<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934
For Quarter Ended September 30, 1997
Commission File Number 0-23252
IGEN INTERNATIONAL, INC.
(Exact name of registrant as specified in is charter)
DELAWARE 94-2852543
- ---------------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16020 INDUSTRIAL DRIVE, GAITHERSBURG, MD 20877
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(301) 984-8000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months, (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT OCTOBER 31, 1997
----- -------------------------------
Common Stock, $0.001 par value 15,148,752
1
<PAGE>
IGEN INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS
Balance Sheets--September 30, 1997 and March 31, 1997...................... 3
Statements of Operations--For the Three and Six Months Ended
September 30, 1997 and 1996................................................ 4
Statements of Cash Flows--For the Six Months Ended
September 30, 1997 and 1996................................................ 5
Notes to Financial Statements.............................................. 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................ 8
PART II OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS.......................................................... 11
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................ 12
Item 6: EXHIBITS AND REPORTS ON FORM 8-K........................................... 12
SIGNATURES............................................................................. 13
</TABLE>
2
<PAGE>
IGEN INTERNATIONAL, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
------------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................................. $ 493 $ 790
Short term investments................................................................. 6,584 8,254
Accounts receivable.................................................................... 1,254 1,783
Notes Receivable....................................................................... 141 417
Inventory.............................................................................. 1,711 2,075
Prepaid expenses and other current assets.............................................. 814 866
------------- -----------
Total current assets................................................................. 10,997 14,185
------------- -----------
EQUIPMENT, FURNITURE, AND IMPROVEMENTS................................................. 7,156 6,950
Accumulated depreciation and amortization.............................................. (4,286) (3,781)
------------- -----------
Equipment, furniture, and improvements, net.......................................... 2,870 3,169
------------- -----------
OTHER ASSETS........................................................................... 425 440
------------- -----------
TOTAL.................................................................................. $ 14,292 $ 17,794
------------- -----------
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.................................................. $ 5,058 $ 4,266
Deferred revenue....................................................................... 5,091 5,393
Obligations under capital leases....................................................... 76 95
------------- -----------
Total current liabilities............................................................ 10,225 9,754
------------- -----------
OBLIGATIONS UNDER CAPITAL LEASES-
NONCURRENT........................................................................... 82 158
STOCKHOLDERS' EQUITY:
Common stock: $.001 par value, 50,000,000 shares authorized:
15,147,510 and 14,987,416 issued and outstanding:.................................... 15 15
Additional paid-in capital............................................................. 65,391 64,876
Accumulated deficit.................................................................... (61,135) (56,700)
Notes receivable from sale of common stock............................................. (286) (309)
------------- -----------
Total stockholders' equity........................................................... 3,985 7,882
------------- -----------
TOTAL.................................................................................. $ 14,292 $ 17,794
------------- -----------
------------- -----------
</TABLE>
See notes to financial statements.
3
<PAGE>
IGEN International, Inc.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Product sales............................................................ $ 1,005 $ 1,450 $ 2,769 $ 3,333
License fees and contract revenue........................................ 2,150 2,875 2,545 5,952
Royalty income........................................................... 1,849 25 3,113 46
--------- --------- --------- ---------
Total.................................................................. 5,004 4,350 8,427 9,331
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Product costs............................................................ 301 613 944 1,237
Research and development................................................. 2,703 3,079 5,604 6,634
Marketing, general and administrative.................................... 3,530 2,543 6,241 5,103
--------- --------- --------- ---------
Total.................................................................. 6,534 6,235 12,789 12,974
--------- --------- --------- ---------
LOSS FROM OPERATIONS....................................................... (1,530) (1,885) (4,362) (3,643)
INTEREST (EXPENSE) INCOME--net............................................. (34) 175 (73) 409
--------- --------- --------- ---------
NET LOSS................................................................... $ (1,564) $ (1,710) $ (4,435) $ (3,234)
--------- --------- --------- ---------
--------- --------- --------- ---------
NET LOSS PER SHARE......................................................... $ (0.10) $ (0.11) $ (0.29) $ (0.22)
--------- --------- --------- ---------
--------- --------- --------- ---------
SHARES USED IN COMPUTING NET LOSS PERSHARE................................. 15,107 14,958 15,053 14,941
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to financial statements.
4
<PAGE>
IGEN International, Inc.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................... $ (4,435) $ (3,234)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Interest on notes receivable from sale of common stock................................... -- (3)
Amortization of deferred compensation.................................................... -- 55
Depreciation and amortization............................................................ 505 653
Deferred revenue......................................................................... (302) (5,120)
Add (deduct) items not affecting cash:
Decrease in accounts receivable........................................................ 529 21
Decrease in notes receivable........................................................... 276 --
Decrease (increase) in inventory....................................................... 364 (160)
(Increase) decrease in prepaid expenses and other assets............................... 67 533
Increase (decrease) accounts payable and accrued expenses............................. 792 (156)
--------- ---------
Net cash used in operating expenses................................................. (2,204) (7,411)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for equipment, furniture and improvements..................................... (206) (223)
Sale of short-term investments............................................................. 1,670 5,619
--------- ---------
Net cash provided by investing activities........................................... 1,464 5,396
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes receivable form sale of common stock, net............................... 23 21
Issuance of common stock -- net............................................................ 515 145
Principal payments under capital lease obligations......................................... (95) (238)
--------- ---------
Net cash provided by (used in) financing activities................................. 443 (72)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS.................................................... (297) (2,087)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................................... 790 4,001
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD..................................................... $ 493 $ 1,914
--------- ---------
--------- ---------
</TABLE>
See notes to financial statements.
5
<PAGE>
IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The financial statements of IGEN International, Inc. (the "Company")
reflect, in the opinion of management, all adjustments, consisting only of
normal and recurring adjustments, necessary to present fairly the Company's
financial position at September 30, 1997 and the Company's results of operations
for the three and six month periods ended September 30, 1997 and 1996
respectively. Interim period results are unaudited and are not necessarily
indicative of results of operations or cash flows for a full year period. The
balance sheet at March 31, 1997 was derived from audited financial statements at
such date.
Pursuant to accounting requirements of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, the accompanying
financial statements and these notes do not include all disclosures required by
generally accepted accounting principles for complete financial statements.
Accordingly, these statements should be read in conjunction with the Company's
most recent annual financial statements included in the Company's Annual Report
for the fiscal year ended March 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Short-Term Investments--Cash equivalents include cash
in banks, money market funds, securities of the U.S. Treasury and certificates
of deposit with original maturities of three months or less.
Concentration of Credit Risks--The Company has invested its excess cash
generally in securities of the U.S. Treasury, money market funds, certificates
of deposit and corporate bonds. The Company invests its excess cash in
accordance with a policy objective that seeks to ensure both liquidity and
safety of principal. The policy limits investments to certain types of
instruments issued by institutions with strong investment grade credit ratings
and places restrictions on their terms and concentrations by type and issuer.
Inventory is recorded at the lower of cost or market using the first-in,
first-out method and consists of the following (in thousands):
SEPTEMBER 30, 1997 MARCH 31, 1997
------------------- ---------------
Finished goods......................... $ 906 $ 1,095
Work in process........................ 187 150
Raw materials.......................... 618 830
------ ------
Total.................................. $ 1,711 $ 2,075
------ ------
------ ------
6
<PAGE>
IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
Notes to Financial Statements (continued)
Equipment, Furniture, and Improvements are carried at cost. Depreciation is
computed over the estimated useful lives of the assets, generally five years,
using accelerated methods.
Revenue Recognition--Nonrefundable license fees, option fees, royalty
income, and milestone payments in connection with research and development
contracts or commercialization agreements with corporate partners are recognized
when they are earned in accordance with the applicable performance requirements
and contractual terms. Amounts received in advance of performance under
contracts or commercialization agreements are recorded as deferred revenue until
earned. Product sales revenue is recorded as products are shipped.
Loss Per Share has been computed based on the weighted average number of
common shares and common equivalent shares outstanding.
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
Share," was recently issued by the Financial Accounting Standards Board. SFAS
No. 128 is effective for periods ending after December 15, 1997 and early
adoption is not permitted. SFAS No. 128 requires the Company to compute and
present a basic and fully diluted earnings per share. Had the company computed
earnings per share in accordance with SFAS No. 128, the resulting Loss Per Share
would not be different than that which has been reported for the periods ended
September 30, 1997 and 1996.
3. BOEHRINGER MANNHEIM GMBH LITIGATION
In 1992, the Company entered into a License and Technology Development
Agreement with Boehringer Mannheim GmbH ("BMG"), pursuant to which BMG launched
its Elecsys product line, which is based on the Company's ORIGEN technology. For
the three and six-month periods ended September 30, 1997, royalties recorded by
the Company under the Agreement totaled $1.7million and $2.9 million,
respectively. These amounts were charged against deferred revenues represented
by a $6 million advance from BMG in January 1997, on which there is a $2.4
million balance at September 30, 1997. As more fully set forth in Part II --Item
1, the Company is involved in litigation with BMG arising out of the Agreement.
One of the disputes at issue in the litigation relates to the computation of
royalties to which the Company is entitled under the Agreement, which the
Company believes have been understated by BMG. It is likely that BMG will
dispute the amount of royalties under the contract for this period and future
periods.
7
<PAGE>
IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company devotes substantially all of its resources to the research and
development of its proprietary technologies, primarily the ORIGEN technology for
clinical diagnostic and life science research products. The Company's sources of
revenue have consisted primarily of license or research payments pursuant to
licensing or collaborative research agreements and from product sales. The
Company has entered into collaborative arrangements with corporate collaborators
that provide for the development and marketing of certain ORIGEN systems. These
agreements provide fees and royalties payable to the Company in exchange for
licenses to produce and sell the resulting products. In the near term, the
Company may selectively pursue additional strategic alliances although, over
time, it expects an increasing amount of its revenues to be derived from sales
of its products and royalties from corporate collaborations.
Certain statements in this Form 10-Q are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve a number of risks and
uncertainties. Factors which may cause the Company's actual results in future
periods to differ materially from forecast results include, but are not limited
to: the risk factors set forth in the Company's annual report on Form 10-K for
the fiscal year ended March 31, 1997, including, without limitation, reliance on
collaborations and license patents and proprietary rights, uncertainty of
health-care reform measures and third-party reimbursements, the ability to
attract and retain qualified personnel, including scientists and consultants to
perform research and development work; general economic and business conditions,
both nationally and internationally; and the outcome of the pending litigation
involving the Company. IGEN disclaims any intent or obligation to update these
forward-looking statements.
RESULTS OF OPERATIONS
THE QUARTER AND SIX MONTHS IN REVIEW
The Company reported a net loss of $1.6 million ($.10 per share) on
revenue of $5 million for the second quarter ended September 30, 1997
compared to a net loss of $1.7 million ($.11 per share) on revenue of $4.4
million for the same period in the prior year. The net loss for the first six
months of fiscal 1998 was $4.4 million ($.29 per share) on revenue of $8.4
million compared to $3.2 million ($.22 per share) on revenue of $9.3million
in prior fiscal 1997. Revenues during the six months ending September 30,
1997 reflect a significant change in revenue mix compared to prior years, as
the Company's license and contract revenue converted to royalty income based
on product sales by corporate licensees. During this period, $5.9 million
(70%) of revenue was generated from the sale of products, either directly by
IGEN or from royalties on licensees' sales. In the prior year, IGEN revenue
related to the sale of products totaled only $3.4 million (36% of total
revenue). Accordingly, revenue from license fees and for contract research
decreased to $2.5 million for the six months ended September 30, 1997 from
$5.9 million in the prior year.
8
<PAGE>
IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
In 1992, the Company entered into a License and Technology Development
Agreement with Boehringer Mannheim GmbH ("BMG"), pursuant to which BMG launched
its Elecsys product line, which is based on the Company's ORIGEN technology. For
the three and six-month periods ended September 30, 1997, royalties recorded by
the Company under the Agreement totaled $1.7million and $2.9 million,
respectively. These amounts were charged against deferred revenues represented
by a $6 million advance from BMG in January 1997, on which there is a $2.4
million balance at September 30, 1997. As more fully set forth in Part II --Item
1, the Company is involved in litigation with BMG arising out of the Agreement.
One of the disputes at issue in the litigation relates to the computation of
royalties to which the Company is entitled under the Agreement, which the
Company believes have been understated by BMG. It is likely that BMG will
dispute the amount of royalties under the contract for this period and future
periods.
Operating costs remained relatively constant totaling $6.5 million and $12.8
million in the current quarter and first six months of fiscal 1998 compared to
$6.2 million and $13 million in the same periods last year. Due to expiring
external collaborations, research and development expenditures decreased to $2.7
million and $5.6 million in the quarter and first six months of the current
year, compared to amounts in the same prior year periods of $3.1 million and
$6.6 million, respectively. Marketing and general and administrative costs
increased to $3.5 million and $6.2 million during the current year periods from
$2.5 million and $5.1 million in the same prior year periods due in part to
professional and legal fees associated with the Company's litigation with
Boehringer Mannheim.
Income (loss) from operations over the next several years is likely to
fluctuate substantially from quarter to quarter as a result of differences in
the timing of revenues earned under license and product development agreements,
and associated product development expenses.
As of March 31, 1997, the Company had federal net operating loss and general
business credit tax carry forwards of approximately $41.9 million and $2.4
million, respectively. The Company's ability to utilize its net operating loss
and general business credit tax carry forwards may be subject to an annual
limitation in future periods pursuant to the "change in ownership rules" under
Section 382 of the Internal Revenue Service Code of 1986, as amended.
9
<PAGE>
IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through the sale of Preferred and
Common Stock, aggregating approximately $65 million through September 30, 1997,
collaborative research and licensing agreements, royalty payments, and sales of
its ORIGEN line of products. As of September 30, 1997, the Company had $7.1
million in cash, cash equivalents and short-term investments. Working capital
excluding current deferred revenue, which is classified as a current liability,
was $5.9 million at September 30, 1997. Including current deferred revenue,
working capital was $772,000.
Net cash used in operating activities was $2.2 million for the six months
ended September 30, 1997, as compared to $7.4 million for the corresponding
prior year period. This decrease was due primarily to a $4.75 million payment
IGEN received during the current quarter from one of its corporate partners,
Eisai Co., Ltd. This payment represents Eisai's final license fee payment of $2
million recorded in this period with the balance representing a non-refundable
royalty advance on Eisai's future product sales of the Picolumi Immunodiagnostic
System, which commenced distribution in Japan during the summer of 1997.
The Company used $206,000 and $223,000 of net cash for investing activities,
substantially related to the acquisition of laboratory equipment, furniture and
leasehold improvements, during the six months ended September 30, 1997 and 1996,
respectively.
The Company expects to incur substantial additional research and development
expenses, manufacturing costs and marketing and distribution expenses. It is the
Company's intention to selectively seek additional collaborative or license
agreements with suitable corporate collaborators although there can be no
assurance the Company will be able to enter into such agreements or that amounts
received under such agreements will reduce substantially the Company's funding
requirements. Additional equity or debt financing may be required, and there can
be no assurance that these funds may be available on favorable terms, if at all.
The Company's future capital requirements depend on many factors, including
continued scientific progress in its diagnostics programs, the magnitude of
these programs, the time and costs involved in obtaining regulatory approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, changes in its existing license and other
agreements, the ability of the Company to establish development arrangements,
the cost of manufacturing scale-up and effective commercialization activities
and arrangements.
10
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IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On September 15, 1997, the Company filed a lawsuit in Maryland against
Boehringer Mannheim GmbH ("BMG"), a German company to which the Company has
licensed certain rights to develop and commercialize diagnostic products
based on the Company's ORIGEN technology. That lawsuit is pending in the
Southern Division of the United States District Court for the District of
Maryland. The Company's dispute with BMG arises out of a 1992 License and
Technology Development Agreement (the "Agreement"), pursuant to which BMG
developed and launched its "Elecsys" line of diagnostic products, which is
based on ORIGEN technology. The Company alleges that BMG has failed to
perform certain material obligations under the Agreement, including
development and commercialization of ORIGEN technology according to the
contractual timetable; exploitation of the license to the extent
contemplated by the parties; phase out of certain non-royalty-bearing
product lines; exploitation of ORIGEN technology only within BMG's licensed
fields; proper treatment of intellectual property rights regarding ORIGEN
technology; maintenance of records essential to the computation of
royalties; and proper computation of royalties; and BMG has breached its
duty of good faith and fair dealing. In its lawsuit, the Company seeks
damages as well as injunctive and declaratory relief, including a judicial
determination of its entitlement to terminate the Agreement.
On September 15, 1997, shortly after the Company filed its lawsuit in
Maryland, BMG filed a lawsuit in the United States District Court for the
Southern District of Indiana (Indianapolis Division) seeking a declaration
that it did not breach the Agreement and a preliminary injunction precluding
the Company from terminating the Agreement pending the judicial resolution
of the dispute between the parties. In addition, BMG sought and obtained a
temporary restraining order that precludes the Company from terminating the
Agreement until such time as BMG's motion for preliminary injunction is
adjudicated.
The Company has requested that the Indiana court transfer BMG's action
to Maryland or stay the Indiana action pending the outcome of the Company's
Maryland lawsuit. Likewise, BMG has requested that the Maryland court
dismiss the Company's Maryland action or, alternatively, transfer it to
Indiana or stay it pending the outcome of the Indiana action. The Indiana
court will not rule on BMG's motion for preliminary injunction until the
venue dispute is resolved, and the temporary restraining order will remain
in place until that time.
11
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IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders of IGEN International, Inc. was
held on October 7, 1997.
(b) Edward B. Lurier and Robert Salsmans were elected to the Board of
Directors at the Annual Meeting. The directors of the Company whose
term of office as directors continued after the meeting are Samuel
J. Wohlstadter, Richard J. Massey and William O'Neill.
(c) The matters voted upon at the meeting and the voting of
shareholders with respect thereto are as follows:
The election of Edward B. Lurier and Robert Salsmans to the Board
of Directors to hold office for a three-year term and until his
successor is elected and has qualified, or until such director's
earlier death, resignation or removal. The voting results, with
approximately 81% of the shares voting, was as follows:
Lurier: For: 12,093,184
Against: 211,230
Salsmans: For: 12,092,884
Against: 211,530
The voting results to approve the selection of Deloitte & Touche LLP as the
Company's Auditors is as follows:
For: 12,228,593
Against: 61,000
Abstain: 14,821
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
- --Dagger--10.4.1 Supplemental Agreement between Eisai Co., Ltd. and the
Company dated July 24, 1997 (with certain confidential
information deleted).
11.1 Statements regarding computation of per share earnings for the
three and six months ended September 30, 1997 and 1996.
27 Financial Data Schedule
--Dagger--Confidential treatment requested.
(b) Reports on Form 8-K
NONE
12
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IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
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.
IGEN INTERNATIONAL, INC.
DATE: NOVEMBER 14, 1997 /s/ George V. Migansky
-----------------------------------------
GEORGE V. MIGAUSKY
VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL OFFICER
(ON BEHALF OF THE REGISTRANT AND AS
PRINCIPAL FINANCIAL OFFICER)
13
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IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- ----------------- -----------
- --Dagger--10.4.1 Supplemental Agreement between Eisai Co., Ltd.
and the Company
11.1 Computation of per share data
27 Financial Data Schedule
--Dagger--Confidential treatment requested.
14
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been separately
filed with the Commission.
EXHIBIT 10.4.1
SUPPLEMENTAL AGREEMENT
Background
Eisai Co., Ltd. (Eisai) and IGEN, Inc. (IGEN) entered into an agreement
dated May 25, 1990 (the Eisai/IGEN License Agreement) whereby Eisai obtained
certain rights relating to IGEN/ /s proprietary electrochemiluminescence (ECL)
technology.
[*
]
the parties wish to express mutually acceptable interpretations of the
Eisai/IGEN License Agreement on certain points, and to establish certain
supplemental provisions in furtherance of the intent of the Eisai/IGEN License
Agreement.
Now, therefore, Eisai and IGEN agree as follows:
1. Relation to Eisai/IGEN License Agreement
(A) The Eisai/IGEN License Agreement, as clarified and supplemented by
this Supplemental Agreement, shall remain in force and effect.
(B) When capitalized, terms used in the Eisai/IGEN License Agreement
and/or this Supplemental Agreement shall have the meanings ascribed to them
in the Eisai/IGEN License Agreement, subject to the following clarifications:
"Clinical Diagnostic Market/ / shall have the meaning set forth in Section
1.4 of the Eisai/IGEN License Agreement, provided that the term / /patient/ /
appearing in that section shall be understood to refer solely to human
patients.
"Eisai Instrument" shall mean the Instrument specified in Attachment A
hereto.
"Enhanced Eisai Instrument" [*
]
"Immunoassay" shall mean an Assay that uses antibodies wherein the
antibody combining site is directly involved in the detection or
quantification of the analyte, and that is formatted to be performed on an
Eisai Instrument or Enhanced Eisai Instrument, wherein the immunoassay is
performed with paramagnetic beads and wherein an immunocomplex containing an
antibody and an ECL labeled moiety coupled to a paramagnetic bead (bead-bound
phase/ /) is separated in one or more steps from other assay and/or sample
components (/ /free phase/ /) in the Wash Station of the Instrument or Enhanced
1
<PAGE>
Instrument, prior to transfer of the bead-bound phase to the flow cell of the
Instrument or Enhanced Instrument.
/ /Instrument/ / shall mean any Eisai Instrument and/or any Enhanced
Eisai Instrument.
/ /Point-of-Care/ / shall mean, with respect to instruments, designed
for doctors' offices, or portable enough for bedside or near-patient use, or
reliant on a disposable electrode, or capable of processing a number of
assays but only for a single patient at a time, or hand-held; and shall mean,
with respect to assays, formatted for use with any such instruments.
/ /Wash Station/ / shall mean a vessel(s) and means for separating bound
phase from free phase, prior to transfer of bound phase to the flow cell of
the instrument.
/ /Wash Step/ / shall mean one or more step(s) of separating bound phase
from free phase in a Wash Station prior to transfer of the washed bound phase
to the flow cell.
2. Instruments
Clarifications:
(A) Eisai has the exclusive right to market and sell the Eisai Instrument
in the Clinical Diagnostic Market in Japan, except for Point-of-Care use.
(B) Eisai has the exclusive right to market and sell in the Clinical
Diagnostic Market in Japan except for Point-of-Care use, any Enhanced Eisai
Instrument that Eisai may develop and obtain authority to sell, provided that
Eisai shall have complied with the procedure specified in Section 5(B) below
with respect to each such Enhanced Eisai Instrument.
(C) IGEN shall not itself market or sell, and shall not grant to any
other party except Eisai any license to market or sell, in the Clinical
Diagnostic Market in Japan, except instruments that are for Point-of-Care
use, any ECL-based instrument whose operation includes a Wash Step.
(D) Eisai has no rights to market or sell the Eisai Instrument or any
Enhanced Eisai Instrument outside Japan, except for sales to IGEN pursuant to
subsection (H) below.
2
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been separately
filed with the Commission.
(E) Eisai has the right to manufacture or have manufactured Eisai
Instruments and Enhanced Eisai Instruments in Japan. In case of any
manufacturing by parties other than Eisai, Eisai shall obtain legally binding
contractual commitments from the manufacturer to the effect that IGEN's
patents and other proprietary or confidential information will be protected
against disclosure or unauthorized use, and that the manufacturer will grant
back to IGEN a non-exclusive, royalty-free license covering any improvements
to IGEN technology that the manufacturer may make. The geographic scope of
each such license shall be worldwide except that marketing and sales for the
Clinical Diagnostic Market (excluding the Point-of-Care market) in Japan of
instruments utilizing the licensed improvement may be excluded. Any
manufacturing of Eisai Instruments or Enhanced Eisai Instruments outside
Japan by Eisai or any other party under contract with Eisai shall require the
prior written consent of IGEN, which consent shall not be unreasonably
withheld. IGEN shall be entitled to withhold or impose conditions on its
consent to avoid conflict with exclusive rights of other IGEN licensees or to
protect IGEN technology or other IGEN business interests reasonably
implicated by the proposed manufacturing outside Japan. In addition to
seeking IGEN's consent for such manufacturing, Eisai shall give IGEN a
reasonable opportunity to bid for the manufacturing work.
(F) Eisai and IGEN shall coordinate in connection with development of
Enhanced Eisai Instruments. Eisai may undertake this development at its
option (but shall have no obligation to do so), and shall inform IGEN
periodically about its efforts. IGEN shall keep Eisai informed concerning
IGEN's development efforts in the field of ECL, and Eisai shall keep IGEN
informed concerning developments by Eisai in the field of ECL and significant
developments in the Japanese market for ECL-based instruments.
(G) IGEN shall not use any specifications received from Eisai for the
Eisai Instrument (or comparable specifications for any Enhanced Eisai
Instrument provided by Eisai pursuant to Section 5(B) hereof) to manufacture
the Eisai Instrument (or any Enhanced Eisai Instrument) for sale or lease to
customers in Japan, although IGEN shall be free to manufacture instruments
based on such specifications for sale in markets outside Japan. If Eisai
elects to have the Eisai Instrument or any Enhanced Eisai Instrument
manufactured by a contractor, Eisai shall purchase finished or semi-finished
instruments directly from the selected contractor. Eisai shall also provide
IGEN with [* ] Eisai Instruments and [* ] of each Enhanced Eisai
Instruments that Eisai may develop [* ]. Such instruments
shall be provided as soon as Eisai=s manufacturing capacity and customer
demand allow, but in no event later than [*
] after execution of this
Supplemental Agreement (in the case of the Eisai Instrument) or the date when
the instrument is first offered to Eisai customers (in the case of each
Enhanced Eisai Instrument).
3
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been
separately filed with the Commission.
(H) Subject to production capacity constraints of Eisai and its
contractors, IGEN shall have the right to purchase from Eisai, Eisai
Instruments or any Enhanced Eisai Instruments for the sole purpose of resale
in markets outside Japan. Priority shall be given during the first twelve
(12) months after execution of this Supplemental Agreement to Eisai's own
requirements for instruments to be sold in Japan, except that IGEN shall be
entitled to receive [* ] Eisai Instruments and [* ] of any
Enhanced Eisai Instruments as provided for in Section 2(G) during such twelve
(12) month period. For deliveries scheduled after the [* ]
, IGEN shall have the right to fulfillment of its orders for up to
[* ]. IGEN shall make commercially
reasonable efforts to prevent instruments it resells outside Japan from
flowing back into the Clinical Diagnostic Market in Japan, but IGEN shall not
bear responsibility for purchasers of such instruments who may disregard
commitments in this area. If Eisai reports to IGEN that one or more Eisai
Instruments or Enhanced Eisai Instruments sold by IGEN outside Japan have
appeared in the Clinical Diagnostic Market in Japan, IGEN shall promptly
attempt to determine the source of the instrument(s), and shall seek to
assert its contractual rights to rectify the problem. IGEN shall not market
or sell in any market in Japan any Eisai Instrument or Enhanced Eisai
Instrument. Eisai shall sell such instruments in finished or semi-finished
packages to IGEN at an FOB ex factory price equal to [*
]. Instruments and
documentation and packaging thereof provided under this paragraph shall be
the same in all respects as Eisai produces for the Japanese market. If IGEN
requests any modifications, Eisai and IGEN shall negotiate a production
schedule and IGEN shall bear all additional costs such as, but not limited
to, development and manufacturing costs necessitated by the requested
modification. Any sales pursuant to this paragraph shall be subject to the
terms and conditions set forth in Attachment D hereto.
(I) Eisai shall include in all Instruments sold pursuant to Sections 2(A)
and 2(B) above the software required for the performance of a Wash Step at
the Wash Station of the Instrument.
Supplementary Provision:
(J) Upon execution of this Supplemental Agreement, Eisai shall provide
IGEN with specifications for the Eisai Instrument, including software code,
mechanical drawings and any other information that would be necessary to
manufacture the Eisai Instrument.
4
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been
separately filed with the Commission.
3. Assays
Clarifications:
(A) Eisai has the right to manufacture or have manufactured, market and
sell in Japan during 1997 and 1998 Immunoassays for the analytes listed in
Attachment B hereto as long as such Immunoassays are formatted specifically
for the Eisai Instrument. Thereafter Eisai shall have the right to
manufacture or have manufactured, market and sell Immunoassays for [*
]
and (ii) Eisai shall have complied with the procedure specified in Section
5(C) below with respect to each such Immunoassays. With respect to other
Assays falling within the scope of the Eisai/IGEN License Agreement, IGEN and
Eisai shall seek to develop mutually acceptable commercially reasonable terms
and timetable for introduction [* ] of
any such Assay proposed by Eisai, provided, however, that Eisai shall not
manufacture, have manufactured, market or sell any such Assay before such
terms and timetable are mutually agreed. In case of any manufacturing of any
Assay by parties other than Eisai, Eisai shall obtain legally binding
contractual commitments from the manufacturer to the effect that IGEN's
patents and other proprietary or confidential information will be protected
against disclosure or unauthorized use, and that the manufacturer will grant
back to IGEN a non-exclusive royalty-free license covering any improvements
to IGEN technology that the manufacturer may make. The geographic scope of
each such license shall be worldwide except that marketing and sales for the
Clinical Diagnostic Market (excluding the Point-of-Care market) in Japan of
Assays utilizing the licensed improvement may be excluded.
(B) Any Assays manufactured by or for Eisai either before or after the end
of 1998 shall be formatted to [*
] be
incompatible with the Elecsys line of instruments marketed by Boehringer
Mannheim GmbH and its affiliates.
(C) It is the common understanding of both Eisai and IGEN that before and
after the end of 1998, Eisai will have exclusive rights to manufacture,
market and sell the PIVKA assay for all clinical uses of ECL in any format,
wash or non-wash, in Japan.
5
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been
separately filed with the Commission.
(D) At IGEN's request, Eisai shall sell any Assays for the analytes
listed on Attachment B or other Assays developed or licensed by or for Eisai
and formatted for the Eisai Instrument or Enhanced Eisai Instruments, as to
which Eisai has rights extending beyond Japan, to IGEN and its Affiliates in
semi-finished form (without labels and instruction pamphlets) for marketing
outside Japan. Any such sales shall be subject to the terms and conditions
set forth in Attachment D hereto. Eisai shall sell such Assays to IGEN at an
FOB ex-factory price equal to [*
]. Eisai shall
also consider in good faith any requests for reagents to format assays for
use by IGEN for any markets outside the Clinical Diagnostic Market on
commercially reasonable terms. In the event of any disagreement between IGEN
and Eisai about whether Eisai has a reasonable basis for withholding the
requested reagents, the matter shall be referred to the Joint Steering
Committee provided for in Section 5.
(E) IGEN may not sell in Japan, nor authorize or allow other parties to
sell in Japan, any Assays formatted for the Eisai Instrument or any Enhanced
Eisai Instrument or any Immunoassays which involve a Wash Step, or any Assays
produced from products or material supplied by Eisai, except that IGEN shall
be entitled to sell or authorize others to sell such Assays (i) for markets
other than the Clinical Diagnostic Market in Japan, and/or (ii) for
Point-of-Care use in Japan.
(F) Eisai shall purchase Ruthenium labels for ECL Assays from IGEN at [*
]
If requested, IGEN shall supply Eisai with up to a two-year supply of its
projected label needs. Eisai shall provide IGEN with manufacturing
specifications for the labels a reasonable time in advance of required
delivery. Eisai shall be entitled to assume manufacturing responsibility for
labels to meet its requirements only in case of IGEN's failure on three
occasions within six (6) months of an order, as determined according to
Attachment E and verified by an independent third-party expert, to provide
labels that comply in all material respects with Eisai's specifications, and
if IGEN fails to cure the problem within an additional three (3) month period.
6
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been separately
filed with the Commission.
4. Fees and Royalties
Clarifications:
(A) Eisai shall pay IGEN the remaining $2,000,000 fee set forth in
Section 4.1(d) of the Eisai/IGEN License Agreement within thirty (30) days of
the date of execution of this Supplemental Agreement, by wire transfer into a
bank account designated by IGEN. Eisai shall be entitled to delay such
payment until the license registration filing referred to in Section 7 has
been made, unless non-filing is attributable to Eisai's non-cooperation in
the process of preparing and making the filing. After payment under this
Section 4(A) is made, there will be no further payments due from Eisai to
IGEN under Section 4.1 of the Eisai/IGEN License Agreement.
(B) Eisai shall pay to IGEN a royalty equal to [*
] whichever is higher, in
connection with all Eisai Instruments and Enhanced Eisai Instruments
manufactured by Eisai or its contractors; provided, however, [*
].
(C) Eisai shall pay to IGEN royalties in connection with all Assays in
accordance with Section 4 of the Eisai/IGEN License Agreement. The royalty
rate applicable to Assays for each analyte listed on Attachment B hereto
shall be as set forth in the column entitled / /Applicable Royalty Rate/ / on
Attachment B. If requested by IGEN with respect to any Assay listed on
Attachment B as having a royalty rate of [* ] Eisai shall provide a
reasonable explanation of the proprietary and/or license rights of Eisai that
justify reduction of the royalty rate to [* ].
(D) Eisai shall pay to IGEN a royalty equal to [* ]
for replacement parts provided by or on behalf of Eisai with respect to any
Eisai Instrument or Enhanced Eisai Instrument.
7
<PAGE>
Supplementary Provision:
(E) Eisai shall pay the amount of $2,750,000 as a non-refundable advance
royalty payment, to be paid within thirty (30) days of the date of execution
of this Supplemental Agreement, to be set off against the first $2,750,000 in
royalties that become payable from Eisai to IGEN by reason of the sale of
Instruments, replacement parts, and Assays during any time period in which
such royalties become due. Eisai shall be entitled to delay such payment
until the license registration filing referred to in Section 7 has been made,
unless non-filing is attributable to Eisai's non-cooperation in the process
of preparing and making the filing.
5. Joint Steering Committee
Clarifications:
(A) Eisai and IGEN shall establish and maintain a Joint Steering
Committee consisting of one or more representatives designated by each party.
The Joint Steering Committee shall meet at least twice per year, alternating
between Eisai headquarters and IGEN headquarters or at such other location as
the parties may jointly select, provided that the visiting party may choose
to attend by video teleconference at its own cost. The Joint Steering
Committee shall serve as a forum for the parties to exchange general
information about matters covered by the Eisai/IGEN License Agreement and
this Supplemental Agreement.
(B) For any Instrument that Eisai proposes to qualify as an Enhanced
Eisai Instrument, Eisai shall provide IGEN's representatives on the Joint
Steering Committee with a description of the Instrument in a level of detail
comparable to Attachment A hereto. The Instrument shall qualify
automatically as an Enhanced Eisai Instrument unless an IGEN representative
on the Joint Steering Committee within thirty days disputes the Instrument's
compliance with the definition of Enhanced Eisai Instrument set forth above.
In that event, the IGEN representative shall provide an explanation of the
basis for the dispute in reasonable detail, and the Joint Steering Committee
shall meet promptly to attempt to resolve the dispute; provided, however,
that the IGEN representative shall not dispute an Eisai proposal for Enhanced
Eisai Instrument, to be manufactured, marketed and sold only in compliance
with the other provisions of the Eisai/IGEN License Agreement and this
Supplemental Agreement, on the basis of proposed use by Eisai of any new
development or feature that IGEN has permitted any other licensee of ECL to
incorporate into instruments intended for sale in Japan. The instrument
shall not qualify as an Enhanced Eisai Instrument pending resolution of the
dispute. Eisai shall be entitled to manufacture but not market, sell, or
offer for sale, the instrument at issue while the dispute is pending. Any
such manufacturing shall be at Eisai's risk that it will be found to lack the
right to market and sell the instruments it manufactures. Resolution of such
a dispute shall be by arbitration pursuant to Section 7 of the Eisai/IGEN
License Agreement, and each party shall use best reasonable efforts to
expedite resolution of the dispute. As soon as they are available, Eisai
shall provide to IGEN the detailed specifications for the Enhanced Eisai
Instrument including software code, mechanical drawings, and any other
information that would be necessary in order to manufacture the Instrument.
Such specifications shall conform to the description provided previously to
the Joint Steering Committee.
8
<PAGE>
(C) At each meeting of the Joint Steering Committee, Eisai shall provide
information concerning any new Assays Eisai plans to offer in Japan during the
next six months. Eisai shall not offer any Assays formatted for the Eisai
Instrument or any Enhanced Eisai Instrument for sale in Japan without first
having provided information about such Assays to the Joint Steering Committee.
The provisions of this Section 5(C) need not be met by Eisai with respect to
assays listed on Attachment B.
6. Mutual Release
Supplemental Provision:
IGEN and Eisai each hereby releases the other party and its Affiliates,
agents, representatives, officers and employees from any and all claims that
have arisen, could have arisen, or may in the future arise with respect to
performance under the Eisai/IGEN License Agreement up to the date of this
Supplemental Agreement.
7. License Registration
Supplemental Provisions:
(A) Within thirty (30) days after execution of this Supplemental
Agreement, Eisai and IGEN shall jointly file an application, in the form
attached hereto as Attachment C, as required in the Eisai/IGEN License
Agreement, for registration covering exclusive license rights under the
Japanese patent law in the governing patent office in Japan. Such
registration shall be co-owned by Eisai and IGEN or its Affiliate established
in Japan. IGEN shall have rights and obligations as set forth in subsections
8(A), 8(C), and 8(D) with respect to enforcement pursuant to the co-owned
registration, and Eisai shall have rights as set forth in subsection 8(A)
with respect to such enforcement. Both parties shall cooperate as
appropriate in the preparation and filing of any amendments of the
application that may be necessary. However, in the event that the parties'
original joint application for registration is not accepted, neither party
shall initiate filing of any other application for registration of exclusive
license rights in Japan covering, in whole or in part, the rights specified
in the original joint application, without the prior approval of the other
party.
(B) Any registration of exclusive license rights for Eisai obtained
pursuant to subsection 7(A) above shall terminate automatically upon the
termination or expiration of the Eisai/IGEN License Agreement in accordance
with the terms of that Agreement, and shall thereafter be of no further force
or effect.
(C) Nothing in this Supplemental Agreement shall in any way limit IGEN's
rights, or constitute a waiver by IGEN of its rights, to enforce its patent
rights against any infringer, notwithstanding the enforcement by Eisai of its
interest in the co-owned registered senyo jisshi ken rights. In no event
shall the provisions of the senyo jisshi ken referred to in subsection (A)
above be construed to expand the scope of Eisai's license rights, nor shall
Eisai have any right to obtain any compulsory license under any IGEN patent
rights that would expand on such license rights granted to Eisai.
9
<PAGE>
(D) Eisai and IGEN and their respective Affiliates shall each cooperate
as needed in all actions with regard to applications referred to in
subsection (A) above, and with regard to the resulting registrations and
enforcement of rights thereunder, and with regard to deregistration in the
event of termination or expiration of the Eisai/IGEN License Agreement.
8. Enforcement of Patent Rights Against Third Parties
Clarifications:
(A) Eisai and its Affiliates shall have the first right to enforce the
registered senyo jisshi ken to be filed and co-owned by Eisai and IGEN or
Affiliate established in Japan pursuant to Articles 3.1 to 3.3 of the
Eisai/IGEN License Agreement and Section 7(A) above, against any third party
infringer, but only in cases where the infringer is
(i) making, using or selling an instrument which contains a wash
station including a vessel and means for separating an
immunocomplex containing analyte and an ECL-labeled moiety
(bound phase), from other assay and/or sample components (free
phase), either integral with or associated with said
instrument, prior to transfer of the bound phase to the flow
cell; or
(ii) making, using or selling a compound, composition, reagent or
kit for performing clinical immunoassays that use antibodies
wherein the antibody combining site is directly involved in the
detection or quantification of an analyte, wherein an
immunocomplex containing analyte and an ECL-labeled moiety
(bound phase), is separated from other assay and/or sample
components (free phase) in the wash station of the instrument
prior to transfer of the washed bound phase to the flow cell of
the instrument and wherein bound phase coupled to paramagnetic
beads is transferred to said flow cell and magnetically
collected at the electrode.
Any such action brought by Eisai and/or any of its Affiliates shall be at
Eisai's own expense. If Eisai does not pursue such an action within the
period specified in Section 11.5 of the Eisai/IGEN License Agreement, IGEN
shall be entitled to enforce its proprietary rights according to the terms
and procedures set forth in such Section 11.5.
(B) Eisai may request IGEN and/or its Affiliate established in Japan to
participate at their own expense in any enforcement action brought by Eisai
and/or any of its Affiliates pursuant to subsection (A) above. Whether or
not requested to do so by Eisai, IGEN and/or its Affiliate established in
Japan shall be entitled to join in any such action, at their own expense, as
a party. IGEN and/or its Affiliate established in Japan shall also be
entitled to monitor proceedings brought by Eisai and/or any of its Affiliates
by appointment of an attorney who shall be kept fully informed by Eisai.
Eisai shall consult with IGEN in connection with any proposed settlement or
compromise of any enforcement action brought by Eisai, and shall enter into
any settlement or compromise only with the prior written approval of IGEN.
10
<PAGE>
(C) IGEN or its Affiliate established in Japan shall have the sole right
to enforce the registered senyo jisshi ken, obtained pursuant to subsection
(A) above, at its own expense, against any third party infringer whose
activity does not meet the criteria set forth in subsection (A) above.
(D) In the event that a third party manufactures, uses or sells a
clinical diagnostic instrument or immunoassay in Japan, which instrument or
immunoassay (i) includes a Wash Station or Wash Step, (ii) falls outside the
scope of Eisai's right to enforce its registered senyo jisshi ken rights
under Section 7, and (iii) is not an instrument or Immunoassay for doctors'
offices or for portable or hand-held use, or an instrument or immunoassay
marketed for use in non-clinical markets, IGEN shall take all reasonable
steps to enforce its proprietary rights in Japan against such third party.
Eisai and IGEN acknowledge, however, that the line of Elecsys instruments
(Elecsys 1010 and Elecsys 2010) currently being marketed by Boehringer
Mannheim GmbH and its affiliates would not, if manufactured, used, or sold in
Japan, justify any action by Eisai based on its exclusive license rights
registration.
(E) If Eisai requests IGEN to initiate an enforcement action pursuant to
subsection 8(D), but IGEN doubts the validity of the position regarding
proprietary rights it would be required to take in such an action, IGEN shall
consult Nagashima & Ono or such other law firm as the parties may mutually
select (hereinafter ALaw Firm@). Law Firm shall be asked first to render a
written opinion to IGEN on the question whether its proprietary rights are
enforceable against the alleged infringer. IGEN shall provide a copy of that
opinion to Eisai. In the event the opinion is favorable, Law Firm shall take
all reasonable actions, as instructed by IGEN, against the alleged infringer.
All expenses of consultation with Law Firm and of any patent infringement
proceeding shall be borne by Eisai, except that IGEN shall bear the costs of
consultation with the Law Firm if the opinion of the Law Firm is clearly
favorable on the issue of enforceability.
9. Cooperation in Financing
Supplemental Provision:
If requested by IGEN at any time after execution of this Supplemental
Agreement, Eisai shall use reasonable efforts to cooperate with efforts by
IGEN to obtain financing in Japan based on the commercial relationship
reflected in the Eisai/IGEN License Agreement and this Supplemental Agreement
by, if requested, providing information concerning sales of the Instruments
and Assays in Japan, copies of its business plans for future sales in Japan,
and projections, all subject to customary confidentiality restrictions agreed
to by the potential financing sources who are given access to such
information; and, if requested, making available a suitable, knowledgeable
Eisai representative to discuss with representatives of potential financing
sources the business progress and prospects for products and services covered
by the Eisai/IGEN License Agreement and this Supplemental Agreement. Eisai
will also consider in good faith any other reasonable requests by IGEN for
additional cooperation in connection with financing, but Eisai retains full
discretion to decide whether to comply with any such requests for additional
cooperation.
11
<PAGE>
10. Public Statements
Supplemental Provision:
In order to protect the integrity and confidentiality of the commercial
relationship between Eisai and IGEN as reflected in the Eisai/IGEN License
Agreement and this Supplemental Agreement, each party and it officers, and
employees, shall refrain from issuing any press release, making any statement
to any third party, or otherwise disseminating any information or opinion
that might reasonably be interpreted as critical of the other party or its
performance pursuant to the agreements referred to above, except as required
by law or as part of the dispute resolution process set forth in Section 7 of
the Eisai/IGEN License Agreement. Each party shall also use all reasonable
efforts to ensure that its agents and other external representatives comply
with the terms of this Section 10.
11. Effectiveness
(A) This Supplemental Agreement shall become effective on the date as of
which authorized representatives of each of Eisai and IGEN shall have signed
it below.
(B) At such time as this Supplemental Agreement may become effective,
Eisai and IGEN agree to be bound by the mutual promises and obligations
herein.
(C) No parties shall be third party beneficiaries of this Supplemental
Agreement, or gain any rights directly by reason of it.
(D) Any dispute relating to the interpretation of this Supplemental
Agreement or performance according to its terms shall be resolved according
to the provision of Section 7 of the Eisai/IGEN License Agreement.
Foregoing Agreed Upon:
Eisai Co., Ltd. IGEN International, Inc.
By: /s/ MATSO OHARA By: /s/ SAMUEL J. WOHLSTADTER
----------------------- ---------------------------
Name: MATSUO OHARA Name: SAMUEL J. WOHLSTADTER
--------------------------- ---------------------------
Title: Director of Ethical Drug Title: Chief Executive Officer
and Diagnostic Division ---------------------------
---------------------------
Date: 23 July 1997 Date: July 22, 1997
--------------------------- -----------------------------
12
<PAGE>
The 2 1/2 page attachment from the point marked below with * and [ ] has been
omitted pursuant to a request for confidential treatment. The omitted
portions have been separately filed with the Commission.
ATTACHMENT A
------------
SPECIFICATIONS FOR [*]
[
1
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been
separately filed with the Commission.
ATTACHMENT B
[*
]
1
<PAGE>
ATTACHMENT C
DRAFT OF LICENSE TO EISAI/IGEN, JAPAN, AS CO-OWNERS
SENYO-JISSHI KEN
(Clinical Diagnostic Instrument License)
IGEN grants EISAI CO., LTD. and [insert name of IGEN's affiliate in Japan]
an exclusive license in Japan under Japanese Patents Nos. 1977946, 1977948,
2005055, 2058815, 2107086 and 2538083;
I. Scope of License
(1) to make and to have made for use in the Clinical Diagnostic Market in
Japan, and
(2) to use and sell, in the Clinical Diagnostic Market in Japan, the
Clinical Diagnostic Instrument described in Annex A for performing clinical
diagnostic immunoassays that use antibodies wherein the antibody combining site
is directly involved in the detection or quantification of an analyte, wherein
an immunocomplex containing analyte and an ECL-labeled moiety (bound phase)
coupled to paramagnetic beads is transferred to a flow cell and magnetically
collected at the electrode; but not including any instrument designed for
doctors' offices, or point-of-care instruments, or instruments for bedside or
near-patient use, or instruments reliant on a disposable electrode, or
instruments capable of processing a number of assays but only for a single
patient at a time, or hand-held instruments.
/ / Clinical Diagnostic Market@ means the market regulated by the Japanese
Ministry of Health and Welfare, or health authorities of other countries
in the Territory for
(i) diagnosing a clinical condition of a patient
(ii) determining a patient's health or physical condition or
(iii) advising a patient with respect to his or her genetic make-up or
prospects for his or her health.
II. Duration
Until May 25, 2005
1
<PAGE>
DRAFT OF LICENSE TO EISAI/IGEN, JAPAN, AS CO-OWNERS
SENYO-JISSHI KEN
(Clinical Diagnostic Assay License)
IGEN grants EISAI CO., LTD. and [insert name of IGEN's affiliate in Japan]
an exclusive license in Japan under Japanese Patents Nos. 1977946, 1977948,
2005055, 2058815, 2107086 and 2538083;
I. Scope of License
(1) to make and to have made for use in the Clinical Diagnostic Market in
Japan, and
(2) to use and sell in the Clinical Diagnostic Market in Japan, compounds,
compositions, reagents and kits, for the conduct of clinical diagnostic
immunoassays that use antibodies wherein the antibody combining site is directly
involved in the detection or quantification of any analyte, on an Instrument as
described in Annex A, wherein an immunocomplex containing analyte and an
ECL-labeled moiety (bound phase) coupled to paramagnetic beads is transferred to
a flow cell and magnetically collected at the electrode; but not including any
compound, composition, reagent or kit formatted for use with an instrument
designed for doctors' offices, or point-of-care instruments, or instruments for
bedside or near-patient use, or instruments reliant on a disposable electrode,
or instruments capable of processing a number of assays but only for a single
patient at a time, or hand-held instruments.
/ / Clinical Diagnostic Market@ means the market regulated by the Japanese
Ministry of Health and Welfare, or health authorities of other countries in
the Territory for
(i) diagnosing a clinical condition of a patient
(ii) determining a patient's health or physical condition or
(iii) advising a patient with respect to his or her genetic make-up or
prospects for his or her health.
II. Duration
Until May 25, 2005
2
<PAGE>
ANNEX A
THE CLINICAL DIAGNOSTIC INSTRUMENT
A clinical diagnostic instrument for conducting electrochemiluminescence,
diagnostic immunoassays that use antibodies wherein the antibody combining site
is directly involved in the detection or quantification of an analyte, with
paramagnetic beads, containing the following components:
(1) a flow cell capable of manifold reuse which includes a metal working
electrode whose surface is capable of manifold regeneration;
(2) a magnet associated with the flow cell to collect paramagnetic bead
coupled to bound phase at the electrode; and
(3) an electronic light detector for detecting photons emitted from the
assay flow cell.
3
<PAGE>
ATTACHMENT D
TERMS AND CONDITIONS
FOR SUPPLY OF INSTRUMENTS AND ASSAYS BY EISAI
Article 1. Supply Commitment
Eisai shall supply to Igen, according to the terms and conditions of the
Supplemental Agreement:
(i) Eisai Instruments or any Enhanced Eisai Instruments
(below / / Instruments / /) and
(ii) assay kits for assays marketed by Eisai for use in connection
with Eisai Instruments or any Enhanced Eisai Instruments
(below / / Assay / /).
Article 2. Mutual Understanding
Eisai and Igen explicitly understand and agree that all Instruments and Assays
supplied by Eisai to Igen are designed and manufactured to conform to law,
regulation and practice in Japan only.
Igen shall not transfer to third parties in any way, or market, sell, distribute
or use for the purpose of obtaining clinical results any Instrument or Assay
supplied by Eisai to Igen unless and until Igen completes all modifications,
labeling or other homologization necessary or desirable so that the Instrument
or Assay shall conform to all applicable laws, regulations, practice or custom
concerning the manufacture and sales of these products in the territory in which
Igen sells these products or in such territory or territories where Igen has or
reasonably should have knowledge that such products will be resold or used.
Igen hereby unconditionally covenants and agrees that any activities of Igen or
its agents and distributors with respect to Instruments and Assays shall be
conducted in accordance with all applicable laws, regulations and requirements.
Igen shall not use Eisai's trademarks or trade names in any manner in connection
with marketing, distribution or sales of Instruments or Assays.
1
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been separately
filed with the Commission.
Article 3. Order
To order Instruments from Eisai, Igen shall issue an order to Eisai at least 180
days prior to the requested date of shipment of such Instruments or Assays.
Eisai shall not be required to accept any order from Igen for either Instruments
or Assays which is [* ] of Eisai's
actual manufacturing capacity for said specific Instrument or specific Assay at
the proposed time of manufacture. Provided, however, that Igen shall not order
any Instrument for delivery during the [* ] after the signing of the
Supplemental Agreement except for [* ] which may be delivered the
[* ] after signing and [* ] which may be delivered
in the [* ] after signing, and provided further that during the
first twelve months after the signing of the Supplemental Agreement, Eisai shall
be obligated to supply only such quantities of Assays as are reasonably
necessary for IGEN's demonstration purposes for Instruments which have been
delivered. The instruments mentioned in this paragraph are separate from and
additional to [* ] instruments to be supplied to Igen [* ] which are
mentioned in Article 2, Section G of the Supplemental Agreement.
In such case that Eisai discontinues the sale in Japan of any Assay, for which
assay Igen has created a substantial market outside of Japan, Eisai shall, if
permitted by law and regulation of Japan and of any jurisdiction in which Igen
proposes to manufacture and/or sell such assay, elect to do one of the
following, to be chosen at Eisai's sole discretion:
i. Continue to sell to Igen on commercially reasonable terms.
ii. Grant a license to Igen, on commercially reasonable terms, to
manufacture and sell such assay in an ECL format.
iii. Inform Igen that Eisai will not object to nor interfere with IGEN's
manufacture and sale outside Japan of such assay in an ECL format.
Article 4. Payment
Full payment of the amount due for all orders of product shall be due and
payable by Igen to Eisai thirty (30) days after acceptance by Igen without
discount or setoff for any reason. Payment shall be made by wire transfer in
immediately available funds.
2
<PAGE>
Article 5. Inspection
Eisai shall give Igen reasonable opportunity to inspect Instruments and Assays
prior to delivery and shall provide space for such inspection on Eisai's
premises or on the premises of such subcontractor where final assembly of
instruments may be done from time to time. Igen shall inspect or have inspected
any Instrument and Assays prior to taking delivery.
Inspection by Igen and approval of delivery shall constitute final acceptance by
Igen. Non-conformance with Eisai published specifications shall be the only
valid reason for rejection of any Instruments and Assays. In the case of any
hidden defect in materials or workmanship, repair or replacement shall be made
under Article 12 of this agreement.
In the case that Igen rejects any Instruments and Assays, Igen shall set forth
in writing the specific reason for such rejection including the specification
which is not in conformance.
If there is a disagreement as to the conformance with any specification, the
parties shall ask for a judgment by an independent third party.
In such case that Eisai agrees that there is non-conformance with a
specification, or in the case that the third party has judged that there is
non-conformance with a specification, Eisai shall repair or replace the
Instrument or Assay at Eisai's sole discretion.
Delay in delivery due to the determination by the third party of a
non-conformance and/or Eisai's reasonably prompt repair or replacement of a
non-conforming Instrument or Assay shall not be a breach of this Supplemental
Agreement or of any purchase order.
Reasonable promptness shall be determined with reference to the necessity of
purchasing or manufacturing any parts or reagents necessary for replacement or
repair.
Article 6. Title and Risk
The title and risk of loss or damage to the Instruments and Assays shall be
transferred from Eisai to Igen when the Instruments and Assays are delivered to
a common carrier at Eisai's loading dock or at such other site as may be
mutually agreed, from time to time, between Eisai and Igen.
Article 7. Re-export
A. Igen warrants that all Instruments and Assays purchased by Igen from Eisai
shall be shipped out of Japan. Igen shall not resell any Instruments or
Assays in Japan, shall use reasonable efforts to assure that Instruments
and Assays transferred to third parties by Igen are not re-imported to or
resold in Japan, and shall not knowingly sell to any party who intends to
re-import Instruments or Assays to Japan or who intends to sell to any
party who would do so.
B. Igen warrants that Igen shall not resell any Assays for use in any format
other than ECL. The requirements for the previous sentences shall be
fulfilled so long as all Assays sold by Igen are sold in ECL format and
Igen ascertains that the end user of such assays possesses at least one ECL
instrument. Igen shall use reasonable efforts to assure that
3
<PAGE>
Assays transferred to third parties by Igen are not sold or resold for use
in these formats other than ECL, and shall not knowingly sell to any party
who intends to sell to a third party who would do so.
Article 8. Reports
Igen shall make quarterly reports to Eisai on the sales of Instruments and
Assays including selling price, and shall also comment on the general market
conditions.
Eisai agrees to keep information divulged in each report confidential for a
period of two years from the date of such report, except where such information
is required to be disclosed by a government entity or pursuant to legal,
administrative or regulatory proceedings. In any case of such requirement to
disclose, Eisai shall inform Igen as soon as practicable so that Igen may take
steps to prevent or limit such disclosure.
Article 9. Indemnification
Igen agrees to indemnify, hold harmless and defend Eisai, its Affiliates and
their officers, employees and agents against any claims, suits, losses, damages,
costs, fees, and expenses of every kind or nature whatsoever resulting from or
arising out of the resale by Igen of any Instrument or Assay purchased
hereunder, including without limitation:
(a) Product liability claims.
(b) Third party claims involving the manufacture, packaging, use, sale or other
distribution of the Instruments or Assays.
(c) Any representations made or warranty given by Igen or its Affiliates with
respect to the Instruments or Assays.
(d) Any claim for damages regarding the re-sale of Assays which have been sold
to Igen in territories which Eisai has notified Igen that Eisai does not
have the right to sell such assays.
(e) Claims by IGEN's agents or distributors.
(f) Claims arising from the acts or non-actions of IGEN's agents and
distributors.
Igen shall, at its own expense, take out and maintain sufficient insurance
against product liability claims, and in particular shall include Eisai as a
named insured on such policies.
Igen shall provide Eisai with a copy of such insurance policies and evidence
that the policies are in force, and shall provide new evidence that such
policies have been renewed at least 30 days before the expiration of any such
policy.
4
<PAGE>
Article 10. Form and Packaging
A. Instruments supplied under this Supplemental Agreement shall be supplied to
Igen in the same form and packaging as Eisai supplies Instruments in Japan,
except that they shall be supplied without the Eisai brand name affixed.
B. Assays supplied under this Agreement shall be supplied in semi-finished
package.
Semi-finished shall mean that containers of each reagent of an assay kit,
such reagents to be of the same size and concentration as sold in Japan,
shall be boxed in multiple, labeled only on the box. Instruments pamphlets
shall not be included.
Article 11. Delivery Place
Delivery shall be ex-factory Eisai's factory at Chiba, Japan.
Eisai shall arrange for loading on a common carrier on IGEN's reasonable
instructions.
Article 12. Warranty Limited
The only warranties provided under this Agreement shall be that a) Eisai shall
repair or replace Instruments or Assays at Eisai's sole discretion, which
Instruments or Assays are not conforming to the specifications of such
Instruments or Assays and which nonconformance is noted and set out under
Article 5 hereabove, and b) Eisai shall repair or replace at Eisai's sole
discretion components of Instruments which are defective in materials or
workmanship and which are returned to Eisai for Eisai for Eisai's verification
of such defect.
There are no other warranties either expressed or implied including any
warranties of merchantability or fitness for any purpose, or of quality or
safety of any parts, construction or design.
Article 13. Training
Eisai shall train, at cost, reasonable numbers of Igen personnel to enable them
to adequately service Instruments. All such training shall take place in Japan
at Eisai's specified location. Igen shall be responsible for all salaries, costs
and expenses of its own personnel. With regard to personnel first sent to
receive such training, Igen shall inform Eisai of IGEN's desire to send
personnel for training 180 days prior to the proposed training and Eisai and
Igen shall endeavor to agree on a suitable schedule for such training. With
regard to subsequent personnel, Igen shall inform Eisai of IGEN's desire to send
personnel for training 90 days prior to the proposed training and Eisai and Igen
shall endeavor to agree on a suitable schedule for such training.
5
<PAGE>
The information marked below with * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portions have been
separately filed with the Commission.
ATTACHMENT E
SPECIFICATIONS FOR RUTHENIUM LABEL
[*
]
1
<PAGE>
IGEN International, Inc.
Form 10-Q
For the Quarter Ended September 30, 1997
EXHIBIT 11.1
Statement Re: Computation of Net Loss Per Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average Common Shares Outstanding:.................................... $15,107 $14,958 $15,053 $14,941
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Loss.............................................................. $(1,564) $(1,710) $(4,435) $(3,234)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss per share.................................................... $ (.10) $ (.11) $ (.29) $ (.22)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 493
<SECURITIES> 6,584
<RECEIVABLES> 1,395
<ALLOWANCES> 0
<INVENTORY> 1,711
<CURRENT-ASSETS> 10,997
<PP&E> 7,156
<DEPRECIATION> 4,286
<TOTAL-ASSETS> 14,292
<CURRENT-LIABILITIES> 10,225
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 3,970
<TOTAL-LIABILITY-AND-EQUITY> 14,292
<SALES> 2,769
<TOTAL-REVENUES> 8,427
<CGS> 944
<TOTAL-COSTS> 12,789
<OTHER-EXPENSES> 73
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
<INCOME-PRETAX> (4,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,435)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
