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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-22890
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SANGSTAT MEDICAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 94-3076-069
- ------------------------ -----------------------------
(State of incorporation) (IRS Employer Identification No.)
6300 Dumbarton Circle
Fremont, CA 94555
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(Address of principal executive office, Zip Code)
Registrant's telephone number, including area code: 510-789-4300
1505 Adams Drive, Menlo Park, CA 94025
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(Former name, former address and former fiscal year,
if changed since last report)
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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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of June 30, 1999.
CLASS NUMBER OF SHARES
----- ----------------
Common Stock 16,933,799
<PAGE>
SANGSTAT MEDICAL CORPORATION
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
----
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1999 and December 31, 1998...........................
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 1999 and 1998.............
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 1999 and 1998.............
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 and 1998.....................
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...........
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..............................................
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......................
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............
ITEM 5. OTHER INFORMATION..............................................
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................
SIGNATURES................................................................
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
SANGSTAT MEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(unaudited) (1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................... $30,501 $16,286
Short-term investments.............................. 4,826 13,375
Accounts receivable (net of allowance for doubtful
accounts of $1,169 in 1999 and $929 in 1998)...... 15,690 10,963
Other receivables................................... 979 2,441
Inventories......................................... 40,484 33,375
Prepaid expenses.................................... 1,237 1,727
----------- -----------
Total current assets......................... 93,717 78,167
PROPERTY AND EQUIPMENT -- net......................... 3,934 3,134
INTANGIBLE ASSETS (net of accumulated amortization
of $1,044 in 1999 and $351 in 1998)................. 13,087 14,151
OTHER ASSETS.......................................... 10,789 11,875
----------- -----------
TOTAL........................................ $121,527 $107,327
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................... $18,472 $25,824
Accrued liabilities................................. 4,263 3,197
Capital lease obligations -- current portion........ 551 493
Deferred revenue -- current portion.................. 2,156 --
Notes payable -- current portion.................... 1,682 1,825
----------- -----------
Total current liabilities.................... 27,124 31,339
CAPITAL LEASE OBLIGATIONS.............................. 501 765
DEFERRED REVENUE...................................... 4,928 --
NOTES PAYABLE......................................... 40,523 15,636
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000
shares authorized; none outstanding............... -- --
Common stock, $.001 par value, 25,000 shares
authorized; outstanding: 1999, 16,934 shares;
1998, 16,215 shares............................... 168,137 160,251
Accumulated deficit................................. (118,576) (100,270)
Accumulated other comprehensive income.............. (1,110) (394)
----------- -----------
Total stockholders' equity................... 48,451 59,587
----------- -----------
TOTAL........................................ $121,527 $107,327
=========== ===========
</TABLE>
(1) Derived from the Company's audited consolidated financial statements.
<PAGE>
SANGSTAT MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1999 1998 1999 1998
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Net product sales................... $14,260 $2,580 $24,363 $4,123
Revenue from collaborative
agreements........................ 125 310 550 310
--------- --------- ---------- ----------
Total revenues...................... 14,385 2,890 24,913 4,433
--------- --------- ---------- ----------
COSTS AND OPERATING EXPENSES:
Cost of sales and manufacturing..... 7,503 2,374 13,343 3,937
Research and development............ 3,558 4,227 7,790 7,309
Selling, general and administrative. 11,149 6,163 21,119 10,796
Amortization of intangible assets... 336 -- 693 --
--------- --------- ---------- ----------
Total costs and operating expenses.. 22,546 12,764 42,945 22,041
--------- --------- ---------- ----------
Loss from operations............... (8,161) (9,874) (18,032) (17,608)
OTHER INCOME (EXPENSE) -- NET........ (390) 890 (368) 1,984
--------- --------- ---------- ----------
LOSS BEFORE INCOME TAXES............. (8,551) (8,984) (18,400) (15,624)
LOSS BEFORE INCOME TAXES............. (9,849) (6,640)
INCOME TAX (PROVISION) BENEFIT....... (32) -- 94 --
--------- --------- ---------- ----------
NET LOSS............................. ($8,583) ($8,984) ($18,306) ($15,624)
========= ========= ========== ==========
NET LOSS PER SHARE (Basic and diluted) ($0.51) ($0.56) ($1.11) ($0.97)
========= ========= ========== ==========
Shares Used in Per Share Computations
(Basic and diluted)................ 16,719 16,054 16,516 16,034
========= ========= ========== ==========
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1999 1998 1999 1998
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss............................. ($8,583) ($8,984) ($18,306) ($15,624)
Unrealized gains and losses on
marketable securities classified
as available for sale.............. 599 (371) (174) (767)
Foreign currency translation
adjustments........................ 446 4 (542) 13
--------- --------- ---------- ----------
($7,538) ($9,351) ($19,022) ($16,378)
========= ========= ========== ==========
</TABLE>
<PAGE>
SANGSTAT MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. ($18,306) ($15,624)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization....................... 2,297 503
Loss on disposal of property and equipment........... 174 --
Deferred revenue..................................... 7,084 --
Stock compensation expense.......................... 57 --
Changes in assets and liabilities:
Accounts receivable............................... (4,727) (984)
Other receivables................................. 1,462 (138)
Inventories....................................... (7,109) (4,189)
Prepaid expenses.................................. 490 1,121
Accounts payable.................................. (7,352) 2,065
Accrued liabilities............................... 1,067 62
---------- ----------
Net cash used in operating activities.......... (24,863) (17,184)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................... (1,799) (721)
Maturities of short-term investments.................. 9,749 18,665
Purchase of short-term investments.................... (1,375) (1,950)
Other assets.......................................... 1,458 (1,014)
---------- ----------
Net cash provided by investing activities............ 8,033 14,980
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock.................................. 7,829 284
Notes payable borrowings............................... 25,520 --
Notes payable repayments.............................. (1,529) (252)
Repayment of capital lease obligations................ (233) (185)
---------- ----------
Net cash provided by financing activities............ 31,587 (153)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................. (542) 15
---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS.......... 14,215 (2,342)
CASH AND EQUIVALENTS, Beginning of period................ 16,286 50,631
---------- ----------
CASH AND EQUIVALENTS, End of period...................... $30,501 $48,289
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.............. $96 $132
========== ==========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property acquired under capital leases................ $27 $159
========== ==========
Unrealized loss on investments........................ ($174) ($768)
========== ==========
</TABLE>
<PAGE>
SANGSTAT MEDICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements include the accounts of SangStat Medical
Corporation and its wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated.
The financial statements presented are unaudited and in the opinion of
management reflect all adjustments (consisting only of normal recurring
adjustments) which the Company considers necessary for a fair presentation of
the financial condition and results of operations as of and for the interim
periods presented. The results for interim periods are not necessarily
indicative of the results to be expected for the full year. These condensed
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto included
in the Company's 1998 Annual Report on Form 10-K.
2. Acquisition
On September 30, 1998, the Company completed the acquisition of Pasteur Merieux
Connaught's (PMC) organ transplant business known as IMTIX. The resulting
wholly owned subsidiary of the Company, named IMTIX-SangStat, is dedicated to
the research, development, manufacture and marketing of pharmaceuticals for
transplantation. The transaction valued at $31 million was accounted for as a
purchase and consisted of $10 million paid upon closing and a non-interest
bearing note of $21 million payable over five years as follows: $3 million in
1999, $3 million in 2000, $6 million in 2001, $5 million in 2002 and $4 million
in 2003. The note payable is discounted at a rate of 9.25%. In addition, the
Company will pay PMC certain royalties on IMTIX-SangStat product sales.
Approximately $3.2 million of the total purchase price represented purchased in-
process technology that had not yet reached technological feasibility, had no
alternative future use and was charged to the Company's operations in the third
quarter of 1998. Approximately $14.2 million of the purchase price was allocated
to various specified intangible assets and is being amortized over their
estimated useful lives ranging from five to fourteen years. Additionally, as
part of the acquisition, the Company has approximately $6.0 million of
restricted cash that serves as collateral for the standby letter of credit in
favor of PMC.
3. Loss Per Share
Basic EPS is computed by dividing net loss by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that would occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Common share equivalents
including stock options, warrants and convertible notes have been excluded as
their effect would be antidilutive.
The following is a reconciliation of the numerators and denominators of the
basic and diluted net loss per share computations (amounts in thousands, except
per share figures):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1999 1998 1999 1998
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss (Numerator):
Net loss - Basic and Diluted........ $8,583 $8,984 $18,306 $15,624
========= ========= ========== ==========
Shares (Denominator):
Weighted average common shares
outstanding -- basic and diluted... 16,719 16,054 16,516 16,034
========= ========= ========== ==========
Net Loss Per Share -- Basic
and Diluted......................... $0.51 $0.56 $1.11 $0.97
========= ========= ========== ==========
</TABLE>
4. Comprehensive Earnings (Loss)
The following are the components of accumulated other comprehensive loss
(in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Unrealized gain (loss) on
investments........................ ($643) ($469)
Accumulated translation adjustments.. (467) 75
------------ ------------
Total ............................. ($1,110) ($394)
============ ============
</TABLE>
5. Inventories
Inventories, valued at the lower of cost (first-in, first-out) or market
consist of (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Raw materials....................... $20,737 $18,104
Work-in-progress.................... 10,651 8,945
Finished goods...................... 9,096 6,326
------------ ------------
Total............................. $40,484 $33,375
============ ============
</TABLE>
6. Co-promotion, Distribution and Research Agreement
In May 1999, the Company and Abbott Laboratories ("Abbott") signed a multi-year
co-promotion, distribution and research agreement for SangCya and cyclosporine
capsules in the United States. As part of this agreement, Abbott made an equity
investment of $7 million in May 1999 in exchange for approximately 534,000
shares of common stock. In addition, Abbott made an up-front payment of $7
million and a long-term loan of $16 million to the Company. In August 1999,
Abbott made a second equity investment of $7 million in exchange for
approximately 360,000 shares of common stock and a further milestone payment of
$6 million. All up-front and milestone payments are recorded as deferred
revenue and recognized rateably over the term of the agreement. In connection
with the equity investment, Abbott and SangStat entered into a Call Option
Agreement, a Right of First Refusal Agreement, and a Registration Rights
Agreement. In addition, Abbott and SangStat amended and restated their existing
Supply Agreement.
7. Notes Payable
In March 1999, the Company issued a $10 million convertible note due March 30,
2004. This note bears interest at the rate of 6.5% through March 30, 2004 and
thereafter at the rate of 8.5% on any overdue amount. The interest is payable
semi-annually in September and March. The note, or any portion thereof, is
convertible at the option of the holder at any time on or after March 31, 2000
and before March 30, 2004 into shares of common stock of the Company at the rate
of 50.0773 shares of common stock for each $1,000 principal amount. The net
proceeds received by the Company were $9,550,000. The note will be accreted to
its face amount over the five year term.
In May 1999, the Company received a loan of $16 million from Abbott
Laboratories. The loan bears interest at 8.75%, payable annually, and is
secured by a security interest in the United States marketing rights for
SangCya. The Company may repay the loan, together with unpaid interest, at any
time up to December 31, 2004.
8. Business Segment Data
The Company is a specialty pharmaceutical company engaged in the discovery,
development, manufacturing and marketing of transplantation products worldwide
as well as applying a disease management approach to improve the outcome of
organ transplantation. The Company is organized and operates in two business
segments: transplantation products and transplantation services.
Transplantation products consist primarily of products for patient monitoring
and therapeutic products for preventing and treating organ rejection.
Transplantation services consist principally of mail order pharmaceutical and
patient management services. The following information is presented in
accordance with the requirements of SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (in thousands).
<TABLE>
<CAPTION>
Three
Months Transplantation
ended ---------------------
June 30, Products Services Total
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues...... 1999 $11,108 $3,277 $14,385
1998 1,178 1,712 2,890
Interest income... 1999 409 409
1998 935 935
Interest expense.. 1999 574 574
1998 45 45
Depreciation and
amortization..... 1999 591 30 621
1998 254 17 271
Segment loss...... 1999 (8,199) (384) (8,583)
1998 (8,178) (806) (8,984)
Segment assets.... 1999 117,225 4,302 121,527
1998 87,602 2,497 90,099
</TABLE>
<TABLE>
<CAPTION>
Six
Months Transplantation
ended ---------------------
June 30, Products Services Total
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues...... 1999 $18,583 $6,330 $24,913
1998 1,400 3,033 4,433
Interest income... 1999 465 465
1998 1,144 1,144
Interest expense.. 1999 442 442
1998 51 51
Depreciation and
amortization..... 1999 2,236 61 2,297
1998 469 34 503
Segment loss...... 1999 (17,410) (896) (18,306)
1998 (14,696) (928) (15,624)
</TABLE>
9. Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. SFAS No. 133 will be effective for
the Company's fiscal year 2000.
10. Litigation
On February 11, 1999, Novartis Pharmaceuticals Corporation ("Novartis US") filed
a lawsuit (case number 99-065) in Federal District Court for the District of
Delaware against the Company alleging infringement of United States patent
#5,389,382, a cyclosporine technology patented by Novartis A.G. (the "US
Patent"). The Novartis A.G. patent does not cover Neoral but rather a separate
delivery system not used in the Neoral formulation. Novartis US seeks the
following relief: (i) a finding that SangStat willfully infringed the patent;
(ii) to permanently enjoin SangStat from infringing the US Patent; (iii) treble
damages; and (iv) reasonably attorneys' fees , costs and expenses. On April 15,
1999, SangStat filed its answer in this case and also filed a counterclaim
against Novartis alleging that Novartis violated the anti-trust laws by engaging
in a series of anti-competitive acts designed and intended to exclude SangStat
from the market. Novartis has filed a motion to bifurcate the anti-trust
counterclaim; the Court has not yet ruled on this motion. The trial date has
been set for October 23, 2000 and discovery has commenced.
On July 9, 1999, Novartis AG and Novartis Pharmaceuticals UK Limited
("Novartis UK") filed an action against Imtix-SangStat (UK) Limited; SangStat
UK, Limited, and SangStat Medical Corporation (collectively, the "UK
Defendents") in the High Court of Justice, Chancery Division, Patents Court,
London (HC-1999-02988) alleging infringement of United Kingdom Patent No 2 200
048 (the "UK Patent"), the counterpart to the US Patent. The lawsuit mirrors
the US patent infringement lawsuit. Novartis AG and Novartis UK seek the
following relief: (i) an injunction to restrain the UK Defendents from
infringing the UK Patent; (ii) the delivery up or destruction of all material
that would infringe such injunction; (iii) damages; (iv) a declaration that the
UK Patent is valid and has been infringed by the UK Defendants; and (v) costs.
Novartis US also sued the FDA on February 11, 1999 in the United States
District Court for the District of Columbia (case number 1:99CV-00323) alleging
that the FDA did not follow its own regulations in approving SangCya oral
solution in October 1998. The lawsuit alleges that because Neoral oral solution
and SangCya oral solution are based on different formulation technologies, they
should be classified as different dosage forms. Novartis asks that the court
rescind the AB rating that was given to SangCya oral solution. Loss of the "AB"
rating would prevent SangCya oral solution from being automatically
substitutable for Neoral oral solution, which would impede the marketing of
SangCya oral solution. The Company believes that the lawsuit is without merit
and that the FDA will prevail in this matter. Although the Company is
optimistic that this dispute will ultimately be resolved favorably to the
Company, the course of litigation is inherently uncertain and there can be no
assurance of a favorable outcome. Novartis' requested relief, if granted, could
have a significant negative economic impact on SangStat. SangStat has intervened
in this lawsuit in order to protect its interests. The Company does not believe
that these lawsuits will have an impact on the regulatory approval of SangCya
capsules in the US.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations - Three and Six Months Ended June 30, 1999 and 1998
SangStat is a specialty pharmaceutical company, applying a disease management
approach to improve the outcome of organ transplantation. The Company has a
total of 12 monitoring and therapeutic product and product candidates to address
the pre-transplant, acute care and chronic phases of transplantation. During
the first six months of the year, the Company continued the launch of its two
lead products, filed for approval of SangCya capsules in Europe, conducted
clinical studies on these and other products, supported the sales and marketing
teams and continued the expansion of THE TRANSPLANT PHARMACYT.
Total revenues. Net product sales in the second quarter of 1999 grew to
$14,385,000 from $2,890,000 in the same quarter of 1998 and were $24,913,000 for
the six months ended June 30, 1999 as compared to $4,433,000 for the same period
in 1998. Both the increase for the second quarter and the six months ended June
30, 1999 reflect the consolidation of revenues from IMTIX-SangStat, the sales of
SangCya oral solution and Thymoglobulin in the U.S. and growth of THE TRANSPLANT
PHARMACY. Revenue from collaborative agreements was $125,000 and $550,000 for
the three and six months ended June 30, 1999, respectively.
Cost of sales and manufacturing. Cost of sales and manufacturing expenses were
$7,503,000 in the second quarter of 1999 compared to $2,374,000 in the same
period in 1998 and were $13,343,000 for the first six months of 1999 compared to
$3,937,000 in the same period in 1998. The increases of $5,129,000 or 216% and
$9,406,000 or 239% for the three and six months ended June 30, 1999,
respectively, were substantially due to additional costs associated with
increased sales of therapeutic products, including sales by IMTIX-SangStat, and
THE TRANSPLANT PHARMACY.
Research and development. Research and development expenses decreased by
$669,000 in the second quarter of 1999 from the second quarter of 1998. The
decrease reflects a decline in research and clinical development expenses. For
the six months ended June 30, 1999, research and development expenses increased
$481,000 from the same period in 1998. The increase primarily reflects an
increase in spending for the Company's products and the addition of research &
development spending for the Company's European operations. In addition, the
Company continued to expand its clinical and regulatory activities for SangCya,
Sang-2000 and Thymoglobulin.
Selling, general and administrative. Selling, general and administrative
expenses rose $4,986,000 or 81% between the second quarters of 1999 and 1998 and
increased $10,324,000 or 96% in the first six months of 1999 over the first six
months of 1998. These increases primarily reflect the consolidation of IMTIX-
SangStat expenses, the Company's build-up of its commercial infrastructure,
continued launch activities in the U.S. for SangCya oral solution and
Thymoglobulin, pre-launch activities for SangCya oral solution in Europe, and
support for the growing number of patients in THE TRANSPLANT PHARMACY.
Other income (expense) - net. Other income (expense) - net decreased by
$1,280,000 and $2,352,000 for the three and six months ended June 30 1999,
respectively, from the comparable periods in 1998. The decrease reflects the
reduction in the average cash balance available for investment as a result of
the Company's use of cash for operating activities and the increase in interest
expense due to the notes payable obtained by the Company.
Income taxes. For the six months ended June 30, 1999, the Company recorded a
tax benefit of $94,000 based upon the financial results of its overseas
operations. A tax provision was not required for the comparable period in 1998.
Net loss. The Company's net loss decreased to $8,583,000 or $0.51 per share in
the second quarter of 1999, compared with a net loss of $8,984,000 or $0.56 per
share in the same period in 1998. The decrease is primarily the result of higher
therapeutic product revenues in the U.S. For the six months ended June 30,
1999, the loss was $18,306,000 or $1.11 per share compared with a loss of
$15,624,000 or $0.97 per share for the same period in 1998. The increase
reflects an increase in cost of sales and manufacturing expenses and selling,
general and administrative expenses partially offset by an increase in revenues.
Liquidity and Capital Resources
During the first six months of 1999 and 1998, the net cash used in operating
activities was approximately $24,863,000 and $17,184,000, respectively. The
increase in net cash used in operating activities in these periods is due
substantially to the increased amount of net loss incurred in each of these
periods, the purchase of inventory and reduction of accounts payable, partially
offset by an increase in deferred revenue. As of June 30, 1999, the Company had
cash, cash equivalents and short-term investments of $35,327,000 and total
assets of $121,527,000.
Net cash provided by investing activities for the six months ended June 30, 1999
was $8,033,000 as compared to $14,980,000 for the comparable period in 1998.
The amount in 1999 is primarily the result of the maturity of short-term
investments, partially offset by purchases of property and equipment.
Net cash provided by financing activities for the six months ended June 30, 1999
was $31,587,000 as compared to net cash used of $153,000 for the same period in
1998. The increase is due to an increase in notes payable and the issuance of
common stock. In March 1999, the Company issued a $10 million convertible note
due March 30, 2004. This note bears interest at the rate of 6.5% through March
30, 2004 and thereafter at the rate of 8.5% on any overdue amount. The interest
is payable semi-annually in September and March. The note, or any portion
thereof, is convertible at the option of the holder at any time on or after
March 31, 2000 and before March 30, 2004 into shares of common stock of the
Company at the rate of 50.0773 shares of common stock for each $1,000 principal
amount. The net proceeds received by the Company were $9,550,000. The note
will be accreted to its face amount over the five-year term.
In May 1999, the Company and Abbott Laboratories ("Abbott") signed a multi-year
co-promotion, distribution and research agreement for SangCya and cyclosporine
capsules in the United States. As part of this agreement, Abbott made an equity
investment of $7 million in May 1999 in exchange for approximately 534,000
shares of common stock. In addition, Abbott made an up-front payment of $7
million and a long-term loan of $16 million to the Company. In August 1999,
Abbott made a second equity investment of $7 million in exchange for
approximately 360,000 shares of common stock and a further milestone payment of
$6 million. All up-front and milestone payments are recorded as deferred
revenue and recognized rateably over the term of the agreement. In connection
with the equity investment, Abbott and SangStat entered into a Call Option
Agreement, a Right of First Refusal Agreement, and a Registration Rights
Agreement. In addition, Abbott and SangStat amended and restated their existing
Supply Agreement.
In the opinion of management, the Company has sufficient funds to continue
operations for at least the next twelve months.
Year 2000 Issue
The ability of the Company's computer systems and equipment to address the Year
2000 issue, as well as those of its key suppliers and customers, represents a
potential risk for the Company. The Company has completed a risk assessment
covering three major areas: information technology systems, hardware, equipment
and instrumentation, and third party relationships. A special task force was
established by the Company to develop an action plan to address Year 2000
compliance. The current status of our Year 2000 compliance efforts in these
three areas is set forth below:
Information technology systems. Most of the Company's key business
information systems have now been made Year 2000 compliant. Since the Company
utilizes purchased software packages for all critical business systems, the
major task was to obtain, install and test the Year 2000 compliant versions of
the various software packages. We have completed this process for the majority
of our business systems, and are actively working with the software vendors to
obtain and install Year 2000 compliant versions for the remaining systems as
soon as possible. The Company expects to be fully Year 2000 compliant in this
area by September 30, 1999.
Hardware, equipment and instrumentation. The Company has identified all items
of hardware, equipment and instrumentation that might be affected by the Year
2000 issue and has developed a comprehensive program to ensure compliance. As
part of this program, the Company retained a consultant to assist in the upgrade
of its hardware and equipment. The Company has completed and tested Year 2000
compliance on 94% of the hardware and equipment that was identified and will
reach 100% compliance by August 31, 1999.
Third Party Relationships. This program focuses on minimizing the risks
associated with Year 2000 compliance in the following areas: (i) the ability of
our key suppliers to continue providing products and services on a timely basis
in the year 2000, (ii) the year 2000 compliance of products supplied to us and
(iii) the ability of our key customers to order, receive and pay for products
that we sell to them. We have sent out requests for information and
certification of Year 2000 compliance and have received responses from many of
our key suppliers and customers. We are presently following up with the
remaining suppliers and customers and expect to have certification from them by
September 30, 1999.
The total out-of-pocket costs of our Year 2000 compliance program have been less
than $100,000 as of June 30, 1999 and the Company currently estimates that total
costs will not exceed that amount. Most of the costs incurred have been on
hardware upgrades and outside consultants.
Although the Company does not presently anticipate any significant issues with
regards to Year 2000 compliance, there is a risk that Year 2000 errors or
defects will not be discovered in the Company's internal information technology
systems. The Company may also be at risk if its suppliers and customers fail to
adequately address their exposures to the year 2000 issues. Such failure could
limit the ability of the Company to manufacture and sell products or otherwise
conduct its business. Where practicable, the Company will attempt to minimize
the risks associated with such third parties being non-compliant. Plans to do
this include, among other things, stocking additional finished goods inventory
and monitoring our distribution channel inventories. With regard to the
Company's Year 2000 compliance plan, there can be no assurance that (i) the
Company will be able to identify all Year 2000 compliance issues affecting its
internal systems and equipment, and its key suppliers and customers, (ii) the
Company's key vendors and customers will be correct in their assertions that
they are Year 2000 compliant, (iii) the Company's estimate of the cost to
achieve Year 2000 compliance will ultimately prove to be accurate or (iv) the
Company will be able to remedy such errors or defects in a timely manner. Should
any of these situations occur, there would be a material adverse effect on the
Company's business, results of operations and financial condition.
Euro-Currency
The Single European Currency (Euro) was introduced on January 1, 1999 with
complete transition to this new currency required by January 2002. The Company
is currently assessing the issues raised by the introduction of the Euro. The
Company has made and expects to continue to make changes to its internal systems
in preparation for the recently introduced Euro. The Company further expects
that introduction and use of the Euro will affect the Company's foreign exchange
activities and may result in increased fluctuations in foreign currency results.
Any delays in the Company's ability to be Euro-compliant could have an adverse
impact on the Company's results of operations or financial position.
Risk Factors
History of Operating Losses; Future Profitability Uncertain. SangStat was
incorporated in 1988 and has experienced significant operating losses since that
date. As of December 31, 1998, the Company's accumulated deficit was
$100,270,000. The Company's operating expenses have increased from approximately
$17.3 million to $31.0 million to $60.9 million over the last three fiscal
years. Total revenues increased from approximately $2.4 million to $4.5 million
to $19.7 million while losses from operations increased from approximately $14.9
million to $26.5 million to $41.3 million over the last three fiscal years.
There can be no assurance that the Company will ever achieve significant
revenues from product sales or profitable operations. To date, the Company's
product revenues have been substantially dependent on sales of certain organ
transplantation products, including a limited number of monitoring products,
international sales of Thymoglobulin and Lymphoglobuline, and limited initial
sales in North America of Thymoglobulin and SangCya Oral Solution.
Future Growth Dependent on Sales of Key Products. The Company expects to
derive a majority of its future revenues from sales of SangCya oral solution,
cyclosporine capsules (to be co-promoted with Abbott Laboratories in the United
States under a trademark to be determined, and sold as SangCya capsules outside
the United States), and Thymoglobulin. SangCya oral solution and Thymoglobulin
were launched in the United States in November 1998 and February 1999,
respectively. SangCya oral solution was launched in the United Kingdom in April
1999. On March 31, 1999, the Company filed in the United Kingdom (UK) for
marketing authorization for SangStat's SangCya capsules for prevention of
rejection in solid organ transplant recipients. The Company will be marketing
cyclosporine capsules in the United States under its co-promotion agreement with
Abbott Laboratories. Accordingly, any factor adversely affecting the regulatory
approval or sale of these key products, individually or collectively, would have
a material adverse effect on the Company's business, financial condition and
results of operations. Sales of these key products could be adversely affected
by competitive changes, regulatory matters, manufacturing or supply
interruptions, number of contracts with managed care providers and group
purchasing organization, factors affecting production, marketing or pricing
actions, changes in the prescribing practices of transplant physicians,
reimbursement practices of third party payors, product liability claims or other
factors. In particular, with respect to SangCya oral solution and cyclosporine
capsules, sales may be affected by perceptions of both patients and physicians
regarding use of a generic version of a critical, life-saving therapeutic, the
availability and acceptance of the CycloTech device to be used in connection
with SangCya oral solution, other generic competitors, and intense competitive
pressure from Novartis as well as the Novartis litigation. Failure of sales to
meet forecasts may also cause excessive inventory build-up, which, if not sold
prior to lot expiration, may be required to be taken as a charge against
earnings. . See "-Uncertainty of Market Acceptance;" "-Substantial
Competition;" and "-Litigation with Novartis."
Litigation with Novartis. On February 11, 1999, Novartis Pharmaceuticals
Corporation ("Novartis US") filed a lawsuit (case number 99-065) in Federal
District Court for the District of Delaware against the Company alleging
infringement of United States patent #5,389,382, a cyclosporine technology
patented by Novartis A.G. (the "US Patent"). The Novartis A.G. patent does not
cover Neoral but rather a separate delivery system not used in the Neoral
formulation. Novartis US seeks the following relief: (i) a finding that
SangStat willfully infringed the patent; (ii) to permanently enjoin SangStat
from infringing the US Patent; (iii) treble damages; and (iv) reasonable
attorneys' fees , costs and expenses. On April 15, 1999, SangStat filed its
answer in this case and also filed a counterclaim against Novartis alleging that
Novartis violated the anti-trust laws by engaging in a series of anti-
competitive acts designed and intended to exclude SangStat from the market.
Novartis has filed a motion to bifurcate the anti-trust counterclaim; the Court
has not yet ruled on this motion. The trial date has been set for October 23,
2000 and discovery has commenced.
On July 9, 1999, Novartis AG and Novartis Pharmaceuticals UK Limited
("Novartis UK") filed an action against Imtix-SangStat (UK) Limited; SangStat
UK, Limited, and SangStat Medical Corporation (collectively, the "UK
Defendants") in the High Court of Justice, Chancery Division, Patents Court,
London (HC-1999-02988) alleging infringement of United Kingdom Patent No 2 200
048 (the "UK Patent"), the counterpart to the US Patent. The lawsuit mirrors
the US patent infringement lawsuit. Novartis AG and Novartis UK seek the
following relief: (i) an injunction to restrain the UK Defendants from
infringing the UK Patent; (ii) the delivery up or destruction of all material
that would infringe such injunction; (iii) damages; (iv) a declaration that the
UK Patent is valid and has been infringed by the UK Defendants; and (v) costs.
Although the Company is optimistic that these disputes will ultimately be
resolved favorably to the Company, the course of litigation is inherently
uncertain and there can be no assurance of a favorable outcome. As a result of
the Novartis suits, SangStat could be enjoined from selling SangCya oral
solution for a significant period of time or ultimately be prevented from
selling SangCya oral solution in both the US and the UK. Should this happen, the
Company does not believe it would be able to obtain a license from Novartis on
acceptable terms for either jurisdiction because the Company believes
cyclosporine is an important product for Novartis and that Novartis would not
want to diminish its profits from this product by licensing it on acceptable
terms to the Company. Failure to obtain any such required license could prevent
the Company from selling SangCya oral solution entirely in the US and the UK,
which would have a material adverse effect on the Company's future results of
operations. The litigation, whether or not resolved favorably to the Company, is
likely to be expensive, lengthy and time consuming, will divert management's
attention and could have a material adverse effect on the Company's business,
financial condition, cash flows and results of operations. SangCya capsules are
not covered by these lawsuits and the Company does not believe that these
lawsuits will have an impact on the regulatory approval of SangCya capsules in
the US or the UK.
Novartis US also sued the FDA on February 11, 1999 in the United States
District Court for the District of Columbia (case number 1:99CV-00323) alleging
that the FDA did not follow its own regulations in approving SangCya oral
solution in October 1998. The lawsuit alleges that because Neoral oral solution
and SangCya oral solution are based on different formulation technologies, they
should be classified as different dosage forms. Novartis asks that the court
rescind the AB rating that was given to SangCya oral solution. Loss of the "AB"
rating would prevent SangCya oral solution from being automatically
substitutable for Neoral oral solution, which would impede the marketing of
SangCya oral solution. The Company believes that the lawsuit is without merit
and that the FDA will prevail in this matter. Although the Company is
optimistic that this dispute will ultimately be resolved favorably to the
Company, the course of litigation is inherently uncertain and there can be no
assurance of a favorable outcome. Novartis' requested relief, if granted, could
have a significant negative economic impact on SangStat. SangStat has intervened
in this lawsuit in order to protect its interests. The Company does not believe
that these lawsuits will have an impact on the regulatory approval of SangCya
capsules in the US.
Fluctuations in Operating Results. The Company's operating losses have
increased each year since inception and losses may be expected to continue in
the near future as a result of a number of factors including the uncertainty in
the timing and the amount of revenue earned upon product sales and achievement
of research and development milestones, funding under collaborative research
agreements and expenses required for product development, clinical trials and
marketing and sales activities. The Company's operating results may fluctuate
significantly depending on other factors, including the introduction of new
products by the Company's competition, regulatory actions, market acceptance of
the Company's products, adoption of new technologies, manufacturing
capabilities, legal actions and third-party reimbursement policies.
No Assurance of Successful Product Development. To achieve profitable
operations, the Company, alone or with others, must successfully develop, obtain
regulatory approval for, manufacture, introduce and market its products and
product candidates. There can be no assurance that the Company's product
development efforts will be successfully completed, that required regulatory
approvals will be obtained, or that any products if developed and introduced
will be successfully marketed.
The Company's product candidates will require extensive development, testing
and investment, as well as regulatory approval prior to commercialization. The
Company's other pharmaceutical product candidates have not been approved for
commercial sale in any country. Cost overruns due to unanticipated regulatory
delays or demands, unexpected adverse side effects or insufficient therapeutic
efficacy would prevent or substantially slow down the development effort and
ultimately would have a material adverse effect on the Company. Furthermore,
there can be no assurance that the Company's research and development efforts
will be successful and that any given product will be approved by appropriate
regulatory authorities or that any product candidate under development will be
safe, effective or capable of being manufactured in commercial quantities at an
economical cost, will not infringe the proprietary rights of others or will
achieve market acceptance.
Risks Associated With the Manufacture of SangCya oral solution and capsules,
and Thymoglobulin. Cyclosporine is particularly difficult to manufacture and
there can be no assurance that SangCya oral solution or capsules can be
manufactured in commercial quantities at an economical cost. The Company has
contracted for commercial scale production of cyclosporine bulk material (i.e.
the active ingredient of cyclosporine) for SangCya oral solution and capsules
from Gensia Sicor and Abbott Laboratories. Gensia has been qualified as a
supplier of cyclosporine bulk material in the SangCya oral solution ANDA.
SangStat has filed a supplemental application to its SangCya oral solution ANDA
to qualify Abbott as an alternative cyclosporine raw material supplier. This
supplemental application has not yet been approved. The Company has also
separately subcontracted the manufacture of SangCya oral solution and capsules
with Eli Lilly. There can be no assurance that such third parties will perform
satisfactorily and any such failure may delay regulatory approval, product
launch, impair the Company's ability to deliver products on a timely basis, or
otherwise impair the Company's competitive position, which would have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
Thymoglobulin is also difficult to manufacture and there can be no assurance
that SangStat will be able to manufacture commercial quantities at an economical
cost. The Company acquired the IMTIX division of PMC in 1998, including certain
manufacturing capabilities with respect to Thymoglobulin. From time to time,
prior to the acquisition, certain batches of Thymoglobulin did not meet
manufacturing specifications, resulting in a shortage of Thymoglobulin product
for commercial sale. Since the acquisition, all batches of Thymoglobulin have
met manufacturing specifications. Even after the acquisition, the Company still
relies on PMC for certain important manufacturing services, including, but not
limited to, quality assurance and quality control, as well as lyophilization.
There can be no assurance that PMC will continue to provide these critical
manufacturing services to the Company in an effective manner or without
interruption. There can be no assurance that the Company will not experience
manufacturing difficulties with respect to Thymoglobulin in the future which may
impair the Company's ability to deliver products on a timely basis, or otherwise
impair the Company's competitive position, which would have a material adverse
effect on the Company's business, financial condition, cash flows and results of
operations.
Uncertainty of Market Acceptance. Whether or not regulatory approvals are
obtained, uncertainty exists as to whether the Company's products will be
accepted by the market. In particular, there can be no assurance that the
Company's products and product candidates would obtain significant market share.
Factors that may affect the willingness of patients, physicians, pharmacists and
third-party payors to convert to SangStat products, if approved, include price,
perception of bioequivalence, perceived clinical benefits and risks, ease of
use, other product features and brand loyalty. In addition, other factors may
limit the market acceptance of products developed by the Company, including the
timing of regulatory approval and market entry relative to competitive products,
the availability of alternative therapies, the price of the Company's products
relative to alternative therapies, the availability of third-party reimbursement
and the extent of marketing efforts by the Company or third-party distributors
or agents retained by the Company. There can be no assurance that patients,
physicians, pharmacists, or third-party payors will accept the Company's
products. In particular, with respect to SangCya oral solution and capsules (if
product approval is obtained), there can be no assurance that the Company will
be successful in taking significant market share away from Novartis.
Volatility of Common Stock Price. The market prices for securities of
pharmaceutical and biotechnology companies, including the Company, have
historically been highly volatile. The market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. Factors such as fluctuations in the
Company's operating results, announcements of new therapeutic products by the
Company or its competitors, announcements regarding collaborative agreements,
governmental regulation, clinical trial results, developments in patent or other
proprietary rights, litigation, public concern as to the safety of drugs
developed by the Company or others, comments made by securities analysts and
general market conditions may have a significant effect on the market price of
the Company's Common Stock. In particular, the realization of any of the risks
described on this 10-Q could have a significant and adverse impact on the market
price.
Ability to Manage Growth. The Company continues to experience a period of
expansion of its operations that places a strain upon its management system and
resources. The Company's ability to compete effectively and to manage future
growth, if any, will require the Company to continue to improve its financial
and management controls, reporting systems and procedures on a timely basis and
expand, train and manage an increasing number of employees. The Company's
failure to do so would have a material adverse effect on the Company's business,
financial condition and results of operations.
Uncertainty Regarding Patents and Proprietary Rights. The Company's success
depends in part on its ability to obtain and enforce patent protection for its
products and to preserve its trade secrets. The Company holds patents and
pending patent applications in the United States and abroad. The Company's
patents involve specific claims and thus do not provide broad coverage. There
can be no assurance that the Company's patent applications or any claims of
these patent applications will be allowed, or found to be valid or enforceable,
that any patents or any claims of these patents will provide the Company with
competitive advantages for its products or that such issued patents and any
patents issued under pending patent applications will not be successfully
challenged or circumvented by the Company's competitors. The Company has not
conducted extensive patent and prior art searches with respect to many of its
product candidates and technologies, and there can be no assurance that third-
party patents or patent applications do not exist or could not be filed in the
United States, Europe or other countries which would have an adverse effect on
the Company's ability to market its products. There can be no assurance that any
claims in the Company's patent applications would be allowed, or found to be
valid or enforceable, or that any of the Company's products would not infringe
on others' patents or proprietary rights in the United States or abroad. The
ALLOTRAP peptide family is being developed under an exclusive, worldwide license
from Stanford University. Although Stanford has filed patent applications with
respect to such technology, there can be no assurance that, other than the
patent application that has issued, any of the claims of such patent
applications will be allowed, or found to be valid or enforceable and as to the
issued patent, that the claims will be found to be valid or enforceable.
There can be no assurance that SangStat can manufacture, or have
manufactured, formulate or commercialize SangCya oral solution and capsules
without infringing patent or other proprietary rights of Novartis or other third
parties. The Company has been sued by Novartis for patent infringement. See "--
Litigation with Novartis."
Patent applications in the United States are maintained in secrecy until
patents issue. Since publication of discoveries in the scientific or patent
literature tends to lag behind actual discoveries by several months, SangStat
cannot be certain that it was the first to discover compositions covered by its
pending patent applications or the first to file patent applications on such
compositions. There can be no assurance that the Company's pending patent
applications will result in issued patents or that any of its issued patents
will afford protection against a competitor.
The Company also relies on trade secrets and proprietary know-how which it
seeks to protect, in part, by confidentiality agreements with its employees and
consultants. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or independently
developed by competitors. The Company has registered or applied for registration
of the names of most of its products under development or commercialized for
research and development use. However, there can be no assurance that any
trademark registration will be granted or not challenged by competitors.
Substantial Competition. The drugs being developed by the Company compete
with existing and new drugs being created by pharmaceutical, biopharmaceutical,
biotechnology and diagnostics companies and universities. Many of these entities
have significantly greater research and development capabilities, as well as
substantial marketing, manufacturing, financial and managerial resources and
represent significant competition for the Company. The principal factors upon
which the Company's products compete are product utility, therapeutic benefits,
ease of use, effectiveness marketing, distribution and price. With respect to
Thymoglobulin, SangCya oral solution, cyclosporine capsules, and azathioprine,
the Company will be competing against large companies that have significantly
greater financial resources and established marketing and distribution channels
for competing products. For example, Novartis currently controls virtually 100%
of the worldwide cyclosporine markets and has significantly greater resources
than the Company. There can be no assurance that the Company will be able to
compete successfully against Novartis. To date, the Company has a limited number
of contracts with managed care providers and group purchasing organizations.
The Company's future sales will be dependent on the Company's ability to enter
into contracts with these entities. The drug industry is characterized by
intense price competition and the Company anticipates that it will face this and
other forms of competition. There can be no assurance that developments by
others will not render the Company's products or technologies obsolete or
noncompetitive or that the Company will be able to keep pace with technological
developments. Many of the 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 these products may have an entirely different
approach or means of accomplishing the desired therapeutic effect than products
being developed by the Company and may be more effective and less costly. In
addition, many of these competitors have significantly greater experience than
the Company in undertaking preclinical testing and human clinical trials of
pharmaceutical products and obtaining regulatory approvals of such products.
Accordingly, the Company's competitors may succeed in commercializing products
more rapidly than the Company. For example, the Company believes that the degree
of market penetration of a cyclosporine capsule is dependent in part on whether
the Company is the first company to market a bioequivalent formulation of
cyclosporine. The Company believes that other companies may be developing
cyclosporine formulations that may be marketed as generic equivalents. Were
these competitors to develop their products more rapidly and complete the
regulatory process sooner, it could have a material adverse effect on the
Company's business, financial condition, cash flows and results of operations.
Treatments for the problems associated with transplantation that the
Company's products seek to address are currently available. For example,
Sandimmune and Neoral, marketed by Novartis, Prograf marketed by Fujisawa
Pharmaceutical Co. Ltd, CellCept, marketed by Roche Ltd. and Imuran, marketed by
Glaxo Wellcome Ltd. would be competitive with SangCya oral solution and capsules
and azapthioprine. Orthoclone OKT3, marketed by Johnson & Johnson and ATGAM,
marketed by Pharmacia & Upjohn Inc., Simulect, marketed by Novartis, and
Zenapax, marketed by Roche Ltd., would be competitive with Thymoglobulin. All
of such products are commercially available for use as immunosuppressive drugs
and are widely prescribed. In addition, One Lambda Inc., Pel Freez, Biotest
Diagnostics Corp., and Genetic Therapy, Inc. market products for pre-transplant
HLA monitoring and Abbott Laboratories markets a cyclosporine level post
transplant monitoring device, all of which are widely used. Additional
therapeutics and monitoring products are available or are under development by
these and other parties including, but not limited to: American Home Products
Corp. (rapamycin), Bristol Myers Squibb (CTLA4), and DuPont Merck (ViaSpan), and
other companies including, but not limited to MedImmune Inc., Eon,
BioTransplant, Inc., and Ivax Corp. All of the aforementioned competitive and
other drugs are commercially available for use as immunosuppressive drugs and
are widely prescribed. To the extent these therapeutics, monitoring products or
novel transplant procedures address the problems associated with transplantation
on which the Company has focused, they may represent significant competition.
Limited Manufacturing Capability. In 1998, the Company leased a
manufacturing facility in Lyon, France as part of the IMTIX transaction for the
manufacture of Thymoglobulin. The Company's wholly-owned subsidiary, IMTIX-
SangStat, manufactures Thymoglobulin. There can be no assurance that IMTIX-
SangStat will continue to meet FDA standards governing Good Manufacturing
Practices ("GMP"). The Company currently relies on PMC to perform certain
services for the Company in the manufacturing process. See "--Risks Related to
the Manufacture of SangCya oral solution and capsules, and Thymoglobulin."
The Company lacks facilities to manufacture any of its other drugs or drug
candidates in accordance with current GMP prescribed by the FDA. The Company
generally relies on third parties to manufacture compounds other than
Thymoglobulin and devices for commercial sales and clinical trials, including
SangCya oral solution and capsules, PRA-STAT, CycloTech, Allotrap 1258,
Azathioprine and Celsior and has contracted for commercial production of these
compounds and devices. There can be no assurance that manufacturers will meet
FDA standards governing GMP or other regulatory guidelines, that any Biologics
License Applications required for manufacturing will be filed, reviewed and
approved, or that any third-party manufacturer will pass a pre-approval
inspection. The Company is currently purchasing Allotrap 1258 for clinical
trials from UCB Bioproducts S.A. ("UCB") located in Belgium, and intends to
contract with UCB for commercial production. The Company has contracted for
commercial scale production of cyclosporine bulk material for SangCya oral
solution and capsules with Gensia Sicor and Abbott Laboratories. In addition,
the Company has contracted for the production of its finished formulated SangCya
oral solution and capsules with Eli Lilly and Company. The Company has also
contracted for manufacture of azathioprine bulk material with an FDA approved
manufacturer and with a separate FDA approved manufacturer for production of its
finished formulated azathioprine product candidate. There can be no assurance
that the Company will be able to enter into secondary commercial scale
manufacturing contracts or that any other third-party arrangements can be
established on a timely or commercially reasonable basis, or at all. The Company
will depend on all such third parties to perform their obligations effectively
and on a timely basis. There can be no assurance that such parties will perform
and any failures by third parties may delay clinical development or submission
of products for regulatory approval, or otherwise impair the Company's
competitive position which could have a material adverse effect on the Company's
business, financial condition, cash flows and results of operations. In
addition, the manufacturing of drug candidates involves a number of technical
steps and requires meeting stringent quality control specifications imposed by
government regulatory bodies and by the Company itself. Additionally, such
products can only be manufactured in facilities approved by the applicable
regulatory authorities. Because of these and other factors, the Company may not
be able to replace its manufacturing capacity quickly or efficiently in the
event that its manufacturers are unable to manufacture their products at one or
more of their facilities. For certain of its potential products, the Company
will need to develop its production technologies further for use on a larger
scale in order to conduct human clinical trials and produce such products for
commercial scale at an acceptable cost.
The Transplant Pharmacy. Establishing THE TRANSPLANT PHARMACY as a viable
distribution system entails a number of risks including the Company's ability to
enter into agreements with transplant centers to utilize THE TRANSPLANT
PHARMACY's services, compliance with state regulations regarding pharmacy
licensing and compliance with federal and state laws regulating payments for
referrals for health care services. On November 11, 1998, the Office of the
Inspector General ("OIG") of the Department of Health & Human Services issued an
Advisory Opinion which stated that the placement by a pharmacy of a licensed
pharmacist at a hospital transplant center might constitute prohibited
remuneration under the anti-kickback statute section 1128B9B) of the Social
Security Act. The Company did not request the Advisory Opinion and the Advisory
Opinion only applies to the requesting party. The Company believes that the
operation of The Transplant Pharmacy differs from the fact pattern set out in
the Advisory Opinion and does not constitute prohibited remuneration. There can
be no assurance that the OIG will agree with this analysis, in which case The
Transplant Pharmacy's program may be modified so that it would no longer include
an on-site pharmacist at transplant centers. There can be no assurance that the
Company will be successful in establishing THE TRANSPLANT PHARMACY as a viable
distribution method for the Company's products and services.
No Assurance of FDA, Canadian or European Regulatory Approval; Government
Regulation. The Company's research, preclinical development, clinical trials,
manufacturing, marketing and distribution of its products in the United States
and other countries are subject to extensive regulation by numerous governmental
authorities including, but not limited to, the FDA. In order to obtain
regulatory approval of a drug product, the Company must demonstrate to the
satisfaction of the applicable regulatory agency, among other things, that such
product is safe and effective for its intended uses and that the manufacturing
facilities are in compliance with GMP requirements. The Company must also
demonstrate the approvability of a BLA for its biological products. The approval
of the Company's generic product candidates is dependent on demonstrating
bioequivalence with reference products in addition to assurance of compliance
with GMP regulations. In order to market its monitoring products, which are
considered to be medical devices, the Company or its licensees will be required
either to receive 510(k) marketing clearance or Premarket Approval Application
("PMA") approvals from the FDA for such products among other regulatory
requirements. To obtain a 510(k) marketing clearance, the Company must show that
a monitoring product is "substantially equivalent" to a legally marketed product
not requiring FDA approval. In addition, the Company must demonstrate that it is
capable of manufacturing the product to the relevant standards. To obtain PMA
approval, the Company must submit extensive data, including pre-clinical and
clinical trial data to prove the safety and efficacy of the device.
Additionally, the Company is currently distributing several monitoring products
for research or investigational use. Although the Company believes it is
complying with FDA regulations regarding such distribution, there can be no
assurance that the FDA will not determine that the Company is violating FDA
regulations with respect to the distribution of these products. The process of
obtaining FDA and other required regulatory approvals is lengthy and will
require the expenditure of substantial resources, and there can be no assurance
that the Company will be able to obtain the necessary approvals. Moreover, if
and when such approval is obtained, the marketing, distribution and manufacture
of the Company's products would remain subject to extensive regulatory
requirements administered by the FDA and other regulatory bodies. Failure to
comply with applicable regulatory requirements can result in, among other
things, warning letters, fines, injunctions, civil penalties, recall or seizure
of products, total or partial suspension of production, refusal of the
government to grant pre-market clearance or pre-market approval, withdrawal of
approvals and criminal prosecution of the Company and employees. Additionally,
the Company intends to pursue commercialization of its products in European
countries. Both the Company's pre-transplant and post-transplant monitoring
products should be subject to regulation as in vitro medical devices for which
regulations are being presently formulated under harmonized European Directives.
This new Directive is likely to impose additional requirements on the pre-
transplant donor/recipient matching products and the post-transplant monitoring
products. This legislation may include, among other things, requirements with
respect to the design, safety and performance of the products as well as impose
premarket approval procedures such as product type certification and quality
systems certification of manufacturing. The Company's therapeutic products are
subject to foreign regulatory requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement, which vary from country to
country. The process of obtaining foreign regulatory approvals can be lengthy
and require the expenditure of substantial resources, and there can be no
assurance that the Company will be able to obtain the necessary approvals or the
approvals for the proposed indications.
Dependence on Collaborative Relationships. The Company has in the past
relied on collaborative relationships to finance certain of its research and
development programs. The Company may enter into collaborative relationships
with corporate and other partners to develop and commercialize certain of its
potential products. There can be no assurance that the Company will be able to
negotiate acceptable collaborative arrangements in the future, that such
collaborations will be available to the Company on acceptable terms or that any
such relationships, if established, will be scientifically or commercially
successful.
Dependence upon Key Personnel. The Company's ability to develop its business
depends in part upon its attracting and retaining qualified management and
scientific personnel. As the number of qualified personnel is limited,
competition for such personnel is intense. There can be no assurance that the
Company will be able to continue to attract or retain such people. The loss of
key personnel or the failure to recruit additional key personnel could
significantly impede attainment of the Company's objectives and have a material
adverse effect on the Company's financial condition and results of operations.
The Company's planned activities will require the addition of new personnel,
including management, and the development of additional expertise by existing
management personnel, in areas such as research, product development,
preclinical testing, clinical trial management, regulatory affairs, finance,
manufacturing, pharmacy affairs and marketing and sales. The inability to
acquire such services or to develop such expertise could have a material adverse
effect on the Company's business, financial condition and results of operations.
Uncertainty of Pharmaceutical Pricing and Reimbursement. The Company's
ability to commercialize its products may depend in part on the extent to which
reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
coverage insurers and other organizations. Significant uncertainty exists as to
the pricing, availability of distribution channels and reimbursement status of
newly approved healthcare products and there can be no assurance that adequate
third party coverage will be available for the Company to maintain price levels
sufficient for realization of an appropriate return on its investment in product
development. In certain foreign markets, pricing or profitability of healthcare
products is subject to government control. In the United States, there have
been, and the Company expects that there will continue to be, a number of
federal and state proposals to implement similar governmental control. In
addition, an increasing emphasis on managed care in the United States has and
will continue to increase the pressure on pharmaceutical pricing. While the
Company cannot predict whether any such legislative or regulatory proposals will
be adopted or the effect such proposals or managed care efforts may have on its
business, the announcement of such proposals or efforts could have a material
adverse effect on the Company's ability to raise capital, and the adoption of
such proposals or efforts could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, to the extent
that such proposals or efforts have a material adverse effect on other
pharmaceutical companies that are prospective corporate partners for the
Company, the Company's ability to establish corporate collaborations may be
adversely affected. In addition, third-party payors are increasingly challenging
the prices charged for medical products and services. If the Company succeeds in
bringing one or more products to the market, there can be no assurance that
these products will be considered cost effective or that reimbursement to the
consumer will be available or will be sufficient to allow the Company to sell
its products on a competitive basis.
Product Liability Exposure; Limited Insurance Coverage. The Company faces an
inherent business risk of exposure to product liability claims in the event that
the use of products manufactured by the Company results in adverse effects
during research, clinical development or commercial use. While the Company will
attempt to take appropriate precautions, there can be no assurance that it will
avoid significant product liability exposure. The Company's product liability
insurance coverage is currently limited to $10,000,000 which may not be adequate
insurance coverage to cover potential liability exposures. Moreover, there can
be no assurance adequate insurance coverage will be available at acceptable
cost, if at all, or that a product liability claim would not materially
adversely affect the business, financial condition, cash flows and results of
operations of the Company.
Hazardous Materials. In connection with its research and development
activities and operations, the Company is subject to federal, state and local
laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of
certain materials, biological specimens and wastes. There can be no assurance
that the Company will not incur significant costs to comply with environmental
and health and safety regulations. The Company's research and development
involves the controlled use of hazardous materials, including but not limited to
certain hazardous chemicals and infectious biological specimens. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company.
Effect of Certain Provisions: Anti-takeover Effects of Certificate of
Incorporation, Bylaws, Stockholder Rights Plan and Delaware Law. Certain
provisions of the Company's Certificate of Incorporation and Bylaws could delay
or make more difficult a merger, tender offer or proxy contest involving the
Company, which could adversely affect the market price of the Company's Common
Stock. The Company's Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Further, the Company has adopted a stockholder rights
plan. The plan allows for the issuance of a dividend to stockholders of rights
to acquire shares of the Company or, under certain circumstances, an acquiring
corporation, at less than half their fair market value. The plan could have the
effect of delaying, deferring or preventing a change in control of the Company.
In addition, the Company is subject to the antitakeover provisions of Section
203 of the Delaware General Corporation Law, which will prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The application of Section 203 also could have the effect
of delaying or preventing a change of control of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to part II, Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, in the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 11, 1999, Novartis Pharmaceuticals Corporation ("Novartis US") filed
a lawsuit (case number 99-065) in Federal District Court for the District of
Delaware against the Company alleging infringement of United States patent
#5,389,382, a cyclosporine technology patented by Novartis A.G. (the "US
Patent"). The Novartis A.G. patent does not cover Neoral but rather a separate
delivery system not used in the Neoral formulation. Novartis US seeks the
following relief: (i) a finding that SangStat willfully infringed the patent;
(ii) to permanently enjoin SangStat from infringing the US Patent; (iii) treble
damages; and (iv) reasonably attorneys' fees, costs and expenses. On April 15,
1999, SangStat filed its answer in this case and also filed a counterclaim
against Novartis alleging that Novartis violated the anti-trust laws by engaging
in a series of anti-competitive acts designed and intended to exclude SangStat
from the market. Novartis has filed a motion to bifurcate the anti-trust
counterclaim; the Court has not yet ruled on this motion. The trial date has
been set for October 23, 2000 and discovery has commenced.
On July 9, 1999, Novartis AG and Novartis Pharmaceuticals UK Limited
("Novartis UK") filed an action against Imtix-SangStat (UK) Limited; SangStat
UK, Limited, and SangStat Medical Corporation (collectively, the "UK
Defendents") in the High Court of Justice, Chancery Division, Patents Court,
London (HC-1999-02988) alleging infringement of United Kingdom Patent No 2 200
048 (the "UK Patent"), the counterpart to the US Patent. The lawsuit mirrors
the US patent infringement lawsuit. Novartis AG and Novartis UK seek the
following relief: (i) an injunction to restrain the UK Defendents from
infringing the UK Patent; (ii) the delivery up or destruction of all material
that would infringe such injunction; (iii) damages; (iv) a declaration that the
UK Patent is valid and has been infringed by the UK Defendants; and (v) costs.
Novartis US also sued the FDA on February 11, 1999 in the United States
District Court for the District of Columbia (case number 1:99CV-00323) alleging
that the FDA did not follow its own regulations in approving SangCya oral
solution in October 1998. The lawsuit alleges that because Neoral oral solution
and SangCya oral solution are based on different formulation technologies, they
should be classified as different dosage forms. Novartis asks that the court
rescind the AB rating that was given to SangCya oral solution. Loss of the "AB"
rating would prevent SangCya oral solution from being automatically
substitutable for Neoral oral solution, which would impede the marketing of
SangCya oral solution. The Company believes that the lawsuit is without merit
and that the FDA will prevail in this matter. Although the Company is
optimistic that this dispute will ultimately be resolved favorably to the
Company, the course of litigation is inherently uncertain and there can be no
assurance of a favorable outcome. Novartis' requested relief, if granted, could
have a significant negative economic impact on SangStat. SangStat has intervened
in this lawsuit in order to protect its interests. The Company does not believe
that these lawsuits will have an impact on the regulatory approval of SangCya
capsules in the US.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EDGAR Financial Data Schedule 27.1
(b) EXHIBITS
EXHIBITS DESCRIPTION
10.26 Co-promotion Agreement dated May 7, 1999 between
the Company and Abbott Laboratories Inc. (1)
10.27 Call Option Agreement dated May 7, 1999 between
the Company and Abbott Laboratories Inc.
10.28 Right of First Refusal Agreement dated May 7, 1999
between the Company and Abbott Laboratories Inc.
10.29 Registration Rightsl Agreement dated May 7, 1999
between the Company and Abbott Laboratories Inc.
(c) There were no reports on Form 8-K filed during the period
covered by this report.
(1) The Company has applied for confidential treatment with respect to
portions of this exhibit.
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.
SANGSTAT MEDICAL CORPORATION
----------------------------
(REGISTRANT)
DATE: August 13, 1999 BY: /S/ STEPHEN G. DANCE
------------------------------------
STEPHEN G. DANCE
SENIOR VICE PRESIDENT, FINANCE
EXHIBIT 10.26
CO-PROMOTION AGREEMENT
BETWEEN
ABBOTT LABORATORIES INC.
AND
SANGSTAT MEDICAL CORPORATION
MAY 7, 1999
Table of Contents
1. Definitions 1
2. Purpose of the Agreement 6
2.1 Purpose 6
2.2 Appointment 7
2.3 Agent for Managed Care Organizations Contracting 7
2.4 [ ]* 7
2.5 Exclusivity 7
3. Co-Promotion Activities 7
3.1 SangStat's Marketing Obligations 7
3.1.1 Co-Promotion Sales Force and Management 7
3.1.2 Product Launches 7
3.1.3 SangStat Detailing Commitment 7
3.1.4 Failure to Achieve SangStat Detailing Commitment 7
3.1.5 Additional Obligations 8
3.2 Abbott's Marketing Obligations 8
3.2.1 Sales Force 8
3.2.2 Product Launches 8
3.2.3 Abbott Detailing Commitment 8
3.2.4 Failure to Achieve Abbott Detailing Commitment 8
3.2.5 Information 9
3.2.6 Additional Obligations 9
3.3 Mutual Marketing Obligations 9
3.3.1 Training 9
3.3.2 Market Research 9
3.3.3 Incentives 10
3.3.4 Sampling 10
3.3.5 Indigent Programs 10
3.3.6 Development of Promotional Materials 10
3.3.7 Promotional and Marketing Costs 10
3.3.8 Detailing 11
3.3.9 Managed Care Organizations 11
4. Distribution Activities 12
4.1 Distribution 12
4.2 Service Level 12
5. Management of Relationship 12
5.1 Co-Promotion Committee 12
5.1.1 Product Manager 12
5.1.2 Co-Promotion Committee 12
5.2 Development Committee 12
5.3 Executive Steering Committee 13
5.3.1 General 13
5.3.2 Quarterly Meetings 13
5.3.3 Authority 13
5.3.4 Dispute Resolution 13
6. Payments 14
6.1 Milestone Payments 14
6.1.1 Signing of Agreement 14
6.1.2 SangCya 14
6.1.3 Gengraf 14
6.1.4 Regulatory Approval - Capsule Product 14
6.2 Loan 14
6.3 Stock Purchase Agreement 14
6.4 Supplemental Fee 15
6.4.1 Definition 15
6.4.2 Calendar Year 2000 15
6.4.3 Calendar Year 2001 and After 15
(a) Base Rate 15
(b) Increases to Base Rate based on Net Sales of Gengraf 15
6.5 Commissions 16
6.5.1 Sang-2000 Commission Rate 16
6.5.2 SangCya Commission Rate 16
6.5.3 CycloTech Commission Rate 17
6.5.4 Other Cyclosporine Product Commission Rate 17
6.6 Calculation of Supplemental Fees and/or Commissions 17
6.7 Reports 17
6.7.1 Gengraf [ ]*Capsule Product 17
6.7.2 Sang-2000 [ ]* Capsule Product 18
6.8 Pricing 18
6.8.1 Product Price 18
6.8.2 Wholesale Acquisition Cost (WAC) 18
6.8.3 Rebates, Administrative Fees and Chargebacks 18
6.8.4 Medicaid Rebates 19
6.9 Product Shortage 19
6.10 Timing of Payments 19
6.10.1 Payment of Product Price 19
(a) Gengraf - Ninety Days following Initial Sale 19
(b) Gengraf - More than Ninety Days following Initial Sale 20
(c) Sang-2000 20
6.10.2 Payment of Supplemental Fee and Commissions 20
6.11 Payment Details 20
6.12 Late Payments 20
6.13 Records/Audits 20
6.14 Product Supplied for Clinical Trials, Promotional and
Humanitarian Uses 21
7. Product Development 21
7.1 Development Obligations 21
7.1.1 CycloStat System 21
7.1.2 Products 21
7.2 Development Costs 21
7.2.1 Sang-2000 21
7.2.2 Gengraf 21
7.2.3 SangCya and CycloTech 21
7.2.4 1999 and 2000 Budgets 21
7.3 Obligations 22
7.4 Regulatory Approvals 22
8. Trademarks 22
9. Supply of Finished Capsule Product 22
9.1 Exclusivity 22
9.2 Forecasting/Ordering. 23
9.2.1 Gengraf 23
9.2.2 Sang-2000 23
9.2.3 Limitation 23
9.3 Manufacturing Capacity. 23
9.3.1 Gengraf 23
9.3.2 Sang-2000 24
9.3.3 Additional Suppliers 24
10. Inventory of Products 24
11. Supply of Bulk Product By Abbott 24
12. Ownership and Confidentiality 24
12.1 Ownership 24
12.2 Covenant Not to Sue 24
12.3 Proprietary Information 25
13. Limited Liability 25
14. Term and Termination 25
14.1 Term 25
14.2 For Cause 25
14.2.1 Ceases to do Business 25
14.2.2 Material Breach 26
14.2.3 Bankruptcy 26
14.3 Regulatory Issues 26
14.4 Certain Acquisitions 26
14.5 Effect of Termination 26
14.6 Pending Orders and Inventory 26
14.7 Effect of Termination for Breach 27
14.8 Effect of Termination for Failure to Obtain Regulatory Approval 27
14.9 Right to Promote Capsule Product 27
14.10 Repayment of Loan 27
14.11 Additional Remedies 27
14.12 Accrued Rights and Obligations 27
15. Warranty and Warranty Disclaimers 27
15.1 Abbott 27
15.1.1 Supplied Product 28
15.1.2 No Infringement 28
15.1.3 Regulatory 28
15.1.4 Title 28
15.1.5 No Violation 28
15.2 SangStat 28
15.2.1 Supplied Product 28
15.2.2 No Infringement 28
15.2.3 Regulatory 28
15.2.4 Title 28
15.2.5 No Violation 28
15.3 Promotional 29
16. Indemnification 29
16.1 Abbott Indemnity 29
16.1.1 Infringement 29
16.1.2 Product Liability 29
16.1.3 General 29
16.2 SangStat Indemnity 30
16.2.1 Infringement 30
16.2.2 Product Liability 30
16.2.3 General 30
17. Adverse Events, Recalls and other Regulatory Matters 30
17.1 Adverse Reaction Reporting 30
17.2 Product Information Requests 31
17.3 Governmental Reports 31
17.4 Product Recall 31
17.5 Procedures 31
17.6 Governmental Contact Reporting 31
17.7 Product Registration 32
17.8 Records Retention 32
18. General 32
18.1 Entire Agreement 32
18.2 Modifications in Writing 32
18.3 No Waiver 32
18.4 Governing Law 32
18.5 Headings 32
18.6 Notices 32
18.7 Severability 33
18.8 Independent Contractor 33
18.9 Assignability 33
18.10 Public Statements 33
18.11 Force Majeure 33
18.12 Remedies 33
18.13 Alternative Dispute Resolution 34
18.14 Compliance with Laws 34
18.15 Counterparts 34
* Confidential Treatment requested
CO-PROMOTION AGREEMENT
THIS CO-PROMOTION AGREEMENT is entered as of May 7, 1999 (the "Effective
Date") by and between ABBOTT LABORATORIES INC. ("Abbott"), an Illinois
corporation, with a place of business at 100 Abbott Park Road, Abbott
Park, Illinois 60064-6400, and SANGSTAT MEDICAL CORPORATION ("SangStat") a
Delaware corporation, with a place of business at 1505 Adams Drive, Menlo
Park, California 94025.
WHEREAS, Abbott and SangStat are each developing a generic capsule
formulation of cyclosporine which capsule is intended to be AB-rated
equivalent to Neoral (as defined below);
WHEREAS, SangStat is currently marketing an oral solution
cyclosporine product known as SangCya (Cyclosporine Oral Solution, USP
[Modified]) that is AB-rated equivalent to Neoral;
WHEREAS, by combining SangStat's strengths in the transplant market,
its portfolio of transplant-related products already on the market, and
its technology in the field of at-home testing devices with Abbott's
strengths in managed care and its technology in the field of assay
development; Abbott and SangStat will create a stronger competitor to
Novartis (as defined below), the market leader, than would otherwise
prevail in the absence of this Agreement thereby enhancing competition;
WHEREAS, Abbott wishes SangStat to co-promote and sell Abbott's
generic capsule formulation of cyclosporine under the terms and conditions
set forth herein; and
WHEREAS, SangStat wishes Abbott to co-promote SangStat's generic
capsule formulation of cyclosporine, along with SangCya and CycloTech (as
defined below), under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants and undertakings contained herein, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties intending to be legally bound hereby agree as
follows:
1. DEFINITIONS
1.1 "Abbott Detailing Commitment" has the meaning set
forth in Section 3.2.3.
1.2 "Acquiror" has the meaning set forth in Section 14.4.
1.3 "Adverse Ruling" has the meaning set forth in Section
14.2.2.
1.4 "Affiliate" means an entity controlling, controlled
by, or under common control with a party to this Agreement. For purposes
of this definition, "control" or any correlative form thereof, means the
ownership of more than fifty percent of the voting stock of such entity,
or if such entity is not a corporation, the ability to control the day-to-
day operations and business of such entity.
1.5 "ANDA" means an Abbreviated New Drug Application as
such is defined by the FDA.
1.6 "Base Rate" has the meaning set forth in Section 6.4.
1.7 "Capsule Product" means a Party's, or any of its
Affiliate's, generic capsule or tablet dosage form for which such Party
either intends to seek, is seeking or has received Regulatory Approval and
is an AB-rated product equivalent to [ ]*. The
current expected Capsule Products are more particularly described
in Exhibit A hereto.
1.8 "Commercially Reasonable Efforts" means, with respect
to each Party, efforts which are consistent with those utilized by such
Party for its own internally-developed or in-licensed pharmaceutical
products of similar market potential, at a similar stage of its product
life, taking into account the existence of other competitive products in
the market place or under development, the proprietary position of the
product, the profitability of the product and other relevant factors.
1.9 "Commission" means any commission due Abbott on
SangCya, Sang-2000 or CycloTech.
1.10 "Co-Promotion Committee" has the meaning set forth in
Section 5.1.2.
1.11 "Co-Promotion Plan" means, for any period, a written
plan developed by SangStat and Abbott for such period that has been
approved by the Executive Steering Committee and that sets forth the key
elements of the sales and marketing strategy for the Products, including,
without limitation, plans for promotional materials, clinical trials and
studies, trade show participation, and advertising, which may include the
elements set forth on Exhibit B.
1.12 "CycloStat System" means the combination of the [ ]* and
[ ].*
1.13 "CycloTech" means the dispensing device used in
conjunction with SangCya, and which received 510(k) approval from the FDA
on August 18, 1998, and which is more particularly described in Exhibit A.
1.14 "CycloTech Commission Rate" has the meaning set forth
in Section 6.5.3.
1.15 "DDMAC" means the FDA's Division of Drug Marketing,
Advertising and Communications.
1.16 "Detailing" means the act of promoting a Product in
the Territory through Physician Details and Sales Calls.
1.17 "Detail Year" means, with respect to the Products, the
calendar year. The first Detail Year shall commence on the earlier of
Abbott's Launch Date for SangCya or ninety (90) days after the Effective
Date and end December 31, 1999.
1.18 "Development Committee" has the meaning set forth in
Section 5.2.
1.19 "Development Costs" means, with respect to a Product,
the costs and expenses incurred by a Party in connection with [ ]*
The initial budget for Development Costs is set forth in Section 7.2.4.
[ ]*
1.20 "Development Plan" has the meaning set forth in
Section 5.2.
1.21 "Distribution Expenses" for a period includes, with
respect to each Product only the following costs (as determined in
accordance with U.S. generally accepted accounting principles):[ ]*
1.22 "Distributor" means the Party appointed to sell the
Products to third parties as set forth in this Agreement, in particular in
Article 2.
1.23 "Executive Steering Committee" has the meaning
specified in Section 5.3 below.
1.24 "FDA" means the U.S. Food and Drug Administration and
any successor entity thereto.
1.25 "Gengraf" means the Capsule Product that is being
developed by Abbott or its Affiliates for which Abbott or its Affiliates
is seeking [ ]* as is more particularly
described in Exhibit A.
1.26 "Initial Sale" has the meaning set forth in Section
6.10.1(a).
1.27 "Launch Date" means with respect to the applicable
Product, the date the full scale Physician Detail effort commences.
1.28 "Legal Requirements" means any and all federal, state
and local laws, regulations, ordinances, orders and requirements,
applicable to the co-promotion, distribution or sale of the Products or
other obligations of the Parties hereunder, including, without limitation,
the Prescription Drug Marketing Act of 1987, the Federal Food, Drug and
Cosmetic Act, and all regulations and other requirements of the FDA. In
the event of any conflict between the foregoing sources of authority, U.S.
federal law and regulations shall be given priority.
1.29 "Loan" has the meaning set forth in Section 6.1.4.
1.30 "Managed Care Organization" means health maintenance
organizations, hospitals, group purchasing organizations, integrated
health systems, physician management groups, pharmacy benefit managers,
mail order, retail pharmacy chains, and government entities.
1.31 "Manufacturing Cost" includes, with respect to the
Products manufactured by or for a Party, only the following (as determined
in accordance with such Party's standard principles for calculating
manufacturing cost to the extent that such principles are in accordance
with U.S. generally accepted accounting principles): [ ]* With
respect to Gengraf, the maximum Manufacturing Cost for finished Gengraf
[ ]* during the term of this Agreement is as follows: [ ]* per
kilogram during the first year after the Launch Date, [ ]*
per kilogram during the second and third year after the Launch Date, and
[ ]* per kilogram thereafter. Abbott shall
exercise Commercially Reasonable Efforts to reduce Manufacturing Costs during
the term of this Agreement. With respect to the finished Sang-2000, the
maximum Manufacturing Cost for the finished Sang-2000 [ ]*
during the term of this Agreement is as follows: [ ]* per
kilogram during the first year after the Launch Date, (ii) [ ]*
per kilogram during the second and third year after the Launch Date, and
[ ]* per kilogram thereafter. With respect to CycloTech, the maximum
Manufacturing Cost during the term of this Agreement is as follows: (i)
[ ]* per unit and (ii) [ ]* for
each disposable fluid path. With respect to SangCya, the maximum Manufacturing
Cost during the term of this Agreement shall be [ ]* per
vial.
1.32 "Market Research" has the meaning set forth in Section
3.3.2.
1.33 "Marketing Party" has the meaning set forth in Section
6.5.4.
1.34 "Marketing Reports" has the meaning set forth in
Section 3.3.2.
1.35 "Marketing Rights" has the meaning set forth in
Section 6.1.4.
1.36 "NDA" means a New Drug Application as such is defined
by the FDA.
1.37 "Neoral" means Neoral* (cyclosporine for
microemulsion) capsules and oral solution, the labeling of which the FDA
has ordered changed to Neoral* (Cyclosporine Capsules or Oral Solution,
USP [Modified]), which is currently marketed by Novartis.
1.38 "Net Distribution Margin" for a period means, with
respect to each Product, the Net Sales for such Product less [ ]*
"Net Sales" for a period means, with respect to each Product, [ ] *
1.39 "Non-Reporting Party" has the meaning set forth in
Section 6.8.4.
1.40 "Novartis" means Novartis A.G. or any of its
Affiliates.
1.41 "Orders" has the meaning set forth in Section 6.9.
1.42 "Other Cyclosporine Product" [ ]*
1.43 "Party" or "Parties" means, as applicable, Abbott or
SangStat or both.
1.44 "Payment Report" has the meaning set forth in Section
6.7.
1.45 "Physician Detail" means a face-to-face sales
presentation in the Territory by an Sales Representative during which
presentation one or more Product is promoted in accordance with the terms
hereof to a licensed medical physician, a resident, intern or other health
care professional who has lawful authority to write prescriptions for the
Products and who specializes in transplantation or nephrology.
1.46 "Primary Market Research" has the meaning set forth in
Section 3.3.2.
1.47 "Primary Physician Detail" means a Physician Detail in
which the Product being detailed is the product most emphasized, and
usually the first product presented, during the Physician Detail.
1.48 "Prime Rate" means the prime rate of interest for the
Bank of America as announced in the Wall Street Journal as of the relevant
date.
1.49 "Product" means [ ]*
1.50 "Product Manager" has the meaning set forth in Section
5.1.1.
1.51 "Product Price" shall mean the price for any Product
which is supplied by a Supplier to a Distributor in accordance with
Section 6.8.1 of this Agreement.
1.52 "Product Shortage" has the meaning set forth in
Section 6.9.
1.53 "Promotional and Marketing Costs" means, with respect
to a Product, the costs and expenses incurred by a party hereto in
connection with a promotional or marketing activity for such Product that
has been approved by the Executive Steering Committee. The initial budget
for Promotional and Marketing Costs is set forth in Section 3.3.7.
Promotional and Marketing Costs shall include the costs of [ ]*
1.54 "Proprietary Information" has the meaning set forth in
Section 12.3.
1.55 "Regulatory Approval" means the ANDA approval required
by the FDA to commercially market a Product in the Territory.
1.56 "Reporting Party" has the meaning set forth in Section
6.8.4.
1.57 "Sales Call" means a presentation regarding the
purchase of the Product(s) to a Managed Care Organization.
1.58 "Sales Representative" means, with respect to each
Party, an individual (i) who is regularly employed by such Party on a
full-time basis as a member of one of its sales forces; and (ii) who is
appropriately qualified and experienced in pharmaceutical product
promotion; and (iii) has been trained by such Party to make effective
sales presentations with respect to the applicable Product.
1.59 [ ] *
1.60 "Sandimmune" means Sandimmune soft gelatin capsules
(cyclosporine capsules, USP), oral solution (cyclosporine oral solution,
USP) and injection (cyclosporine concentrate for injection, USP), which is
currently marketed by Novartis.
1.61 "Sang-2000" means the Capsule Product that is being
developed by SangStat or its Affiliates and for which SangStat or an
Affiliate expects to submit an application for ANDA approval on or before
[ ]* as is more particularly described
in Exhibit A.
1.62 "Sang-2000 Commission Rate" has the meaning set forth
in Section 6.5.1.
1.63 "SangCya" means the oral solution cyclosporine product
known as SangCyaT (Cyclosporine Oral Solution, USP [Modified]) that was
approved by the FDA on October 31, 1998 as AB rated to Neoral, as is more
particularly described in Exhibit A, whether sold under the SangCya
trademark or any other trademark.
1.64 "SangCya Commission Rate" has the meaning set forth in
Section 6.5.2.
1.65 "SangStat Detailing Commitment" has the meaning set
forth in Section 3.1.2.
1.66 "Secondary Market Research" has the meaning set forth
in Section 3.3.2.
1.67 "Service Level Commitment" has the meaning set forth
in Section 4.2.
1.68 "Stock Package Request Units" means a packaged and
labeled container of a Product intended for distribution free of charge on
the written request of a physician.
1.69 "Stock Package Request Program" means the program
under which Stock Package Request Units are distributed.
1.70 "Supplemental Fees" has the meaning set forth in
Section 6.4.
1.71 "Supplier" [ ]*
1.72 "Territory" means the United States of America,
including Puerto Rico.
1.73 "WAC" has the meaning set forth in Section 6.8.2.
2. PURPOSE OF THE AGREEMENT
2.1 Purpose. The purpose of the Agreement is to enhance the
ability of the Parties to market, promote and distribute the Products
within the Territory through coordinated marketing efforts and a refined
distribution channel.
2.2 Appointment. SangStat hereby appoints Abbott as its
exclusive co-promotion partner for SangCya and CycloTech throughout the
term of the Agreement in the Territory. [ ] *
2.3 Agent for Managed Care Organizations Contracting.
SangStat hereby appoints Abbott as its agent in the Territory for entering
into contracts with Managed Care Organizations for SangCya and CycloTech.
[ ] *
2.4 [ ]*
2.5 Exclusivity. During the term of this Agreement, neither
Party nor any of its Affiliates shall directly or indirectly promote,
market, distribute or sell (or license or permit any other party to do so)
[ ]* in the Territory except pursuant
to the terms of this Agreement.
3. CO-PROMOTION ACTIVITIES
3.1 SangStat's Marketing Obligations
3.1.1 Co-Promotion Sales Force and Management. SangStat
shall market and co-promote the Products in the Territory using a minimum
of [ ]* SangStat Sales Representatives who
are dedicated full-time to the transplant market, and [ ]* Managed
Care Organization account representatives. SangStat shall have at least
one employee dedicated full-time to act as Product Manager for the
Products.
3.1.2 Product Launches. SangStat shall use Commercially
Reasonable Efforts to initiate the Physician Details and Sales Calls for
the Products as follows: (a) CycloTech in [
]* , (b) [ ]* The Parties acknowledge
that SangStat has launched SangCya as of the Effective Date.
3.1.3 SangStat Detailing Commitment. During the term of
this Agreement, SangStat shall conduct Physician Details, Sales Calls and
otherwise promote the sale of Products in the Territory in accordance with
the terms of this Agreement, the then-current Co-Promotion Plan for such
Product, and all Legal Requirements. For each Product, SangStat Sales
Representatives shall perform at least the number and types of Physician
Details set forth on Exhibit C attached hereto (the "SangStat Detailing
Commitment"). In addition, the SangStat Managed Care Organization
account representatives shall use Commercially Reasonable Efforts to
conduct Sales Calls. SangStat shall perform the SangStat Detailing
Commitment for each Detail Year on a pro-rata basis over the four (4)
calendar quarters in such Detail Year. SangStat may perform, but Abbott
shall have no obligation to compensate SangStat for, any of SangStat's
Physician Details in excess of the SangStat Detailing Commitment for each
Detail Year. SangStat shall provide Abbott within thirty (30) days
following the end of each calendar quarter a report on the number of
Primary Physician Details conducted by SangStat Sales Representatives for
such calendar quarter.
3.1.4 Failure to Achieve SangStat Detailing Commitment.
If SangStat fails to achieve at least [ ]* of the
SangStat Detailing Commitment in any calendar quarter, then [ ]*
If SangStat fails to achieve at least [ ]* of the SangStat Detailing
Commitment in any [ ]* consecutive calendar
quarters, then Abbott may terminate this Agreement pursuant to Section 14.2.2.
3.1.5 Additional Obligations. In addition to (and
without in any way limiting) the foregoing, SangStat shall undertake and
perform, without limitation, all SangStat obligations set forth in the Co-
Promotion Plan approved by the Executive Steering Committee. Such Co-
Promotion Plan may include all of the activities listed on Exhibit B. The
Executive Steering Committee may revise the Co-Promotion Plan obligations
at any time and from time to time, provided that any such amendment must
be in writing and signed by the Parties.
3.2 Abbott's Marketing Obligations
3.2.1 Sales Force. Abbott shall market and co-promote
the Products in Territory, using (i) the equivalent of [ ]*
full-time equivalent Managed Care Organization account representatives, and
(ii) [ ]* Abbott Sales Representatives who
are dedicated to the hospital setting and the transplant market. Abbott shall
have at least one employee dedicated to act as Product Manager for the
Products.
3.2.2 Product Launches. Abbott shall use Commercially
Reasonable Efforts to launch (a) its Physician Detail effort for SangCya
in the Territory within ninety (90) days after the Effective Date, (b) its
Sales Calls effort for SangCya with respect to Managed Care Organizations
within thirty (30) days after the Effective Date, (c) its Physician Detail
and Sales Calls effort for CycloTech within thirty (30) days after launch
of CycloTech by SangStat, but with no obligation to launch before [ ]*,
and (d) [ ]*
3.2.3 Abbott Detailing Commitment. During the term of
this Agreement, Abbott shall conduct Physician Details, Sales Calls and
otherwise promote the sale of Products in the Territory in accordance with
the terms of this Agreement, the then-current Co-Promotion Plan for such
Product, and all Legal Requirements. For each Product, Abbott Sales
Representatives shall perform at least the number and types of Physician
Details set forth on Exhibit C attached hereto (the "Abbott Detailing
Commitment"). In addition, the Abbott Managed Care Organization account
representatives shall use Commercially Reasonable Efforts to conduct Sales
Calls. Abbott shall perform the Abbott Detailing Commitment for each
Detail Year on a pro-rata basis over the four (4) calendar quarters in
such Detail Year. Abbott may perform, but SangStat shall have no
obligation to compensate Abbott for, any of Abbott's Physician Details in
excess of the Abbott Detailing Commitment for each Detail Year. Abbott
shall provide SangStat within thirty (30) days following the end of each
calendar quarter a report on the number of Primary Physician Details
conducted by Abbott Sales Representatives for such calendar quarter.
3.2.4 Failure to Achieve Abbott Detailing Commitment.
If Abbott fails to achieve at least [ ]* of the Abbott
Detailing Commitment in any calendar quarter, then [ ]* If
Abbott fails to achieve at least [ ]* of the Abbott
Detailing Commitment in any three consecutive calendar quarters, then SangStat
may terminate this Agreement pursuant to Section 14.2.2.
3.2.5 Information. In addition to the mutual
obligations set forth in Section 3.3.2, Abbott shall, on a regular basis
provide SangStat with all current marketing and sales information relating
to the subject matter of the Products, including, without limitation,
research, analysis, customer and distribution information and competitive
analysis; provided (i) such research, analyses, and information are
available at Abbott and have already been prepared at Abbott; (ii) Abbott
has no contractual or other obligation which would prevent it from sharing
such information with SangStat; and (iii) Abbott shall not be required to
absorb any internal or external expenses with respect to providing such
information. SangStat will be free to use such information internally for
purposes of this Agreement only and only during the term of this
Agreement. Any such information shall be considered Confidential
Information.
3.2.6 Additional Obligations. In addition to (and
without in any way limiting) the foregoing, Abbott shall undertake and
perform, without limitation, all Abbott obligations set forth in the Co-
Promotion Plan approved by the Executive Steering Committee. Such Co-
Promotion Plan may include all of the activities listed on Exhibit B. The
Executive Steering Committee may revised the Co-Promotion Plan obligations
at any time and from time to time, provided that any such amendment must
be in writing and signed by the Parties.
3.3 Mutual Marketing Obligations
3.3.1 Training. Each Party shall pay all costs
associated with training and re-training its relevant staff to promote
knowledge of the Products and in accordance with the Co-Promotion Plans
and all Legal Requirements; provided, however, that SangStat shall make
available to Abbott the Product-specific training materials that are
currently being used for its Sales Representatives for SangCya and
CycloTech in sufficient quantities to distribute to each Abbott Sales
Representative. The Co-Promotion Committee shall determine who shall
develop the training materials for the Capsule Product and any other
Product, including new training materials for SangCya or CycloTech. The
costs for printing the SangCya and CycloTech specific training materials
for either Abbott or SangStat and for developing and printing Training
Materials for the Capsule Product or any other Product shall be considered
part of Promotional and Marketing Costs.
3.3.2 Market Research. The Co-Promotion Committee shall
determine what market research should be done. Market research shall
consist of Primary and Secondary Market Research ("Market Research").
The Co-Promotion Committee shall assign responsibility for Primary Market
Research between the Parties. "Primary Market Research" shall include
focus group interviews, market research surveys, in-depth interviews with
medical providers, and similar types of market research agreed to by the
Co-Promotion Committee. "Secondary Market Research" shall include
syndicated data from IMS and other representative data sources (the
"Marketing Reports"). The Co-Promotion Committee shall determine the
type of reports to be obtained through Secondary Market Research. The
Marketing Reports shall be shared between the Parties and may be used by
either Party. The costs for Market Research shall be considered part of
Promotional and Marketing Costs. Additional market research or reports
beyond the Marketing Reports shall be the responsibility and cost of the
individual Parties.
3.3.3 Incentives. Each Party shall reward its personnel
for promoting the Products through an incentive-based compensation system
at least to the same extent and in the same manner as such Party would
reward its personnel for the promotion of one of its own products of
comparable commercial value and comparable required detailing effort and
in any event at least equal to the product with the highest level of
incentives which is being promoted by such Sales Representatives. Each
Party shall have the right, at its expense, to audit the other Party's
compliance with this Section 3.3.3 pursuant to the audit provisions set
forth in Section 6.13.
3.3.4 Sampling. The Co-Promotion Committee shall
establish a sampling program pursuant to which one or both of the Parties
shall distribute Stock Package Request Units free of charge to health care
personnel on an ongoing basis in accordance with a Stock Package Request
Program developed by the Co-Promotion Committee for such Product and all
Legal Requirements. Each Party shall maintain all records required
pursuant to the Prescription Drug Marketing Act of 1987, including,
without limitation, maintenance of written requests and delivery receipts
for any units delivered to its sales force for so long as required by such
Act. Each Party shall promptly report to the other Party any thefts or
losses of Stock Package Request Units. The costs related to the
Manufacturing Costs of such Stock Package Request Program shall be
considered Promotional and Marketing Costs.
3.3.5 Indigent Programs. In addition to the sales and
marketing activities covered under this Agreement, the ANDA holder for the
applicable Product shall establish and operate an indigent program for
distribution of its Products to needy individuals and/or the physicians
and other providers serving such needy individuals in the Territory. The
Co-Promotion Committee shall meet and agree upon the details and costs of
such program. The ANDA holder for the applicable Product shall be solely
responsible for administering such programs. The costs related to such
indigent programs shall be considered Promotional and Marketing Costs.
3.3.6 Development of Promotional Materials. The Co-
Promotion Committee shall develop, produce and distribute the Product
promotional materials to the Sales Representatives. All Product
promotional materials shall be subject to final review and approval of the
regulatory department of the Party that holds the ANDA on such Product.
The ANDA holder shall indemnify the other Party for any use of such
approved promotional material in accordance with Article 16, provided the
distribution of such promotional materials by such Party is in accordance
with the terms of this Agreement. SangStat shall provide, at cost, a
reasonable number of copies of its currently existing promotional
materials regarding SangCya and CycloTech as requested by Abbott, for
distribution by Abbott to its Sales Representatives. SangStat's
regulatory department has or shall have approved such promotional
materials. All costs relating to promotional materials for the Products
shall be shared by the Parties as set forth below in Section 3.3.7.
3.3.7 Promotional and Marketing Costs. The Parties
shall share the Promotional and Marketing Costs for each of the Products
as follows: (a) SangStat shall be responsible for [ ]* and
Abbott shall be responsible for [ ]* of the
Promotional and Marketing Costs for [ ]* (b)
SangStat shall be responsible for [ ]* and
Abbott shall be responsible for [ ]* of Promotional
and Marketing Costs for [ ]* and (c)
SangStat shall be responsible for [ ]* and
Abbott shall be responsible for [ ]* of Promotional
and Marketing Costs for [ ]* The total 1999
Calendar Year budget and 2000 Calendar Year budget for Promotional and
Marketing Costs are set forth below:
SangCya Capsule
and CycloTech Product
----------------- -----------------
1999 [ ]* [ ] *
2000 [ ]* [ ] *
The 1999 budget for SangCya and CycloTech shall be pro-rated for the
remainder of the calendar year based on the Effective Date. For example,
if the Effective Date is June 1, 1999, then the calendar year 1999 budget
for Promotional and Marketing Costs for SangCya and CycloTech would be [ ]*
The 1999 calendar year budget for the Capsule Product assumes the
Capsule Product is launched [ ]* If
the Co-Promotion Committee determines that the Capsule Product is not
likely to be launched [ ] * then the 1999
budget for the Capsule Product shall be [
]* If the Capsule Product is not launched on or before [ ]* the
calendar year 2000 budget for the Capsule Product will be pro-rated
monthly for the calendar year based on the Launch Date. For example, if
the Launch Date is April 1, 2000, the calendar year 2000 budget shall be
[ ]* The Executive Steering Committee may revise such budgets. Any such
revision shall be documented and signed by the Parties. Within ninety
(90) days prior to the start of each calendar year beginning with 2001,
the Co-Promotion Committee shall meet and agree upon the budget for the
Promotional and Marketing Costs for SangCya and the Capsule Product for
the upcoming calendar year.
3.3.8 Detailing. The Executive Steering Committee shall
review the Abbott Detailing Commitment and the SangStat Detailing
Commitment on an annual basis to determine whether or not adjustments
should be made to either Party's detailing commitment. Notwithstanding
the foregoing, no changes shall be made to either the Abbott Detailing
Commitment or the SangStat Detailing Commitment unless both Parties agree
in writing.
3.3.9 Managed Care Organizations. Abbott and SangStat
shall work together to develop Product acceptance among Managed Care
Organizations as widely as possible. SangStat shall have the right to
conduct Sales Calls to Managed Care Organizations, either concurrently or
separately from Abbott, and to promote any of the Products in accordance
with the terms of this Agreement. In connection therewith, the Parties
shall share information regarding proposed Sales Calls on Managed Care
Organizations under the supervision of the Co-Promotion Committee to
ensure co-ordination. Abbott shall use Commercially Reasonable Efforts to
promote SangCya and CycloTech to Managed Care Organizations.
4. DISTRIBUTION ACTIVITIES
4.1 Distribution. The distribution of the Products shall be
as set forth in Section 2.2.
4.2 Service Level. The Distributor of the Product [ ]* shall
completely fulfill at least [ ]* of the
orders placed for Products by N.D.C. number within [ ]*
business days of the receipt of such orders by shipping all of the Products
ordered to the customer within such [ ]*
business day period (the "Service Level Commitment"). The Distributor shall
maintain, and provide to the other Party upon request, sufficient, accurate
and complete records to evidence its compliance or noncompliance with this
Service Level Commitment. The obligations of the Distributor under this
Section 4.2 are subject to Supplier timely providing Distributor with
sufficient quantities of Product to fulfill such obligations.
5. MANAGEMENT OF RELATIONSHIP
5.1 Co-Promotion Committee
5.1.1 Product Manager. Each Party shall have a
"Product Manager." Initially, the Product Manager shall be the current
cyclosporine Product Manager for each Party. The Product Managers shall
be responsible for day-to-day communications between the Parties. Either
Party may change its Product Manager at any time and from time to time by
giving the other Party written notice. The Product Managers shall meet
every month to discuss the progress of the development and marketing
efforts and, if applicable, to exchange information. Product Managers are
not authorized to amend, alter or extend this Agreement in any manner. If
the Product Managers disagree on any issue, and cannot resolve it within
14 days, either Product Manager may submit the problem to the Co-Promotion
Committee.
5.1.2 Co-Promotion Committee. The Parties shall form a
Co-Promotion Committee within thirty (30) days after the Effective Date.
The Co-Promotion Committee shall consist of three members from each party.
Each Party may change its members of the Co-Promotion Committee at any
time and from time to time by giving the other Party written notice. The
Co-Promotion Committee shall meet on a calendar quarterly basis or more
frequently if agreed to by both Parties. The Co-Promotion Committee shall
keep minutes of each meeting. In addition to other responsibilities
agreed to by the Parties, the Co-Promotion Committee shall develop,
propose and oversee the implementation of the annual Co-Promotion Plan for
the promotion of such Product, including both an associated budget
therefor and a sampling program for such Product. [ ]* The
budgets for Promotional and Marketing Costs for 1999 and 2000 have been
established and are set forth in Section 3.3.7. The Co-Promotion Committee
may not change any obligation of the Parties established under this Agreement
without written consent of the Parties. Decisions of the Co-Promotion
Committee shall be unanimous, and disagreements within the Co-Promotion
Committee shall be escalated to the Executive Steering Committee.
5.2 Development Committee. The Parties shall form a
Development Committee within thirty (30) days after the Effective Date..
The Development Committee shall consist of three members from each party.
Each Party may change its members of the Development Committee at any time
and from time to time by giving the other Party written notice. The
Development Committee shall meet on a calendar quarterly basis or more
frequently if agreed by the Parties. The Development Committee shall keep
minutes of each meeting. In addition to other responsibilities agreed to
by the Parties, the Development Committee shall develop, propose and
oversee the implementation of an annual plan for the post-approval
development activities for such Product (each a "Development Plan"),
including an associated budget therefor. Section 7.2.4 sets forth the
agreed budget for the Development Plan for both calendar years 1999 and
2000. The Development Committee may not change any obligation of the
Parties established under this Agreement without written consent of the
Parties. Decisions of the Development Committee shall be unanimous, and
disagreements within the Development Committee shall be escalated to the
Executive Steering Committee. The Development Committee shall meet within
ninety (90) days after the Effective Date to develop [ ]*
5.3 Executive Steering Committee
5.3.1 General. The Executive Steering Committee shall
consist of three executives from each party. Each party may change its
members of the Executive Steering Committee at any time and from time to
time by written notice to the other Party. The initial members of the
Executive Steering Committee for each Party are set forth below:
For Abbott For SangStat
Vice President, Commercial Operations, Chief Executive Officer
Pharmaceutical Products Division
Vice President, Commercial Operations, Senior Vice President,
Chemical and Agricultural Products Division Finance
General Manager, HIV and Transplantation, Senior Vice President,
Pharmaceutical Products Division Operations
5.3.2 Quarterly Meetings. The Executive Steering
Committee shall meet each calendar quarter to discuss the status of the
sales and marketing of the Products. The Executive Steering Committee
shall also review quarterly performance versus budget. Twice per year,
the Executive Steering Committee shall adopt or readopt an operating
budget and a Co-Promotion Plan. Within the parameters of this Agreement,
the budget and Co-Promotion Plan will describe the major financial and
non-financial responsibilities of the Parties (e.g., manufacturing, sales,
marketing, development, etc. and major objectives.)
5.3.3 Authority. The Executive Steering Committee may
take action only by the unanimous written consent of all members
identified above.
5.3.4 Dispute Resolution. If an issue remains
unresolved after consideration by the Executive Steering Committee, any
Executive Steering Committee member may escalate it to the President,
Pharmaceutical Products Division, for Abbott, but in the case of a dispute
relating to the supply of Gengraf, then to the President, Chemical and
Agricultural Products Division, for Abbott, and the Chief Executive
Officer, for SangStat for resolution. If an issue still remains
unresolved, either Party may refer to Section 18.13 for resolution.
6. PAYMENTS
6.1 Milestone Payments
6.1.1 Signing of Agreement. Within ten (10) business
days after the Effective Date, Abbott shall pay SangStat a non-refundable
(except as provided in Section 14.4) seven million dollar (U.S.
$7,000,000) milestone.
6.1.2 SangCya. In consideration of the right to co-
promote SangCya, Abbott shall pay SangStat a non-refundable (except as
provided in Section 14.4) milestone payment of [ ]* payable
as follows:
(a) Ninety (90) days after the Effective Date,
Abbott shall pay SangStat six million dollars (U.S. $6,000,000);
(b) Ninety (90) days after the Abbott Launch Date
for SangCya, Abbott shall pay SangStat [ ]* and
(c) One hundred and eighty (180) days after the
Abbott Launch Date for SangCya, Abbott shall pay SangStat [ ]*
6.1.3 Gengraf. In consideration of the right to co-
promote Gengraf, SangStat shall pay Abbott a non-refundable milestone
payment of [ ]* payable by [ ]*
6.1.4 Regulatory Approval - Capsule Product. Within ten
(10) business days after Regulatory Approval of the [ ]*
Capsule Product, Abbott shall pay SangStat a non-refundable (except as
provided in Section 14.4) milestone of [ ]*
6.2 Loan. Within ten (10) business days of the Effective
Date, Abbott shall pay SangStat sixteen million dollars (U.S. $16,000,000)
(the "Loan"). The Loan shall bear simple interest calculated annually
at [ ]* Interest is payable annually on
whatever interest is accrued, starting December 31, 1999 and each December
31st thereafter until December 31, 2004. The Loan shall be secured by a
security interest in the exclusive United States marketing rights for
SangCya, including all necessary license rights to manufacture, promote
and sell SangCya in the United States (the "Marketing Rights").
SangStat may repay the Loan, together with accrued interest at any time,
but in no event with respect to the principal and accrued but unpaid
interest, by later than December 31, 2004. SangStat shall execute such
instruments as are reasonably necessary so that Abbott may perfect its
security interest in the Marketing Rights.
6.3 Stock Purchase Agreement. Concurrent with execution of
this Agreement, the Parties shall enter into a Stock Purchase Agreement
and related agreements in the form attached hereto as Exhibit G pursuant
to which Abbott shall purchase from SangStat and SangStat shall issue to
Abbott certain securities of SangStat.
6.4 Supplemental Fee
6.4.1 Definition. If [ ]* Abbott shall
pay to SangStat as a supplemental fee a percentage share
of Net Distribution Margin on Gengraf as described in this Section 6.4
(the "Supplemental Fee").
6.4.2 Calendar Year 2000. From the Launch Date and
through calendar year 2000, the Supplemental Fee shall equal [ ]*
6.4.3 Calendar Year 2001 and After
(a) Base Rate. For calendar years 2001 and
beyond, the base rate percentage for the Supplemental Fee shall be fixed
using Matrix A below based on the date on which Abbott receives Regulatory
Approval for Gengraf (the "Base Rate").
Matrix A
Supplemental Fee - SangStat's Base Rate
Date of Regulatory Approval of Gengraf
[ ]* [ ]* [ ]* [ ]* [ ]* [ ]*
SangStat's [ ]* [ ]* [ ]* [ ]* [ ]* [ ]*
Percentage
Share of
Net
Distribution
Margin
(b) Increases to Base Rate based on Net Sales of
Gengraf. In addition, SangStat's percentage share of Net Distribution
Margin shall be increased from the Base Rate, by (i) [ ]* on
all sales of Gengraf if Net Sales of Gengraf for such calendar year are more
than [ ]* but less than [ ]*
(ii) [ ]* on all sales of Gengraf if Net Sales of
Gengraf for such calendar year are more than [ ]* but no more
than [ ]* and (iii) [ ]*
on all sales of Gengraf if Net Sales of Gengraf for such calendar year are
more than [ ]* The additional percentage
points set forth in clauses (i), (ii) and (iii) above shall apply to all
sales of Gengraf for such calendar year during which the minimum Net Sales
thresholds described above in this paragraph have been exceeded. For
example, if Gengraf is approved [ ]* the Supplemental Fee
shall be [ ]* for all calendar years
beginning with 2001. Each calendar year that the Gengraf Net Sales are
greater than [ ]* the Parties shall
adjust the Supplemental Fee based on the amount of the Gengraf Net Sales.
For example, if the Gengraf Net Sales for calendar year 2001 are
[ ]* then for calendar year 2001, the Supplemental
Fee shall be increased from [ ]* to
[ ]*
6.5 Commissions
6.5.1 Sang-2000 Commission Rate. [ ]*
SangStat shall pay Abbott a commission equal to a percentage of the Net
Distribution Margin of Sang-2000 as set forth below (the "Sang-2000
Commission Rate"). The Sang-2000 Commission Rate shall be determined based
upon the timing of the Sang-2000 Regulatory Approval as set forth below:
Sang-2000 Sang-2000
Regulatory Approval Date Commission Rate
(a) [ ]* [ ]*
(b) [ ]* [ ]*
(c) [ ]* [ ]*
(d) [ ]* [ ]*
(e) [ ]* See Matrix B below
In addition, the Sang-2000 Commission Rate shall be adjusted as provided
in Matrix B below if the Sang-2000 Regulatory Approval occurs (i) [ ]*
prior to Regulatory Approval of Gengraf, and (ii) on or after [ ]* If
(i) and (ii) are satisfied, the Sang-2000 Commission Rate shall be increased
to the percentage specified in Matrix B below, based on the date that
Sang-2000 receives Regulatory Approval:
Matrix B
Sang-2000 Commission Rate
( )
Date of Regulatory Approval of Sang-2000
[ ]* [ ]* [ ]* [ ]* [ ]*
Abbott's
Share of [ ]* [ ]* [ ]* [ ]* [ ]*
Net
Distribution
Margin
[ ] *
6.5.2 SangCya Commission Rate. As additional
consideration, SangStat shall pay Abbott a commission equal to a
percentage of Net Distribution Margin as set forth below in Matrix C (the
"SangCya Commission Rate") from the sales of SangCya. However, if [ ]*
then the Commission Rate for SangCya shall be limited to [ ]*
In addition, if [ ]* then the
SangCya Commission Rate shall be limited to [ ]*
Matrix C
SangCya Commission Rate
[ ]*
Date
[ ]* [ ]* [ ]*
Commission Rate
(Measured as a [ ]* [ ]* [ ]*
Percentage of Net
Distribution Margin
of SangCya)
6.5.3 CycloTech Commission Rate. If SangStat elects to
sell CycloTech for use with SangCya in the Territory, SangStat shall pay
Abbott a commission on the sales of such CycloTech devices that is a
percentage of the Net Distribution Margin on such devices and which is
calculated in the same manner as the then applicable SangCya Commission
Rate set forth in Matrix C above (the "CycloTech Commission Rate").
However, if [ ]* then the CycloTech Commission Rate
shall be limited to [ ]* In addition,
if [ ]* then the CycloTech Commission
Rate shall be limited to [ ]*
6.5.4 Other Cyclosporine Product Commission Rate. In
consideration for the mutual covenant contained in Section 2.5, if a Party
or any of its Affiliates sells in the Territory an Other Cyclosporine
Product (the "Marketing Party"), the Marketing Party shall pay to the
other Party on each Other Cyclosporine Product sold, a commission of
[ ]* of Net Sales received by the
Marketing Party from the sale of the Other Cyclosporine Product in the
Territory, until the earlier of (a) December 31, 2004, or (b) such time as
the Marketing Party has paid to the other Party [ ]*
in respect of such Net Sales of such Other Cyclosporine Product, or (c)
termination of this Agreement pursuant to Section 14.2 due to a breach by the
non-Marketing Party; or (d) termination of this Agreement pursuant to Section
14.3 or Section 14.4.
6.6 Calculation of Supplemental Fees and/or Commissions.
[ ]* SangStat shall at the end of each
calendar quarter calculate Net Sales and Net Distribution Margins to
determine (i) the commission due SangStat for SangCya and (ii) the
Supplemental Fee due SangStat for Gengraf. [
]*, Abbott shall at the end of each calendar quarter calculate Net Sales
and Net Distribution Margin to determine the commission due Abbott for
Sang-2000.
6.7 Reports
6.7.1 Gengraf [ ]*Capsule Product. [ ]*
Abbott shall provide to SangStat its Manufacturing Costs for Gengraf,
and any applicable deductions needed to calculate Net Sales of Gengraf
(including, for example, rebates, administrative fees or chargebacks
incurred), quarterly by the thirtieth (30th) day after each calendar
quarter. SangStat shall provide to Abbott its Distribution Expense for
Gengraf and SangCya and its Manufacturing Cost for SangCya quarterly by
the thirtieth (30th) day after each calendar quarter. SangStat shall
provide Abbott with a Net Distribution Margin report for each Product (a
"Payment Report") by the forty-fifth (45th) day after each calendar
quarter. In addition, the Payment Report shall include a report
delineating, for each entity contributing to Net Distribution Margin:
(a) the number and types of Products sold during the applicable period,
(b) the calculation of Net Sales of such Product; (c) the calculation of
Net Distribution Margin for such Product, and (d) the calculation of the
amount due to Abbott or SangStat, as the case may be.
6.7.2 Sang-2000 [ ]*Capsule
Product. [ ]* then SangStat shall provide to Abbott its
Manufacturing Costs for Sang-2000, and any applicable deductions needed to
calculate Net Sales of Sang-2000 (including, for example, rebates,
administrative fees or chargebacks incurred) to Abbott quarterly by the
thirtieth (30th) day after each calendar quarter. Abbott shall provide to
SangStat its Distribution Expense for Sang-2000 quarterly by the thirtieth
(30th) day after each calendar quarter. Abbott shall provide SangStat
with a Payment Report for Sang-2000 by the forty-fifth (45h) day after
each calendar quarter. SangStat shall continue to provide Abbott the
Payment Reports for SangCya and CycloTech as set forth in Section 6.7.1.
6.8 Pricing
6.8.1 Product Price. In the case of Capsule Product,
Supplier shall sell Capsule Product to Distributor, and Distributor agrees
to purchase the Capsule Product from Supplier at a price equal to [ ]*
6.8.2 Wholesale Acquisition Cost (WAC). The Distributor
shall establish the wholesale acquisition cost ("WAC") for each Product
sold by the Distributor. Within ten (10) days after the first Capsule
Product receives Regulatory Approval, each Party shall deliver a letter(s)
to the First Databank informing First Databank that the Distributor shall
be solely authorized to utilize the N.D.C. number for the Product to
establish the WAC for such Product throughout the Term, unless the
Distributor's rights to distribute such Product expire or are terminated
hereunder. Distributor shall cooperate with Supplier in executing such
letters to be sent to First Databank as may be necessary to permit
Distributor to establish the WAC for each Product.
6.8.3 Rebates, Administrative Fees and Chargebacks.
Abbott shall be solely responsible for paying any rebates and
administrative fees and processing chargebacks due thereunder for the
Products. Abbott shall not include SangCya or Sang-2000 in a contract
with a Managed Care Organization covering any of Abbott's other products.
SangStat shall maintain and provide to Abbott upon request sufficient,
accurate and complete records to permit Abbott to validate chargebacks and
other contract sales, including sales to Managed Care Organizations.
Abbott shall be solely responsible for the terms and conditions of any
Managed Care Organization contracts for Gengraf Capsule Product. All
rebates, administrative fees and chargebacks paid to Managed Care
Organizations shall be included in the calculation of Net Sales, subject
to the restrictions contained in the definition of Net Sales.
6.8.4 Medicaid Rebates. The Parties anticipate that the
holder of the ANDA for each Product (the "Reporting Party") shall be
responsible both for paying any Medicaid rebates owed to the government on
the sales of such Product, and filing any required reports with the
government with respect to such rebates. The Party that is not the
Reporting Party (the "Non-Reporting Party") shall provide any
information that is reasonably requested by the Reporting Party in order
to prepare such government reports on a calendar quarterly basis. The
Reporting Party, in its sole discretion, shall determine the calculation
of any Medicaid rebate due on its Product(s); the Non-Reporting Party
shall reimburse the Reporting Party for the financial liability resulting
from any inaccurate or incomplete provision of information to the
Reporting Party. Any other liability relating to the Reporting Party's
calculation of the Medicaid rebate shall be the Reporting Party's
responsibility.
6.9 Product Shortage. With respect to any Product that is
the subject of a Product Shortage, the Parties shall each receive [ ]*
of Net Distribution Margin for such Product during the [ ]*
in which such Product Shortage is in effect. Immediately following
termination of a Product Shortage, the Net Distribution Margin for such
Product shall be re-established at the percentages in effect immediately
prior to the calendar quarter in which the Product Shortage first occurs.
For purposes of this Section, a "Product Shortage" means any calendar
quarter in which Supplier fails to supply, for any reason except for Force
Majeure, at least [ ]* of all firm
orders of a Product (the "Orders") for such calendar quarter, but if and
only if such Orders (i) do not exceed the most recent forecast for such
calendar quarter, (ii) are no greater than the level required to fill
Product prescriptions dispensed in the Territory during such calendar
quarter. If, however, Supplier fills all pending and new Orders which have
been placed in accordance with the terms of this Agreement during the
calendar quarter immediately following the calendar quarter in which such
Product Shortage occurred, Supplier shall be deemed to have remedied the
Product Shortage and no change in the Net Distribution Margin percentages
will occur with respect to such Product Shortage. However, the first
calendar quarter for which the Parties shall apply the Product Shortage
test shall be the third calendar quarter after the calendar quarter in
which the Launch Date for such Product occurs.
6.10 Timing of Payments
6.10.1 Payment of Product Price
(a) Gengraf - Ninety Days following Initial Sale.
[ ]* with respect to shipments delivered before SangStat's
first sale of Gengraf to the market (the "Initial Sale") or within
ninety (90) days thereafter, SangStat shall pay to Abbott the Product
Price for such Capsule Product within ninety (90) days of receipt of
invoice; provided, however, that SangStat may defer payments on each
shipment until one hundred and twenty (120) days after receipt of invoice
without being in breach of this Agreement if SangStat pays interest to
Abbott at the Prime Rate on the amount of the payment that remains
outstanding on the ninety-first (91st) day after receipt of such invoice
and after one hundred and twenty (120) days in accordance with Section
6.12. After one hundred and twenty (120) days, however, SangStat shall be
in material breach of this Agreement for failure to pay until SangStat
makes such payment and all accrued interest.
(b) Gengraf - More than Ninety Days following Initial Sale.
[ ]* with respect to shipments
delivered more than ninety (90) days after the Initial Sale of the Capsule
Product, SangStat shall pay to Abbott the Product Price for such Capsule
Product within sixty (60) days of receipt of invoice; provided, however,
that SangStat may defer payments on each shipment until ninety (90) days
after receipt of invoice without being in breach of this Agreement if
SangStat begins to pay interest to Abbott at the Prime Rate on the amount
of the payment that remains outstanding on the 61st day after receipt of
such invoice and after ninety (90) days in accordance with Section 6.12.
After one hundred and twenty (120) days, however, SangStat shall be in
material breach of this Agreement for failure to pay until SangStat makes
such payment and all accrued interest.
(c) Sang-2000. [ ]* with respect to
Sang-2000 shipped to Abbott hereunder, Abbott shall pay to SangStat the
Product Price for such product within forty-five (45) days after the date
Abbott receives such shipment. 6.10.2 Payment of Supplemental Fee and
Commissions. The Supplemental Fee and the Commissions due pursuant to this
Article 6 shall be paid within forty-five (45) days after the end of the
calendar quarter in which they are accrued by each Party.
6.11 Payment Details. All such payments are to be made in US
dollars in the United States.
6.12 Late Payments. Late payments by either Party to the
other Party shall bear interest at the lower of: (i) the Prime Rate plus
2% or (ii) the maximum rate allowed by law.
6.13 Records/Audits. Each Party shall keep complete and
accurate records reflecting all information necessary or useful in
verifying the accuracy of each Payment Report, as well as records
reflecting all information necessary or useful to verify the accuracy of
each Party's Supplemental Fees, Commissions, Net Distribution Margins, Net
Sales, Manufacturing Costs, Distribution Expenses, Development Costs,
Promotional and Marketing Costs, Physician Details, and Service Level
Commitment (collectively, the "Audited Information"). Each Party shall
have the right to hire an independent certified public accountant to
inspect the Audited Information (which accountant shall agree in writing
to keep all Audited Information confidential except as needed to disclose
any discovered discrepancies); provided, such audit: (i) is conducted
during normal business hours, (ii) is conducted no more often then once
per year (unless a discrepancy greater than five percent (5%) is
discovered in favor of the auditing party), and (iii) is conducted only
after the auditing party has given thirty (30) days' prior written notice.
The auditing party shall bear the full cost and expense of such audit,
unless a discrepancy in excess of five percent (5%) in favor of the
auditing party is discovered, in which event the audited party shall bear
the full cost and expense of such audit. Regardless of the amount of
discrepancy discovered, all discrepancies (and interest thereon) shall be
due and payable within thirty (30) days after the Party receives notice
thereof.
6.14 Product Supplied for Clinical Trials, Promotional and
Humanitarian Uses. The Executive Steering Committee shall determine the
quantity of each Product to be used for clinical trials and
investigational IND's (as that term is defined by the FDA). Product
supplied for such purposes shall be without charge hereunder except as
provided in this Section 6.14. Such Product shall be supplied at its [ ]*
7. PRODUCT DEVELOPMENT
7.1 Development Obligations
7.1.1 CycloStat System. Abbott Pharmaceutical Products
Division shall introduce and facilitate discussions between SangStat and
Abbott Diagnostic Division with respect to co-development, marketing and
promotion of the CycloStat System.
7.1.2 Products. As directed by the Executive Steering
Committee, the Parties shall conduct Phase IV marketing support trials for
the Products (after obtaining Regulatory Approval of such Products) to
enhance the marketing and development of the Products in the Territory.
7.2 Development Costs. The Parties shall share the
Development Costs for the Products as set forth below. Except as set
forth in this Section 7.2, no payments for Development Costs shall be
incurred with respect to a Product until [ ]*
7.2.1 Sang-2000. Beginning in calendar year 2000,
SangStat shall be responsible for [ ]*
and Abbott shall be responsible for [ ]* of
post-Regulatory Approval Development Costs for Sang-2000 [ ]*
7.2.2 Gengraf. Beginning in calendar year 2000 SangStat
shall be responsible for [ ]* and
Abbott shall be responsible for [ ]* of
Development Costs for Gengraf [ ]*
Notwithstanding the foregoing, SangStat shall be responsible for [ ]*
of Development Costs for Gengraf up to a maximum amount of [ ]*
If Gengraf does not have Regulatory Approval by [ ]*
SangStat shall have no further obligation to pay for any Development
Costs for Gengraf until Gengraf obtains Regulatory Approval and then on a
pro-rata basis for the remainder of calendar year 2000 using the
percentages set forth in this Section 7.2.2.
7.2.3 SangCya and CycloTech. In calendar year 1999,
SangStat shall be responsible for [ ]*
and Abbott shall be responsible for [ ]* of
Development Costs for SangCya and CycloTech. Beginning in calendar year
2000, SangStat shall be responsible for [ ]* and
Abbott shall be responsible for [ ]* of Development Costs for
SangCya and CycloTech. Beginning in calendar year 2001 and thereafter,
SangStat shall be responsible for [ ]*
and Abbott shall be responsible for [ ]*
of Development Costs for SangCya and CycloTech.
7.2.4 1999 and 2000 Budgets. The calendar year 1999 and
calendar year 2000 budget for Development Costs are set forth below:
Oral Solution Capsule
Product/CycloTech Product
1999 [ ]* [ ]*
2000 [ ]* [ ]*
The 1999 budget for SangCya and CycloTech shall be pro-rated for the
calendar year based on the Effective Date. For example, if the Effective
Date is June 1, 1999, then the calendar year 1999 budget for Development
Costs for SangCya and CycloTech would be [ ]*
The Executive Steering Committee may revise such budgets based on the
written agreement of the Parties. Any such revision shall be documented
and signed by the Parties. Except for the calendar year 1999 and calendar
year 2000 budgets, which are set forth above, the Executive Steering
Committee shall meet and agree upon the budget for the Development Costs
for SangCya, CycloTech and the Capsule Product for the upcoming calendar
year within ninety (90) days prior to the end of each calendar year.
7.3 Obligations. Each party may, upon mutual agreement of
the Parties, support the other by performing on the other's behalf certain
of the other's obligations under Section 7.1.2, as applicable. The
Parties also shall keep each other informed of expected dates of
Regulatory Approvals for the Products as soon as they become aware of such
information, in order to allow planning and co-ordination of pre-launch
activities and Product manufacturing planning.
7.4 Regulatory Approvals. Except as expressly agreed upon
by the Executive Steering Committee, or otherwise expressly set forth in
this Agreement, each Party shall be fully responsible for obtaining all
necessary and applicable legal and regulatory approvals, including the
Regulatory Approvals, and for compliance with all Legal Requirements
necessary to manufacture and commercially market, (i) with respect to
Abbott, Gengraf, and (ii) with respect to SangStat, SangCya, CycloTech and
Sang-2000.
8. TRADEMARKS
[ ]*
9. SUPPLY OF FINISHED CAPSULE PRODUCT
9.1 Exclusivity. [ ]*
then in accordance with the terms of this Agreement, Abbott shall fill
SangStat's orders for Gengraf for the Territory. Abbott shall be the
exclusive supplier of Gengraf in the Territory, including all bulk
cyclosporine to be manufactured for use in such Gengraf. [ ]*
then SangStat shall fill Abbott's orders for Sang-2000 for the Territory.
SangStat shall be Abbott's exclusive supplier of Sang-2000 in the Territory.
Neither Abbott nor its Affiliates shall manufacture or have manufactured
any Product (whether or not it receives Regulatory Approval) for
distribution or sale by any other party (including Abbott and its
Affiliates) within the Territory except pursuant to this Agreement. Neither
SangStat nor its Affiliates shall manufacture or have manufactured any
Product (whether or not it receives Regulatory Approval) for distribution or
sale by any other party (including SangStat and its Affiliates) within the
Territory except pursuant to this Agreement, provided however the Parties
recognize that SangStat shall distribute SangCya and CycloTech pursuant to
the terms of this Agreement. This Section 9.1 shall not apply with respect
to CycloTech for use with products other than (i) Products or (ii) Other
Cyclosporine Products.
9.2 Forecasting/Ordering
9.2.1 Gengraf. SangStat shall develop jointly with
Abbott (i) at least three (3) full calendar quarters prior to the calendar
quarter in which the first commercial sale of Gengraf is projected to
occur, a non-binding, good faith forecast of SangStat's quantity
requirements for Gengraf for the calendar quarter in which the first
commercial sale of Gengraf is projected to occur and (ii) a non-binding,
good faith forecast of its quantity requirements for Gengraf for the
subsequent three (3) calendar quarters. At least one (1) full calendar
quarter prior to the calendar quarter in which the first commercial sale
of Gengraf is projected to occur, SangStat's shall deliver to Abbott (i)
its firm order and requested delivery dates for Gengraf for such calendar
quarter and (ii) a non-binding, good faith forecast of its quantity
requirements for Gengraf for the subsequent three (3) calendar quarters.
SangStat shall deliver to Abbott within ten (10) days after the beginning
of each calendar quarter, SangStat's firm order and requested delivery
dates for Gengraf for the next calendar quarter and its binding, good
faith forecast of its quantity requirements for Gengraf for the subsequent
three (3) calendar quarters.
9.2.2 Sang-2000. [ ]* Abbott shall
develop jointly with SangStat (i) at least three (3) full calendar quarters
prior to the calendar quarter in which the first commercial sale of
Sang-2000 is projected to occur, a non-binding, good faith forecast of
Abbott's quantity requirements for Sang-2000 for the calendar quarter in
which the first commercial sale of Sang-2000 is projected to occur and (ii)
a non-binding, good faith forecast of its quantity requirements for
Sang-2000 for the subsequent three (3) calendar quarters. At least one (1)
full calendar quarter prior to the calendar quarter in which the first
commercial sale of Sang-2000 is projected to occur, Abbott shall deliver to
SangStat (i) its firm order and requested delivery dates for Sang-2000 for
such calendar quarter and (ii) a non- binding, good faith forecast of its
quantity requirements for Sang-2000 for the subsequent three (3) calendar
quarters. Abbott shall deliver to SangStat within ten (10) days after the
beginning of each calendar quarter, Abbott's firm order and requested
delivery dates for Sang-2000 for the next calendar quarter and its binding,
good faith forecast of its quantity requirements for Sang-2000 for the
subsequent three (3) calendar quarters.
9.2.3 Limitation. No Supplier shall be required to
accept a purchase order for any calendar quarter to the extent that it is
in excess of one hundred and twenty-five percent (125%) of the most recent
forecast for such calendar quarter. The Parties shall work together to
manage any significant increase in wholesaler orders as a result of Year
2000 loading of Products.
9.3 Manufacturing Capacity
9.3.1 Gengraf. In order to fulfill SangStat's orders
for Gengraf under this Agreement, Abbott shall use Commercially Reasonable
Efforts to secure sufficient manufacturing capacity to launch and market
Gengraf in the Territory with approximately [ ]* tons of bulk
cyclosporine capacity available on an annual basis for Gengraf for
distribution and sale in the Territory by [ ]*
9.3.2 Sang-2000. [ ]* then SangStat
shall use Commercially Reasonable Efforts to secure sufficient manufacturing
capacity to launch and market Sang-2000 in the Territory with approximately
[ ]* tons of bulk cyclosporine capacity
available on an annual basis for Sang-2000 for distribution and sale in the
Territory by [ ]*.
9.3.3 Additional Suppliers. The Parties shall work to
determine additional sources of supply of cyclosporine to address any
unexpected increase in the forecast or market for the Capsule Product [ ]*
In particular, SangStat shall endeavor to arrange for the Parties to meet
with SangStat's primary supplier of bulk cyclosporine for the purposes of
ensuring that the Parties have access to additional quantities of bulk
cyclosporine.
10. INVENTORY OF PRODUCTS
Supplier shall be responsible for maintaining adequate inventories
of the Capsule Product based on the good faith forecast agreed to by the
Parties in accordance with Section 9.2; Distributor shall be responsible
for maintaining adequate inventories of Products for distribution to
customers as provided hereunder. For purposes of this Section, "adequate
inventories" shall mean inventories of such Product that are consistent
with current practices for such Party's other currently marketed products.
11. SUPPLY OF BULK PRODUCT BY ABBOTT
Pursuant to the terms of the Amended and Restated Supply Agreement
attached hereto as Exhibit F, Abbott shall supply bulk cyclosporine to
SangStat for use in the manufacture of Cyclosporine Formulations (as
defined in the Amended and Restated Supply Agreement).
12. OWNERSHIP AND CONFIDENTIALITY
12.1 Ownership. As between the Parties, each party will be
the sole owner of the intellectual property rights in any invention of
which only its employees and its third party contractors are inventors and
each party will jointly own the intellectual property rights in all
inventions of which its and the both Parties employees or contractors are
joint inventors. Any assignments necessary to accomplish the foregoing
are hereby made and each party will execute such further documents as may
be reasonably requested by the other with respect thereto. Jointly owned
inventions may be exploited and non-exclusively licensed to third parties
by either party without accounting to or further approval of the other
party either during the term of this Agreement or thereafter. Neither
party will be obligated under this Agreement to obtain intellectual
property licenses from third parties.
12.2 Covenant Not to Sue. Neither Party nor its Affiliates
shall during the term of this Agreement and thereafter assert any claim
against the other Party or any of its Affiliates that the sale of such
other Party's (or its Affiliate's) Product(s) or Other Cyclosporine
Product(s) in the Territory infringes such Party's intellectual property.
12.3 Proprietary Information. Each Party agrees that all
inventions, processes, materials, chemicals, know-how and ideas and all
other business, technical and financial information they obtain from the
other are the confidential property of the disclosing party ("Proprietary
Information" of the disclosing party). Except as expressly allowed in
this Agreement, the receiving Party will hold in confidence and not use or
disclose any Proprietary Information of the disclosing Party and shall
similarly bind its employees in writing. The receiving Party shall not be
obligated under this Section 12.3 (i) beyond five years after termination
of this Agreement, or (ii) with respect to information the receiving Party
can document:
(a) is or has become readily publicly available
through no fault of the receiving Party or its employees or agents; or
(b) is received from a third party lawfully in
possession of such information and lawfully empowered to disclose such
information and provided the receiving party abides by all restrictions
imposed by such third party; or
(c) was rightfully in the possession of the
receiving party prior to its disclosure by the disclosing party without
restriction; or
(d) was independently developed by employees or
consultants of the receiving party who did not have access to such
Proprietary Information; or
(e) was required to be disclosed by law, provided
that the receiving party gave the disclosing party notice of any required
disclosure, and the opportunity to limit such disclosure as permitted
under applicable law and regulation.
13. LIMITED LIABILITY
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE,
NEITHER PARTY WILL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY
OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES, UNLESS SUCH DAMAGES ARE AWARDED UNDER A CLAIM FOR WHICH SUCH
PARTY HAS AGREED TO INDEMNIFY THE OTHER.
14. TERM AND TERMINATION
14.1 Term. Unless terminated earlier as provided herein,
this Agreement will have an initial term commencing on the Effective Date
and ending December 31, 2004.
14.2 For Cause. This Agreement may be terminated in its
entirety by a Party for cause immediately upon the occurrence of any of
the following events:
14.2.1 Ceases to do Business. If the other Party
ceases to do business, or otherwise terminates its business operations;
14.2.2 Material Breach. If the other Party commits
a material breach of a material provision of this Agreement, subject to
following the following procedures: it is the Parties' express intent
that consideration shall first and foremost be given to remedying any
breach of this Agreement through the payment of monetary damages or such
other legal or equitable remedies as shall be appropriate under the
circumstances and that there shall only be a limited right to terminate
this Agreement under the following circumstances as a matter of last
resort. In the event that the Neutral, in accordance with the procedures
set forth in Exhibit E, has rendered a ruling that a Party has materially
breached a material provision of this Agreement, which ruling specified
the remedies imposed on such breaching Party for such breach and such
remedies did not include termination (the "Adverse Ruling"), and the
breaching Party has failed to comply with the terms of the Adverse Ruling
within the time period specified therein for compliance, where Abbott has
been found to have breached a material obligation under this Agreement and
has failed to comply with the Adverse Ruling, SangStat may terminate this
Agreement by delivering written notice to Abbott after the expiration of
the period to comply; where SangStat has been found to have breached a
material obligation under this Agreement and has failed to comply with the
Adverse Ruling, Abbott may, upon written notice to SangStat after the
expiration of the period to comply, Abbott may terminate this Agreement by
delivering written notice to SangStat after the expiration of the period
to comply.
14.2.3 Bankruptcy. If the other Party shall seek
protection under any bankruptcy, receivership, trust deed, creditors
arrangement, composition or comparable proceeding, or if any such
proceeding is instituted against the other Party.
14.3 Regulatory Issues. Either party may terminate this
Agreement without cause upon sixty (60) days' prior written notice if no
Capsule Product has obtained U.S. Regulatory Approval by [ ]*.
14.4 Certain Acquisitions. Either party may terminate this
Agreement without cause upon thirty (30) days prior written notice should
the other party either be acquired (whether by acquisition of stock,
assets or otherwise) or announce that it will be acquired by
[ ]* If SangStat is acquired by the
Acquiror within twenty-four (24) months after the Launch Date of the first
Capsule Product, then upon SangStat becoming an Affiliate of such
Acquiror, SangStat shall pay to Abbott an amount equal to [ ]*
previously paid to SangStat by Abbott under this Agreement.
14.5 Effect of Termination. The following provisions shall
survive the termination or expiration of this Agreement: Sections 1
(Definitions), the last sentence of 3.1.3 and 3.2.3 (with respect to any
final report of Physician Details only), the seventh sentence of 3.3.2,
12, 13,14.5, 14.6, 14.7, 14.8, 14.10, 14.11, 14.12, 16, 17.2, 17.3, 17.4,
17.8, 18.4, 18.5, 18.12 and 18.13. Each party will promptly return all
Proprietary Information of the other (and all copies and abstracts
thereof) that it is not entitled to use under the surviving terms of this
Agreement. Any termination of this Agreement does not affect the status
of Amended and Restated Supply Agreement attached as Exhibit F and the
Stock Purchase Agreement and related documents attached as Exhibit G.
14.6 Pending Orders and Inventory. The Party exercising its
right to terminate this Agreement or the ANDA holder of the Product in the
case of expiration of this Agreement may, at its option, either (i) cancel
any pending firm orders, or (ii) elect to supply and/or purchase Product,
as the case may be, under a firm order. In addition, such Party (the ANDA
holder, in the case of expiration, and the terminating Party in all other
cases), may repurchase all inventory of Product (if any) from the other
Party or allow the other Party to sell off such remaining inventory at
commercially reasonable prices. The Parties shall grant each other any
necessary rights to sell off the inventory of Product.
14.7 Effect of Termination for Breach. If the Agreement is
terminated by Abbott for breach pursuant to Section 14.2, SangStat shall
pay as minimum damages [ ]* concurrent with the termination
of the Agreement by Abbott following the procedures set forth in Section
14.2. In addition, Abbott may pursue the collection of any additional
damages, including all milestones paid whether or not identified as non-
refundable, pursuant to the dispute resolution procedures of Exhibit E.
14.8 Effect of Termination for Failure to Obtain Regulatory
Approval. In the event of termination of this Agreement without cause
pursuant to Section 14.3, SangStat shall pay to Abbott [ ]*
within sixty (60) days following termination of the Agreement.
14.9 Right to Promote Capsule Product. Unless this Agreement
terminates earlier in accordance with its terms, the Parties may,
commencing no earlier than [ ]* each elect to promote
(but not sell or distribute) [ ]*
during the remainder of the term of this Agreement; provided, however,
that each Party must continue to meet its obligations under this Agreement
including but not limited to the Abbott Detailing Commitment and the
SangStat Detailing Commitment, as the case may be.
14.10 Repayment of Loan. If this Agreement terminates prior
to December 31, 2004 for any reason other than due to breach of the
Agreement by Abbott, and there remains principal and accrued interest due
under the Loan, the Loan (including all outstanding principal and accrued
interest) shall be due and payable sixty (60) days following termination
of the Agreement. If the Agreement terminates due to breach of the
Agreement by Abbott, then interest and principal under the Loan shall
remain payable in accordance Section 6.2.
14.11 Additional Remedies. Termination is not the sole remedy
under this Agreement and, whether or not termination is effected, all
other remedies will remain available, subject to being awarded pursuant to
the dispute resolution procedures of Exhibit E.
14.12 Accrued Rights and Obligations. Termination of this
Agreement shall not relieve the Parties hereto of any liability that
accrued hereunder prior to the effective date of such termination and
shall not prejudice either Party's right to obtain performance of any
obligation provided for in this Agreement which expressly survives
termination.
15. WARRANTY AND WARRANTY DISCLAIMERS
15.1 Abbott. Abbott warrants that:
15.1.1 Supplied Product. Gengraf will conform in
all respects to the specifications therefor included in the Regulatory
Approval, as then in effect (which, upon such approval shall be attached
hereto as an exhibit), and shall be manufactured in accordance with
current Good Manufacturing Practices. Such warranty does not apply to
Products that have been mishandled, mistreated or maintained or stored
other than in conformity with Abbott's instructions.
15.1.2 No Infringement. To the best of its
knowledge, the manufacture, distribution or use of Gengraf in the
Territory will not infringe or otherwise violate any intellectual or
proprietary rights of any person.
15.1.3 Regulatory. [ ]*
15.1.4 Title. To the best of its knowledge, after
due investigation, Abbott has sufficient title and ownership of all
patents, trademarks, service marks, trade names, copyrights and other
proprietary rights necessary for the business covered by this Agreement as
now conducted without conflict with or violation of the rights of others.
15.1.5 No Violation. Abbott has not received any
communication alleging that Abbott has violated or, by conducting its
business in the Territory as proposed, would violate any cyclosporine-
related patents, trademarks, service marks, trade names, copyrights or
trade secrets or other proprietary rights of any third party.
15.2 SangStat. SangStat warrants that:
15.2.1 Supplied Product. SangCya, CycloTech, and
Sang-2000 will conform in all respects to the specifications therefor
included in the Regulatory Approval, as then in effect (which, upon such
approval shall be attached hereto as an exhibit), and shall be
manufactured in accordance with current Good Manufacturing Practices.
Such warranty does not apply to Products that have been mishandled,
mistreated or maintained or stored other than in conformity with
SangStat's instructions.
15.2.2 No Infringement. To the best of its
knowledge, the manufacture, distribution or use of SangCya in the
Territory does not, and Sang-2000 will not infringe or otherwise violate
any intellectual or proprietary rights of any person. Abbott acknowledges
that it is aware that Novartis has filed a lawsuit against SangStat with
respect to SangCya.
15.2.3 Regulatory. [ ]*
15.2.4 Title. To the best of its knowledge, after
due investigation, SangStat has sufficient title and ownership of all
patents, trademarks, service marks, trade names, copyrights and other
proprietary rights necessary for the business covered by this Agreement as
now conducted without conflict with or violation of the rights of others.
15.2.5 No Violation. Except for litigation
involving Novartis identified in Section 15.2.2, SangStat has not received
any communication alleging that SangStat has violated or, by conducting
its business in the Territory as proposed, would violate any cyclosporine-
related patents, trademarks, service marks, trade names, copyrights or
trade secrets or other proprietary rights of any third party.
15.3 Promotional. [ ]*
SangStat shall not make any claims, representations or warranties directly
or indirectly to any third party about Gengraf except as specified in the
Gengraf labeling. [ ]* Abbott shall
not make any claims, representations or warranties directly or indirectly
to any third party about Sang-2000, SangCya, and CycloTech except as
specified in the applicable labeling therefor.
16. INDEMNIFICATION
16.1 Abbott Indemnity
16.1.1 Infringement. Abbott shall hold SangStat
and its officers, directors, agents and employees harmless from all
liability, costs and damages (including attorneys' fees) arising from or
relating to a claim of infringement by Products, for which Abbott is the
ANDA holder, of any patent, copyright, trademark or misappropriation of
any third party trade secrets, provided Abbott is promptly notified of any
and all threats, claims and proceedings related thereto and given
reasonable assistance and the opportunity to assume sole control over the
defense and all negotiations for a settlement or compromise. Abbott shall
not be responsible for any settlement it does not approve in writing.
16.1.2 Product Liability. Abbott shall hold
SangStat and its officers, directors, agents and employees harmless from
all liability, costs and damages (including attorneys' fees) arising from
or relating to any claim of personal injury or death arising from or
relating to Products for which Abbott is the ANDA holder, provided Abbott
is promptly notified of any and all threats, claims and proceedings
related thereto and given reasonable assistance and the opportunity to
assume sole control over the defense and all negotiations for a settlement
or compromise. Abbott shall not be responsible for any settlement it does
not approve in writing.
16.1.3 General. Abbott shall hold SangStat and its
officers, directors, agents and employees harmless from all liability,
costs and damages (including attorneys' fees) arising from or relating to
(i) Abbott's breach of any representation, warranty, covenant, or other
obligation provided for in this Agreement; and (ii) the negligence,
recklessness or willful misconduct of Abbott, its Affiliates, their
directors, officers or employees, or Abbott Sales Representatives and/or
managed care executives, including, but not limited to, product liability
claims arising out of out-of-label promotions by Abbott, its Affiliates,
their directors, officers or employees, or Abbott Sales Representatives
and/or managed care executives, and (iii) SangStat's distribution of any
promotional materials approved by Abbott, provided such distribution is in
accordance with the terms of this Agreement, provided Abbott is promptly
notified of any and all threats, claims and proceedings related thereto
and given reasonable assistance and the opportunity to assume sole control
over the defense and all negotiations for a settlement or compromise.
Abbott shall not be responsible for any settlement it does not approve in
writing.
16.2 SangStat Indemnity
16.2.1 Infringement. SangStat shall hold Abbott
and its officers, directors, agents and employees harmless from liability,
costs and damages (including attorneys' fees) arising from or relating to
a claim of infringement by the Products, for which SangStat is the ANDA
holder, of any patent, copyright, trademark or misappropriation of any
third party trade secrets, provided SangStat is promptly notified of any
and all threats, claims and proceedings related thereto and given
reasonable assistance and the opportunity to assume sole control over the
defense and all negotiations for a settlement or compromise. SangStat
shall not be responsible for any settlement it does not approve in
writing.
16.2.2 Product Liability. SangStat shall hold
Abbott and its officers, directors, agents and employees harmless from all
liability, costs and damages (including attorneys' fees) arising from or
relating to any claim of personal injury or death arising from or relating
to the Products for which SangStat is the ANDA holder, provided SangStat
is promptly notified of any and all threats, claims and proceedings
related thereto and given reasonable assistance and the opportunity to
assume sole control over the defense and all negotiations for a settlement
or compromise. SangStat shall not be responsible for any settlement it
does not approve in writing.
16.2.3 General. SangStat shall hold Abbott and its
officers, directors, agents and employees harmless from all liability,
costs and damages (including attorneys' fees) arising from or relating to
(i) SangStat's breach of any representation, warranty, covenant or other
obligation provided for in this Agreement, (ii) the negligence,
recklessness or willful misconduct of SangStat, its Affiliates, their
directors, officer or employees, or SangStat Sales Representatives and/or
managed care representatives, including, but not limited to claims arising
out of out-of-label promotions by SangStat, its Affiliates, their
directors, officers or employees, or SangStat Sales Representatives and/or
managed care representatives, and (iii) Abbott's distribution of any
promotional materials approved by SangStat, provided such distribution is
in accordance with the terms of this Agreement, provided SangStat is
promptly notified of any and all threats, claims and proceedings related
thereto and given reasonable assistance and the opportunity to assume sole
control over the defense and all negotiations for a settlement or
compromise. SangStat shall not be responsible for any settlement it does
not approve in writing.
17. ADVERSE EVENTS, RECALLS AND OTHER REGULATORY MATTERS
17.1 Adverse Reaction Reporting. Each Party shall inform the
other of information in or coming into its possession or control
concerning side effects, injury, toxicity or sensitivity reaction and
incidents of severity thereof associated with commercial and clinical
uses, studies, investigations or tests of each Product (in humans), in the
Territory, whether or not determined to be attributable to the Product.
During the Term, each Party shall notify the applicable drug surveillance
department of the holder of the ANDA (the Medical Services Department, in
the case of Abbott) for the Product within twenty-four (24) hours, by
facsimile only, and after a responsible employee of such Party first
becomes aware of any adverse drug experience involving Product. In
addition, the holder of the ANDA for each Product shall keep the other
Party advised with respect to information concerning the safety or
efficacy of the Products. On the written request of the Party which is
not the holder of the ANDA with respect to any Product, the holder of the
ANDA shall supply derailed information regarding such safety, efficacy and
medical information issues, including, if requested, copies of safety
reports filed with the FDA.
17.2 Product Information Requests. Information concerning
any complaints, medical inquiries and/or drug information requests from
consumers, physicians or other Third Parties received by a Party regarding
a Product shall be forwarded to the Drug Information Department of the
Party which is the holder of the ANDA for such Product within twenty-four
(24) hours of such Party's receipt of the request. The Drug Information
Department of the holder of the ANDA for such Product shall respond to
such complaints, inquiries and requests, if necessary, in accordance with
such Department's usual and customary procedures. The holder of the ANDA
for a Product shall supply the other Party, for such Party's information
only, with copies of its standard response information for the Products as
well as any updates thereto. Any patient inquires or requests received by
a Party shall be forwarded to the holder of the ANDA with respect to the
Product related to such request.
17.3 Governmental Reports. The holder of the ANDA for each
Product shall be responsible for filing with the FDA adverse reaction
reports that it receives directly from third parties and any adverse
reaction reports it receives from the other Party.
17.4 Product Recall. The Distributor of any Product shall
have an established system to ascertain all recipients of Product by lot
number and quantity. In the event that either Party determines that an
event, incident or circumstance has occurred which may result in the need
for a recall or other removal of any Product, or any lot or lost thereof,
from the market, such Party shall advise the other and the Parties shall
consult with respect thereto. The Party that is the holder of the ANDA
for such Product shall have the sole authority to decide whether a recall
or other removal of such Product shall be made. Except as provided below,
if the holder of such ANDA recalls or otherwise removes such Product or
any lot or lots thereof from the market, such Party shall bear all costs
and expenses of such recall or removal, including, without limitation,
expenses and other costs or obligations to third parties. The cost and
expense of notifying customers and the costs and expenses associated with
the shipment of the recalled Product and the cost and expense of
destroying the Product removed from the market, if necessary. Any such
recall or removal costs, expenses or obligations shall be borne by the
other Party (i.e., the Party which is not the holder of the ANDA for such
Product) only to the extent that the recall or removal results from such
Party's: (i) improper distribution, storage or shipment or the Product,
(ii) improper sampling practices or mishandling of Sample Units; (iii) Co-
Promotion of the Product in a manner inconsistent with the Product's
labeling; or (iv) violation of this Agreement. In the event of a recall,
each Party shall promptly meet and discuss in good faith whether the
Parties' Detailing obligations should be adjusted.
17.5 Procedures. Within thirty (30) days after the Execution
Date, representatives from the drug safety and medical information
departments of each Party shall meet to establish procedures to accomplish
the obligations set forth in this Article 19.
17.6 Governmental Contact Reporting. Each Party shall
promptly notify the other Party, as well as such other Party's general
counsel, as from time to time made know to such Party, upon being
contracted by the FDA or any other federal, state or local governmental
agency for any regulatory purpose pertaining to this Agreement or to the
Products. If practical the Party receiving such contact shall notify the
other Party within twenty-four (24) hours. The Party receiving notice
from such agency shall provide the other Party with prompt written notice
of any inquiries from, or positions taken by, the FDA or any other
federal, state or local governmental agencies which may affect the co-
promotion or distribution of any Product.
17.7 Product Registration. During the Term, the holder of
the ANDA shall, at its own expense, obtain and thereafter maintain all
regulatory approvals necessary for the marketing of each of the Products
in the Territory. The holder of the ANDA shall maintain product and
establishment regulations under 21 C.F.R. Part 207, Subparts C and D, for
the Products.
17.8 Records Retention. Each Party shall keep for five (5)
years (or longer, if required by any regulatory authorities) after
termination of this Agreement records of all Product sales and customers
sufficient to adequately administer a recall of any Product and to fully
cooperate in any decision by the Parties to recall, retrieve and/or
replace any Product.
18. GENERAL
18.1 Entire Agreement. This Agreement, together with the
Exhibits attached hereto and incorporated herein by this reference,
represents the entire understanding as of the Effective Date between the
Parties with respect to the matter hereof, and supersedes all prior
agreements, negotiations, understandings, representations, and statements,
whether written or oral, between the Parties relating thereto. All goods
provided hereunder shall be subject to and governed by the terms and
provisions set forth herein, and none of the terms and conditions
contained on any proposal, purchase order, invoice, or other writing,
shall have any effect or change the provisions of this Agreement.
18.2 Modifications in Writing. No modification, alteration,
waiver, or change in any of the terms of this Agreement shall be valid or
binding upon the Parties hereto unless made in writing and duly executed
by each of the Parties hereto.
18.3 No Waiver. Any waiver on the part of either party of
any breach or any right or interest hereunder shall not imply the waiver
of any subsequent breach or waiver of any other right or interest.
18.4 Governing Law/Attorneys' Fees. This Agreement shall be
governed by and construed under the laws of the State of New York and the
United States without regard to conflicts of law provisions thereof. The
Parties hereby expressly exclude the United Nations Convention on
Contracts for the International Sale of Goods.
18.5 Headings. Headings and captions are for convenience
only and are not to be used in the interpretation of this Agreement.
18.6 Notices. Notices under this Agreement shall be
sufficient only if personally delivered, delivered by a major commercial
overnight courier service or mailed by certified or registered mail,
return receipt requested to a Party at the addresses set forth above or as
amended by notice pursuant to this subsection, to the attention of the
President, CAPD and President, Pharmaceutical Products Division in the
case of Abbott and to the attention of the Chief Executive Officer and
General Counsel in the case of SangStat. If not received sooner, notice
by mail shall be deemed received 5 days after deposit in the U.S. mails
and notice by overnight courier shall be deemed received on the next
business day.
18.7 Severability. If any provision of this Agreement is
held to be illegal or unenforceable, that provision shall be limited or
eliminated to the minimum extent necessary so that this Agreement shall
otherwise remain in full force and effect and enforceable.
18.8 Independent Contractor. The Parties hereto expressly
understand and agree that the other is an independent contractor in the
performance of each and every part of this Agreement, is solely
responsible for all of its employees and agents and its labor costs and
expenses arising in connection therewith.
18.9 Assignability. This Agreement and the rights and
obligations hereunder are not transferable or assignable without the prior
written consent of the Parties hereto, except for rights to payment and
except for all of its rights and obligations, which may be transferred or
assigned without consent to a person or entity who acquires all or
substantially all of the assets or business of a party, whether by sale,
merger or otherwise, except in the case of an acquisition by an Acquiror.
Notwithstanding the foregoing, either party hereunder may delegate its
rights and obligations to an Affiliate for the period of time during which
such party remains an Affiliate; provided such Party shall remain
responsible for its Affiliates' performance hereunder.
18.10 Public Statements. Except to the extent necessary under
applicable laws or for ordinary marketing purposes, the Parties agree that
no press releases or other publicity relating to the substance of the
matters contained herein will be made without joint approval. A press
release announcing this Agreement will be jointly developed and shall be
released by the Parties upon full execution of this Agreement. Each of
the Parties may not use and disclose any information contained in such
press release (or subsequent, agreed upon press releases) without the
prior consent of the other Party. Prior to the submission of this
document to the Securities and Exchange Commission, SangStat shall allow
Abbott an opportunity to review and recommend redactions to the Agreement.
SangStat shall endeavor, in its reasonable discretion, to include Abbott's
recommendations in its submission. SangStat must receive comments from
Abbott by no later than May 11, 1999.
18.11 Force Majeure. No liability or loss of rights hereunder
shall result to either party from delay or failure in performance (other
than payment) caused by force majeure, that is, circumstances beyond the
reasonable control of the party affected thereby, including, without
limitation, acts of God, fire, flood, war, government action, compliance
with laws or regulations (including, without limitation, those related to
infringement), strikes, lockouts or other serious labor disputes.
18.12 Remedies. Except as otherwise expressly stated in this
Agreement, the rights and remedies of a party set forth herein with
respect to failure of the other to comply with the terms of this Agreement
(including, without limitation, rights of full termination of this
Agreement) are not exclusive, the exercise thereof shall not constitute an
election of remedies and the aggrieved party shall in all events be
entitled to seek whatever additional remedies may be available in law or
in equity.
18.13 Alternative Dispute Resolution. The Parties agree to
effectuate all reasonable efforts to resolve in an amicable manner any and
all disputes between them in connection with this Agreement. The Parties
agree that any dispute that arises in connection with this Agreement,
which cannot be amicably resolved informally shall be finally settled as
set forth in the Alternative Dispute Resolution provisions of Exhibit E.
18.14 Compliance with Laws. Each Party shall comply with all
Legal Requirements in the Territory.
18.15 Counterparts. This Agreement may be executed in any
number of counterparts and may be executed by facsimile. All counterparts
shall collectively constitute one and the same Agreement.
ABBOTT LABORATORIES INC. SANGSTAT MEDICAL CORPORATION
Arthur Higgins Jean-Jacques Bienaime
Senior Vice President President and Chief Executive Officer
EXHIBIT A
DESCRIPTION OF PRODUCTS
[ ] *
EXHIBIT B
MARKETING/SALES ACTIVITIES TO BE CONSIDERED
FOR INCLUSION IN THE CO-PROMOTION PLAN
- Conduct marketing research to further define Product positioning.
- Develop and implement a marketing strategy for the Products.
- Promote the Products using all appropriate means, including, but not
limited to, journal advertising, sample placement, consumer advertising
such as direct mail or TV promotion, detailing literature, and store
promotion such as displays and promotional allowances, as determined by
the Co-Promotion Committee.
- Provide Physician Details and Sales Calls to the following audiences
- Applicable Specialists (i.e., Members of the Transplant Team
including Transplant Surgeons, Transplant Physicians, Transplant
Coordinators, Transplant Nurses, and Transplant/Hospital
Pharmacists and Members of Transplant Provider Groups that follow
Transplant Patients outside of Transplant Centers including
Transplant Nephrologists, Cardiologists, Hepatologists, Nurses,
Coordinators, and Pharmacists.)
- Managed Care Organizations
- Consider Physician Details and Sales Calls to the following audiences
- Applicable Primary Care Physicians (GP, FP, IM, DO and
pediatricians)
- Initiate and maintain professional and consumer public relations
programs in order to make healthcare professionals, transplanted
patients, and the general public aware of the Products and their
benefits.
- Develop programs that provide ongoing support and motivation to utilize
the Products in an optimal manner.
- Implement strategies for Product reimbursement in managed care
organizations, government healthcare programs, and other payer and
provider organizations.
- Train sales organization on the Product technology, appropriate
clinical utilization and competition.
- Implement a convention promotion program to generate Product interest.
- Design, implement and publish the results from clinical trials and
studies that answer common questions from healthcare professionals
about the Products, or demonstrate unique features and benefits of the
technology.
- Design, implement and publish the results of ongoing clinical trials
and studies that demonstrate the benefits of the Products from a
clinical, quality of life and economic perspective.
EXHIBIT C
SALES SUPPORT PLAN
Abbott Detailing Commitment
First Detail Year to be Pro-rated Second, Third, Fourth and Fifth
From SangCya Launch Date* Detail Year for Products
---------------------------------- ---------------------------------
Product Primary Physician Total Physician Primary Physician Total Physician
Details Details Details Details
----------------- -----------------
[ ]* [ ]*
Physician
Details [ ]* [ ]*
SangStat Detail Commitment
First Detail Year to be Pro-rated Second, Third, Fourth and Fifth
From SangCya Launch Date* Detail Year for Products
---------------------------------- ---------------------------------
Product Primary Physician Total Physician Primary Physician Total Physician
Details Details Details Details
----------------- -----------------
[ ]* [ ]*
Physician
Details [ ]* [ ]*
- For example, if the SangCya Launch Date is July 1, 1999, then the number
of Primary Physician Details for the First Detail Year shall be [ ] * .
- The Detailing Commitments set forth above shall apply to SangCya and
CycloTech until such time as a Capsule Product is launched, and shall
thereafter apply, in the aggregate, to all Products.
- The numbers set forth above only reflect Physician Details. Abbott and
SangStat Managed Care Organization account representatives shall also
conduct Sales Calls under the direction of the Co-Promotion Committee.
EXHIBIT D
MANAGED CARE ORGANIZATIONS WITH WHOM SANGSTAT HAS ON-GOING NEGOTIATIONS
[ ]*
EXHIBIT E
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may
arise from time to time during the term of this Agreement that relates to
either party's rights and/or obligations. To have such a dispute resolved
by this Alternative Dispute Resolution ("ADR") provision, a party first
must send written notice of the dispute to the other party for attempted
resolution by good faith negotiations between their respective presidents
(or their equivalents) of the affected subsidiaries, divisions, or
business units within twenty-eight (28) days after such notice is received
(all references to days*in this ADR provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of the
notice of dispute, or if the parties fail to meet within such twenty-eight
(28) days, either party may initiate an ADR proceeding as provided herein.
The parties shall have the right to be represented by counsel in such a
proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to
the other party of the issues to be resolved by ADR. Within
fourteen (14) days after its receipt of such notice, the other party
may, by written notice to the party initiating the ADR, add
additional issues to be resolved within the same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding.
If the parties are unable to agree on a mutually acceptable neutral
within such period, either party may request the President of the
CPR Institute for Dispute Resolution ("CPR"), 366 Madison Avenue,
14th Floor, New York, New York 10017, to select a neutral pursuant
to the following procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates within fourteen (14) days after
receipt of the request, along with a Curriculum Vitae
for each candidate. No candidate shall be an employee,
director, or shareholder of either party or any of their
subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by
each candidate of any circumstances likely to affect his
or her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the
greatest preference) and shall deliver the list to the
CPR within seven (7) days following receipt of the list
of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that
party shall provide a written explanation of the
conflict to the CPR along with its list showing its
order of preference for the candidates. Any party
failing to return a list of preferences on time shall be
deemed to have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR
immediately shall designate as the neutral the candidate
for whom the parties collectively have indicated the
greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If
the parties collectively have identified three (3) or
more candidates deemed to have conflicts, the CPR shall
review the explanations regarding conflicts and, in its
sole discretion, may either (i) immediately designate as
the neutral the candidate for whom the parties
collectively have indicated the greatest preference, or
(ii) issue a new list of not less than five (5)
candidates, in which case the procedures set forth in
subparagraphs 2(a) - 2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six (56)
days after selection, the neutral shall hold a hearing to resolve
each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other
than the principal place of business of either party or any of their
subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at
the hearing, and a short summary of the anticipated
testimony of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other
remedy for each issue. The proposed rulings and remedies
shall not contain any recitation of the facts or any
legal arguments and shall not exceed one (1) page per
issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed
twenty (20) pages. This page limitation shall apply
regardless of the number of issues raised in the ADR
proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d), no
discovery shall be required or permitted by any means, including
depositions, interrogatories, requests for admissions, or production
of documents.
5. The hearing shall be conducted on two (2) consecutive days and shall
be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of
hearing time to present its case. The neutral shall
determine whether each party has had the five (5) hours
to which it is entitled.
(b) Each party shall be entitled, but not required, to make
an opening statement, to present regular and rebuttal
testimony, documents or other evidence, to cross-examine
witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time
shall be charged against the party conducting the
cross-examination.
(c) The party initiating the ADR shall begin the hearing
and, if it chooses to make an opening statement, shall
address not only issues it raised but also any issues
raised by the responding party. The responding party,
if it chooses to make an opening statement, also shall
address all issues raised in the ADR. Thereafter, the
presentation of regular and rebuttal testimony and
documents, other evidence, and closing arguments shall
proceed in the same sequence.
(d) Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any
circumstances. Affidavits prepared for purposes of the
ADR hearing also shall not be admissible. As to all
other matters, the neutral shall have sole discretion
regarding the admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each
party may submit to the other party and the neutral a post-hearing
brief in support of its proposed rulings and remedies, provided that
such brief shall not contain or discuss any new evidence and shall
not exceed ten (10) pages. This page limitation shall apply
regardless of the number of issues raised in the ADR proceeding.
7. The neutral shall rule on each disputed issue within fourteen (14)
days following completion of the hearing. Such ruling shall adopt
in its entirety the proposed ruling and remedy of one of the parties
on each disputed issue but may adopt one party's proposed rulings
and remedies on some issues and the other party's proposed rulings
and remedies on other issues. The neutral shall not issue any
written opinion or otherwise explain the basis of the ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These
fees and expenses, along with the reasonable legal fees and expenses
of the prevailing party (including all expert witness fees and
expenses), the fees and expenses of a court reporter, and any
expenses for a hearing room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay
100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some
issues and the other party on other issues, the neutral
shall issue with the rulings a written determination as
to how such fees and expenses shall be allocated between
the parties. The neutral shall allocate fees and
expenses in a way that bears a reasonable relationship
to the outcome of the ADR, with the party prevailing on
more issues, or on issues of greater value or gravity,
recovering a relatively larger share of its legal fees
and expenses.
9. The rulings of the neutral and the allocation of fees and expenses
shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR
hearing, any submissions (including exhibits, testimony, proposed
rulings, and briefs), and the rulings shall be deemed Confidential
Information. The neutral shall have the authority to impose
sanctions for unauthorized disclosure of Confidential Information.
EXHIBIT F
AMENDED AND RESTATED SUPPLY AGREEMENT
EXHIBIT G
STOCK PURCHASE AGREEMENT AND RELATED DOCUMENTS
* Confidential Treatment requested
Exhibit 10.27
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ABBOTT LABORATORIES, AN ILLINOIS CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED.
CALL OPTION AGREEMENT
THIS CALL OPTION AGREEMENT (the "Agreement") is made as of
May 7, 1999, between SangStat Medical Corporation, a Delaware corporation,
("SangStat") and Abbott Laboratories, an Illinois corporation ("Abbott").
WHEREAS, SangStat and Abbott have entered a Stock Purchase
Agreement even date herewith (the "Stock Purchase Agreement"); and
WHEREAS, subject to the terms and conditions of this Call
Option Agreement (the "Agreement") and on the basis of the representations
and warranties set forth in this Agreement and in the Stock Purchase
Agreement, Abbott has agreed to grant SangStat the right to repurchase
from Abbott the Initial Shares and Option Shares purchased by Abbott from
SangStat pursuant to the Stock Purchase Agreement.
NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Certain Definitions.
1.1 Terms Defined in the Stock Purchase Agreement. To
the extent a term is not otherwise defined in this Agreement, it shall
have the same meaning as the meaning given to it in the Stock Purchase
Agreement.
1.2 Call Option. The term "Call Option" shall mean
either a Call Option for the Initial Shares or a Call Option for the
Option Shares, as the context requires.
1.3 Call Option for the Initial Shares. The term "Call
Option for the Initial Shares" shall mean the right of SangStat to
purchase SangStat stock from Abbott described in Section 2. 1 (a) below.
1.4 Call Option for the Option Shares. The term "Call
Option for the Option Shares" shall mean the right of SangStat to purchase
SangStat stock from Abbott described in Section 2.1(b) below.
2. Call Options.
2.1 Grant of Call Options, Exercise Price. Subject to
the terms and conditions herein set forth, Abbott hereby grants to
SangStat:
(a) the right (the "Call Option for the Initial
Shares") to purchase from Abbott any or all of the
Initial Shares at an exercise price per share
equal to two times the Price per Initial Share
paid by Abbott to SangStat pursuant to Section 1.1
of the Stock Purchase Agreement); and
(b) the right (the "Call Option for the Option
Shares") to purchase from Abbott any or all of the
Option Shares at an exercise price per share equal
to two times the Price per Option Share paid by
Abbott to SangStat pursuant to Section 2.2 of the
Stock Purchase Agreement.
2.2 Term of the Call Options. SangStat may exercise
either or both of the Call Options, in whole or in part, at any time after
the date hereof until December 31, 2001.
2.3 Manner of Exercising Call Option. SangStat may
exercise a Call Option only by surrendering a completed and fully-executed
Call Option Subscription Form (in the form attached hereto as Exhibit A)
to Abbott. On the fifth day following proper exercise of the Call Option
(the "Closing Date"), SangStat shall pay the exercise price for the Call
Option to Abbott. The Call Option shall be deemed to have been exercised
immediately prior to the close of business on the Closing Date, and any
person(s), entity or entities entitled to receive the shares of Common
Stock issuable upon exercise shall be treated for all purposes as the
holder of record of such shares as of the close of business on such date.
The exercise price for a Call Option shall be paid to Abbott by wire
transfer to the bank account of Abbott.
3. Changes in Capital Structure. If SangStat shall at any
time change the number of its issued common shares without receiving new
consideration (such as by stock dividends or stock splits), then the
number of shares of SangStat common stock covered by each of the Call
Options and the exercise price of each of the Call Options shall be
adjusted so that the aggregate consideration payable to Abbott and the
value of the Call Options, in the aggregate, shall not be changed.
4. California Commissioner of Corporations.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF, THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM ALL QUALIFICATION BY SECTION
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
5. Representations, Warranties and Covenants of Abbott.
Abbott represents and warrants as of this date, and
covenants for the period beginning on this date and ending the termination
of this Agreement, that:
(a) Abbott has the right to enter into this Agreement
and to transfer to SangStat all or any part of
the Initial Shares and the Option Shares, free
and clear of any lien, claim, encumbrance or
restriction of any type or nature whatsoever
(other than those created by SangStat or
restrictions on resale that may arise under
applicable federal and state securities laws); and
(b) Abbott is not a party to any agreement and will
not enter into an agreement, by which Abbott is
or would be bound (or to which Abbott is or would
become subject) that conflicts or would conflict
with this Agreement or the performance of Abbott's
obligations under this Agreement.
6. Miscellaneous.
6.1 Entire Agreement, Controlling Document. This
Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof and supersedes any and all prior negotiations,
correspondence and understandings between the parties with respect to the
subject matter hereof, whether oral or in writing.
6.2 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
6.3 Delay and Waiver. No delay on the part of either
party in exercising any right under this Agreement shall operate as a
waiver of such right. The waiver by either party of any other term or
condition of this Agreement shall not be construed as a waiver of a
subsequent breach or failure of the same term or condition or a waiver of
any other term or condition contained in this Agreement.
6.4 Assignment: Successors and Assigns. No provision
of this Agreement may be assigned without the prior written consent of the
other party hereto. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including
transferees of any of the Initial Shares or Option Shares). Nothing in
this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
6.5 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Delaware without regard to
conflicts of law principles.
6.6 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
6.7 Expenses. Irrespective of whether either of the
Call Options is exercised, each party shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement.
6.8 Alternative Dispute Resolution. The parties agree
to effectuate all reasonable efforts to resolve in an amicable manner any
and all disputes between them in connection with this Agreement. The
parties agree that any dispute that arises in connection with this
Agreement, which cannot be amicably resolved informally, shall be finally
settled as set forth in the Alternative Dispute Resolution provisions of
Exhibit E to the Co-Promotion Agreement between Abbott and SangStat dated
as of May 7, 1999.
6.9 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of SangStat
and Abbott. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into
which such securities are convertible), each future holder of all such
securities and SangStat.
6.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
6.11 Further Assurances. SangStat and Abbott shall do
and perform or cause to be performed all such further acts and things and
shall execute and deliver all such other agreements, certificates,
instruments or documents as the other party may reasonably request from
time to time in order to carry out the intent and purposes of this
Agreement and the consummation of the transactions contemplated by the
Agreement. Neither SangStat nor Abbott shall voluntarily undertake any
course of action inconsistent with the satisfaction of the requirements
applicable to them as set forth in this Agreement, and each shall promptly
do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable their obligations under
this Agreement.
6.12 No Third Party Rights. Nothing in this Agreement
shall create or be deemed to create any rights in any person or entity not
a party to his Agreement.
6.13 Mutual Drafting. This Agreement is the joint
product of SangStat and Abbott and each provision of the Agreement has
been subject to consultation, negotiation and agreement of SangStat and
Abbott and their respective legal counsel and advisers and any rule of
construction that a document shall be interpreted or construed against the
drafting party shall not apply.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
SangStat Medical Corporation
By:
Title:
Abbott Laboratories
By:
Title:
SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT
EXHIBIT A
CALL OPTION SUBSCRIPTION FORM
(To be signed only upon exercise of Call Option)
To:
The undersigned, the holder of the attached Call Option,
hereby irrevocably elects to exercise the purchase right represented by that
Call Option for, and to purchase under that Call Option, _________________
shares of Common Stock of ____________________ and herewith makes payment of
an aggregate price of $ __________________ for those shares and requests
that the certificates for the shares be issued in the name of, and
delivered to, _______________________ address is ___________________________
________________________ and that all other actions be taken as are
necessary to transfer title to such other property subject to the Call
Option.
Dated:
By:
Title:
Address:
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED,________________________________
hereby sell, assign and transfer unto_____________________________________,
_____________________________________ Shares of the Common Stock of
SangStat Medical Corporation, a Delaware corporation ("SangStat"), standing
in its name on the books of SangStat represented by Certificate No. ________
herewith and do hereby irrevocably constitute and appoint EquiServ LLP to
transfer said stock on the books of SangStat with full power of
substitution in the premises.
Dated:
_________________________________________
Signature
_________________________________________
_________________________________________
This Assignment Separate from Certificate was executed in conjunction with
the terms of a Call Option Agreement dated ____________________ , 1999, and
shall not be used in any manner except as provided in such Agreement.
Exhibit 10.28
RIGHT OF FIRST REFUSAL AGREEMENT
This RIGHT OF FIRST REFUSAL AGREEMENT is entered into as of
the 7th day of May, 1999 by and among SangStat Medical Corporation, a
Delaware corporation ("SangStat"), and Abbott Laboratories, an Illinois
corporation ("Abbott").
W I T N E S S E T H :
WHEREAS, SangStat and Abbott are parties to the Stock Purchase
Agreement of even date herewith (the "Stock Purchase Agreement"),
pursuant to which Abbott is purchasing those shares of SangStat's common
stock $0.001 par value (the "Common Stock") that are defined in the
Stock Purchase Agreement as being the "Initial Shares" and may purchase
those shares of the Common Stock that are defined in the Stock Purchase
Agreement as being the "Option Shares" (the Initial Shares and the
Option Shares are referred to collectively herein as the "Shares"); and
WHEREAS, SangStat and Abbott wish to provide further
inducements to each other to consummate the proposed transaction;
WHEREAS, all terms not otherwise defined herein shall have the
same meanings ascribed to them in the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual promises set forth in this Agreement;
THE PARTIES AGREE AS FOLLOWS:
1. Right of Refusal.
(a) Transfer Notice. If at any time after the
expiration of the Market Stand-Off set forth in the Stock Purchase
Agreement, Abbott proposes to transfer any of the Shares to one or more
third parties or in an open market transaction (a "Transfer"), then
Abbott shall give SangStat written notice of Abbott's intention to make
the Transfer (the "Transfer Notice"), which Transfer Notice shall
include (i) a description of the Shares to be transferred ("Offered
Shares"), (ii) the identity of the prospective transferee(s) if it is not
an open market transaction and (iii) the consideration and the material
terms and conditions upon which the proposed Transfer is to be made. The
Transfer Notice shall also include a copy of any written proposal, term
sheet or letter of intent, or other agreement relating to the proposed
Transfer.
(b) SangStat's Option. SangStat shall have an option
for a period of thirty (30) days from receipt of the Transfer Notice to
elect to purchase the Offered Shares at the same price and subject to the
same material terms and conditions as described in the Transfer Notice or
if the Transfer Notice proposes an open market transaction, then the
purchase price for SangStat shall be the average of the closing prices for
SangStat's Common Stock, as quoted on the Nasdaq National Market, on each
of the twenty (20) trading days immediately preceding the date of the
Transfer Notice. SangStat may exercise such purchase option and, thereby,
purchase all of the Offered Shares if the Transfer Notice proposes a
transfer to one or more third parties not in an open market transaction,
or purchase all (or a portion of) the Offered Shares if the Transfer
Notice proposes an open market transaction by notifying Abbott in writing
before expiration of the such thirty (30) day period as to the number of
such shares which it wishes to purchase. If SangStat gives Abbott notice
that it desires to purchase such shares, then payment for the Offered
Shares shall be by check or wire transfer, against delivery of the Offered
Shares to be purchased at a place agreed upon between the parties and at
the time of the scheduled closing therefor, which shall be no later than
forty-five (45) days after SangStat's receipt of the Transfer Notice,
unless the Transfer Notice contemplated a later closing with the
prospective third party transferee(s) or unless the value of the purchase
price has not yet been established pursuant to Section 1.1(c).
(c) Valuation of Property. Should the purchase price
specified in the Transfer Notice be payable in property other than cash or
evidences of indebtedness, SangStat shall have the right to pay the
purchase price in the form of cash equal in amount to the value of such
property. If Abbott and SangStat cannot agree on such cash value within
ten (10) days after SangStat's receipt of the Transfer Notice, the
valuation shall be made by an appraiser of recognized standing selected by
Abbott and SangStat or, if they cannot agree on an appraiser within twenty
(20) days after SangStat's receipt of the Transfer Notice, each shall
select an appraiser of recognized standing and the two appraisers shall
designate a third appraiser of recognized standing, whose appraisal shall
be determinative of such value. The cost of such appraisal shall be
shared equally by Abbott and SangStat. If the time for the closing of
SangStat's purchase but for the determination of the value of the purchase
price offered by the prospective transferee(s), then such closing shall
held on or prior to the fifth business day after such valuation shall have
been made pursuant to this subsection.
1.2 Non-Exercise of Rights. To the extent that SangStat has
not exercised its right to purchase the Offered Shares within the time
period specified in Section 1.1, the rights set forth herein shall
terminate.
1.3 Limitations to Right of Refusal. Notwithstanding the
provisions of Section 1.1 and 1.2 of this Agreement, Abbott may sell or
otherwise assign, with or without consideration, Shares to any affiliate
or successor in interest of Abbott provided that each such transferee or
assignee, prior to the completion of the sale, transfer, or assignment
shall have executed documents assuming the obligations of Abbott under
this Agreement with respect to the transferred securities.
2. Assignments and Transfers; No Third Party Beneficiaries.
This Agreement and the rights and obligations of the parties hereunder
shall inure to the benefit of, and be binding upon, their respective
successors, assigns and legal representatives, but shall not otherwise be
for the benefit of any third party.
3. Legend. Each existing or replacement certificate for
shares now owned by Abbott shall bear the following legend upon its face:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR
TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN RIGHT OF FIRST REFUSAL AGREEMENT BY
AND BETWEEN THE STOCKHOLDER AND THE CORPORATION.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
4. Term. This Agreement shall terminate upon the earlier
of (i) December 31, 2004 and (ii) the closing of SangStat's sale of all or
substantially all of its assets or the acquisition of SangStat by another
entity by means of merger, consolidation or other transaction or series of
related transactions resulting in the exchange of the outstanding shares
of SangStat's capital stock such that the stockholders of SangStat prior
to such transaction own, directly or indirectly, less than 50% of the
voting power of the surviving entity.
5. Miscellaneous.
5.1 Entire Agreement; Controlling Document. This Agreement
constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes any and all prior negotiations,
correspondence and understandings between the parties with respect to the
subject matter hereof, whether oral or in writing.
5.2 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
5.3 Delay and Waiver. No delay on the part of either party
in exercising any right under this Agreement shall operate as a waiver of
such right. The waiver by either party of any other term or condition of
this Agreement shall not be construed as a waiver of a subsequent breach
or failure of the same term or condition or a waiver of any other term or
condition contained in this Agreement.
5.4 Assignment: Successors and Assigns. No provision of
this Agreement may be assigned without the prior written consent of the
other party hereto. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including
transferees of any of the Initial Shares or Option Shares). Nothing in
this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
5.5 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware without regard to
conflicts of law principles.
5.6 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
5.7 Expenses. Irrespective of whether the Right of First
Refusal is exercised, each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and
performance of this Agreement.
5.8 Alternative Dispute Resolution. The parties agree to
effectuate all reasonable efforts to resolve in an amicable manner any and
all disputes between them in connection with this Agreement. The parties
agree that any dispute that arises in connection with this Agreement,
which cannot be amicably resolved informally shall be finally settled as
set forth in the Alternative Dispute Resolution provisions of Exhibit E to
the Co-Promotion Agreement between Abbott and SangStat dated as of May 7,
1999.
5.9 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of SangStat and Abbott. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement
at the time outstanding (including securities into which such securities
are convertible), each future holder of all such securities and SangStat.
5.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
5.11 Further Assurances. SangStat and Abbott shall do and
perform or cause to be performed all such further acts and things and
shall execute and deliver all such other agreements, certificates,
instruments or documents as the other party may reasonably request from
time to time in order to carry out the intent and purposes of this
Agreement and the consummation of the transactions contemplated by the
Agreement. Neither SangStat nor Abbott shall voluntarily undertake any
course of action inconsistent with the satisfaction of the requirements
applicable to them as set forth in this Agreement, and each shall promptly
do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable their obligations under
this Agreement.
5.12 No Third Party Rights. Nothing in this Agreement shall
create or be deemed to create any rights in any person or entity not a
party to his Agreement.
5.13 Mutual Drafting. This Agreement is the joint product of
SangStat and Abbott and each provision of the Agreement has been subject
to consultation, negotiation and agreement of SangStat and Abbott and
their respective legal counsel and advisers and any rule of construction
that a document shall be interpreted or construed against the drafting
party shall not apply.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SANGSTAT MEDICAL CORPORATION
By:
----------------------------------
President and Chief Executive Officer
Address: 1505 Adams Drive
Menlo Park, CA 94025
ABBOTT LABORATORIES:
By:
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Name:
----------------------------------
Title:
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Address:
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Exhibit 10.29
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
made as of the 7th day of May, 1999, by and between SangStat Medical
Corporation, a Delaware corporation ("SangStat"), and Abbott
Laboratories, an Illinois corporation ("Abbott").
RECITALS
WHEREAS, SangStat and Abbott are parties to the Stock Purchase
Agreement, dated the Closing Date (together with all exhibits, schedules,
supplements and any amendments thereto, the "Stock Purchase Agreement");
WHEREAS, the execution and delivery of this Agreement is a
condition to the Closing of the Stock Purchase Agreement; and
WHEREAS, all terms not otherwise defined herein shall have the
same meanings ascribed to them in the Stock Purchase Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights SangStat covenants and agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
(c) The term "Holder" means both Abbott and any transferee
of Abbott to whom registration rights granted under this Agreement
are assigned pursuant to Section 1.6 of this Agreement.
(d) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing
a registration statement or similar document in compliance with the Act,
and the declaration or ordering of effectiveness of such registration
statement or document.
(e) The term "Registrable Securities" means
the Common Stock of SangStat issued to Abbott pursuant to the Stock
Purchase Agreement, and any Common Stock of SangStat issued as a dividend
or other distribution with respect to such Common Stock.
(f) The term "Rule 144" shall mean Rule 144
promulgated under the Act, as amended, or any similar successor rule
thereto that may be promulgated by the SEC.
(g) The term "SEC" shall mean the Securities
and Exchange Commission.
1.2 Registration.
(a) If SangStat shall receive at any time after
November 15, 2001, a written request from a Holder that SangStat file a
registration statement under the Act covering the registration of all of
the Registrable Securities, then SangStat shall use all commercially
reasonable efforts to file within 45 days of such written request, at its
own expense (excluding any brokers fees or commissions) a registration
statement on Form S-3 (or such other registration statement as is then
available) and any related qualification or compliance with respect to all
of the Registrable Securities so as to permit or facilitate the sale and
distribution of all of the Registrable Securities. SangStat agrees to use
reasonable commercial efforts to accelerate the effectiveness of the
registration statement as soon as practicable after filing but no less
than within three (3) business days of any notification by the SEC of its
decision not to review the registration statement or its determination
that it has completed its review of the registration statement and has no
further comments for SangStat.
(b) SangStat agrees it will not include any
additional securities of SangStat other than the Registrable Securities
and will not permit any other person or entity to include any additional
securities in the registration statement to be filed pursuant to this
Section 1.
1.3 Obligations of SangStat. Whenever required under
this Section 1 to effect the registration of any Registrable Securities,
SangStat shall:
(a) Prepare and file with the SEC a registration
statement under the Act to register the resale of the Registrable
Securities by the Holder and use its best efforts to cause such
registration statement to become effective, and, subject to the provisions
below, use its best efforts to keep such registration statement effective
until the distribution contemplated in the registration statement has been
completed or until the provisions of Section 1.8 hereof are applicable.
If at any time after a registration statement becomes effective, SangStat
advises Abbott in writing that the registration statement shall contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, or any prospectus comprising a part of such registration
statement shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading or the occurrence or existence of any pending
corporate development that, in the reasonable discretion of SangStat,
makes it appropriate to suspend the availability of the registration
statement and the related prospectus, SangStat shall give notice to Abbott
that the availability of the registration statement is suspended and
Abbott shall suspend any further sale of Registrable Securities pursuant
to the registration statement until Abbott has been informed in writing
that the registration statement is available. With respect to pending
corporate developments, SangStat shall be entitled to exercise its right
to suspend the availability of the registration statement for a period
exceeding not more than sixty (60) days in any six (6) month period, not
to exceed in the aggregate one hundred twenty (120) days in any twelve
(12) month period. With respect to material misstatements or omissions,
SangStat shall use reasonable commercial efforts to amend the registration
statement to correct such misstatements or omissions as soon as reasonably
practicable.
(b) Subject to subsection 1.3(a), prepare and
file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the Act
with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holder such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as the Holder may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by the Holder.
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holder; provided that SangStat shall not be required in
connection therewith or as a condition thereto to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions, unless SangStat is already subject to service in such
jurisdiction and except as may be required by the Act.
(e) Amend its listing application with the
Nasdaq Stock Market and any other securities exchange on which similar
securities of SangStat are or become listed or quoted to include the
Registrable Securities as soon as practicable after the Closing Date.
(f) Notify the Holder, promptly after SangStat
shall have received notice thereof, of the date and time the registration
statement and each post-effective amendment thereto has become effective
or a supplement to any prospectus forming a part of such registration
statement has been filed.
1.4 Information from the Holder. It shall be a
condition precedent to the obligations of SangStat to take any action
pursuant to this Section 1 with respect to the Registrable Securities that
the Holder shall furnish to SangStat the information requested on Appendix
1.4 hereto, which shall include such information regarding the Holder, the
Registrable Securities held by it, and the intended method of disposition
of such securities, and such other information as shall be reasonably
requested by SangStat and required to effect the registration of the
Registrable Securities.
1.5 Expenses of Registration. All expenses of the
Holder, except underwriting discounts (if any) or commissions, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for
SangStat shall be borne by SangStat; provided, however, that SangStat
shall not be required to pay any legal and accounting fees incurred by the
Holder.
1.6 Assignment of Registration Rights. The rights to
cause SangStat to register Registrable Securities pursuant to this
Agreement may be assigned by Abbott to a transferee of Registrable
Securities only if: (a) SangStat is, prior to such transfer, furnished
with written notice of the name and address of such transferee and the
Registrable Securities with respect to which such registration rights are
being assigned and a copy of a duly executed written instrument in form
reasonably satisfactory to SangStat by which such transferee assumes all
of the obligations and liabilities of its transferor hereunder and agrees
itself to be bound hereby; (b) immediately following such transfer the
disposition of such Registrable Securities by the transferee is restricted
under the Act; (c) such assignment includes all of the Registrable
Securities then held by Abbott; provided, however, that such share
limitation shall not apply to transfers by Abbott to its subsidiaries if
all such transferees or assignees agree in writing to appoint a single
representative as their attorney-in-fact for the purpose of receiving any
notices and exercising their rights under this Agreement, and (d) Abbott
guarantees the performance of the Holder of its obligations under this
Agreement.
1.7 Indemnification.
(a) The Holder will indemnify and hold harmless
SangStat, as well as each of its directors, each of its officers who has
signed the registration statement, affiliates, each person, if any, who
controls SangStat within the meaning of the Act, against any losses,
claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject (under the Act, the 1934 Act or
otherwise), insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereto) arise out of or are based upon
omissions or violations (collectively, a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto,
(ii) any omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein
not misleading, or (iii) any violation or alleged violation by SangStat of
the Act, the 1934 Act, any rule or regulation promulgated under the Act or
the 1934 Act or other federal or state law, in each case to the extent
that such Violation is contained in any written information furnished by
the Holder for inclusion in such registration; and the Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.7(a), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, action or
proceeding if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.7(a) exceed the
net proceeds from the offering received by such Holder.
(b) SangStat will indemnify and hold harmless a
Holder, as well as each of such Holders's officers, directors, partners,
legal counsel, affiliates and persons controlling Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may be subject (under the Act, the 1934 Act or
otherwise), insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereto) arise out of or are based upon
any of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) any omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Holder of the Act, the 1934 Act or
any rule or regulation promulgated under the Act or the 1934 Act or other
federal or state law, in each case to the extent that such Violation is
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with any written
information furnished by SangStat in an instrument duly executed by the
Holder; and SangStat will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to
this subsection 1.7(b) in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.7(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability,
action, or proceeding if settlement is effected without the consent of
SangStat, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified
party under this Section 1.7 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 1.7, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in at the indemnifying party's expense, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties at the indemnifying party's
expense; provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the
fees and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential conflicts of
interests between such indemnified party and any other party represented
by such counsel in such proceeding. No indemnifying party, in defense of
any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgement or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the indemnified party of a release
from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this
Section 1.7 is unavailable or insufficient to hold harmless to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand
and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the indemnifying
party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent
such statement or omission. Notwithstanding the provisions of this
paragraph (d), Holder shall not be required to contribute any amount in
excess of the amount of net proceeds received by such Holder from the sale
of such Holder's Registrable Securities. Moreover, no person or entity
guilty of fraudulent misrepresentation within the meaning of Section 11(f)
of the Act shall be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
(e) The obligations of a Holder under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement and shall be
in addition to any other liability which SangStat and the Holder may have.
(f) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in an
underwriting agreement (if any) entered into in connection with the
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.
1.8 Termination of Registration Rights. The
registration rights provided in this Section 1 shall terminate if all
shares of Registrable Securities may be sold pursuant to Rule 144 in any
three (3) month period. Upon the termination of registration rights
pursuant to this Section 1.8, SangStat shall have the right to withdraw
the registration statement, or any portion thereof, covering the
Registrable Securities.
1.9 Legends. Each certificate representing the Common
Stock purchased pursuant to the terms of the Stock Purchase Agreement,
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND ALL
SUCH APPLICABLE LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
reasonably satisfactory to SangStat the securities being sold thereby may
be publicly sold without registration under the Securities Act and any
applicable state securities laws.
1.10 Reports Under Securities Exchange Act of 1934. With a view to
making available to a Holder the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of SangStat to the public without
registration or pursuant to a registration on Form S-3, SangStat agrees
to:
(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times;
(b) file with the SEC in a timely manner all
reports and other documents required of SangStat under the Act and the
1934 Act; and
(c) furnish to the Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written
statement by SangStat that it has complied with the reporting requirements
of SEC Rule 144, the Act and the 1934 Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a
copy of the most recent annual or quarterly report of SangStat and such
other reports and documents so filed by SangStat, and (iii) such other
information as may be reasonably requested in availing the Holder of any
rule or regulation of the SEC that permits the selling of any such
securities without registration or pursuant to such form.
2. Miscellaneous.
2.1 Amendment. This Agreement may only be amended by
a writing signed by the Holder and SangStat.
2.2 Entire Agreement; Controlling Document. This
Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof and supersedes any and all prior negotiations,
correspondence and understandings between the parties with respect to the
subject matter hereof, whether oral or in writing.
2.3 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
2.4 Headings. The section headings used in this
Agreement are intended principally for convenience and shall not by
themselves determine the rights and obligations of the parties to this
Agreement.
2.5 Delay and Waiver. No delay on the part of either
party in exercising any right under this Agreement shall operate as a
waiver of such right. The waiver by either party of any other term or
condition of this Agreement shall not be construed as a waiver of a
subsequent breach or failure of the same term or condition or a waiver of
any other term or condition contained in this Agreement.
2.6 Governing Law. This Agreement shall be governed
by and construed under the laws of the State of Delaware without regard to
conflicts of law principles.
2.7 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
2.8 Expenses. Each party shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, and
delivery of this Agreement.
2.9 Alternative Dispute Resolution. The parties agree
to effectuate all reasonable efforts to resolve in an amicable manner any
and all disputes between them in connection with this Agreement. The
parties agree that any dispute that arises in connection with this
Agreement, which cannot be amicably resolved informally shall be finally
settled as set forth in the Alternative Dispute Resolution provisions of
Exhibit E to the Co-Promotion Agreement between Abbott and SangStat dated
as of May 7, 1999.
2.10 Amendments and Waivers. Any term of this
Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of SangStat
and the Holder.
2.11 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
2.12 Further Assurances. SangStat and Abbott shall do
and perform or cause to be performed all such further acts and things and
shall execute and deliver all such other agreements, certificates,
instruments or documents as the other party may reasonably request from
time to time in order to carry out the intent and purposes of this
Agreement and the consummation of the transactions contemplated by the
Agreement. Neither SangStat nor Abbott shall voluntarily undertake any
course of action inconsistent with the satisfaction of the requirements
applicable to them as set forth in this Agreement, and each shall promptly
do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable their obligations under
this Agreement.
2.13 No Third Party Rights. Nothing in this Agreement
shall create or be deemed to create any rights in any person or entity not
a party to his Agreement.
2.14 Mutual Drafting. This Agreement is the joint
product of SangStat and Abbott and each provision of the Agreement has
been subject to consultation, negotiation and agreement of SangStat and
Abbott and their respective legal counsel and advisers and any rule of
construction that a document shall be interpreted or construed against the
drafting party shall not apply.
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first above written.
SANGSTAT MEDICAL CORPORATION
By:
----------------------------------
Address: 1505 Adams Drive
Menlo Park, CA 94025
ABBOTT LABORATORIES:
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Address:
----------------------------------
APPENDIX 1.4
ABBOTT INFORMATION:
All information furnished below by the undersigned for use in the
Registration Statement on Form S-3 is, and on the date such shares
registered thereunder, will be true, correct, and complete in all material
respects, and does not, and on the date on which the undersigned sells
such shares, will not, contain any untrue statement of a material fact or
omit to state any material fact necessary to make such information not
misleading. By completing and returning this information statement, the
undersigned hereby consents to the use of its, address, and share
ownership information in the Form S-3 of SangStat Medical Corporation.
A. Date.
Fill in Date: __________________________
B. Name. Print:
Print and sign name or names ______________________________
exactly as name or names appear on
share certificate. If certificate ______________________________
is held in more than one name,
all must sign.
Sign:
______________________________
______________________________
C. Address.
Fill in your address:
______________________________
______________________________
______________________________
D. Stock Owned.
Fill in number of shares of Of Record Beneficially
Common Stock owned of record
and beneficially.
_____________________ ____________________
E. Aggregate Number of Shares of Common Stock to be sold:
_____________ Shares
F. Status.
The undersigned is an individual ( ), partnership ( ), corporation
( ), or other, as more fully described below ( ). The undersigned is
not acting in a fiduciary capacity or as a nominee in selling shares in
the public offering, except as indicated below.
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONDENSED CONSOLIDATED BALANCE SHEET OF JUNE 30, 1999
AND THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS,
JUNE 30, 1999.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 30,501
<SECURITIES> 4,826
<RECEIVABLES> 16,859
<ALLOWANCES> 1,169
<INVENTORY> 40,484
<CURRENT-ASSETS> 93,717
<PP&E> 3,934
<DEPRECIATION> 0
<TOTAL-ASSETS> 121,527
<CURRENT-LIABILITIES> 27,124
<BONDS> 0
0
0
<COMMON> 168,137
<OTHER-SE> (119,686)
<TOTAL-LIABILITY-AND-EQUITY> 121,527
<SALES> 24,363
<TOTAL-REVENUES> 24,913
<CGS> 13,343
<TOTAL-COSTS> 13,343
<OTHER-EXPENSES> 29,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 368
<INCOME-PRETAX> (18,400)
<INCOME-TAX> (94)
<INCOME-CONTINUING> (18,306)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,306)
<EPS-BASIC> (1.11)
<EPS-DILUTED> (1.11)
</TABLE>
