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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(AMENDMENT NO.1)
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-27628
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SUPERGEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1841574
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
TWO ANNABEL LANE, SUITE 220, SAN RAMON, CA 94583
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (925) 327-0200
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE PER SHARE
COMMON STOCK PURCHASE WARRANTS
(Title of Class)
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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. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant (based on the closing sale price of the Common Stock as reported on
the Nasdaq Stock Market on March 12, 1999) was approximately $167,930,081. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. The number of outstanding shares of the Registrant's Common
Stock as of the close of business on March 12, 1999 was 21,091,303.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III incorporate information by reference
from the definitive proxy statement for the Registrant's Annual Meeting of
Stockholders to be held on May 5, 1999.
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EXPLANATORY NOTE
The Registrant hereby amends and restates the following sections of its
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 in their
entirety.
SUPERGEN, INC.
1998 ANNUAL REPORT ON FORM 10-K/A
TABLE OF CONTENTS
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PART I
Item 1. Business................................................................................... 1
Item 2. Properties................................................................................. 15
Item 3. Legal Proceedings.......................................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders........................................ 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...................... 17
Item 6. Selected Financial Data.................................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 19
Item 7A. Quantitative and Qualitative Disclosures about Market Risk................................. 31
Item 8. Financial Statements and Supplementary Data................................................ 31
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................... 31
SIGNATURES ................................................................................................ S-1
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PART I
ITEM I. BUSINESS.
THIS "ITEM 1--BUSINESS" AND OTHER PARTS OF THIS REPORT CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THESE
FORWARD-LOOKING STATEMENTS REPRESENT OUR EXPECTATIONS OR BELIEFS CONCERNING
FUTURE EVENTS AND INCLUDE STATEMENTS, AMONG OTHERS, REGARDING:
- THE TIMING AND PROGRESS OF THE DEVELOPMENT OF OUR PROPOSED PRODUCTS;
- FILING FOR AND RECEIVING REGULATORY APPROVALS;
- ACQUIRING ADDITIONAL PRODUCTS AND TECHNOLOGIES;
- SOURCING OF BULK GENERICS;
- MANUFACTURING OF FINISHED PRODUCTS;
- ANTICIPATING THE MARKET OPPORTUNITIES FOR OUR EXTRA AND PROPRIETARY
PRODUCTS;
- MARKETING CURRENT AND PROPOSED PRODUCTS TO HOSPITAL BUYING GROUPS AND
OTHERS;
- DEVELOPING DISTRIBUTOR RELATIONSHIPS;
- FORMING STRATEGIC MARKETING RELATIONSHIPS;
- INCURRING OPERATING LOSSES;
- REQUIRING ADDITIONAL CAPITAL; AND
- INCURRING CAPITAL EXPENDITURES.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF:
- FAILURE TO OBTAIN ADDITIONAL FINANCING;
- THE FAILURE TO RECEIVE APPROPRIATE REGULATORY APPROVALS OF MARKETING OR
MANUFACTURING ACTIVITIES ON A TIMELY BASIS OR AT ALL;
- INABILITY TO MANUFACTURE APPROVED PRODUCTS IN SUFFICIENT VOLUME OR AT ALL;
- LACK OF MARKET ACCEPTANCE OF AND DEMAND FOR OUR PRODUCTS;
- PRICE OR PRODUCT COMPETITION;
- LACK OF AVAILABLE SUPPLY OF BULK GENERICS;
- FAILURE TO SELL EXISTING INVENTORIES AT PRICES SUFFICIENT TO COVER RELATED
COSTS; AND
- OTHER FACTORS SET FORTH UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--FACTORS AFFECTING FUTURE
OPERATING RESULTS" AND ELSEWHERE IN THIS REPORT.
OVERVIEW
SuperGen, Inc. ("We", the "Company" or "SuperGen") is an emerging
pharmaceutical company dedicated to the acquisition, rapid development and
commercialization of products for the treatment of life-threatening diseases,
particularly cancer. We seek to minimize the time, expense and technical risk
associated with drug commercialization by identifying, acquiring and developing
pharmaceutical compounds in the later stages of development, rather than
committing significant resources to the research phase of drug discovery. We are
focusing our existing and proposed commercialization efforts on two drugs,
Nipent-Registered Trademark- and RFS 2000.
We are currently marketing Nipent-Registered Trademark- in the United States
for the treatment of hairy cell leukemia. We are also conducting clinical trials
of Nipent-Registered Trademark- to seek FDA approval to expand its use for the
treatment of additional forms of leukemia and lymphoma. RFS 2000 is a drug
compound in the late stage of clinical development. Clinical studies indicate it
has the potential to treat a variety of solid tumors, such as pancreatic,
breast, lung, colorectal, ovarian and prostate cancers, and hematological
disorders.
We are also developing our product line of enhanced generic anticancer drugs
using our Extra proprietary drug delivery technology. This technology,
consisting of a delivery system incorporating the active drug cyclodextrin, has
the following properties:
- The form of a ready to inject, stable solution that increases the ease and
safety of administration.
- Increased shelf life, facilitating multiple doses from a single vial.
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- Less susceptibility to ulceration at the injection site due to shielding
properties of the Extra formulation. The drug is released only upon
circulation within the bloodstream.
Our Extra technology is protected by a combination of exclusive and
non-exclusive licenses and related patents. These patents were issued between
1991 and 1998. The licenses pertaining to the Extra platform generally are
effective for the terms of the related patents.
We also seek to expand our portfolio of anticancer drugs through the
acquisition of products and product candidates, or companies owning such
products or candidates, which complement our portfolio and provide us with
market opportunities.
We have non-oncology programs in the large market areas of anemias and other
blood cell disorders, obesity/diabetes and autoimmune diseases. We intend to
seek partnerships with larger drug companies for the development and marketing
of these non-oncology drug candidates.
Throughout this report, we use the term "proprietary" to refer to some of
our products and technology. By use of this term, we mean to refer to those
products and technology that are protected from competition by patents,
licenses, manufacturing know-how or a combination of these competitive barriers.
In January 1999, we executed an agreement to acquire all of the outstanding
capital stock of Sparta Pharmaceuticals, Inc. for 650,000 shares (subject to
adjustment) of our common stock. The acquisition is subject to the approval of
Sparta's stockholders. If all conditions of the acquisition are satisfied, we
expect to complete this transaction during the summer of 1999. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
We incorporated in March 1991 as a California corporation and changed our
state of incorporation to Delaware on November 3, 1997. Our executive offices
are located at Two Annabel Lane, Suite 220, San Ramon, California 94583, and our
telephone number at that address is (925) 327-0200.
STRATEGY
Our objective is to become a leading supplier of oncology therapies as well
as pharmaceuticals for other serious diseases, such as blood cell disorders,
obesity and diabetes. We focus our product development efforts where we believe
there are significant market opportunities, as well as in smaller niche markets
such as anticancer drug markets where we believe there is limited competition.
Within our focused oncology market, we seek to develop a diversified offering of
products, including proprietary and Extra drugs. We are implementing a staged
strategy for commercializing oncology products in a multitude of therapeutic and
other areas, such as immunotherapies and vaccines, photodynamic therapy, new
biotechnology-based drugs, diagnostic agents and prophylaxis. We believe that by
marketing acquired anticancer products, such as Nipent-Registered Trademark-, we
are developing our reputation and presence in the oncology market. Concurrently,
we will continue to develop our proprietary and Extra products, which have a
longer development cycle but may offer us more significant market opportunities.
We will consider development and marketing of generic drugs only if they offer
access to large markets or can serve as an initial step in the application of
our Extra technology.
Our strategy is to license or buy the rights to lead compounds rather than
engaging in pure discovery research. These compounds are typically at the late
preclinical or early stage of clinical development and have shown efficacy in
humans or in an animal model relevant to a particular disease. We then seek to
enhance and complete the product development and bring the product to market.
Our objective is to shorten the research and development cycle and thereby
reduce the time, expense and technical risk associated with drug development. We
believe that our approach minimizes the significant financial investment
required by pure discovery research and reduces the risk of failure in
developing a commercially viable product.
Our Extra and generic drug development program targets and develops products
based on compounds which have been fully developed, approved by the United
States Food and Drug Administration ("FDA") and marketed by others but which are
no longer protected by patents. We also seek to acquire rights to products which
have been similarly commercialized and which we believe have strong market
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positions or potential. In addition, we may acquire other companies that own
products or compounds that complement our portfolio. Our initial development
efforts target diseases in the oncology, anemia and obesity fields that have
small patient populations and are therefore eligible for Orphan Drug
Designation. In the areas of anemia and obesity, we will explore partnership
opportunities when we feel we have built enough value into the programs to
maximize the return on our expenditures.
We have a highly experienced management team and maintain operations focused
primarily on product development and clinical registration. In late 1997, we
established the SuperGen Pharmaceutical Research Institute near our corporate
headquarters, where we conduct much of the management of the preclinical,
product development and regulatory functions. While we believe it is essential
that we perform these functions ourselves, our current strategy is to outsource
other activities to keep our costs relatively low while maintaining high
technical and operational standards. For example, we outsource manufacturing to
avoid the high fixed costs of operating a plant with a large manufacturing
staff, while maintaining our own proprietary manufacturing process. We also
contract our inventory control function to an established third party that
handles warehousing, shipping, invoicing and product delivery.
PRODUCTS AND PRODUCTS IN DEVELOPMENT
Our current products and our products in development include our proprietary
oncology drugs, Nipent-Registered Trademark- and RFS 2000, Extra and generic
oncology drugs, and proprietary compounds for blood cell disorders,
obesity/diabetes and autoimmune diseases. A description of each of these
products and potential products appears below. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Factors Affecting
Future Operating Results."
SUPERGEN PRODUCTS AND PRODUCTS IN DEVELOPMENT
ONCOLOGY PRODUCTS AND PRODUCTS IN DEVELOPMENT
PROPRIETARY ONCOLOGY COMPOUNDS
NIPENT-REGISTERED TRADEMARK-
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ESTIMATED
U.S. MARKET(1)
INDICATION STATUS -------------------
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Hairy Cell Leukemia Currently marketed in the U. S. $ 15
Cutaneous T-cell lymphoma NDA filed in February 1999 65
Chronic lymphocytic leukemia Clinical studies ongoing 150
Non-Hodgkin's lymphoma Clinical studies ongoing 150
Prolymphocytic leukemia Clinical studies ongoing 10
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We are currently marketing Nipent-Registered Trademark- (pentostatin for
injection), a proprietary drug that we acquired from Warner-Lambert Company in
1996. Nipent-Registered Trademark- is approved for the treatment of Hairy Cell
Leukemia, a type of B-lymphocytic leukemia. In 1998, our net sales of
Nipent-Registered Trademark- in the United States were approximately $2.1
million, which represented 14% of the estimated total United States market of
$15 million for products used to treat this disease. Our net sales of
Nipent-Registered Trademark- of $1.5 million in 1997 and $225,000 in 1996 were
from the finished goods inventory obtained when we acquired the drug. In
December 1997, we received approval from the FDA to begin selling our own
commercially manufactured Nipent-Registered Trademark-. Thereafter, sales have
consisted of product manufactured at our subcontractor's facility.
We are selling this drug only in the United States, although we have rights
to sell it in Canada and Mexico. We may sell it outside of North America for
diseases other than cancer until September 2006, at which time we may sell the
drug worldwide for any disease. Warner-Lambert retained a worldwide,
royalty-free license to sell Nipent-Registered Trademark- outside North America
but has agreed not to sell Nipent-Registered Trademark- in North America through
September 2006. In 1997, Warner-Lambert further agreed to buy all its
Nipent-Registered Trademark- for sales outside the United States from us through
at least October 2004. Shipments under this supply agreement
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(1) Estimates based on available industry data.
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commenced in the first quarter of 1998. We believe we can manufacture sufficient
product to actively promote sales of Nipent-Registered Trademark-, satisfy the
supply agreement referred to above, and conduct clinical trials for other
indications in both oncology and non-oncology fields.
Although Nipent-Registered Trademark- is approved only for the treatment of
Hairy Cell Leukemia, we believe that the drug has a unique mechanism of action
and may have activity in a variety of cancers and other diseases with larger
markets. In oncology fields, we are pursuing treatments for lymphatic
malignancies and disorders, such as cutaneous T-cell lymphoma, chronic
lymphocytic leukemia, non-Hodgkin's lymphoma and prolymphocytic leukemia.
Nipent-Registered Trademark- has received Orphan Drug Designation by the FDA for
use against cutaneous T-cell lymphoma and chronic lymphocytic leukemia. If
results from ongoing trials are consistent with previously completed trials, we
intend to pursue approval for both of these diseases. We filed for FDA approval
to use Nipent-Registered Trademark- to treat various mature T-cell lymphomas and
cutaneous T-cell lymphoma in February of 1999.
RFS 2000
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INDICATION STATUS
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Pancreatic cancer Phase III trials underway
Ovarian cancer Phase II trials completed; Phase III
trials commencing
Myelodysplastic syndrome Phase II trials completed; Phase III
trials commencing
Colorectal cancer Phase II trials underway
Lung cancer Phase II trials underway
Melanoma sarcoma Phase II trials underway
Other solid tumors (breast, prostate) Phase II trials being launched
Combinatorial therapy Phase I trials underway
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In September 1997, we acquired the exclusive worldwide royalty-bearing
rights to this patented anticancer compound developed by the Stehlin Foundation
for Cancer Research. RFS 2000 is a third-generation topoisomerase I inhibitor
that causes single-strand breaks in the DNA of rapidly dividing tumor cells. It
is a patented analogue of camptothecin, the active drug extracted from the
CAMPTOTHECA ACUMINATA tree. We believe that this is a platform drug for
leadership in the treatment of a broad array of solid tumors and hematological
malignancies. We are seeking rapid development and approval of the drug for
pancreatic cancer, for which there are limited treatment options. We have Orphan
Drug Designation for this disease. Pancreatic cancer is the fifth leading cause
of cancer death in the United States, with both an incidence and death rate of
about 29,000 individuals per year. The current United States market for products
used to treat this disease is more than $125 million a year(2). Median survival
for patients with an advanced form of this disease is only a few months. Results
of clinical trials using RFS 2000 indicate a favorable comparison with
historical data in quality of life, survival data and tumor size. In September
1998, we received FDA approval to use our own supplies of RFS 2000 manufactured
under current Good Manufacturing Practices for expanded human trials in
pancreatic cancer. We are conducting Phase III trials for pancreatic cancer in
over 50 sites in the United States, including leading cancer centers. These
trials consist of two primary studies. The first compares RFS 2000 to
Gemzar-Registered Trademark- (gemcitabine, marketed by Eli Lilly and Co.) in
patients who have not undergone chemotherapy. The second compares RFS 2000 to
5-FU (a generic anticancer drug typically prescribed for gastrointestinal
tumors) in patients who have failed treatment with gemcitabine.
RFS 2000 has also shown activity in more than 30 human and animal tumor
models in indications such as breast, lung, colorectal, ovarian and prostate
cancers and in hematological disorders such as myelodysplastic syndrome and
chronic myelo-monocytic leukemia. We estimate the current United States market
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(2) Unless otherwise indicated, product sales and market size information cited
in this Report consist of data provided by IMS HEALTH.
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for products to treat most of these diseases is at least $500 million. All of
these diseases represent significant market opportunities. In studies to date,
RFS 2000 has not exhibited any of the cardiac, pulmonary, hepatic or renal
toxicities that limit the acute and/or chronic dosages of most
chemotherapeutics. In addition, some early studies suggest RFS 2000 could be
used to treat cancer on a chronic rather than acute basis.
We believe that RFS 2000 may have significant advantages over many existing
anticancer drugs, including oral dosing and superior side effect profile. In
particular, we believe that the compound causes significantly less inhibition of
bone marrow function, due in part to its dosing schedule, which provides for a
cycle of five days of administration followed by two days of recovery. The
observed side effects are mild to moderate hematological toxicities, low-grade
cystitis, infrequent and mild hair loss and gastrointestinal disorder. Finally,
as an oral drug that can be taken at home, RFS 2000 may provide patients with
additional convenience and significantly reduce healthcare costs.
EXTRA AND GENERIC ANTICANCER DRUGS.
OUR EXTRA TECHNOLOGY. We have developed several applications for our
proprietary Extra technology. We believe this technology significantly improves
the safety profile and handling characteristics of several anticancer drugs
currently on the market. Current product targets include Mito Extra (mitomycin),
Nipent-Registered Trademark- Extra (pentostatin), Paxo Extra (paclitaxel),
Etoposide Extra, Dauno Extra (daunorubicin) and Cisplatin Extra. In March 1994,
we acquired exclusive worldwide rights to the patented cyclodextrin technology
used in our Extra technology from Janssen Biotech, N.V. and others.
Many anticancer generic drugs are available only in a powder form that must
be mixed into a liquid solution before injection into a vein. If successful, our
Extra technology will produce a ready-to-inject, stable solution that will ease
administration and save time by eliminating the potentially dangerous mixing
procedure. It could also provide safety benefits for those administering the
dose by reducing their risk of exposure to the drug. Moreover, we believe that
our ready-to-inject stable solutions may have a significantly longer shelf life
at room temperature than the mixed solutions. This means less waste of expensive
drugs as one vial could be utilized for several doses. In addition, many
existing anticancer pharmaceuticals, including those under development by us,
are potent toxins that can cause serious irreversible damage to a patient's
muscle or skin should the drug accidentally leak during injection. We believe
that our Extra technology may increase the safety of these existing anticancer
drugs by shielding the tissue from the drug at the injection site. The drug is
released upon circulation within the bloodstream. We believe that each of these
features will result in our Extra products having a significant competitive
advantage over their counterparts currently on the market.
We have filed an application for worldwide patent protection for our
anticancer Extra technology and, in February 1997, we obtained our first Extra
patent in the United States. An additional patent, issued in September 1998,
complements the first patent with more specific claims, including
Taxol-Registered Trademark- and amsacrine, and expands coverage to antibiotic,
antifungal, vesicant and other agents. In addition, we have licensed the rights
to the excipient used for the Extra technology. At the time we acquired the
licenses to this excipient, it was in its later stages of development and had
already undergone extensive animal toxicology and human testing in areas other
than anticancer drugs. Janssen Biotech, N. V. has received FDA approval for and
is now marketing an antifungal compound that uses the same underlying
technology.
GENERIC ANTICANCER DRUGS. We believe that the total estimated United States
sales for mitomycin, bleomycin, etoposide, cisplatin and other proposed generic
products have decreased over the last few years due to increased competition. We
also believe sales for these generics may continue to decrease as a result of
competitive factors. These factors may include reductions in the per unit sales
price, the introduction of additional generics as well as other cancer drugs,
new formulations for these drugs and the use of different therapies. Therefore,
we currently intend to limit our development of generic products to those that
we feel either require minimal effort to submit an Abbreviated New Drug
Application ("ANDA") and obtain marketing clearance or that offer significant
market opportunities. These presently include paclitaxel, daunorubicin, and
bleomycin.
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Our Extra and generic drugs anticancer drugs currently under development are
as follows:
MITOMYCIN is currently commercially available in powder form and is approved
to treat gastric and pancreatic cancer. Doctors also prescribe mitomycin for
breast, lung and colorectal cancer. Estimated sales of mitomycin in the United
States were approximately $15 million in 1998 and $21 million in 1997. The
patent for mitomycin expired in 1987 and, as of December 31, 1998, there were
only two approved generic versions of mitomycin in addition to the original
version produced by Bristol-Myers Squibb Company.
MITO EXTRA (MITOMYCIN). We filed an NDA for Mito Extra in December 1997,
which was accepted by the FDA in February 1998. We have received a response from
the FDA and anticipate responding to the FDA's request for additional
formulation, manufacturing and clinical information by the end of the first
quarter of 1999.
GENERIC MITOMYCIN. We received marketing approval for our generic version
of mitomycin in April 1998. Our sales of mitomycin, which commenced in June
1998, totaled $270,000 in 1998.
NIPENT-REGISTERED TRADEMARK- EXTRA. Pentostatin
(Nipent-Registered Trademark-) is approved to treat Hairy Cell Leukemia and has
the potential application to treat chronic lymphocytic leukemia and other
lymphatic malignancies. We believe that there is a potential for expanding its
application in oncology and non-oncology markets and intend to initiate
preclinical studies with Nipent-Registered Trademark- Extra.
PACLITAXEL (Taxol-Registered Trademark-) is approved to treat ovarian and
other solid tumors and is being used experimentally to treat numerous cancers.
It currently generates the highest revenue of all anticancer drugs sold in the
United States, with sales of approximately $620 million in 1998 and $570 million
in 1997.
PAXO EXTRA (paclitaxel). The current formulation of PACLITAXEL
(TAXOL-REGISTERED TRADEMARK-) has numerous problems because the
Cremophor-Registered Trademark- EL solvent used for the injection concentrate
causes hypersensitivity reactions, leaching of plasticizer from PVC infusion
bags, haziness of diluted solutions and the need for in-line filters. We believe
that our potential Paxo Extra product would reduce these problems. In 1997, we
secured a source of bulk paclitaxel, although the manufacturer has not undergone
a pre-approval inspection. We intend to file an NDA with the FDA relating to our
potential Paxo Extra.
GENERIC PACLITAXEL. In August 1998, we filed an Abbreviated New Drug
Application with the FDA for our generic version of paclitaxel. Although the
original period of marketing exclusivity for paclitaxel
(Taxol-Registered Trademark-) expired in December 1997, the FDA granted
Bristol-Myers Squibb a use patent that effectively extended its exclusive rights
to market the drug until December 2014. Several companies have expressed
interest in marketing generic versions of paclitaxel and are challenging the use
patent but, to date, Bristol-Myers Squibb has successfully defended its
exclusive marketing rights. While other companies may continue to challenge the
use patent, we do not have the financial or other resources to do so. Therefore,
our plans to market a generic version of paclitaxel
(Taxol-Registered Trademark-) in the United States and the success of our
related FDA filing are dependent upon the successful outcome of challenges to
the use patent made by others. These challenges may never be successful and we
may not be able to market our generic version of paclitaxel
(Taxol-Registered Trademark-) in the United States.
ETOPOSIDE EXTRA. Etoposide is used to treat small cell lung cancer and
testicular tumors unresponsive to other therapies. Etoposide had estimated sales
in the United States of $32 million in 1998 and $25 million in 1997. There are
currently six approved generic versions of etoposide, in addition to the
original version produced by Bristol-Myers Squibb. Generic formulations of
etoposide have limited stability and limited solubility. We believe that
etoposide Extra formulations would decrease such limitations. Formulation and
preclinical evaluation are currently in progress, and we intend to file an NDA
for this formulation.
DAUNORUBICIN is approved to treat a variety of acute leukemias. Daunorubicin
had estimated sales in the United States of $10 million in both 1998 and 1997.
Daunorubicin is currently sold in powder form only. We believe that daunorubicin
represents a niche market with limited competition from large pharmaceutical
companies due to its relatively small market size. However, we believe the use
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daunorubicin may increase substantially in the future, as recent experimental
studies suggest that daunorubicin may be used in an increasing number of
combination drug protocols treating a number of cancers.
DAUNO EXTRA (DAUNORUBICIN). We have commenced preclinical testing for our
potential Dauno Extra product and intend to file an NDA with the FDA.
GENERIC DAUNORUBICIN. We filed an Abbreviated New Drug Application with the
FDA in December 1998 for Marketing Approval for daunorubicin.
CISPLATIN EXTRA. Cisplatin is approved for the treatment of metastatic
testicular tumors, metastatic ovarian tumors and advanced bladder cancer. Sales
of cisplatin in the United States were estimated to be approximately $100
million in 1998 and $106 million in 1997. We intend to file an NDA with the FDA
relating to our potential Cisplatin Extra. Cisplatin is currently protected by a
17-year patent extension granted to Bristol-Myers Squibb in 1996. We expect that
other companies interested in marketing generic versions of cisplatin will
challenge the extension of Bristol-Myers Squibb's patent but we do not have the
financial or other resources to do so. Therefore, the success of our planned FDA
filing for our Extra version of cisplatin will be dependent upon the successful
outcome of challenges to the patent extension made by others. These challenges,
if made, may never be successful and we may not be able to market our generic
version of cisplatin in the United States.
GENERIC BLEOMYCIN. Bleomycin is indicated for the treatment of head and
neck cancer, Hodgkin's disease, reticulum cell sarcoma, lymphosarcoma and
testicular cancer. Sales of bleomycin in the United States were estimated to be
approximately $29 million in 1998 and $30 million in 1997. The patent for
bleomycin expired in 1989. Only one generic version of bleomycin has been
approved for commercial sale to date. We have a generic version of bleomycin
currently under development and intend to file an Abbreviated New Drug
Application.
NON-ONCOLOGY PROPRIETARY PRODUCTS
ANEMIAS
RF 1010. We are developing a series of proprietary products to treat
various forms of anemia and neutropenia. These diseases destroy red and white
blood cells and thereby weaken the immune system, leaving patients susceptible
to infection that could result in serious illness or death. The blood cell
disorders targeted by us frequently result from a severe insult (such as
pesticide or radiation poisoning); from treatment with existing anticancer
therapies, including chemotherapy and radiation; and from renal failure. We
believe that our products under development may have improved therapeutic
benefits relative to existing drugs commercially available and may be used in
conjunction with existing drugs or may replace existing drugs.
OBESITY AND DIABETES
RF 1051. Obesity is a disorder with significant mortality and morbidity due
to heart, joint or respiratory problems. The American Obesity Association has
estimated that 70 million Americans are defined as obese and that effective
prevention of obesity could result in healthcare system savings of up to $100
billion annually. We are developing a proprietary product in pill form for the
treatment of obesity. Most obesity drugs depend on suppressing appetite or on
stimulating increased metabolic activity by amphetamine-like activity, and some
users regain weight and develop severe complications. We believe that our
product, which is a naturally occurring substance in humans, may cause the body
to store less fat or use more fat to produce energy. Initial studies also
indicate that there is an inverse correlation between the body mass index of a
person and the amount of RF 1051 that is present. We have received Orphan Drug
Designation for RF 1051 in the treatment of Prader-Willi Syndrome, a type of
genetic obesity.
While the results of our clinical studies were consistent with our
expectations, we believe that highly publicized problems with other obesity
drugs have significantly increased the regulatory requirements for drugs
targeting general obesity. As RF 1051 appears to work in diabetic mouse models
as well as obese mouse models, and a direct correlation has been shown between
RF 1051 administration and reduced blood sugar levels, we have chosen to focus
upon multi-center Phase I/II trials in Type II diabetes, which we believe has a
more easily defined clinical endpoint for studies and thus a better chance of
regulatory approval.
7
<PAGE>
AUTOIMMUNE DISEASES
NIPENT-REGISTERED TRADEMARK-. Our non-oncology targets for
Nipent-Registered Trademark-are various autoimmune diseases, including graft-
versus-host disease and rheumatoid arthritis which is not responsive to standard
therapies. We estimate the United States market for graft-versus-host disease to
be $500 million and the market for refractory rheumatoid arthritis to be $1
billion. We currently are conducting clinical trials in both of these
indications.
CLINICAL DEVELOPMENT AND REGISTRATIONS
We believe that in-house management of clinical development and
registrations is central to our strategy for the accelerated, cost-effective
commercialization of drugs. We have assembled a team comprised of seasoned
professionals with significant industry experience to coordinate and manage
clinical development and registrations of all or our products. The amount we
spent on sponsored research and development was $10.5 million in 1998, $8.6
million in 1997 and $6.2 million in 1996.
NEW DRUG DEVELOPMENT AND APPROVAL PROCESS
The United States system of new drug approvals is the most rigorous in the
world. It costs an average of $500 million and takes an average of almost 15
years from the discovery of a compound to bring a single new pharmaceutical to
market. For every 5,000 to 10,000 chemically synthesized molecules screened,
only 250 are ever issued an Investigational New Drug Application and tested in
humans. Of those, the FDA will approve only one for commercialization.(3) Yet,
in recent years, societal and governmental pressures have created the
expectation that biotech and pharmaceutical companies will reduce the costs for
drug discovery and development without sacrificing safety, efficacy and
innovation. The need to significantly improve or provide alternative strategies
for successful pharmaceutical discovery, research and development remains a
major health care industry challenge.
DRUG DISCOVERY. In the initial stages of drug discovery before a compound
reaches the laboratory, tens of thousands of potential compounds are randomly
screened for activity against an assay assumed to be predictive for particular
disease targets. This drug discovery process can take several years. Once a
company locates a "screening lead", or starting point for drug development,
isolation and structural determination may begin. The development process
results in numerous chemical modifications to the screening lead in an attempt
to improve the drug properties of the lead. After a compound emerges from the
above process, the next steps are to conduct further preliminary studies on the
mechanism of action, further IN VITRO (test tube) screening against particular
disease targets and finally, some IN VIVO (animal) screening. If the compound
passes these barriers, the toxic effects of the compound are analyzed by
performing preliminary exploratory animal toxicology. If the results are
positive, the compound emerges from the basic research mode and moves into the
preclinical phase.
PRECLINICAL TESTING. During the preclinical testing stage, laboratory and
animal studies are conducted to show biological activity of the compound against
the targeted disease, and the compound is evaluated for safety. These tests
typically take approximately three and one-half years to complete.
INVESTIGATIONAL NEW DRUG APPLICATION. During the preclinical testing, an
IND is filed with the FDA to begin human testing of the drug. The IND becomes
effective if not rejected by the FDA within 30 days. The IND must indicate the
results of previous experiments, how, where and by whom the new studies will be
conducted, the chemical structure of the compound, the method by which it is
believed to work in the human body, any toxic effects of the compound found in
the animal studies and how the compound is manufactured. In addition, an
Institutional Review Board, comprised of physicians at the hospital or clinic
where the proposed studies will be conducted, must review and approve the IND.
Progress reports detailing the results of the clinical trials must be submitted
at least annually to the FDA.
- ------------------------
(3) Source: Pharmaceutical Research and Manufacturers of America.
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<PAGE>
Some limited human clinical testing may be done under a Physician's IND in
support of an IND application and prior to receiving an IND. A Physician's IND
is an IND application that allows a single individual to conduct a clinical
trial under less rigorous standards with a shorter FDA review process. A
Physician's IND does not replace the more formal IND process, but can provide a
preliminary indication as to whether further clinical trials are warranted, and
can, on occasion, facilitate the more formal IND process.
PHASE I CLINICAL TRIALS. After an IND becomes effective, Phase I human
clinical trials can begin. These tests, involving usually between 20 and 80
healthy volunteers, typically take approximately one year to complete. The tests
study a drug's safety profile, including the safe dosage range. The Phase I
clinical studies also determine how a drug is absorbed, distributed, metabolized
and excreted by the body, and the duration of its action. Phase I trials are
normally not conducted for anticancer product candidates.
PHASE II CLINICAL TRIALS. In Phase II clinical trials, controlled studies
are conducted on approximately 100 to 300 volunteer patients with the targeted
disease. The primary purpose of these tests is to evaluate the effectiveness of
the drug on the volunteer patients as well as to determine if there are any side
effects. These studies generally take approximately two years, and may be
conducted concurrently with Phase I clinical trials. In addition, Phase I/II
clinical trials may be conducted to evaluate not only the efficacy of the drug
on the patient population, but also its safety.
PHASE III CLINICAL TRIALS. This phase typically lasts about three years and
usually involves 1,000 to 3,000 patients. During the Phase III clinical trials,
physicians monitor the patients to determine efficacy and to observe and report
any reactions that may result from long-term use of the drug.
NEW DRUG APPLICATION. After the completion of all three clinical trial
phases, if the data indicates that the drug is safe and effective, an NDA is
filed with the FDA. The NDA must contain all of the information on the drug
gathered to that date, including data from the clinical trials. NDAs are often
over 100,000 pages in length. The average NDA review time for new
pharmaceuticals approved in 1997 was 16.2 months, down from 23 months in 1996.
ABBREVIATED NEW DRUG APPLICATION. This application is for a license to
market a generic version of a drug already approved for marketing under a full
NDA.
MARKETING APPROVAL. If the FDA approves the NDA, the drug becomes available
for physicians to prescribe. Periodic reports must be submitted to the FDA,
including descriptions of any adverse reactions reported. The FDA may request
additional studies (Phase IV) to evaluate long-term effects.
PHASE IV CLINICAL TRIALS AND POST MARKETING STUDIES. In addition to studies
requested by the FDA after approval, these trials and studies are conducted to
explore new indications. The purpose of these trials and studies and related
publications is to broaden the application and use of the drug and its
acceptance in the medical community.
ORPHAN DRUG DESIGNATION. The Orphan Drug Act provides incentives to
manufacturers to develop and market drugs for rare diseases and conditions
affecting fewer than 200,000 persons in the United States. The first developer
to receive FDA Marketing Approval for an orphan drug is entitled to a seven-year
exclusive marketing period in the United States following approval for that
product. However, the FDA will allow the sale of a drug clinically superior to
or different from another approved orphan drug, although for the same
indication, during the seven-year exclusive marketing period. There have been
140 drugs approved under this act since its adoption in 1983.
GENERIC DRUG DEVELOPMENT
The development of a generic drug is significantly abbreviated from that of
a new drug and the approval process may begin once all applicable patents for a
particular drug expire. For each generic drug,
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<PAGE>
FDA approval must be obtained for the active ingredient of the generic drug (the
"bulk source") and the final formulation ("Marketing Approval"). The entire
approval process takes approximately 36 months.
EXTRA DRUG DEVELOPMENT
Each Extra product candidate contains an active drug substance which has
already been approved by the FDA and may already also have generic versions
approved by the FDA. The excipient for the Extra technology has also been
approved by the FDA in a non-oncology application. To gain approval to market,
we must provide data to the FDA to support the safety, efficacy and quality of
each Extra product, but these data are more limited in scope and content than
would be required for a novel drug formulation. While extensive clinical trials
will not be required, we will be required to provide clinical data that
demonstrate that the administration of our Extra formulation results in the same
presence of the drug in the body as that of the generic version, within
clinically acceptable statistical guidelines. Overall, the data packages we will
submit to the FDA for Extra product candidates will be smaller than a typical
NDA and may take less time to review.
We also expect that, after the safety and quality of the Extra technology
have been adequately demonstrated to the FDA, future Extra submissions will be
able to cross-refer to these data, further streamlining our submissions. If we
are able to show that the Extra technology does not alter the performance of the
underlying generics in a sufficient number of approved Extra NDAs, it is
possible that the FDA may, at some future date, accept Extra submissions as
ANDAs. This may further reduce their size and review times.
RECENT REGULATORY DEVELOPMENTS
The Food and Drug Administration Modernization Act of 1997, which extended
the highly successful Prescription Drug User Fee Act of 1992, is expected to
enable the FDA to further reduce regulatory approval times, allowing
manufacturers to make new cures and treatments available to patients about a
year earlier than otherwise would have been possible.(3) Under the user-fee law,
the FDA was able to cut drug approval times nearly in half over the past five
years. The FDA has also agreed to a number of specific performance goals to
streamline the development and approval of new drugs. For example, the FDA has
agreed to review standard NDAs, applications for biologics and efficacy
supplements in an average of ten months by the end of five years as compared
with the current average of twelve months. Other goals set periods for holding
meetings, ending clinical holds on INDs, and resolving disputes on procedural
and scientific issues. For the first time, the FDA has a legislatively
established mission to promote public health by the timely review of
applications for new products and to protect public health by ensuring that
regulated products are safe, effective and properly labeled.
Other major provisions of the FDA Modernization Act include:
- A provision for fast-track drugs that address unmet medical needs for
patients with serious or life-threatening conditions;
- Expanded access to investigational drugs for patients with serious
diseases and conditions;
- A reduction from two to one, adequately controlled clinical study, to
prove substantial evidence of effectiveness (at the discretion of the
FDA);
- A reduction of postmarket manufacturing changes needing FDA approval; and
- Adoption of guidance for the submission of abbreviated reports, standards
for review, including prompt review of supplemental applications for new
indications for approved products, and dispute resolution.
- ------------------------
(3) Source: Pharmaceutical Research and Manufacturers of America
10
<PAGE>
There is an additional provision of the FDA Modernization Act, which we feel
is very important to us. This provision will allow us to distribute, under
strict conditions and FDA supervision, copies of peer-reviewed medical journal
articles and other validated scientific information about unapproved uses of
approved drugs to physicians and other health-care professionals. Thus
physicians will have more up-to-date product information and will be better able
to meet their patients' medical needs.
MANUFACTURING
We currently outsource manufacturing for all of our bulk drugs,
Nipent-Registered Trademark-, RFS 2000, RF 1010, and RF 1051, as well as
mitomycin and other bulk generics used in the Extra and generic dosage forms. We
currently use both United States and foreign suppliers. We expect to continue to
outsource manufacturing in the near term. We believe our current suppliers will
be able to efficiently manufacture our bulk proprietary and generic compounds in
sufficient quantities and on a timely basis, while maintaining product quality.
We seek to maintain quality control over manufacturing through ongoing
inspections, rigorous review, control over documented operating procedures, and
thorough analytical testing by outside laboratories. We believe that our current
strategy of outsourcing manufacturing is cost-effective since we avoid the high
fixed costs of plant, equipment and large manufacturing staffs and conserve our
resources.
The FDA must issue marketing clearance and deem a manufacturer acceptable
under current Good Manufacturing Practices standards before production of bulk
proprietary or generic compounds for commercial sale may begin. Once a bulk
proprietary or generic compound is manufactured on our behalf, it is sent to one
or more domestic manufacturers that process it into the finished proprietary,
Extra, or generic dosage forms. We currently follow these procedures for our
marketed products, Nipent-Registered Trademark- and mitomycin. We then ship our
finished proprietary and generic products to an outside vendor for distribution
to our customers.
We have entered agreements with a domestic entity for the future production
of our bulk generics required for both our Extra and generic dosage forms. We
have licensed from this manufacturer, on an exclusive basis, proprietary
fermentation technology for anticancer antibiotic agents. In the future, we may
adapt this proprietary fermentation technology to produce other bulk generics.
In December 1997, we received approval from the FDA to commercially
manufacture Nipent-Registered Trademark- at our designated vendors'
manufacturing site using our proprietary manufacturing process. We believe we
own sufficient bulk inventory for the manufacture of
Nipent-Registered Trademark- to meet our clinical and commercial needs for the
near future. In April 1998, the FDA approved our application for the production
of bulk mitomycin using the fermentation technology described above.
We intend to continue evaluating our manufacturing requirements and may
establish or acquire our own facilities to manufacture our products for
commercial distribution if we feel doing so would reduce costs or improve
control and flexibility of product supply. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Factors Affecting
Future Operating Results."
SALES AND MARKETING
We sell Nipent-Registered Trademark- to Warner-Lambert Company for resale
and distribution outside North America. Warner-Lambert was our single largest
customer in 1998 with sales of approximately $600,000 or 20% of total net sales.
Our remaining Nipent-Registered Trademark- sales result from direct selling and
marketing. We market Nipent-Registered Trademark- and mitomycin to hospitals
(major cancer centers), private practice oncology clinics, oncology distributors
and drug wholesalers. Oncologists/hematologists, oncology nurses and oncology
pharmacists are included in each of these classes of customers. Our target
market is approximately 1,700 hospitals, the large majority of which are members
of hospital buying groups. We have focused on obtaining winning bids from these
groups for generic products since they control a significant majority of the
hospital business in the oncology and blood disorder pharmaceutical market.
Since acceptance from each buying group can be time consuming, there may be
significant delays before we can win bids and generate sales revenue.
11
<PAGE>
However, we have taken significant steps toward such acceptance. A large number
of these buying groups, including Premier Purchasing Partners, Novation
(formally University HealthSystem Consortium), Kaiser Permanente, and the
Department of Veteran Affairs have given us approved vendor status. In addition,
we have gained recognition as an approved vendor in each state that requires
registration or licensing before bidding for those customers. We will continue
to target these large buying groups and, as we attain market share, bid with
other buying groups while seeking to minimize any price erosion that may occur.
There are a large number of private practice physicians (approximately 5,000
oncologists/hematologists) in the United States. These physicians usually
purchase oncology products through distributors, with whom we are developing
relationships. The four major oncology distributors in the United States are
Oncology Therapeutic Network Joint Venture, L.P., Florida Infusion Services,
Inc., National Specialty Services, Inc. and Priority Healthcare Corporation.
These distributors control approximately 60% of the private practice oncology
clinics that in turn represent approximately 30% of the oncology-related
pharmaceutical market. We have taken significant steps in building relationships
with these distributors, all of whom have purchased
Nipent-Registered Trademark-. Our sales force will also continue to target the
important private practice oncology clinics within their assigned territories.
We also sell to large drug wholesalers that supply hospitals and hospital buying
groups. In 1998, two distributors and one wholesaler each accounted for ten
percent or more of revenues.
Generally, our business is not seasonal. However, as chemotherapeutic
products often have debilitating side effects, some patients may choose to abate
treatment during summer months or during holidays so that they may experience a
better temporary quality of life with their family and friends.
We have divided our sales group into three regions; each headed by a manager
who supervises local sales representatives, all of whom have extensive industry
experience. We plan to expand our sales force upon receipt of additional
Marketing Approvals for proprietary, Extra and generic products. Our sales and
marketing group conducts direct sales, sponsors speakers' programs, works with
distributors, performs market research analysis, develops marketing strategies,
creates and implements educational and promotional programs, establishes pricing
and product advertising and maintains compliance with hospital and other buying
groups. We contract warehousing, shipping, invoicing and a portion of our
customer service responsibilities with an established outside vendor. Customers
may return products for credit.
We may enter strategic marketing or sales arrangements with other companies,
particularly with respect to our non-oncology product candidates. No such
strategic arrangements exist as of the date of this Report.
PATENTS AND LICENSES
We actively pursue a policy of seeking patent protection for our proprietary
products and technologies whether developed in-house or from outside
acquisition. We have acquired licenses to or assignments of numerous United
States patents covering our principal proprietary drugs. In February 1997, we
received our United States patent relating to our Extra products. This initial
patent position was further enhanced in September 1998 with the issuance of an
additional patent with more specific claims including
Taxol-Registered Trademark- and amsacrine, as well as broader coverage of
anticancer, antibiotic, antifungal, vesicant and other chemical cytotoxic
agents. We have entered patent royalty agreements with The Jackson Laboratory
and The Stehlin Foundation for Cancer Research. Under these agreements, each of
these entities has assigned to us an exclusive license for patents and patent
applications (which may be important to our blood cell disorder,
obesity/diabetes and RFS 2000 product development programs). Under the terms of
these licenses, we will be obligated to pay fees and royalties and take
reasonable steps to achieve specified milestones. These milestones include
filing INDs, filing NDAs if commercially reasonable, and using diligent efforts
to commence marketing programs after Marketing Approvals. Under the agreement
with Stehlin, we are required to issue to Stehlin unregistered common stock of
the Company to pay agreed upon amounts which are due upon the FDA's acceptance
of the first NDA utilizing the licensed compound and upon our
12
<PAGE>
receipt of Marketing Approval. We further have a worldwide license agreement
with Janssen Biotech, N.V. related to patent rights and know-how regarding
hydroxypropyl-beta-cyclodextrin, which is important to our Extra development
program. This agreement gives us an exclusive license, outside the United
States, in return for consideration in the form of milestone payments and
royalties. In addition, we have a patent license agreement with Cyclex, Inc.
("Cyclex") to license a patent (which is important to our Extra development
program) and to make and sell licensed products for cytotoxic anticancer
formulations containing hydroxypropyl-beta-cyclodextrin in the United States in
return for payments of royalties to Cyclex.
In addition to pursuing patent protection in appropriate cases, we rely on
trade secret protection for our unpatented proprietary technology. We also
pursue a policy of having our employees and consultants execute proprietary
information agreements upon commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed or made known to the individual during the course of the
relationship is confidential except in specified circumstances. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Future Operating Results."
COMPETITION
There are many companies, both public and private, including well-known
pharmaceutical companies, that are engaged in the development and sale of
pharmaceutical products for some of the applications that we are pursuing. Our
competitors and probable competitors include Ortho-McNeil Pharmaceutical, Amgen,
Inc., Gensia-Sicor Inc., Bristol-Myers Squibb and Immunex Corporation, among
others. These companies have substantially greater financial, research and
development, manufacturing and marketing experience and resources than we do and
represent substantial long-term competition for us. Such companies may succeed
in developing pharmaceutical products that are more effective or less costly
than any we may develop or market.
Factors affecting competition in the pharmaceutical industry vary depending
on the extent to which the competitor is able to achieve a competitive advantage
based on proprietary technology. If we are able to establish and maintain a
significant proprietary position with respect to our proprietary products,
competition will likely depend primarily on the effectiveness of the product and
the number, gravity and severity of its unwanted side effects as compared to
alternative products. Companies compete with respect to generic products
primarily on price and, to a lesser extent, on name recognition and the
reputation of the manufacturer in its target markets. Moreover, the number of
competitors offering a particular generic product could dramatically affect
price and gross margin for that product or an Extra product based on that
generic product. We may be at a disadvantage in competing with more established
companies based on price or market reputation. In addition, increased
competition in a particular generic market would likely lead to significant
price erosion for our generic products and Extra products based on such generic
products. This would have a negative effect on our sales and potential gross
profit margins. For example, we believe that the total estimated United States
sales for our proposed generic products, and generic products upon which we
propose to base our Extra products, have decreased in recent years due to
increased competition. We believe that sales volumes and unit prices of these
generics may continue to decrease as a result of competitive factors. These
factors include the introduction of additional generics and other cancer drugs,
the desire of some companies to increase their market share, new formulations
for those drugs and the use of different therapies.
Extensive research and development efforts and rapid technological progress
characterize the industry in which we compete. Although we believe that our
proprietary position may give us a competitive advantage with respect to our
proposed nongeneric drugs, we expect development of new products to continue.
Discoveries by others may render our current and potential products
noncompetitive. Our competitive position also depends on our ability to attract
and retain qualified scientific and other personnel, develop effective
proprietary products, implement development and marketing plans, obtain
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<PAGE>
patent protection and secure adequate capital resources. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Future Operating Results."
EMPLOYEES
As of December 31, 1998, we had 54 full-time employees. We use consultants
and temporary employees to complement our staffing. Our employees are not
subject to any collective bargaining agreements, and we regard our relations
with employees to be good. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Factors Affecting Future
Operating Results."
EXECUTIVE OFFICERS OF THE REGISTRANT
Our officers and their ages as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- --------------------------------------------------------
<S> <C> <C>
Joseph Rubinfeld............. 66 Chief Executive Officer, President and Director
Frank Brenner................ 51 Vice President of Sales
Frederick L. Grab............ 57 Vice President of Pharmaceutical Operations
R. David Lauper.............. 54 Vice President of Professional Services
Luigi Lenaz.................. 57 Senior Vice President of Clinical Research and Medical
Affairs
Rajesh C. Shrotriya.......... 54 Executive Vice President and Chief Scientific Officer
Simeon M. Wrenn.............. 54 Vice President of Biotechnology
</TABLE>
JOSEPH RUBINFELD, PH.D. co-founded the Company in 1991. He has served as
Chief Executive Officer, President, and a director of the Company since our
inception and was Chief Scientific Officer from inception until September 1997.
Dr. Rubinfeld was one of the four initial founders of Amgen in 1980 and served
as Vice President and Chief of Operations until 1983. From 1987 to 1990, he was
a Senior Director at Cetus Corporation. From 1968 to 1980, Dr. Rubinfeld was
employed at Bristol-Myers Company International Division ("Bristol-Myers") in a
variety of positions, most recently as Vice President and Director of Research
and Development. While at Bristol-Myers, Dr. Rubinfeld was instrumental in
licensing the original anticancer line of products for Bristol-Myers, including
Mitomycin and Bleomycin. Before that time, Dr. Rubinfeld was a research
scientist with several pharmaceutical and consumer product companies including
Schering-Plough Corporation and Colgate-Palmolive Co. He received his BS in
chemistry from C.C.N.Y., and his MA and Ph.D. in chemistry from Columbia
University. Dr. Rubinfeld has numerous patents and/or publications on a wide
range of inventions and developments, including the 10-second developer for
Polaroid film, manufacture of cephalosporins and the first commercial synthetic
biodegradable detergent. In 1984, Dr. Rubinfeld received the Common Wealth Award
for Invention.
FRANK BRENNER joined us as Vice President of Sales and Marketing in January
1994. Before joining us, he was an independent management consultant for various
biotechnology and pharmaceutical companies from September 1991 to January 1994.
From December 1987 to September 1991, Mr. Brenner was Senior Director of
National Sales for Cetus Corporation and was a Regional Sales Manager from
October 1986 to December 1987. Before that time, he served in a variety of
positions at Lederle International, including as Senior Product Manager. Mr.
Brenner received his BS from California State University at Dominguez Hills. He
resigned as Vice President of Sales in January 1999, and we hired his
replacement in February 1999.
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FREDERICK L. GRAB, PH.D. joined us as Vice President of Pharmaceutical
Operations in July 1996. From April 1989 to July 1996, Dr. Grab was Director,
Regulatory Affairs, Generic Drugs for Pharmacia Inc., a developer and
manufacturer of pharmaceuticals. From 1982 to 1988, Dr. Grab served as Manager,
Pharmaceutical Product Development at Pharmacia Inc. Dr. Grab received his BS in
Pharmacy from Columbia University, College of Pharmacy and his Ph.D. in
pharmaceutical chemistry from the University of California, San Francisco
Medical Center.
R. DAVID LAUPER, PHARM.D. has served as Vice President of Professional
Services since December 1996 and as Vice President of Oncology Product
Development from August 1995 to November 1996. Dr. Lauper joined SuperGen from
Chiron Corp. where he served as Director of Professional Services, Chiron
Therapeutics, from 1994 to 1995. Before that time, from 1986 to 1993, Dr. Lauper
served in the same capacity at Cetus Corporation. From 1980 to 1986, Dr. Lauper
was with Bristol-Myers Squibb as Assistant Director of Medical Information
Oncology. He received his Pharm.D. in pharmacy from the University of California
School of Pharmacy.
LUIGI LENAZ, M.D. has served as Senior Vice President of Clinical Research
and Medical Affairs since October 1997. Before joining SuperGen, he was Senior
Medical Director, Oncology Franchise Management for Bristol-Myers Squibb from
1990 to 1997 and was Director, Scientific Affairs, Anti-Cancer for Bristol-Myers
Squibb from 1978 to 1990. Dr. Lenaz was a Post Doctoral Fellow at both the
Memorial Sloan-Kettering Cancer Center in New York and at the National Cancer
Institute in Milan, Italy. He received his medical training at the University of
Bologna Medical School in Bologna, Italy.
RAJESH C. SHROTRIYA, M.D. has served as our Executive Vice President and
Chief Scientific Officer since October 1997 and as Senior Vice President and
Special Assistant to the President from January 1997 to September 1997. Before
joining us, Dr. Shrotriya was Vice President and Chief Medical Officer of MGI
Pharma, Inc., an oncology company, from August 1994 to October 1996. Previously
he spent 18 years at Bristol-Myers Squibb in a variety of positions most
recently as Executive Director, Worldwide CNS Clinical Research. Dr. Shrotriya
received his medical training in India at Grant Medical College in Bombay, Delhi
University and the Armed Forces Medical College in Poona.
SIMEON M. WRENN, PH.D. joined SuperGen in January 1996 as Vice President of
Biotechnology. From September 1995 to January 1996 he was a consultant to The
Purdue Frederick Company, a privately held manufacturer and distributor of drug
products. From 1983 to 1995, Dr. Wrenn served in several senior research and
product development positions at Lederle Laboratories. He also was a founding
scientist of Centocor, Inc. Dr. Wrenn has been an Assistant Professor of
Medicine at Baylor College and the University of Pennsylvania and an Associate
Professor of Medicine at Johns Hopkins University. He received his Ph.D. from
Emory University in Atlanta, Georgia and completed his Postdoctoral Fellowship
at Harvard Medical School and Massachusetts General Hospital in Boston,
Massachusetts.
ITEM 2. PROPERTIES.
Our principal administrative facility is currently located in leased general
office space in San Ramon, California, under a lease that expires on January 31,
2002. Either the landlord or we may cancel the lease upon substantial
catastrophic damage to the property or its condemnation, and the landlord has
the right to move us, at its expense, to comparable facilities. We have the
right to extend the lease for one additional five-year period at the fair market
rental rate. In late 1998, we ended the lease for the office space used in our
sales and marketing efforts in Parsippany, New Jersey, and those activities are
now being coordinated from San Ramon. In April 1997, we purchased an unimproved
industrial building in Pleasanton, California, and located our laboratory
operations there upon substantial completion of the improvements in December
1997. We believe the above properties are suitable for our operations. The San
Ramon office facility and Pleasanton laboratory facility are nearing full
utilization, therefore, we have leased additional office space in Pleasanton for
a period of seven years commencing May, 1999.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our stockholders during the fiscal
quarter ended December 31, 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET FOR COMMON STOCK
Our Common Stock trades on the Nasdaq Stock Market under the symbol "SUPG."
Our Common Stock Purchase Warrants trade on the Nasdaq Stock Market under the
symbol "SUPGW." The following table sets forth the high and low bid information
for the Common Stock for each quarterly period in the two most recent fiscal
years as reported on the Nasdaq Stock Market:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
Quarter ended March 31, 1997............................................... $ 14.13 $ 9.63
Quarter ended June 30, 1997................................................ 14.75 10.88
Quarter ended September 30, 1997........................................... 18.81 12.88
Quarter ended December 31, 1997............................................ 18.63 14.50
1998
Quarter ended March 31, 1998............................................... 15.13 11.69
Quarter ended June 30, 1998................................................ 17.75 9.63
Quarter ended September 30, 1998........................................... 12.50 5.13
Quarter ended December 31, 1998............................................ 9.31 5.38
</TABLE>
HOLDERS OF RECORD
As of March 12, 1999, there were 338 holders of record of the Common Stock
and approximately 6,900 beneficial stockholders.
DIVIDENDS
We have never paid cash dividends on our capital stock and do not expect to
pay any dividends in the foreseeable future. We intend to retain future
earnings, if any, for use in our business.
RECENT SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 1998, we issued the following securities:
- 74,416 shares of common stock in March 1998, in connection with the 1997
acquisition of a patent royalty agreement and other intellectual property
related to our obesity/diabetes product candidate, RF 1051.
- 460,000 shares of common stock in December 1998, in a private placement to
an institutional investor for a total of $3,000,000.
The issuances of shares described above were in reliance on Section 4(2) of
the Securities Act of 1933, as amended.
We made no public solicitation in connection with the issuance of the above
securities nor were there any other offerees. We relied on representations from
the recipients of the securities that they purchased the securities for
investment for their own account and not with a view to, or for resale in
connection with, any distribution thereof and that they were aware of our
business affairs and financial condition and had sufficient information to reach
an informed and knowledgeable decision regarding their acquisition of the
securities.
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<PAGE>
USE OF PROCEEDS
On March 13, 1996, we commenced our initial public offering (the "IPO") of
4,025,000 units and an underwriters' over-allotment option consisting of 525,000
units at a public offering price of $6.00 per unit. We made this offering
pursuant to a registration statement on Form S-B (file no. 333-476 LA) filed
with the Securities and Exchange Commission. A unit consisted of one share of
Common Stock, $.001 par value per share, and a warrant to purchase one share of
Common Stock at $9.00. Of the units registered, 4,024,302 were sold. Paulson
Investment Company was the managing underwriter of the IPO. The aggregate gross
proceeds of the IPO (before deduction of underwriting discounts and commissions
and expenses of the offering and any exercises of the warrants) were
$24,146,000. We have not yet sold all of the shares registered for the exercise
of the warrants. There were no selling stockholders in the IPO.
We paid total expenses of $2,615,000 in connection with the IPO consisting
of underwriting discounts, commissions and expenses of $1,992,000 and other
expenses of $623,000. The net proceeds of the IPO through December 31, 1998,
including subsequent exercises of warrants to purchase common stock, were
$23,424,000.
From March 13, 1996, the effective date of the registration statement for
the IPO, to December 31, 1998 (our most recent fiscal year end), the approximate
amount of net proceeds used were:
<TABLE>
<S> <C>
Construction of plant, building and facilities................. $1,246,000
Purchase and installation of machinery and equipment........... 295,000
Purchase of real estate........................................ 744,000
Working capital used in operations............................. 16,862,000
Repurchase of common stock..................................... 3,557,000
Purchase of equity investment.................................. 500,000
Acquisition of developed technology............................ 220,000
</TABLE>
None of such payments consisted of direct or indirect payments to directors,
officers, 10% stockholders or affiliates, with the exception of:
- The payment to repurchase common stock, which was made to a stockholder
that, immediately prior to the repurchase, owned more than 10% of the our
then outstanding common stock; and
- Payments to directors and officers as compensation for services provided.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth below is not necessarily indicative of results of
future operations and should be read in conjunction with the financial
statements and notes thereto appearing in Item 14 of Part IV of this Report.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1998 1997 1996 1995 1995
------------ ------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 3,004 $ 1,802 $ 264 $ 13 $ 169
Net loss................................... (15,577) (15,996) (8,758) (2,729) (3,639)
Total assets............................... 19,793 30,772 17,936 2,162 2,440
Basic net loss per common share............ (0.77) (0.85) (0.55) (0.22) (0.31)
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING
STATEMENTS REPRESENT OUR EXPECTATIONS OR BELIEFS CONCERNING FUTURE EVENTS AND
INCLUDE STATEMENTS, AMONG OTHERS, REGARDING:
- TIMING AND PROGRESS OF THE DEVELOPMENT OF OUR PROPOSED PRODUCTS;
- FILING FOR AND RECEIVING REGULATORY APPROVALS;
- ACQUIRING ADDITIONAL PRODUCTS AND TECHNOLOGIES;
- SOURCING OF BULK GENERICS;
- MANUFACTURING OF FINISHED PRODUCTS;
- ANTICIPATING THE MARKET OPPORTUNITIES FOR OUR EXTRA AND PROPRIETARY
PRODUCTS;
- MARKETING CURRENT AND PROPOSED PRODUCTS TO HOSPITAL BUYING GROUPS AND
OTHERS;
- DEVELOPING DISTRIBUTOR RELATIONSHIPS;
- FORMING STRATEGIC MARKETING RELATIONSHIPS;
- INCURRING OPERATING LOSSES;
- REQUIRING ADDITIONAL CAPITAL; AND
- INCURRING CAPITAL EXPENDITURES.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF NUMEROUS FACTORS, INCLUDING, WITHOUT
LIMITATION:
- FAILURE TO OBTAIN ADDITIONAL FINANCING;
- THE FAILURE TO RECEIVE APPROPRIATE REGULATORY APPROVALS OF MARKETING OR
MANUFACTURING ACTIVITIES ON A TIMELY BASIS OR AT ALL;
- INABILITY TO MANUFACTURE APPROVED PRODUCTS IN SUFFICIENT VOLUME OR AT ALL;
- LACK OF MARKET ACCEPTANCE OF AND DEMAND FOR OUR PRODUCTS;
- PRICE OR PRODUCT COMPETITION;
- LACK OF AVAILABLE SUPPLY OF BULK GENERICS;
- FAILURE TO SELL EXISTING INVENTORIES AT PRICES SUFFICIENT TO COVER RELATED
COSTS; AND
- OTHER FACTORS SET FORTH IN "--FACTORS AFFECTING FUTURE OPERATING RESULTS"
AND ELSEWHERE IN THIS REPORT.
OVERVIEW
We are an emerging pharmaceutical company dedicated to the acquisition,
rapid development and commercialization of products for the treatment of
life-threatening diseases, particularly cancer. A key element of our strategy is
to identify and acquire potential pharmaceutical products in the later stages of
development that complement our portfolio. We may also acquire companies owning
such potential or approved products. We believe this strategy will shorten the
research and development cycle and thereby minimize the time, expense and
technical risk associated with drug development. Our primary oncology programs
target leukemias and lymphomas, solid tumors and the development of our
proprietary Extra technology (our enhanced line of already established
anticancer drugs). We also have non-oncology
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<PAGE>
programs in the large market areas of anemias and other blood cell disorders,
obesity/diabetes and certain autoimmune diseases. We intend to seek partnership
opportunities in these areas.
We currently sell two anticancer products, Nipent-Registered Trademark- and
mitomycin. We acquired Nipent-Registered Trademark- (pentostatin for injection),
along with associated North American marketing rights, in 1996. In December
1997, we received governmental approval to sell Nipent-Registered Trademark-
manufactured under our own Supplemental New Drug Application.
Nipent-Registered Trademark- is approved for the treatment of Hairy Cell
Leukemia and has Orphan Drug Designation for both chronic lymphocytic leukemia
and cutaneous T-cell lymphoma. In April 1998, we received FDA approval to market
the generic drug mitomycin for injection. Mitomycin, originally developed and
marketed by Bristol-Myers Squibb under the tradename
Mutamycin-Registered Trademark-, is approved in the United States for the
treatment of adenocarcinoma of the stomach and pancreas in combination with
other approved chemotherapeutics. We began to sell mitomycin in June 1998.
Sales of Nipent-Registered Trademark- were responsible for 91% of product
revenues in 1998, 84% of product revenues in 1997 and virtually all product
revenues in 1996. Remaining product revenues in 1998 consisted of sales of
mitomycin, and remaining product revenues in 1997 and 1996 consisted of sales of
other generic products purchased in 1997 and 1996 under a program that we have
discontinued.
In September 1997, we acquired exclusive worldwide rights to a patented
anticancer compound (RFS 2000), which is currently in Phase III human trials for
pancreatic cancer, the fifth leading cause of cancer death. This compound has
also shown activity against an array of solid tumors and hematological
malignancies in animal and initial human studies with a favorable side effect
profile.
Late in 1997, we filed for governmental approval for our first Extra
product, Mito Extra. The Food and Drug Administration accepted that filing for
review in February 1998 and we are responding to the comments we received from
them in December 1998. We intend to file for approval of several additional
Extra and generic anticancer products over the next several years.
Also, we have continued development of a proprietary blood cell disorder
product for the treatment of aplastic anemia (and other anemias associated with
chemotherapy, radiotherapy, and renal failure). Our proprietary obesity/diabetes
pill has shown promise in early preclinical and human studies. It is currently
in Phase II clinical trials for a genetic disorder leading to chronic obesity
and we plan to begin multi-center Phase I/II trials of this pill for Type II
diabetes. We have received Orphan Drug Designations for our aplastic anemia
agent and for our obesity pill for the treatment of a genetic disorder leading
to chronic obesity.
We expect our research and development expenses to increase as a result of
expanded clinical trials of RFS 2000, Nipent-Registered Trademark-, the Extra
product line and other drugs. We expect our marketing and sales expenses to
increase as we expand our United States direct sales and marketing organization.
In January 1999, we executed an agreement to acquire all of the outstanding
capital stock of Sparta Pharmaceuticals, Inc. for 650,000 shares (subject to
adjustment) of our common stock. Sparta has several anticancer compounds in
late-stage clinical development. The acquisition is subject to the approval of
Sparta's stockholders. If Sparta's stockholders approve the acquisition we
anticipate accounting for the acquisition using the purchase method of
accounting. Assuming that the SuperGen common stock market price used at the
time of acquisition is equal to the stock's closing price on March 12, 1999
($10.13) we estimate the purchase price for this acquisition would be
approximately $6.6 million. We believe that substantially all of this estimated
amount will represent an excess of the purchase price over the net book value of
Sparta's assets at the time of acquisition.
We expect our future operating results to fluctuate and these results will
depend on a variety of factors, including:
- Changes in our level of research and development, including the timing of
any expansion of clinical trials;
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<PAGE>
- Acquisitions of products, technology or companies owning such assets;
- Regulatory approvals of new products or expanded labeling of existing
products;
- The price, volume and timing of sales of our products;
- Our ability to successfully manufacture approved products for sale;
- The mix between Nipent-Registered Trademark- sales in the United States
and those under a supply agreement for sale outside North America;
- Variations in gross margins of our products, which may be affected by the
sales mix referred to above;
- Competitive pricing pressures; and,
- Fluctuations in manufacturing yields.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Total revenues were $3.0 million in 1998 compared to $1.8 million in 1997.
The increase in revenues was due primarily to higher sales volumes of
Nipent-Registered Trademark- in 1998. This volume increase resulted principally
from sales of Nipent-Registered Trademark- under a supply agreement for sale
outside North America. We began to sell mitomycin late in the second quarter of
1998 and revenues from sales of mitomycin contributed slightly to the overall
revenue increase.
Gross margin was higher in 1998 due primarily to lower
Nipent-Registered Trademark- unit costs. In 1998, virtually all
Nipent-Registered Trademark- sales consisted of our own manufactured inventory.
In 1997, sales of Nipent-Registered Trademark- consisted entirely of inventory
acquired from Warner-Lambert Company and the relatively high unit cost of that
inventory affected our margins. The unit cost of manufactured
Nipent-Registered Trademark- has been, and is expected to continue to be,
significantly lower than the unit cost assigned to the
Nipent-Registered Trademark- inventory acquired from Warner-Lambert Company.
This positive effect upon margin was partially offset by lower selling prices
for Nipent-Registered Trademark- sold under the supply agreement and a $667,000
charge to cost of sales for unabsorbed fixed product manufacturing costs, as
production of Nipent-Registered Trademark- fell short of the minimum level of
production for which we were obligated to pay our contract manufacturer. We
believe there will not be a shortfall during the remainder of the contract and
that the Nipent-Registered Trademark- produced will ultimately be sold at prices
in excess of cost. We have limited Nipent-Registered Trademark- sales and
manufacturing experience and current Nipent-Registered Trademark- margins may
not be indicative of future margins due to variations in average selling prices
and manufacturing costs.
Research and development expenses were $10.5 million in 1998 compared to
$8.6 million in 1997. Product formulation and development costs associated with
RFS 2000, Nipent-Registered Trademark- and mitomycin contributed to the overall
increase in expenses in 1998. Costs attributable to expansion of the research
and development staff also contributed to the increase in research and
development expense, as did our investment of $200,000 in a related party in the
first quarter of 1998.
Sales and marketing expenses were $3.2 million in 1998 compared to $2.0
million in 1997. This increase was primarily due to costs reflecting the
continued expansion of the sales and marketing group in 1998. Upon receiving NDA
approval to begin selling our own manufactured Nipent-Registered Trademark- we
began media advertising for Nipent-Registered Trademark- and expanded our
participation at strategic trade shows. Costs associated with these activities
also contributed to the overall increase in sales and marketing expenses.
General and administrative expenses were $3.8 million in 1998, compared to
$2.9 million in 1997. The increase was due principally to consultancy costs
relating to investor relations, patent related legal fees and information
technology services. Higher facilities and personnel costs also contributed to
the overall
21
<PAGE>
increase in expense. We moved into larger administrative offices in March of
1997 and we have hired additional administrative staff to accommodate increases
in headcount and business activities.
We incurred no charges for the acquisition of in-process research and
development in 1998 compared to $3,506,000 in 1997. See "--Acquisition of
In-Process Research and Development and Related Assets."
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Total revenues were $1.8 million in 1997 compared to $264,000 in 1996.
Product revenues in 1997 and 1996 consisted primarily of sales of
Nipent-Registered Trademark- acquired in September 1996 and were limited to
inventory then acquired. The increase in revenues in 1997 was primarily due to
the increased volume resulting from a full year's sales of
Nipent-Registered Trademark- compared to only the fourth quarter's sales in
1996. The remainder of 1997 and 1996 sales related to the generic etoposide
inventory acquired in January 1997 and other generic products purchased in 1996.
We have no further plans to market etoposide as competition has eroded market
prices and potential margins below an acceptable level. In 1997, we concluded
our program of selling other generic products we had acquired in 1996. The
primary intent of this program was to establish a marketing presence and
initiate sales activities.
Gross margin was relatively low in both 1997 and 1996 primarily due to the
high cost assigned to Nipent-Registered Trademark- acquired in 1996.
Research and development expenses were $8.6 million in 1997 compared to $6.2
million in 1996. The increase in 1997 resulted from costs associated with a
higher number of research and development personnel and projects undertaken, as
well as increased legal and facilities costs and the cost of bulk drugs used for
product research. While overall expense was higher in 1997, costs associated
with clinical trials were lower stemming from a reduced level of clinical trial
activity in 1997.
Sales and marketing expenses were $2.0 million in 1997 compared to $982,000
in 1996. We began to sell products in the fourth quarter of 1996 and established
our sales staff shortly before then. The increase in expense in 1997 was
primarily due to the effects of a full year's payroll and related costs
associated with increased levels of staffing. Costs of promotional materials,
sales-related services and sales and marketing facilities also contributed to
the increased expense in 1997.
General and administrative expenses were $2.9 million in 1997 compared to
$1.9 million in 1996. The administrative resources needed to support our
increased activities in both research and development and sales and marketing
resulted in increased expense. Our payroll costs were higher in 1997 due to
increased staffing for administration, finance and investor relations. Service
provider costs were higher in 1997 primarily due to increased investor relations
activity following our initial public offering in March 1996. Legal costs were
also higher in 1997 due primarily to legal and other costs associated with our
first annual report and proxy statement.
We incurred charges for the acquisition of in-process research and
development of $3,506,000 in 1997 compared to $442,000 in 1996. The 1996 charge
was related to the acquisition of Nipent-Registered Trademark-. See
"--Acquisition of In-Process Research and Development and Related Assets."
LIQUIDITY AND CAPITAL RESOURCES
Our cash, cash equivalents and marketable securities totaled $11.9 million
at December 31, 1998, compared to $23.3 million at December 31, 1997. The net
cash used in operating activities of $13.8 million in 1998 reflected the net
loss of $15.6 million partially offset by non-cash charges for depreciation,
stock options granted to consultants and the termination of a consultancy
relationship with a former director. Cash used for 1998 purchases of property
and equipment was $672,000, principally for equipment, fixtures and computer
equipment at our research facility established in Pleasanton, California, late
in 1997.
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<PAGE>
We believe our cash, cash equivalents and investments in marketable
securities on-hand at December 31, 1998, together with the ability to borrow up
to $5 million under a secured promissory note executed in March 1999, will
satisfy our budgeted cash requirements at least through December 31, 1999. Our
primary planned uses of cash during that period are:
- Funding operations;
- Conducting clinical testing of RFS 2000, Nipent-Registered Trademark- and
product candidates;
- Marketing for expanded indications for Nipent-Registered Trademark- that
may be developed; and
- Continuing other research and development programs.
In December 1998, we sold 460,000 shares of common stock for net proceeds of
$2.632 million to an institutional investor.
We are actively considering future contractual arrangements that would
require significant financial commitments, particularly for clinical trials for
existing and new drug candidates and acquisition of product rights to additional
drug candidates. In addition, we may incur significant capital expenditures in
1999 for tenant improvements relating to new office facilities.
We are seeking additional funding through public or private financings or
collaborative or other arrangements with third parties. In evaluating potential
private placements and other forms of equity funding, we consider both our
liquidity needs and the dilutive effects of such financings upon our
stockholders. We seek additional equity funding only when necessary and when we
believe that we can negotiate a transaction that is in the best interest of the
Company and our stockholders. It has been our recent experience that private
placements of restricted stock have been the best source of funding available to
us. While we would prefer to offer registered stock through underwritten
offerings at market prices, we believe that market conditions and our stage of
development make it more difficult to enter into an underwritten offering.
We believe offering stock to private placement investors at a discount to
market is necessary to attract investors. For example, the private placement we
closed in August 1997 for approximately $9.8 million reflected a discount of
approximately 20% to the market price of our stock at that time. This discount
resulted from prior discussions with several of the participants and the selling
price was the highest amount we believed we could achieve given the restrictive
nature of the stock. In June 1997, we executed a private placement to Tako
Ventures, LLC ("Tako") an investment entity controlled by Lawrence J. Ellison,
Founder and Chairman of Oracle Corporation, for approximately $23 million. This
transaction reflected a discount of approximately 20% to the market price of our
stock and included further incentives in the form of options and warrants
granted to Tako. We considered the size of the Tako investment, the limited
number of events that could trigger further dilution and the anticipated
positive effect of adding Mr. Ellison to our Board of Directors to be
significant factors, which we believe warranted the incentives provided in this
transaction.
Also, we believe that private placements have substantially the same effect
upon existing stockholders as would underwritten offerings as stock prices
typically decline in reaction to announcements of underwritten secondary
offerings. Furthermore, underwriters' fees are typically more substantial than
costs associated with private placements.
We have no credit facility or other committed sources of capital other than
those described above. We cannot assure you that additional funds will be
available on acceptable terms, if at all. See "--Factors Affecting Future
Operating Results."
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<PAGE>
ACQUISITION OF IN-PROCESS RESEARCH AND DEVELOPMENT AND RELATED ASSETS
YEAR ENDED DECEMBER 31, 1997
In 1997, we incurred the following charges for the acquisition of in-process
research and development ("IPR&D):
- $831,000 related to the acquisition of the generic anticancer drug
etoposide;
- A non-cash charge of $1,875,000 for the acquisition of the drug candidate
RFS 2000; and
- $800,000, consisting of a non-cash charge of $750,000 and $50,000 of
additional cash expenses, for the acquisition of a patent royalty
agreement and other intellectual property related to our ongoing
obesity/diabetes product candidate, RF 1051.
Each of the programs and their relative stage of development, including key
assumptions used in the valuations, are described in greater detail below.
Etoposide
In January 1997, we purchased from Immunex Corporation the rights to its
version of the generic anticancer drug etoposide. The acquisition included the
Abbreviated New Drug Application, Immunex's inventory of the product, records
relating to the production of etoposide, and data, information and know-how
relating to the manufacture, testing, storage and regulatory status of
etoposide. We allocated the purchase price based on the fair value of the net
tangible assets and identified intangible assets acquired including IPR&D. In
performing this allocation, we considered the completed status of the
Abbreviated New Drug Application, the future use of the other technology and the
incremental cash flows from projects when completed and the associated risks,
our intentions for the future use of the acquired assets and estimates of the
future performance of etoposide products. Of the total purchase price of
$1,315,000, we allocated $334,000 to inventory, $150,000 to developed
technology, and $831,000 as a charge for the acquisition of IPR&D.
Subsequent to the acquisition, the sales prices for the various dosage forms
of generic etoposide significantly eroded. The price erosion was so severe that
very shortly after the acquisition we decided not to proceed with the
manufacturing and marketing of a generic version of this drug. However, we do
intend to develop an Extra version of this drug. We submitted our first Extra
product, Mito Extra, to the FDA in December 1997 and are awaiting marketing
approval before submitting additional applications for other Extra products, and
we likely will proceed with other Extra NDAs, such as
Nipent-Registered Trademark- Extra and Dauno Extra, before submitting an NDA for
etoposide. Although we do not expect revenues from Etoposide Extra for at least
several years, we believe the cost of completing the related IPR&D will be
immaterial.
RFS 2000
In September 1997, we acquired exclusive worldwide rights to RFS 2000, a
patented anticancer compound in development, from the Stehlin Foundation for
Cancer Research for $1,875,000, which we charged to the acquisition of the IPR&D
project. At the time of acquisition, RFS 2000 was in Phase II for pancreatic
cancer. The FDA has not granted Marketing Approval to use RFS 2000 for the
treatment of any disease. In assigning the purchase price to IPR&D, we
considered, among other factors, our intentions for the future use of the
acquired project, its stage of completion, the lack of alternative future uses
of the technology, and that no other tangible or intangible assets were
acquired. We believe RFS 2000 has a unique mechanism of action that may
demonstrate its effectiveness in a variety of solid tumors and hematological
disorders. We currently estimate that the completion of the clinical trials and
submission of an NDA could occur in 2000 and the approximate research and
development costs to complete those processes will total $6 to $8 million.
Revenues could begin with the introduction of a product in 2001.
RF 1051. Our on-going efforts to develop RFS 1051 for the treatment of
obesity and diabetes are described on page 7. In addition, as mentioned in the
"Overview" section beginning on page 1, we believe
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<PAGE>
that before this product can be successfully marketed, we need to attract a
corporate partner to fund product development, clinical studies and market
introduction. We do not believe the unfunded portion of these research and
development expenses will be material.
YEAR ENDED DECEMBER 31, 1996
In September 1996, we purchased from Warner-Lambert Company the exclusive
rights to the anticancer drug Pentostatin (trade name
Nipent-Registered Trademark-) for the United States, Canada and Mexico.
Nipent-Registered Trademark- had been approved for the treatment of hairy cell
leukemia. We also acquired certain assets pertaining to the drug, including all
of Warner-Lambert's crude concentrate form of the drug and certain of its
finished goods inventory; the trademarks, patents and data relating to the
manufacture of the drug; the United States NDA relating to the drug (including
two Orphan Drug Designations); the Canadian New Drug Submission; and clinical
studies in three indications (the IPR&D). The clinical studies used
Nipent-Registered Trademark- to treat cutaneous T-cell lymphoma, chronic
lymphocytic leukemia and rheumatoid arthritis. The FDA has not approved the use
of Nipent-Registered Trademark- for any of these diseases.
We allocated the total purchase price of $3,273,000 based on the fair value
of the net tangible assets and identified intangible assets acquired, including
the IPR&D project present at the date of acquisition. In performing this
allocation, we considered our intentions for the future use of the acquired
assets and analyses of historical financial performance and estimates of future
performance of Nipent-Registered Trademark- and the IPR&D project. We allocated
$1,561,000 to inventory, $1,270,000 to developed technology and $442,000 to
IPR&D. With regard to the IPR&D, we considered, among other factors, the stage
of completion of each project, the importance of each project to the overall
development plan, alternative future uses of the technology and the projected
incremental cash flows from the projects when completed and any associated
risks. The incremental cash flows were discounted at an annual rate of 40% to
determine the value of the IPR&D project. The discount rate reflects the risks
associated with the inherent difficulties and uncertainties in completing the
project and thereby achieving FDA approval, achieving anticipated levels of
market acceptance and penetration, achieving market growth rates and
anticipating competition.
We filed for FDA approval to use Nipent-Registered Trademark- to treat
cutaneous T-cell lymphoma in February of 1999. We believe that further costs to
complete this project will be immaterial and expect that revenues could begin
with the projected FDA approval in 2000. Additional research and development
costs for Phase II clinical trials to broaden Nipent-Registered Trademark-'s
acceptance in the medical community for the treatment of chronic lymphocytic
leukemia are estimated to total approximately $950,000 over the next fifteen
months. Revenues are expected to begin in 1999. Our efforts to develop
Nipent-Registered Trademark- for the treatment of rheumatoid arthritis are
described on page 8. In addition, as mentioned in the "Overview" section
beginning on page 1, we believe that before Nipent-Registered Trademark- can be
successfully marketed for this disease, we need to attract a corporate partner
to fund product development, clinical studies and market introduction. We do not
believe the unfunded portion of these research and development expenses will be
material.
ADDITIONAL FACTORS CONSIDERED FOR IPR&D
The nature of the efforts required to develop any of the acquired IPR&D into
technologically feasible and commercially viable products principally relates to
the successful performance of additional clinical trials. Though we currently
expect that the acquired IPR&D will be successfully developed, commercial
viability of these proposed products may never be achieved. See "Factors
Affecting Future Operating Results" beginning on page xx for further information
on the risks and uncertainties associated with the drug development and approval
process, the consequences of failure to complete or untimely completion, and
other risks associated with the completion of the above and other IPR&D
projects.
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EFFECT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer software applications being
written using two rather than four digits to define a year. On January 1, 2000,
computers and other equipment using time sensitive software may not be able to
distinguish whether "00" means 1900 or 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, prepare invoices,
or engage in similar normal business activities.
We converted to new accounting software in 1998 and we believe that software
properly recognizes dates beyond December 31, 1999. We believe that no other
software programs that we currently use will require significant modification or
replacement to properly recognize dates beyond December 31, 1999. We have
initiated and maintain formal communications with significant contract
manufacturers, contract research organizations and certain other vendors to
determine the extent to which we are vulnerable to those third parties' failure
to address their own Year 2000 issues. Based upon those communications, we
believe that all significant computer software programs utilized by third
parties upon which we rely are either Year 2000 compliant or will be converted
to Year 2000 compliance prior to December 31, 1999.
Our total estimated cost of addressing and mitigating our Year 2000 issue is
less than $10,000.
One or more of our own or our business partners' software applications may
prove to be non-Year 2000 compliant. If so, we may experience difficulties on
and after January 1, 2000. Our worst case Year 2000 scenario would involve
delays in invoicing and shipping, inventory production, and clinical trial
documentation. We believe that such delays, if encountered, will be addressed
quickly and will not result in a material adverse affect upon our business,
results of operations, or cash flows.
We are developing a contingency plan to address a worst case Year 2000
scenario as described above and we plan to complete this contingency plan in the
second quarter of 1999.
FACTORS AFFECTING FUTURE OPERATING RESULTS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING OUR COMPANY. OUR BUSINESS OPERATIONS MAY BE IMPAIRED BY
ADDITIONAL RISKS AND UNCERTAINTIES THAT WE DO NOT KNOW OF OR THAT WE CURRENTLY
CONSIDER IMMATERIAL.
OUR BUSINESS, RESULTS OF OPERATIONS OR CASH FLOWS MAY BE ADVERSELY AFFECTED
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR. IN SUCH CASE, THE TRADING PRICE OF
OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
THIS REPORT ALSO CONTAINS AND INCORPORATES BY REFERENCE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS, INCLUDING THE RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS
REPORT.
WE HAVE INCURRED LOSSES AND MAY NEVER ACHIEVE SIGNIFICANT REVENUES OR
PROFITABLE OPERATIONS. We have incurred cumulative losses of $56.0 million for
the period from inception through December 31, 1998. These losses include
non-cash charges of $7.5 million for the acquisition of in-process research and
development. We have not achieved profitability and we expect to continue to
incur substantial operating losses at least through 2000. Substantially all of
our revenues have come from sales of Nipent-Registered Trademark-, and we expect
this trend to continue for some time. Our ability to achieve profitability will
depend in part upon our ability to develop, obtain regulatory approval for and
successfully market Nipent-Registered Trademark- for other indications, and
bring several of our other proprietary products to market. Our ability to
achieve profitability will also depend upon a variety of other factors,
including the following:
- The price, volume and timing of sales of products;
- The mix between Nipent-Registered Trademark- sales in the United States
and those under a supply agreement with Warner-Lambert Company for sales
outside North America;
26
<PAGE>
- Variations in gross margins of our products, which may be affected by
sales mix and competitive pricing pressures;
- Regulatory approvals of new products or expanded labeling of existing
products;
- Changes in the level of our research and development, including the timing
of any expansion of clinical trials; and
- Acquisitions of products or technology.
Our long-term success will also be affected by expenses, difficulties and
delays frequently encountered in developing and commercializing new
pharmaceutical products, competition, and the regulatory environment in which we
operate.
OUR PROPOSED PROPRIETARY PRODUCTS WILL REQUIRE SIGNIFICANT ADDITIONAL
DEVELOPMENT. Our proposed proprietary products are in the development rather
than the research stage. However, we must significantly develop all of our
proposed products before we can market them. Although we believe that our
preclinical and pilot clinical studies support further development of our
proprietary products, the results we have obtained to date do not necessarily
indicate results of further testing, including controlled human clinical
testing. All of the potential proprietary products that we are currently
developing will require extensive clinical testing before we can submit any
regulatory application for their commercial use.
OUR PRODUCT DEVELOPMENT EFFORTS MAY ULTIMATELY FAIL. Our proposed
proprietary products and our proposed Extra and generic products are subject to
the risks of failure inherent in the development of pharmaceutical products.
These risks include the following:
- Some of our potential products may be found to be unsafe or ineffective,
or may fail to receive the necessary regulatory clearances in a timely
fashion, if at all;
- Our products, if safe and effective, may be difficult to manufacture on a
large scale or may be uneconomical to market;
- The proprietary rights of third parties may preclude us from marketing
such products; and
- Third parties may market more effective or less costly products for
treatment of the same diseases.
As a result, we cannot be certain that any of our products will be
successfully developed, receive required governmental regulatory approvals on a
timely basis, become commercially viable or achieve market acceptance. Also, we
have only limited experience in conducting clinical trials and other aspects of
the regulatory process.
Our generic products and our potential Extra products based on generic
products are also subject to additional risks. These risks relate to the
expiration or anticipated expiration of the patents for the underlying drug. For
instance, although the original period of exclusivity for
Taxol-Registered Trademark- expired in December 1997 and the patent for
cisplatin expired in December 1996, the FDA has granted Bristol Myers Squibb
extended patent protection for both drugs. We expect that other companies
interested in marketing generic versions of these drugs will challenge these
patent extensions but we do not have the financial or other resources to do so.
We cannot be certain that the issues relating to these patents will be resolved
favorably or in a timely manner. In addition, similar patent or other
intellectual property issues could affect other Extra and generic products or
potential products. An unfavorable resolution or significant delays in the
resolution of such issues could significantly limit or prevent our ability to
compete in these marketplaces and could adversely effect our business, results
of operations and cash flows. In addition, because of the lack of proprietary
protection of generic products, such products could face intense competition and
prices and gross profit margins could be significantly eroded. See
"--Competition."
27
<PAGE>
WE WILL NEED ADDITIONAL FINANCING WHICH MAY NOT BE READILY AVAILABLE. We
expect that we will need substantial additional funding. Our business, results
of operations and cash flows will be adversely affected if we fail to obtain
adequate funding in a timely manner.
Our funding requirements will depend on many factors, including:
- The progress of our development programs;
- The availability of additional drugs or drug candidates for acquisition or
in-licensing;
- The availability of companies as potential acquisition or merger
candidates;
- Future revenue growth, if any;
- The amount of cash generated, if any, by our operations;
- The timing and receipt of regulatory approvals;
- The costs involved in preparing, filing, prosecuting, maintaining,
enforcing and defending patent claims and other intellectual property
rights;
- Developments related to reimbursement matters;
- Competing technological and market developments; and
- The need for additional office and manufacturing facilities to accommodate
any growth.
We anticipate that our existing capital resources will be adequate to fund
operations and capital expenditures at least through December 31, 1999. However,
if we experience unanticipated cash requirements during this period, we could
require additional funds much sooner. We cannot be certain that any such funding
will occur, or if it occurs, that it will be on favorable terms. Also, the
dilutive effect of equity funding may adversely affect our results per share.
OUR BUSINESS WILL SUFFER IF WE FAIL TO COMPLY WITH GOVERNMENTAL
REGULATIONS. Our research, testing, manufacturing, labeling, distribution,
marketing and advertising activities are regulated extensively by governmental
authorities in the United States. If we fail to comply with these regulatory
requirements, we may be subject to regulatory or judicial enforcement actions.
Such actions could include product recalls or seizures, injunctions, civil
penalties, criminal prosecution, refusals to approve new products, withdrawal of
existing approvals and potentially enhanced product liability exposure.
OUR BUSINESS WILL SUFFER IF WE FAIL TO OBTAIN REGULATORY MANUFACTURING OR
MARKETING APPROVALS IN A TIMELY MANNER. The FDA and comparable agencies in
foreign countries impose substantial requirements for the introduction of new
pharmaceutical products through lengthy and detailed clinical testing
procedures, sampling activities and other costly and time-consuming compliance
procedures. We have obtained clearance from the FDA related to our
Nipent-Registered Trademark- manufacturing processes, Marketing Approval for
internally developed mitomycin and approval of sources of bulk drugs for our
Extra and generic products. However, we have not yet received Marketing Approval
for any of our internally developed proprietary products. Our proprietary drugs
and Extra drugs may require substantial clinical trials and FDA review as new
drugs. Our generic drugs require both approval of the bulk source of the drug
and FDA approval of their final formulation. We cannot predict with certainty if
or when we might submit for regulatory review those products currently under
development. Once we submit our potential products for review, we cannot assure
you that the FDA or other regulatory agencies will grant approvals for any of
our pharmaceutical products on a timely basis or at all. For example, we
initially believed that the FDA would abbreviate the approval process for our
Extra products. However, the FDA is reviewing Mito Extra, our first Extra
product submission, as a new drug. Sales of our products outside the United
States will be subject to regulatory requirements governing clinical trials and
Marketing Approval. These requirements vary widely from country to country and
could delay the introduction of our products in those countries.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR
INTELLECTUAL PROPERTY. We will suffer negative consequences if competitors
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets, if our trade secrets are disclosed
or if we cannot effectively protect our rights to unpatented trade secrets.
28
<PAGE>
We actively seek patent protection for our proprietary products and
technologies. We have a number of United States patents and we have licenses to
or assignments of numerous issued United States patents. However, litigation may
be necessary to protect our patent position, and we cannot be certain that we
will have the required resources to pursue such litigation or otherwise to
protect our patent rights. Our efforts to protect our patents may fail. In
addition to pursuing patent protection in appropriate cases, we also rely on
trade secret protection for unpatented proprietary technology. However, trade
secrets are difficult to protect.
Our proprietary products are dependent upon compliance with certain licenses
and agreements. These licenses and agreements require us to make certain royalty
and other payments, reasonably exploit the underlying technology of the
applicable patents, and comply with certain regulatory filings. If we fail to
comply with such licenses and agreements, we could lose the underlying rights to
one or more of these potential products, which could adversely effect our
business, results of operations and cash flows.
Claims may be brought against us in the future based on patents held by
others. Such other persons could bring legal actions against us claiming damages
and seeking to enjoin clinical testing, manufacturing and marketing of the
affected product. If any actions are successful, in addition to any potential
liability for damages, we could be required to obtain a license in order to
continue to manufacture or market the affected product. We cannot assure you
that we would prevail in any such action or that we could obtain any license
required under any such patent on acceptable terms, if at all. There has been,
and we believe that there will continue to be, significant litigation in the
pharmaceutical industry regarding patent and other intellectual property rights.
If we become involved in any litigation, it could consume a substantial portion
of our resources, regardless of the outcome of such litigation.
Extensive research and development efforts and rapid technological progress
characterize our industry. Although we believe that our proprietary position
gives us a competitive advantage with respect to our proposed non-generic drugs,
we anticipate that development will continue and discoveries by others may
render our current and potential products noncompetitive. In addition, we have
only limited experience in selling and marketing pharmaceutical products. Our
competitive position also depends on our ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products,
implement development and marketing plans, obtain patent protection and secure
adequate capital resources.
BECAUSE WE ARE DEPENDENT ON THIRD PARTIES FOR MANUFACTURING OUR BUSINESS MAY
BE HARMED. We currently rely on vendors for manufacturing activities related to
Nipent-Registered Trademark- and our generic version of mitomycin. The
facilities used by these vendors have passed plant inspections required by the
FDA before market clearance of all pharmaceutical products. The FDA conducts
these inspections to ensure compliance with current Good Manufacturing Practices
("cGMP") regulations enforced by the FDA. If the facilities fail to maintain
their cGMP status, or there is an interruption at any of these facilities due to
the occurrence of a fire, natural disaster, equipment failure or other
condition, we may not be able to locate other facilities that are FDA-approved
for manufacturing activities in a timely manner or on commercially acceptable
terms.
In addition, we store the majority of our Nipent-Registered Trademark- crude
concentrate at a single storage location. Improper storage, fire, natural
disaster, theft or other conditions at this location that may lead to the loss
or destruction of our Nipent-Registered Trademark- crude concentrate could
adversely affect our business, results of operations and cash flows. We are
currently negotiating a long-term agreement with the vendor that purifies our
current supply of crude concentrate to continue its purification services.
However, we cannot assure you that we will be able to finalize such an
agreement. If we are not able to do so, our supply of
Nipent-Registered Trademark- may be interrupted while we seek to locate another
facility and to have that facility approved by the FDA. Such a delay could
adversely affect our business, results of operations and cash flows.
We will encounter similar issues with respect to any potential products that
the FDA clears for sale. We must establish and maintain relationships with
manufacturers to produce and package our finished pharmaceutical products,
including RFS 2000. In addition, the FDA must clear the facilities used by these
contract manufacturers. If we are unable to obtain or retain third-party
manufacturing on commercially
29
<PAGE>
acceptable terms or obtain necessary FDA clearances to manufacture the products
currently being developed, we may not be able to commercialize pharmaceutical
products as planned. Our dependence upon third parties for the manufacture of
pharmaceutical products may adversely affect our profit margins and our ability
to develop and deliver pharmaceutical products on a timely and competitive
basis.
We currently rely on foreign manufacturers for the production of certain of
bulk Extra and generic formulations and on domestic manufacturers to supply
sufficient quantities of compounds to conduct clinical trials on proposed
proprietary products. If we are unable to contract for or obtain a sufficient
supply of pharmaceutical products on acceptable terms, or such supplies are
delayed or contaminated, we could experience significant reductions in sales,
delays in bringing our proposed proprietary, Extra and generic products to
market, delays in preclinical and human clinical testing schedules, and delays
in submitting products for regulatory approval and initiating new development
programs. Any of these factors could adversely affect our business, results of
operations and cash flows.
We do not currently intend to manufacture any pharmaceutical products,
although we may choose to do so in the future. If we decide to manufacture
products, we will be subject to the regulatory requirements described above. We
will also be subject to similar risks regarding delays or difficulties
encountered in manufacturing any such pharmaceutical product and we will require
additional facilities and substantial additional capital. In addition, we have
only limited experience in manufacturing pharmaceutical products. We cannot
assure you that we would be able to manufacture any such product successfully
and in a cost-effective manner.
IF WE LOSE THE SERVICES OF CERTAIN KEY EMPLOYEES, OUR BUSINESS WILL BE
HARMED. Our success is dependent on certain key management and scientific
personnel, including Dr. Joseph Rubinfeld, the loss of whose services could
significantly affect our ability to achieve our planned development objectives.
We maintain a key executive life insurance policy for $2.1 million on Dr.
Rubinfeld. The loss of key personnel or the inability to attract and retain the
additional, highly skilled personnel required for the expansion of our
activities could adversely affect our business, results of operations and cash
flows.
THE CONTINUING EFFORTS OF GOVERNMENT AND THIRD-PARTY PAYERS TO CONTAIN OR
REDUCE THE COSTS OF HEALTH CARE MAY ADVERSELY AFFECT OUR REVENUES AND
PROFITABILITY. We cannot predict the effect that health care reforms may have
on our business, and it is possible that any such reforms will adversely affect
our business. In addition, in both the United States and elsewhere, sales of
prescription pharmaceuticals are dependent in part on the availability of
reimbursement to the consumer from third-party payers, such as government and
private insurance plans. Third-party payers are increasingly challenging the
prices charged for medical products and services. If our current and proposed
products are not considered cost-effective, reimbursement to the consumer may
not be available or be sufficient to allow us to sell products on a competitive
basis.
THE NATURE OF OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY CLAIMS. Clinical
trials or marketing of any of our current and potential pharmaceutical products
may expose us to liability claims from the use of such pharmaceutical products.
We currently carry product liability insurance. However, we cannot be certain
that we will be able to maintain insurance on acceptable terms for clinical and
commercial activities or that such insurance would be sufficient to cover any
potential product liability claim or recall.
OUR OFFICERS AND DIRECTORS OWN A SIGNIFICANT PORTION OF OUR STOCK AND THEY
MAY NOT ACT IN THE BEST INTEREST OF OTHER STOCKHOLDERS. Our officers and
directors beneficially own approximately 30% of the outstanding shares of Common
Stock. Beneficial ownership includes shares of Common Stock subject to options
exercisable at May 11, 1999. These stockholders, if acting together, may be able
to elect all of our directors and otherwise significantly influence matters
requiring approval by our stockholders. This concentration of ownership and the
lack of cumulative voting may also delay or prevent a third party from acquiring
us.
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Due to the short-term nature of our interest bearing assets we believe that
our exposure to interest rate market risk is not significant.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
All information required by this item is included on pages F-1 to F-17 in
Item 14 of Part IV of this Report and is incorporated into this item by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. FINANCIAL STATEMENTS. The following financial statements of the
Company and the Report of Ernst & Young LLP, Independent Auditors, are
included in Part IV of this Report on the pages indicated:
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...................................... F-1
Consolidated Balance Sheets............................................................ F-2
Consolidated Statements of Operations.................................................. F-3
Consolidated Statement of Changes in Stockholders' Equity.............................. F-4
Consolidated Statements of Cash Flows.................................................. F-5
Notes to Consolidated Financial Statements............................................. F-6
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
the notes thereto.
3. EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ------------------------------------------------------------
<C> <S>
(f)3.1 Certificate of Incorporation of the Registrant.
(m)3.2 Bylaws, as amended, of the Registrant.
(m)4.1 Specimen Common Stock Certificate.
(a)4.2 Form of Representative's Warrant.
(a)4.3 Form of Warrant Agreement (including form of Common Stock
Purchase Warrant).
(l)10.1 Form of Indemnification Agreement between the Registrant and
each of its directors and officers.
(n)(s)10.2 1993 Stock Option Plan (as amended through March 9, 1998).
(i)(s)10.3 Forms of stock option agreements under the 1993 Stock Option
Plan.
(i)(s)10.4 1996 Directors' Stock Option Plan, as amended effective
February 3, 1997, and form of stock option agreement
thereunder.
(c)(s)10.5 Employees and Consultants Stock Option Agreement/Plan.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ------------------------------------------------------------
<C> <S>
(n)(s)10.6 1998 Employee Stock Purchase Plan
(b)(q)10.7 Patent License and Royalty Agreement dated August 30, 1993
between the Registrant and The Jackson Laboratory.
(b)(q)10.8 Worldwide License Agreement dated March 1, 1994 between the
Registrant and Janssen Biotech, N.V.
(b)(q)10.9 Patent License Agreement dated March 1, 1994 between the
Registrant and Cyclex Inc.
(b)(q)10.10 Patent License and Royalty Agreement dated November 15, 1993
between the Registrant and The Long Island Jewish Medical
Center.
(b)(q)10.11 License Agreement dated February 1, 1995 between the
Registrant and Pharmos Corporation.
(i)10.12 Common Stock Sale/Repurchase Agreement dated August 6, 1997
between Israel Chemicals, Ltd. ("ICL") and the Registrant.
(m)10.13 First Amendment to Common Stock Sale/Repurchase Agreement
between ICL and the Registrant dated November 12, 1997.
(m)(s)10.14 Amended and Restated Employment, Confidential Information
and Invention Assignment Agreement dated January 1, 1998
between the Registrant and Joseph Rubinfeld.
(b)10.15 Consulting Agreement between the Registrant and Vida
International Pharmaceutical Consultants.
(d)10.16 Purchase and Sale Agreement dated as of September 30, 1996
between the Registrant and Warner-Lambert Company, a
Delaware corporation.
(e)(q)10.17 Asset Purchase Agreement dated January 15, 1997 between the
Registrant and Immunex Corporation, a Washington
corporation.
(e)10.18 Bishop Ranch Business Park Building Lease dated October 14,
1996 between the Registrant and Annabel Investment
Company, a California partnership.
(g)(q)10.19 License Agreement between Inflazyme Pharmaceuticals Ltd. and
the Registrant dated April 11, 1997.
(g)(q)10.20 Nonexclusive Supply Agreement between the Registrant and
Yunnan Hande Technological Development Co. Ltd. dated May
7, 1997.
(g)10.21 Assignment and Assumption Agreement between the Registrant
and R&S, LLC dated April 17, 1997.
(h)10.22 Convertible Secured Note, Option and Warrant Purchase
Agreement dated June 17, 1997 among the Registrant, Tako
Ventures, LLC and, solely as to Sections 5.3 and 5.5
thereof, Lawrence J. Ellison (the "Tako Purchase
Agreement").
(r)10.23 Amendment No. 1 to the Tako Purchase Agreement dated March
17, 1999.
(j)10.24 Form of Common Stock Purchase Agreement among the purchasers
and the Registrant dated August 29, 1997.
(j)(q)10.25 License Agreement between Stehlin Foundation for Cancer
Research and the Registrant dated September 3, 1997.
(j)10.26 Letter Agreement dated August 13, 1997 between the
Registrant and South Bay Construction, Inc.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ------------------------------------------------------------
<C> <S>
(k)(q)10.27 Supply Agreement dated October 20, 1997 between the
Registrant and Warner-Lambert Company.
(l)10.28 Standard Industrial/Commercial Multi-Tenant Lease dated
October 13, 1997 between R&S, LLC and Quark Biotech, Inc.
10.29 Registration Rights Agreement dated November 23, 1998.
(o)10.30 Agreement and Plan of Reorganization by and among the
Registrant, Royale Acquisition Corp., and Sparta
Pharmaceuticals, Inc. dated January 18, 1999.
(r)10.31 Stock Purchase Agreement between the Registrant and Tako
dated January 29, 1999.
(r)10.32 Standard Industrial/Commercial Multi-Tenant Lease dated
February 12, 1999 between the Registrant and Sea Cliff
Properties, a California general partnership (for the
premises at 1075 Serpentine Lane, Pleasanton, California,
Suite A).
(r)10.33 Standard Industrial/Commercial Multi-Tenant Lease dated
February 12, 1999 between the Registrant and Sea Cliff
Properties, a California general partnership (for the
premises at 1075 Serpentine Lane, Pleasanton, California,
Suite B).
(r)10.34 Secured Promissory Note Commitment dated March 25, 1999
issued by the Registrant to Tako Ventures LLC.
(r)10.35 Common Stock Purchase Warrant dated March 25, 1999.
(p)(q)10.36 Letter of Intent regarding Nipent--Registered Trademark--
Manufacturing.
10.37 Common Stock Purchase Agreement dated November 23, 1998.
(r)23.1 Consent of Ernst & Young LLP, Independent Auditors.
(r)27.1 Financial Data Schedule.
</TABLE>
- ------------------------
(a) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 (Reg. No. 333-476-LA) filed with the Securities and Exchange
Commission January 18, 1996.
(b) Incorporated by reference from Amendment No. 1 to the Registrant's
Registration Statement on Form SB-2 (Reg. No. 333-476-LA) filed with the
Securities and Exchange Commission February 26, 1996.
(c) Incorporated by reference from the Registrant's Report on Form S-8 filed
with the Securities and Exchange Commission on July 1, 1996.
(d) Incorporated by reference from the Registrant's Report on Form 8-K filed
with the Securities and Exchange Commission on October 15, 1996.
(e) Incorporated by reference from the Registrant's Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1997.
(f) Incorporated by reference from the Registrant's Proxy Statement filed with
the Securities and Exchange Commission on April 25, 1997.
(g) Incorporated by reference from the Registrant's Report on Form 10-Q filed
with the Securities and Exchange Commission on May 15, 1997.
(h) Incorporated by reference from the Registrant's Report on Form 8-K filed
with the Securities and Exchange Commission on July 2, 1997.
(i) Incorporated by reference from the Registrant's Report on Form 10-Q filed
with the Securities and Exchange Commission on August 13, 1997.
33
<PAGE>
(j) Incorporated by reference from Amendment No. 2 on Form S-3 to the
Registrant's Registration Statement on Form SB-2 (Reg. No. 333-476-LA) filed
with the Securities and Exchange Commission on October 6, 1997.
(k) Incorporated by reference from the Registrant's Report on Form 8-K filed
with the Securities and Exchange Commission on October 31, 1997.
(l) Incorporated by reference from Amendment No. 3 on Form S-3 to the
Registrant's Registration Statement on Form SB-2 (Reg. No. 333-476-LA) filed
with the Securities and Exchange Commission on November 5, 1997.
(m) Incorporated by reference from the Registrant's Report on Form 10-K filed
with the Securities and Exchange Commission on March 19, 1998.
(n) Incorporated by reference from the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-58303) filed with the Securities and Exchange
Commission on July 1, 1998.
(o) Incorporated by reference from the Registrant's Report on Form 8-K filed
with the Securities and Exchange Commission on January 28, 1999.
(p) Incorporated by reference from the Registrant's Report on Form 10-Q filed
with the Securities and Exchange Commission on November 12, 1998.
(q) Confidential treatment has been previously granted for certain portions of
these exhibits.
(r) Previously filed with the Registrant's Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1999.
(s) Indicates a management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed in 1998.
(c) EXHIBITS. See Item 14(a) above.
(d) FINANCIAL STATEMENT SCHEDULES. See Item 14(a) above.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to the
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized, on this 14th day of May, 1999.
<TABLE>
<S> <C> <C>
SUPERGEN, INC.
By: /s/ JOSEPH RUBINFELD
-----------------------------------------
Joseph Rubinfeld
CHIEF EXECUTIVE OFFICER, PRESIDENT AND
DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to the Report on Form 10-K has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chief Executive Officer,
President and Director
/s/ JOSEPH RUBINFELD (Principal Executive
- ------------------------------ Officer and Principal May 14, 1999
(Joseph Rubinfeld) Financial and Accounting
Officer)
- ------------------------------ Director May , 1999
(Denis Burger)
- ------------------------------ Director May , 1999
(Lawrence J. Ellison)
*
- ------------------------------ Director May 14, 1999
(Julius A. Vida)
*
- ------------------------------ Director May 14, 1999
(Daniel Zurr)
</TABLE>
<TABLE>
<S> <C> <C> <C>
* /s/ JOSEPH RUBINFELD
-------------------------
Joseph Rubinfeld
(ATTORNEY-IN-FACT)
</TABLE>
S-1
<PAGE>
EXHIBIT 10.29
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 23, 1998
(this "Agreement"), is made by and between SUPERGEN, INC., a Delaware
corporation (the "Company"), and HSBC JAMES CAPEL CANADA, INC. (the
"Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Common
Stock Purchase Agreement, dated as of November 23, 1998, between the Investor
and the Company (the "Purchase Agreement"), the Company has agreed to issue
and sell to the Investor, 460,000 shares of the common stock, $.0001 par
value per share (the "Common Stock"), of the Company (the "Shares"), and
warrants issued pursuant to Section 7.1 of the Purchase Agreement to purchase
shares of Common Stock (the "Warrants"), which Warrants will be exercisable
for shares of Common Stock (the "Warrant Shares"), for a purchase price of
$3,000,000; and
WHEREAS, to induce the Investor to execute and deliver the Purchase
Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), with respect to the Shares and Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agrees as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Shares and the Warrant
Shares.
<PAGE>
(iv) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file
with the SEC a Registration Statement on an appropriate form for registering
for resale by the Investor a sufficient number of shares of Common Stock for
the Investor (or such lesser number as may be required by the SEC, but in no
event less than the number of shares of Common Stock which will be issued
under the Purchase Agreement and the Warrants exercisable at the time of
filing of the Registration Statement, or an amendment to any pending Company
Registration Statement, and such Registration Statement or amended
Registration Statement shall state that, in accordance with Rule 416 and 457
under the Securities Act, it also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon the exercise of
the Warrants to prevent dilution resulting from stock splits, or stock
dividends), and the Company shall use its best efforts to cause the
Registration Statement shall be declared effective no later than 75 days
after the Closing Date. If at any time the number of shares of Common Stock
issuable under the Purchase Agreement exceeds the aggregate number of shares
of Common Stock then registered, the Company shall, within ten (10) business
days after receipt of a written notice from any Investor, either (i) amend
the Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by
the SEC at that time, to register all shares of Common Stock issuable upon
each of the Company's Draw Downs and the Investor's Call Options, or (ii) if
such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement to register the
shares of Common Stock issuable under the Purchase Agreement that exceed the
aggregate number of shares of Common Stock already registered.
(b) PAYMENTS BY THE COMPANY.
If the Registration Statement covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a)
hereof (i) has not been filed within thirty (30) days from the Closing Date,
the Company will pay the Investor liquidated damages equal to $20,000 per
week for each week (pro rated for a period which is less than an entire week)
that the Company fails to file the Registration Statement and/or (ii) has not
been declared effective by seventy-five (75) days following the Closing Date
(except as provided by the last sentence of Section 2(a)), then the Company
will pay the Investor liquidated damages equal to $20,000 per month for each
month (pro rated for a period which is less than an entire month) until the
earlier of (x) the date such Registration Statement is declared effective or
(y) the date all such Registrable Securities may be sold in reliance on Rule
144.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
2
<PAGE>
(a) Prepare promptly and file with the SEC, a Registration
Statement with respect to not less than the number of Registrable Securities
provided in Section 2(a), above, and thereafter use its best efforts to cause
each Registration Statement relating to Registrable Securities to become
effective seventy-five (75) days after the Closing Date, and keep the
Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is three years after the Closing
Date (ii) the date when the Investor may sell all Registrable Securities
under Rule 144 or (iii) the date the Investor no longer owns any of the
Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during
the Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated
by the Investor to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with
the SEC;
(d) Furnish to the Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to
the Company, (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one (1) copy of
the Registration Statement, each preliminary prospectus and prospectus, and
each amendment or supplement thereto, and (ii) such number of copies of a
prospectus, and all amendments and supplements thereto and such other
documents, as the Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by the Investor;
(e) As promptly as practicable after becoming aware of such event,
the Company shall notify the Investor of (x) the issuance by the SEC of a
stop order suspending the effectiveness of the Registration Statement, (y)
the happening of any event of which the Company has knowledge as a result of
which the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
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 (z) the occurrence or existence of any pending corporate
development that, in the reasonable discretion of the Company, makes it
appropriate to suspend the availability of the Registration Statement, and
use its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement
3
<PAGE>
or amendment to each Investor as such Investor may reasonably request;
provided that, for not more than twenty (20) days (or a total of not more
than forty (40) days in any twelve (12) month period, the Company may delay
the disclosure of material non-public information concerning the Company (as
well as prospectus or Registration Statement updating) the disclosure of
which at the time is not, in the good faith opinion of the Company, the best
interests of the Company and in the opinion of counsel to the Company (an
"Allowed Delay"); provided, further, that the Company shall promptly (i)
notify the Investor in writing of the existence of material non-public
information giving rise to an Allowed Delay and (ii) advise the Investor in
writing to cease all sales under the Registration Statement until the end of
the Allowed Delay. Upon expiration of the Allowed Delay, the Company shall
again be bound by the first sentence of this Section 3(f) with respect to the
information giving rise thereto, and shall be obligated to pay to the
Investors any amounts provided for in Section 2(b).
(f) As promptly as practicable after becoming aware of such event,
notify the Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance
by the SEC of a Notice of Effectiveness or any notice of effectiveness or any
stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(g) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Registration Statement;
(h) Cooperate with the Investor who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investor may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investor whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(i) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. OBLIGATIONS OF THE INVESTOR. In connection with the
registration of the Registrable Securities, the Investor shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of the Investor that the Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request.
At least five (5) days prior to the first anticipated filing date of the
4
<PAGE>
Registration Statement, the Company shall notify the Investor of the
information the Company requires from the Investor (the "Requested
Information").
(b) The Investor agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement hereunder; and
(c) The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e)
or 3(f), above, the Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and,
if so directed by the Company, the Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession, of the
prospectus covering such Registrable Securities current at the time of
receipt of such notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company, shall be borne by the Company.
6. INDEMNIFICATION. The rights of the Investor and the Company
to indemnification and/or contribution in the event any Registrable
Securities are included in a Registration Statement under this Agreement are
set forth on Schedule A hereto.
7. REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Investor the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time
permit the Investor to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company and (iii) such other information as may be reasonably
requested to permit the Investor to sell such securities pursuant to Rule 144
without registration.
5
<PAGE>
8. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities only if: (a) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished
to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee
or assignee and (ii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein, and (e) such transferee shall be an "accredited
investor" as defined in Rule 501 of Regulation D. In the event of any delay
in filing or effectiveness of the Registration Statement as a result of such
assignment, the Company shall not be liable for any damages arising from such
delay, or the payments set forth in Section 2(c) hereof.
9. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Investor. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon the Investor and the Company.
10. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission,
receipt confirmed, or other means) or sent by certified mail, return receipt
requested, properly addressed and with proper postage pre-paid (i) if to the
Company, 2 Annabel Lane, Suite 220, San Ramon, California 94583, Attention:
Joseph Rubin Feld, with a copy to Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California 94304-1050, Attention: Kathleen Block,
Esq.; and (ii) if to the Investor, at 105 Adelaide Street West, Suite 1200,
Toronto Ontario MSH 1P9, Attention: Mr. Isser Elishis, or at such other
address as each such party furnishes by notice given in accordance with this
Section 10(b), and shall be effective, when personally delivered, upon
receipt and, when so sent by certified mail, four (4) calendar days after
deposit with the United States Postal Service.
6
<PAGE>
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware, without giving
effect to the choice of law provisions. Each of the Company and the Investor
(i) hereby irrevocably submits to the jurisdiction of the United States
District Court and other courts of the United States sitting in the State of
Delaware for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
(e) A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. This Agreement may be amended only by
an instrument in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) This Agreement and the Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof.
(g) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by
7
<PAGE>
telephone line facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
(j) Neither party shall be liable for consequential damages.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SUPERGEN, INC.
By: /s/ Dr. Joseph Rubinfeld
---------------------------------------------
Name: Dr. Joseph Rubinfeld
Title: President and Chief Executive Officer
HSBC JAMES CAPEL CANADA, INC.
By: /s/ Isser Elishis
---------------------------------------------
Name: Isser Elishis
Title: Senior Vice President (SRA)
8
<PAGE>
SCHEDULE A
(a) To the extent permitted by law, the Company will indemnify and
hold harmless the Investor who holds such Registrable Securities, the
directors, if any, of the Investor, the officers, if any, of the Investor,
each person, if any, who controls the Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"Indemnified Party"), against any losses, claims, damages, liabilities or
reasonable expenses (joint or several) incurred (collectively, "Claims") to
which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any prospectus
included therein: (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective
amendment thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to clause (b) of this Schedule A, the
Company shall reimburse the Investor, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this clause (a) shall not (I) apply to
a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company
by or on behalf of any Indemnified Person expressly for use in connection
with the preparation of the Registration Statement or any such amendment
thereof or supplement thereto, (II) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (III) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. The Investor will indemnify the Company and its officers,
directors and agents and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act against any Claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on
behalf of the Investor, expressly for use in connection with the preparation
of the Registration Statement, subject to such limitations and conditions as
are applicable to the Indemnification provided by the Company hereunder.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investor pursuant
to Section 8 of this Agreement.
A-1
<PAGE>
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Schedule A of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Schedule A, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party,
as the case may be. In case any such action is brought against any
Indemnified Person or Indemnified Party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject to
the provisions herein stated and after notice from the indemnifying party to
such Indemnified Person or Indemnified Party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
Indemnified Person or Indemnified Party under this Schedule A for any legal
or other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action of its final conclusion. The Indemnified
Person or Indemnified Party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the
reasonable fees and reasonable out-of-pocket expenses of such counsel shall
not be at the expense of the indemnifying party if the indemnifying party has
assumed the defense of the action with counsel reasonably satisfactory to the
Indemnified Person or Indemnified Party. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Schedule A, except
to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Schedule A shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
(c) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under this Schedule A to the fullest extent permitted by law;
provided, however, that (a) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the
fault standards set forth in this Schedule A; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
A-2
<PAGE>
EXHIBIT 10.37
COMMON STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 23, 1998
BY AND BETWEEN
SUPERGEN, INC.
AND
HSBC JAMES CAPEL CANADA, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE OF PREFERRED STOCK . . . . . . . . . . . . . . . . . 1
Section 2.1 PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . . 2
Section 2.2 THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3 PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . . . . 2
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 2
Section 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 2
(a) ORGANIZATION, GOOD STANDING AND POWER . . . . . . . . . . . . . . . 2
(b) AUTHORIZATION; ENFORCEMENT . . . . . . . . . . . . . . . . . . . . 3
(c) CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) ISSUANCE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(f) COMMISSION DOCUMENTS, FINANCIAL STATEMENTS . . . . . . . . . . . . 4
(g) SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . 5
(i) NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . 5
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES . . . . . . . . . . . . . . 6
(k) INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) ACTION PENDING . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
(n) COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . . 7
(o) CERTAIN FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(p) DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(q) OPERATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 7
(r) ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . 7
(s) MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 8
(t) TRANSACTION WITH AFFILIATES . . . . . . . . . . . . . . . . . . . . 8
(u) SECURITIES ACT OF 1933 . . . . . . . . . . . . . . . . . . . . . . 8
(v) EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(w) USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(x) PUBLIC UTILITY HOLDING COMPANY ACT AND INVESTMENT
COMPANY ACT STATUS . . . . . . . . . . . . . . . . . . . . . . . . 9
(y) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(z) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SHARES . . . . . . 9
Section 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . 10
(a) ORGANIZATION AND STANDING OF THE PURCHASER . . . . . . . . . . . . 10
(b) AUTHORIZATION, AND POWER . . . . . . . . . . . . . . . . . . . . . 10
(c) NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) ACQUISITION FOR INVESTMENT . . . . . . . . . . . . . . . . . . . . 10
(e) ACCREDITED PURCHASER . . . . . . . . . . . . . . . . . . . . . . . 11
(f) INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(g) GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
ii
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ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 SECURITIES COMPLIANCE . . . . . . . . . . . . . . . . . . . . 11
Section 4.2 REGISTRATION AND LISTING . . . . . . . . . . . . . . . . . . . 12
Section 4.3 REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . 12
Section 4.4 DELIVERY OF THE SHARES . . . . . . . . . . . . . . . . . . . . 12
Section 4.5 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . 12
Section 4.6 KEEPING OF RECORDS AND BOOKS OF ACCOUNT . . . . . . . . . . . 12
Section 4.7 REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . 13
Section 4.8 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.9 OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE SHARES . . . . . . . . . . . . . . . . . . . . . . . 13
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . 14
(b) PERFORMANCE BY THE PURCHASER . . . . . . . . . . . . . . . . . . . 14
(c) NO INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER
TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES . . . . . 14
(b) PERFORMANCE BY THE COMPANY . . . . . . . . . . . . . . . . . . . . 14
(c) NO SUSPENSION, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) NO INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) NO PROCEEDINGS OR LITIGATION . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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(f) OPINION OF COUNSEL, ETC. . . . . . . . . . . . . . . . . . . . . . 15
(g) REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.1 TERMINATION BY MUTUAL CONSENT . . . . . . . . . . . . . . . . 15
Section 6.2 OTHER TERMINATION . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.3 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.1 GENERAL INDEMNITY . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.2 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.1 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION . . . . . . . . 17
Section 8.3 ENTIRE AGREEMENT; AMENDMENT . . . . . . . . . . . . . . . . . 18
Section 8.4 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8.5 WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.7 SUCCESSOR AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 19
Section 8.8 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . 19
Section 8.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.10 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.11 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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Section 8.12 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.13 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.14 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
v
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
November 23, 1998 by and among between SuperGen, Inc., a Delaware corporation
(the "Company") and HSBC James Capel Canada, Inc. (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS.
(a) "MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties or financial condition of the Company that is material
and adverse to the Company and its subsidiaries, taken as a whole and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with the ability of the Company to enter into and perform any of its obligations
under this Agreement or the Registration Rights Agreement in any material
respect.
(b) "MATERIAL CHANGE IN OWNERSHIP" shall mean that the officers and
directors of the Company shall own in the aggregate less than 50% of the
outstanding Common Stock of the Company that the officers and directors own as
of the date hereof.
(c) "REGISTRATION STATEMENT" shall mean the registration statement
under the Securities Act of 1933, as amended, to be filed with the Securities
and Exchange Commission for the registration of the Shares.
(d) "SHARES" shall have the meaning assigned to such term in Section
2.1 hereof.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions of this Agreement and the preemptive rights in favor of Tako
Ventures, LLC ("Tako") pursuant to the Tako Agreement described in Section
3.1(c) of the Schedule of Exceptions (the "Tako Preemptive Rights"), the Company
hereby issues and sells to the Purchaser and the Purchaser hereby purchases from
the Company 460,000 shares (the "Shares") of the Company's common stock, par
value $.001 per share (the "Common Stock"), for a purchase price of Three
Million Dollars ($3,000,000). In the
<PAGE>
event Tako elects to exercise any Tako Preemptive Rights with respect to the
Shares, then the amount of Common Stock that may be acquired by Tako pursuant
to the Tako Preemptive Rights shall be based on the number of Shares;
PROVIDED, that the amount of Shares purchased by the Purchaser shall not be
reduced as a result of the exercise by Tako of such Tako Preemptive Rights.
Section 2.2 THE SHARES. The Company has authorized, free of preemptive
rights and other similar contractual rights of stockholders other than the Tako
Preemptive Rights, the Shares to be issued under this Agreement.
Section 2.3 PURCHASE PRICE AND CLOSING. The Company agrees to issue and
sell to the Purchaser and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchaser, agrees to purchase that number of the Shares to be issued under
this Agreement. The closing under this Agreement shall take place at the
offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New
York, New York 10036 (the "Closing") at 10:00 a.m. E.S.T. on (i) December 30,
1998, or (ii) such other time and place or on such date as the Purchaser and the
Company may agree upon (the "Closing Date"). Each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATION AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries (as defined in
Section 3.1(g)) except as set forth in the Company's most recent Form 10-K,
including the accompanying financial statements (the "Form 10-K"), or in the
Company's most recent Form 10-Q (the "Form 10-Q"), or in the Company's filings
on Form 8-K or public filings made by the Company with the Securities and
Exchange Commission (the "Commission"), pursuant to the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including the
Commission Documents referred to in Section 3.1(f) below (the "Commission
Filings", which term shall include such filings made prior to any Draw Down
Exercise Date), or on SCHEDULE 3.1(a) of the Schedule of Exceptions. The
Company and each such subsidiary is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction in which the failure to be so qualified
will not have a material adverse effect on the Company's financial condition.
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<PAGE>
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement attached hereto as Exhibit A (the "Registration
Rights Agreement") and to issue and sell the Shares in accordance with the terms
hereof. The execution, delivery and performance of this Agreement and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Company. Each of this Agreement and the
Registration Rights Agreement constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth in
the Form 10-K, Form 10-Q, on SCHEDULE 3.1(c) of the Schedule of Exceptions or in
the Commission Filings or as otherwise disclosed in writing to the Purchaser.
All of the outstanding shares of the Company's Common Stock have been duly and
validly authorized. Except as set forth in this Agreement and the Registration
Rights Agreement and as set forth in the Form 10-K, Form 10-Q, on SCHEDULE
3.1(c) of the Schedule of Exceptions or in the Commission Filings, no shares of
Common Stock are entitled to preemptive rights or registration rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and the Registration Rights Agreement and
as set forth in the Form 10-K, Form 10-Q, on SCHEDULE 3.1(c) of the Schedule of
Exceptions or in the Commission Filings, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as provided in the Form
10-K, Form 10-Q, on SCHEDULE 3.1(c) of the Schedule of Exceptions or in the
Commission Filings, the Company is not a party to any agreement granting
registration rights to any person with respect to any of its equity or debt
securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of the Company. Except as set forth in the Form 10-K, Form 10-Q or on SCHEDULE
3.1(c) of the Schedule of Exceptions, the offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable Federal and state securities laws,
and no stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect on the Company's financial condition
or operating results. The Company has furnished or made available to the
Purchaser true and correct copies of the
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<PAGE>
Company's Certificate of Incorporation as in effect on the date hereof (the
"Articles"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").
(d) ISSUANCE OF SHARES. The Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid for
or issued in accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid and nonassessable, and the Purchaser shall be
entitled to all rights accorded to a holder of Common Stock.
(e) NO CONFLICTS. Except as disclosed on SCHEDULE 3(e) of the
Schedule of Exceptions, the execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated therein do not (i)
violate any provision of the Company's Articles or Bylaws, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including Federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in the case of clause (ii) above, any conflicts arising under
and in connection with the Tako Agreement, and except, in all cases, for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under Federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement and the
Registration Rights Agreement, or issue and sell the Shares in accordance with
the terms hereof (other than any filings which may be required to be made by the
Company with the Commission, the National Association of Securities Dealers,
Inc. (the "NASD"), or state securities administrators subsequent to the Closing,
by the Company and the Purchaser with the Federal Trade Commission and the
Department of Justice under the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended, subsequent to the Closing, and, any registration statement
which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.
(f) COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and, except as disclosed in the Form 10-K, Form 10-Q or on SCHEDULE 3.1(f)
of the Schedule of Exceptions, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
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<PAGE>
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the "Commission Documents"). The Company has delivered or
made available to the Purchaser true and complete copies of the Commission
Documents filed with the Commission since December 31, 1997 and prior to the
Closing Date. The Company has not provided to the Purchaser any information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement. As of
their respective dates, the Form 10-K for the year ended December 31, 1997 and
the Forms 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Form 10-K and the Form 10-Q referred to above contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) SUBSIDIARIES. The Form 10-K, Form 10-Q, SCHEDULE 3.1(g) of the
Schedule of Exceptions or the Commission Filings sets forth each subsidiary of
the Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such subsidiary. For the purposes of this Agreement,
"subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. Except as set
forth in the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.
(h) NO MATERIAL ADVERSE CHANGE. Since September 30, 1998, the date
through which the most recent quarterly report of the Company on Form 10-Q has
been prepared and filed with the Commission, a copy of which is included in the
Commission Documents, the Company has not experienced or suffered any Material
Adverse Effect.
-5-
<PAGE>
(i) NO UNDISCLOSED LIABILITIES. Except as disclosed in the Form
10-K, Form 10-Q, on SCHEDULE 3.1(i) of the Schedule of Exceptions or the
Commission Filings, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP not disclosed in the
Commission Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since June 30, 1998 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) INDEBTEDNESS. The Form 10-K, Form 10-Q SCHEDULE 3.1(k) of the
Schedule of Exceptions or the Commission Filings sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or any
subsidiary, or for which the Company or any subsidiary has commitments. For the
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $25,000 (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company's
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in
excess of $25,000 due under leases required to be capitalized in accordance with
GAAP. Neither the Company nor any subsidiary is in default with respect to any
Indebtedness.
(l) TITLE TO ASSETS. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the Form
10-K, Form 10-Q or on SCHEDULE 3.1(l) of the Schedule of Exceptions or such that
could not reasonably be expected to cause a Material Adverse Effect on the
Company's financial condition or operating results. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect in all material respects.
(m) ACTIONS PENDING. There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any subsidiary which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Form 10-K, Form 10-Q, on SCHEDULE
3.1(m) of the Schedule of Exceptions or the Commission Filings, there is no
action, suit, claim, investigation or proceeding pending or, to the knowledge of
the Company, threatened,
-6-
<PAGE>
against or involving the Company, any subsidiary or any of their respective
properties or assets and which, if adversely determined, is reasonably likely
to result in a Material Adverse Effect. Except in respect of rulings made by
the Food and Drug Administration, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any subsidiary.
(n) COMPLIANCE WITH LAW. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Form 10-K, Form 10-Q or on SCHEDULE
3.1(n) of the Schedule of Exceptions or such that do not cause a Material
Adverse Effect. The Company and each of its subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it unless the failure to possess such franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(o) CERTAIN FEES. Except as set forth on SCHEDULE 3.1(o) of the
Schedule of Exceptions, no brokers, finders or financial advisory fees or
commissions will be payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.
(p) DISCLOSURE. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(q) OPERATION OF BUSINESS. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the Form 10-K,
Form 10-Q, on SCHEDULE 3.1(q) of the Schedule of Exceptions and the
Commission Filings, and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any
conflict with the rights of others, except to the extent that a Material
Adverse Effect could not reasonably be expected to result from such conflict.
(r) ENVIRONMENTAL COMPLIANCE. Except as disclosed in the Form 10-K,
Form 10-Q or on SCHEDULE 3.1(r) of the Schedule of Exceptions, the Company and
each of its subsidiaries have obtained all material approvals, authorization,
certificates, consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any other person, that
are required under any Environmental Laws. "Environmental Laws" shall mean all
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into
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<PAGE>
the air, surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid
or gaseous in nature. Except for such instances as would not individually or
in the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating
to or in any way affecting the Company or its subsidiaries that violate or
could reasonably be expected to violate any Environmental Law after the
Closing or that could reasonably be expected to give rise to any
environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without
limitation underground storage tanks), disposal, transport or handling, or
the emission, discharge, release or threatened release of any hazardous
substance.
(s) MATERIAL AGREEMENTS. Except as set forth in the Form 10-K, Form
10-Q, Form 8-K, on SCHEDULE 3.1(s) of the Schedule of Exceptions or the
Commission Filings, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement on Form S-3 or applicable form
(collectively, "Material Agreements") if the Company or any subsidiary were
registering securities under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and, to the
best of the Company's knowledge are not in default under any Material Agreement
now in effect, the result of which could reasonably be expected to cause a
Material Adverse Effect.
(t) TRANSACTIONS WITH AFFILIATES. Except as set forth in the Form
10-K, Form 10-Q or on SCHEDULE 3.1(t) of the Schedule of Exceptions or in
Commission Filings, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (a) the Company, any subsidiary or any
of their respective customers or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person who would be covered by Item 404(a) of
Regulation S-K or any corporation or other entity controlled by such officer,
employee, consultant, director or person.
(u) SECURITIES ACT OF 1933. The Company has complied and will comply
with all applicable Federal and state securities laws in connection with the
offer, issuance and sale of the Shares hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy the Shares or similar securities to, or solicit
offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, so as to bring the issuance and
sale of the Shares under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation
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or general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of the Shares.
(v) EMPLOYEES. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the Form 10-K, Form 10-Q or on SCHEDULE 3.1(v) to the
Schedule of Exceptions or as otherwise disclosed to the Purchaser. Except as
set forth in the Form 10-K, Form 10-Q, on SCHEDULE 3.1(v) hereto or as otherwise
disclosed by the Company to the Purchaser, neither the Company nor any
subsidiary has any employment contract, agreement regarding proprietary
information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since September 30,
1998, except as disclosed in Schedule 3.1(v) to the Schedule of Exceptions, no
officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, has terminated or, to the knowledge
of the Company, has any present intention of terminating his or her employment
or engagement with the Company or any subsidiary.
(w) USE OF PROCEEDS. The proceeds from the sale of the Shares will
be used by the Company and its subsidiaries for general corporate purposes.
(x) PUBLIC UTILITY HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT
STATUS. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(y) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
subsidiaries which is or would be materially adverse to the Company and its
subsidiaries. The execution and delivery of this Agreement and the issue and
sale of the Shares will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as
amended, provided that, if any of the Purchaser, or any person or entity that
owns a beneficial interest in any of the Purchaser, is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a "party in interest" (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term "Plan" shall
mean an "employee pension benefit plan" (as defined in Section 3 of ERISA) which
is or has been established or maintained, or to which contributions are or have
been made, by the Company or any subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.
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(z) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SHARES. The
Company acknowledges and agrees that each of the Purchaser is acting solely in
the capacity of arm's length purchaser with respect to this Agreement, the
Registration Rights Agreement and the transactions contemplated hereunder. The
Company further acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement, the Registration Rights Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement, the Registration
Rights Agreement and the transactions contemplated hereunder is merely
incidental to the Purchaser's purchase of the Shares.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) ORGANIZATION AND STANDING OF THE PURCHASER. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
(b) AUTHORIZATION AND POWER. The Purchaser has the requisite power
and authority to enter into and perform this Agreement and to purchase the
Shares being sold to it hereunder. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. Each of this Agreement and the
Registration Rights Agreement constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership, or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by the
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Purchaser is
a party, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to the
Purchaser or its properties, except for such conflicts, defaults and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of the Purchaser to enter into and perform its obligations
under this Agreement in any material respect. The Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this
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Agreement or the Registration Rights Agreement or to purchase the Shares in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Company herein.
(d) ACQUISITION FOR INVESTMENT. The Purchaser is purchasing the
Shares solely for its own account for the purpose of investment. The Purchaser
does not have a present arrangement or intention to effect any organized
distribution of the Shares to or through any person or entity; PROVIDED,
HOWEVER, that by making the representations herein, the Purchaser does not agree
to hold the Shares for any minimum or other specific term and reserves the right
to dispose of the Shares at any time in accordance with Federal and state
securities laws applicable to such disposition. The Purchaser acknowledges that
it is able to bear the financial risks associated with an investment in the
Shares and that it has been given full access to such records of the Company and
the subsidiaries and to the officers of the Company and the subsidiaries as it
has deemed necessary or appropriate to conduct its due diligence investigation.
The Purchaser is capable of evaluating the risks and merits of an investment in
the Shares by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Purchaser is capable of bearing the entire loss of its investment in the Shares.
(e) ACCREDITED PURCHASER. The Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
(f) INFORMATION. Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by Investor. Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company. Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Shares.
Investor understands that it (and not the Company) shall be responsible for its
own tax liabilities that may arise as a result of this investment or the
transactions contemplated by this Agreement.
(g) GENERAL. The Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Purchaser to acquire the Shares.
ARTICLE IV
COVENANTS
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The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined
herein).
Section 4.1 SECURITIES COMPLIANCE.
(a) The Company shall notify the Commission and NASD, if applicable,
in accordance with their rules and regulations, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Shares to the Purchaser or subsequent holders.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the applicability of
Federal and state securities laws exemptions and the suitability of the
Purchaser to acquire the Shares.
Section 4.2 REGISTRATION AND LISTING. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the NASDAQ system or any relevant
market or system, if applicable, and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD and NASDAQ system or any relevant market or system.
Section 4.3 REGISTRATION STATEMENT. The Company shall cause to be filed
the Registration Statement, which Registration Statement shall provide for the
resale of the Shares purchased by and issued to the Purchaser in accordance of
this Agreement and the Registration Rights Agreement. The Company shall take
all action necessary to cause such Registration Statement to be declared
effective by the Commission in accordance with the Registration Rights
Agreement. Before the Purchaser shall be obligated to accept a Draw Down (other
than the initial Draw Down) request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover
the Shares to be issued in connection with this Agreement.
Section 4.4 DELIVERY OF THE SHARES. The Company shall cause 460,000
unregistered shares of Common Stock to be delivered to the Purchaser prior to
the funding of the Purchase Price. The Purchaser agrees to hold such Shares in
trust for the benefit of the Company until the Purchaser has paid the purchase
price.
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Section 4.5 COMPLIANCE WITH LAWS. (a) The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 4.6 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.7 REPORTING REQUIREMENTS. Upon request, the Company shall
furnish the following to the Purchaser so long as such Purchaser is the
beneficial owner of the Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon
as available, and in any event within 47 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within 92 days after the end of each fiscal year of
the Company.
Section 4.8 AMENDMENTS. The Company shall not amend or waive any provision
of the Articles of Incorporation or Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.9 OTHER AGREEMENTS. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right to perform of the Company or any subsidiary under this Agreement or the
Articles of Incorporation of the Company. So long as the Purchaser is the
beneficial owner of the Shares, the Company is restricted from entering in any
other financing agreement without the prior consent of the Purchaser or without
terminating its agreement with the Purchaser, except that the Company may (i)
enter into a loan, credit or lease facility with a bank or financing
institution, establish an employee stock option plan or finance the acquisition
of other companies and/or (ii) issue shares of Common Stock in connection with
Tako Ventures exercise of its preemptive rights under the Tako Preemptive
Rights, stock splits, the Company's current director option plans or stock
purchase plans, currently outstanding warrants or options, acquisition of
products, licenses or other assets and strategic partnerships or joint ventures
(the primary purpose of which is not to raise equity); PROVIDED, that the
Company may not issue shares of Common Stock or securities convertible into
shares of Common Stock in excess of ten percent (10%) of the issued and
outstanding shares of Common Stock of the Company in connection with any
acquisition without the prior written consent of the Purchaser.
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ARTICLE V
CONDITIONS TO CLOSING
Section 5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO SELL
THE SHARES. The obligation hereunder of the Company to issue and sell the
Shares to the Purchaser is subject to the satisfaction or waiver, at or before
the Closing and with respect to each Draw Down and Call Option, of each of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
at that time, except for representations and warranties that are expressly made
as of a particular date.
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
CLOSE. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing as
though made at that time (except for representations and warranties that speak
as of a particular date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) NO SUSPENSION, ETC. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission or the NASDAQ (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
Closing), and, at any time prior to the Closing, trading in securities generally
as reported by NASDAQ shall not have been suspended or limited, or minimum
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prices shall not have been established on securities whose trades are reported
by NASDAQ, or on the New York Stock Exchange, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of the Purchaser, makes it impracticable or inadvisable to
purchase the Shares.
(d) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any subsidiary, or any of the officers, directors or
affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(f) OPINION OF COUNSEL, ETC. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in the form of Exhibit A hereto, and such other certificates and documents as
the Purchaser or its counsel shall reasonably require incident to the Closing.
(g) REGISTRATION RIGHTS AGREEMENT. At the Closing the Company shall
have executed and delivered the Registration Rights Agreement to the Purchaser.
ARTICLE VI
TERMINATION
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement shall terminate
on December 31, 1998 if the Shares have not been issued and sold by the Company
and purchased by the Purchaser. This Agreement may be terminated by mutual
consent of the parties.
Section 6.2 OTHER TERMINATION. The Purchaser may terminate this Agreement
upon one (1) day's notice if (x) an event resulting in a Material Adverse Effect
or a Material Change in Ownership has occurred, or (y) the Company is insolvent
or has commenced or is the subject of a bankruptcy proceeding.
Section 6.3 EFFECT OF TERMINATION. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions
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contemplated by this Agreement shall be terminated without further action by
either party. If this Agreement is terminated as provided in Section 6.1 or
6.2 herein, this Agreement shall become void and of no further force and
effect, except for Sections 8.1 and 8.2, and Article VII herein. Nothing in
this Section 6.3 shall be deemed to release the Company or the Purchaser from
any liability for any breach under this Agreement, or to impair the rights of
the Company and the Purchaser to compel specific performance by the other
party of its obligations under this Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1 GENERAL INDEMNITY. The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns but excluding consequential damages) from and against any
and all actual losses, liabilities, deficiencies, costs, damages and reasonable
expenses (including, without limitation, reasonable attorney's fees, charges and
disbursements) incurred by the Purchaser as a result of any breach of the
covenants made by the Company herein. The Purchaser agrees to indemnify and
hold harmless the Company and its directors, officers, affiliates, agents,
successors and assigns from and against any and all actual losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys fees, charges and disbursements but excluding consequential
damages) incurred by the Company as result of any breach of the covenants made
by the Purchaser herein.
Section 7.2 INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party
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in connection with any negotiation or defense of any such action or claim by
the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to
such action or claim. The indemnifying party shall keep the indemnified
party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall
be entitled to participate in such defense with counsel of its choice at its
sole cost and expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its prior
written consent. Notwithstanding anything in this Article VII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent (which consent shall not be unreasonable withheld),
settle or compromise any claim or consent to entry of any judgment in respect
thereof which imposes any future obligation on the indemnified party or which
does not include, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the indemnified party of a release from all
liability in respect of such claim. The indemnification required by this
Article VII shall be made by periodic payments of the amount thereof during
the course of investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred, so long as the indemnified
party irrevocably agrees to refund such moneys if it is ultimately determined
by a court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. The Company shall pay all reasonable
fees and expenses related to the transactions contemplated by this Agreement;
PROVIDED, that the Company shall pay, at the Closing, all reasonable attorneys
fees and expenses (exclusive of disbursements and out-of-pocket expenses)
incurred by the Purchaser up to $35,000 in connection with the preparation,
negotiation, execution and delivery of this Agreement. In addition, the Company
shall pay all reasonable fees and expenses incurred by the Purchaser in
connection with any amendments, modifications or waivers of this Agreement or
the Registration Rights Agreement or incurred in connection with the enforcement
of this Agreement and the Registration Rights Agreement, including, without
limitation, all reasonable attorneys fees and expenses. The Company shall pay
all stamp or other similar taxes and duties levied in connection with issuance
of the Shares pursuant hereto.
Section 8.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the
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parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of Delaware for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company
and the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 8.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby,
supersedes all prior agreements with respect to subject matter hereof and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by a written instrument signed by the party against whom enforcement of any
such amendment or waiver is sought.
Section 8.4 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: SuperGen, Inc.
2 Annabel Lane, Suite 220
San Ramon, California 94583
Telephone Number: (925) 327-0200
Fax: (925) 327-7355
Attention: Joseph
Rubinfeld
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With copies to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone Number: (650) 493-9300
Fax: (650) 496-4006
Attention: Kathleen Bloch, Esq./John V. Roos, Esq.
If to any Purchaser: HSBC James Capel Canada, Inc.
105 Adelaide Street West, Suite 1200
Toronto ON MSH 1P9
Telephone Number: (416) 947-2700
Fax: (416) 947-9450
Attention: Mr. Isser Elishis
With copies to: Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Telephone Number: (212) 704-6000
Fax: (212) 704-6288
Attention: Martin Eric Weisberg, Esq.
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 8.5 WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission
of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Section 8.6 HEADINGS. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 8.7 SUCCESSORS AND ASSIGNS. The Purchaser may not assign this
Agreement to any person (other than to an affiliate of the Purchaser) without
the prior consent of the Company, which consent will not be unreasonably
withheld. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The parties hereto may not amend this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company and each Purchaser to be affected by the amendment.
After Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
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Section 8.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 8.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving effect to the choice of law provisions.
Section 8.10 SURVIVAL. The representations and warranties of the Company
and the Purchaser contained in Article III shall survive the execution and
delivery hereof and the Closing until the date three years from the Closing
Date, and the agreements and covenants set forth in Articles IV, VI and VII of
this Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 8.12 PUBLICITY. Prior to the Closing, neither the Company nor the
Purchaser shall issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. In the event the Company is required
by law, based upon an opinion of the Company's counsel, that the Company must
issue a press release or otherwise make a public statement or announcement with
respect to this Agreement prior to the Closing, the Company will use its best
efforts to consult with the Purchaser on the form and substance of such press
release. After the Closing, the Company may issue a press release or otherwise
make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement; PROVIDED,
that prior to issuing any such press release, making any such public statement
or announcement, the Company obtains the prior consent of the Purchaser, which
consent shall not be unreasonably withheld or delayed.
Section 8.13 SEVERABILITY. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
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Section 8.14 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Shares.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
SUPERGEN, INC.
By: /S/ DR. JOSEPH RUBINFELD
-----------------------------------------
Name: Dr. Joseph Rubinfeld
Title: President and Chief Executive Officer
HSBC JAMES CAPEL CANADA, INC.
By: /S/ ISSER ELISHIS
-----------------------------------------
Name: Isser Elishis
Title: Senior Vice President (SRA)
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