7,976,269 41,422
Proposal II - Approval of the 1992 Stock Option Plan, as
Amended:
For Against Abstain Non-Vote
--- ------- ------- --------
6,158,126 142,968 1,045,056 671,541
Proposal III - Approval of the 1998 Employee Stock Purchase Plan:
For Against Abstain Non-Vote
--- ------- ------- --------
6,180,773 120,501 1,044,876 671,541
Proposal IV - Ratification of Selection of Independent Auditors:
For Against Abstain Non-Vote
--- ------- ------- --------
6,987,458 2,089 483,144 0
Item 5. Other Information
Pursuant to the Company's bylaws, stockholders who wish to
bring matters or propose nominees for director at the
Company's 1999 annual meeting of stockholders must provide
specified information to the Company before December 14,
1998 (unless such matters are included in the Company's
proxy statement pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended).
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits - The following documents are filed as
Exhibits to this report:
Exhibit Number Description
-------------- -----------
10.36* Amended and Restated First Amendment to
Technology Development and Services
Agreement, dated May 1, 1998, between
the Company and Hoechst Marion Roussel,
and its affiliates.
27.1 Financial Data Schedule
*Portions of this agreement have been deleted pursuant to our
request for confidential treatment.
b) No reports on Form 8-K were filed during the quarter
ended June 30, 1998
Page 10 of 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LYNX THERAPEUTICS, INC.
/s/ Sam Eletr
------------------------------------
By: Sam Eletr, Ph.D.
Chief Executive Officer and
Chairman of the Board
Date: August 12, 1998
/s/ Edward C. Albini
------------------------------------
By: Edward C. Albini
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: August 12, 1998
Page 11 of 11
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.36* Amended and Restated First Amendment to Technology
Development and Services Agreement, dated May 1, 1998,
between the Company and Hoechst Marion Roussel, and its
affiliates.
27.1 Financial Data Schedule
*Portions of this agreement have been deleted pursuant to our
request for confidential treatment.
EXHIBIT 10.36
*** TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS.200.80(B)(4),
200.83 AND 240.24B-2
AMENDED AND RESTATED
RESTATED FIRST AMENDMENT TO
TECHNOLOGY DEVELOPMENT AND SERVICES AGREEMENT
This Amended and Restated First Amendment (" Restated First Amendment") to the
Technology Development and Services Agreement ("Agreement") is made and entered
into as of the first day of May, 1998 (the "Amended Effective Date") by LYNX
THERAPEUTICS, INC., a Delaware corporation, and its majority-owned subsidiaries,
including SPECTRAGEN, INC., (collectively referred to as "Lynx") and Hoechst
Marion Roussel, Inc., a Delaware corporation, to whom the Agreement was
assigned, and its affiliates ("HMRI"), for the purpose of replacing in its
entirety the Restated First Amendment to the Agreement dated September 1, 1997,
which as of the Amended Effective Date shall have no further force or effect.
RECITALS
WHEREAS, Lynx and HMRI agree that the Practical Application Milestone
as set forth in the Agreement may not be achievable as originally defined;
WHEREAS, HMRI continues to desire early, preferred access to Lynx's
library analysis and other subscription services;
NOW THEREFORE, in consideration of the foregoing premises and the
covenants and promises in the Agreement and in this Restated First Amendment.
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Restated First Amendment shall have the
meanings ascribed to them in the Agreement unless otherwise defined in or
amended by this Restated First Amendment.
1.1 "Massively Parallel Signature Sequencing" or "MPSS" means the
acquisition of at least [...***...] contiguous bases (a "Signature Sequence")
from each of at least [...***...] templates sampled from a given cell culture or
tissue cDNA library or of such other information
- -------------------------
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
as may be obtained by customers of technology subscription services developed
and made available from time to time by Lynx.
1.2 "MPSS Library Analysis" means a report containing each [...***...]
base sequence and its abundance within the [...***...] or more cCNA templates
extracted from a given sample or such other information as can be generated and
is provided by Lynx to its other subscription service customers.
1.3 No amendment is made to Article 1.3.
1.4 "Practical Application Milestone" as defined in Article 1.4 of the
Agreement and Exhibit A thereto are no longer applicable.
ARTICLE 2
DEVELOPMENT OF MPSS TECHNOLOGY
2.1 Lynx Program. Lynx shall continue to use commercially reasonable
efforts consistent with its normal business practices and objectives to develop
its sequencing and solid phase cloning technologies and to define, develop and
offer to customers in the ordinary course of its business subscription services
based on such technologies.
2.2 Reports and Information. Periodically during the term of this
Agreement, and in any event at least once per calendar quarter, Lynx will
provide Hoechst written reports summarizing its technical progress to date, its
plans with respect to the nature of subscription services that it intends to
offer and its assessment of how customers could use such services to further
their research objectives. If requested by Hoechst, Lynx will provide relevant
supporting data and studies to enable Hoechst to assess its interest in securing
access to such services. All such reports, including supporting data and
studies, and all information contained therein, shall be deemed "Confidential
Information" of Lynx under Article 4 hereof.
2.3 Ownership of Technology. No amendment is made to this Article,
except that the parties agree to amend the last sentence thereof if and as
necessary to accurately describe the services that Hoechst ultimately determines
to access hereunder.
2.4 Development Payments to Lynx. Lynx acknowledges that Hoechst has
paid to Lynx Three Million U.S. Dollars ($3,000,000), in part, for Lynx's
commitment to undertake the development of technologies that may be useful to
Hoechst. Lynx agrees that no additional payment by HMRI to Lynx shall be
required for Lynx's continued development work. If in the course of the
Development Program Lynx is able to establish to HMRI's satisfaction that the
services offered or to be offered by Lynx are applicable for HMRI's purposes and
fulfill HMRI's needs as determined by HMRI at its sole discretion then HMRI will
pay to Lynx a technology access fee to be negotiated but of not more than
[...***...] U.S. Dollars [...***...] within thirty (30) days. In the event that
a third party (other than BASF) has paid Lynx less than [...***...]
- -------------------------
* CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE>
U.S. Dollars [...***...] as a technology access fee, than HMRI will pay no more
than such third party technology access fee less [...***...] U.S. Dollars
[...***...].
2.5 If Lynx notifies HMRI that it has developed the MPSS technology to
the extent that it is being accessed and used by another party, HMRI will at its
sole discretion determine the usefulness of the technology for HMRI's purpose
and decide whether to access the technology under the conditions outlined under
2.4. A decision by HMRI during the term of this Agreement not to access the
technology does not constitute a termination of the Agreement.
ARTICLE 3
LYNX MPSS SERVICES
No amendment is made to this Article except that (a) the parties agree
to amend the description of the services to be offered if and as necessary to
accurately describe the services that Hoechst ultimately determines to access
hereunder, (b) HMRI no longer requires that Lynx limit its services to a maximum
of three parties and (c) the cost of the renewal of the subscription shall be
renegotiated in good faith according to the then prevailing circumstances
regarding third party subscribers and the amount of work to be done.
ARTICLE 4
CONFIDENTIALITY
The provisions of this article the Agreement are not amended by this
Restated First Amendment.
ARTICLE 5
TERM AND TERMINATION
5.1 The term of the Agreement shall be extended to [...***...], and may
be extended for another [...***...] at HMRI's discretion upon written notice to
Lynx. If the Agreement terminates pursuant to this section, Lynx agrees that
HMRI shall be entitled to a credit of [...***...] U.S. Dollars [...***...] with
regard to any future technology access fee and any such technology access fee
and subscription fee shall be reduced as set forth in this Restated First
Amendment. All other terms and conditions of Article 5 of the Agreement are not
amended by this Restated First Amendment.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
- -------------------------
* CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE>
The provisions of this article of the Agreement are not amended by this
Restated First Amendment.
ARTICLE 7
MISCELLANEOUS
The provisions of the Agreement are not amended by this Restated First
Amendment except that all notices to Hoechst pursuant to Article 7.6 of the
Agreement shall hereafter be delivered to
Hoechst Marion Roussel, Inc.
2110 East Galbraith Road
Cincinnati, OH 42512
Attention: General Patent Counsel
IN WITNESS WHEREOF, the parties hereto have duly executed this Restated
First Amendment as of the date first written above.
LYNX THERAPEUTICS, INC. HOECHST MARION ROUSSEL, INC.
By: /s/ Sam Eletr By: /s/ Thomas Hofstaetter
----------------------------- -------------------------------------
Title: Chief Executive Officer Title: Senior Vice President, Business
-------------------------- ----------------------------------
Development and Strategic Planning
----------------------------------------
Date: June 8, 1998 Date: June 15, 1998
--------------------------- -----------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
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