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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
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<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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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)
<TABLE>
<S> <C>
DELAWARE 91-1841574
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
TWO ANNABEL LANE, SUITE 220, 94583
SAN RAMON, CALIFORNIA (Zip Code)
(Address of principal executive
offices)
</TABLE>
(925) 327 - 0200
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
------------------------
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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the registrant's Common Stock, $.001 par value,
outstanding as of
November 3, 1999, was 24,952,937.
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TABLE OF CONTENTS
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PAGE
NO.
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PART I FINANCIAL INFORMATION
Item 1-- Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998..... 3
Consolidated Statements of Operations for the
three and nine month periods
ended September 30, 1999 and 1998.......... 4
Consolidated Statements of Cash Flows for the
nine month periods ended
September 30, 1999 and 1998................ 5
Notes to Consolidated Financial Statements... 6
Item 2-- Management's Discussion and Analysis of
Financial Condition and
Results of Operations...................... 12
Item 3--Quantitative and Qualitative Disclosures of
Market Risk.......................................... 20
PART II OTHER INFORMATION
Item 2--Changes in Securities and Use of Proceeds.... 21
Item 6--Exhibits and Reports on Form 8-K............. 23
SIGNATURES.................................................. 24
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2
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SUPERGEN, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 31,844 $ 8,614
Marketable securities..................................... 1,042 3,299
Accounts receivable, net.................................. 970 712
Inventories............................................... 1,631 1,245
Due from related parties.................................. 121 91
Prepaid expenses and other current assets................. 2,257 615
-------- --------
Total current assets.................................... 37,865 14,576
Property, plant and equipment, net.......................... 2,816 2,939
Developed technology at cost, net........................... 1,811 1,266
Goodwill and other intangibles, net......................... 2,175 --
Investment in preferred stock of related party.............. 500 500
Due from related party...................................... 450 450
Other assets................................................ 1,145 62
-------- --------
Total assets............................................ $ 46,762 $ 19,793
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 2,527 $ 2,451
Accrued employee benefits................................. 704 524
-------- --------
Total current liabilities............................... 3,231 2,975
Stockholders' equity:
Preferred stock, $.001 par value; 2,000,000 shares
authorized; none outstanding............................ -- --
Common stock, $.001 par value; 40,000,000 shares
authorized; 24,749,736 and 20,969,953 shares issued and
outstanding at September 30, 1999 and December 31, 1998,
respectively............................................ 25 21
Additional paid in capital................................ 128,777 72,818
Deferred compensation..................................... (892) --
Accumulated other comprehensive loss...................... (106) (128)
Accumulated deficit....................................... (84,273) (55,893)
-------- --------
Total stockholders' equity.............................. 43,531 16,818
-------- --------
Total liabilities and stockholders' equity.............. $ 46,762 $ 19,793
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
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SUPERGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................................. $ 736 $ 537 $ 3,076 $ 2,089
Operating expenses:
Cost of sales....................................... 131 739 1,324 1,327
Research and development............................ 3,934 2,592 10,730 7,630
Sales and marketing................................. 1,774 738 4,239 2,185
General and administrative.......................... 1,198 947 2,838 2,885
Acquisition of in-process research and
development....................................... 10,850 -- 10,850 --
-------- ------- -------- --------
Total operating expenses.......................... 17,887 5,016 29,981 14,027
-------- ------- -------- --------
Loss from operations.................................. (17,151) (4,479) (26,905) (11,938)
Interest income....................................... 241 205 525 742
Amortization of prepaid loan commitment fee........... (1,304) -- (2,000) --
-------- ------- -------- --------
Net loss.............................................. $(18,214) $(4,274) $(28,380) $(11,196)
======== ======= ======== ========
Basic net loss per share.............................. $ (0.78) $ (0.21) $ (1.29) $ (0.55)
======== ======= ======== ========
Weighted average shares used in basic net loss per
share calculation................................... 23,307 20,379 21,993 20,326
======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
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SUPERGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
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Operating activities:
Net loss.................................................. $(28,380) $(11,196)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 578 417
Amortization of prepaid loan commitment fee............. 2,000 --
Expense related to stock options and warrants granted to
non-employees......................................... 1,244 170
Non-cash charges related to acquisition of in-process
research and development.............................. 10,850 --
Changes in operating assets and liabilities:
Accounts receivable................................... (221) (304)
Inventories........................................... (386) 462
Prepaid expenses and other assets..................... (1,625) (927)
Accounts payable and other liabilities................ (12) 1,051
Due from related parties.............................. (30) 105
-------- --------
Net cash used in operating activities....................... (15,982) (10,222)
Investing activities:
Purchase of marketable securities......................... (1,033) (5,353)
Sale of marketable securities............................. 2,240 1,076
Purchase of property and equipment........................ (206) (637)
Acquisition of cash due to purchase of Sparta
Pharmaceuticals......................................... 510 --
-------- --------
Net cash provided by (used in) investing activities......... 1,511 (4,914)
Financing activities:
Issuance of common stock, net of issuance costs........... 37,701 190
-------- --------
Cash provided by financing activities....................... 37,701 190
-------- --------
Net increase (decrease) in cash and cash equivalents........ 23,230 (14,946)
Cash and cash equivalents at beginning of period............ 8,614 23,326
-------- --------
Cash and cash equivalents at end of period.................. $ 31,844 $ 8,380
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
SuperGen, Inc. ("we," "SuperGen" or "the Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information on a basis consistent with the audited financial statements for the
year ended December 31, 1998 and in accordance with the instructions to
Form 10-Q. The consolidated financial statements include the accounts of Sparta
Pharmaceuticals, Inc. ("Sparta") from August 12, 1999, the date of acquisition,
and two other wholly owned subsidiaries, which are immaterial. The statements
include all adjustments (consisting of normal recurring accruals) which in our
opinion are necessary for a fair presentation of the results for the periods
presented. The interim results are not necessarily indicative of results that
may be expected for the full year.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1998.
NOTE 2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
Cash and cash equivalents include bank demand deposits, certificates of
deposit, investments in debt securities with maturities of three months or less
when purchased, and an interest in money market funds which invest primarily in
U.S. government obligations and commercial paper. These instruments are highly
liquid and are subject to insignificant risk.
Investments in marketable securities consist of corporate or government debt
securities that have a readily ascertainable market value and are readily
marketable. We report these investments at fair value. We designate all debt
securities as available-for-sale, with unrealized gains and losses included in
equity.
The following is a summary of available-for-sale securities as of
September 30, 1999 (in thousands):
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GROSS
AMORTIZED UNREALIZED ESTIMATED
COST LOSSES FAIR VALUE
--------- ---------- ----------
<S> <C> <C> <C>
U.S. corporate debt securities.............................. $24,254 $ (5) $24,249
Marketable equity security.................................. 167 (101) 66
------- ----- -------
Total................................................. $24,421 $(106) $24,315
======= ===== =======
</TABLE>
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED ESTIMATED
COST LOSSES FAIR VALUE
--------- ---------- ----------
<S> <C> <C> <C>
Amounts included in cash and cash equivalents............... $22,177 $ (3) $22,174
Marketable securities, current.............................. 1,043 (1) 1,042
Amounts included in other assets............................ 1,201 (102) 1,099
------- ----- -------
Total................................................. $24,421 $(106) $24,315
======= ===== =======
</TABLE>
6
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 2. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (CONTINUED)
Available-for-sale securities by contractual maturity are shown below (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
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<S> <C> <C>
Debt securities:
Due in one year or less............................. $23,216 $1,391
Due after one year through three years.............. 1,033 2,065
------- ------
24,249 3,456
Marketable equity security.......................... 66 26
------- ------
Total......................................... $24,315 $3,482
======= ======
</TABLE>
Realized gains and losses for the nine months ended September 30, 1999 and
1998 were not material.
NOTE 3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
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<S> <C> <C>
Raw material........................................ $ 204 $ 210
Work in process..................................... 996 511
Finished goods...................................... 431 524
------ ------
$1,631 $1,245
====== ======
</TABLE>
NOTE 4. ACQUISITION ACTIVITY AND RELATED IN-PROCESS RESEARCH AND
DEVELOPMENT
SPARTA PHARMACEUTICALS, INC.
In August 1999, we completed our acquisition of Sparta
Pharmaceuticals, Inc., a biopharmaceutical company engaged in developing
technologies and drugs for the treatment of a number of life-threatening
diseases, including cancer, cardiovascular disorders, chronic metabolic
diseases, and inflammation.
On the effective date of the merger Sparta became a wholly-owned subsidiary
of the Company. The Company issued 429,055 shares of its common stock, with a
fair value of $7,800,000, and 220,945 common stock warrants, with a fair value
of $1,558,000, to former Sparta stockholders. The Company assumed approximately
2.9 million options and warrants to purchase Sparta common stock and converted
such options to SuperGen options and warrants to acquire approximately 110,600
shares of SuperGen common stock. The $12,000 value of the options assumed is
included in the purchase price and as a component of stockholders' equity in the
consolidated financial statements. Additionally, the Company recorded
transaction related costs of approximately $262,000, which when aggregated with
the above consideration brings the total cost of the acquisition to $9,632,000.
7
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 4. ACQUISITION ACTIVITY AND RELATED IN-PROCESS RESEARCH AND
DEVELOPMENT (CONTINUED)
The acquisition has been accounted for by the purchase method of accounting
and, accordingly, the results of operations of Sparta for the period from
August 12, 1999 are included in the accompanying consolidated financial
statements. Assets acquired and liabilities assumed have been recorded at their
estimated fair values. Approximately $7,450,000 of the purchase price was
allocated to acquired in-process research and development ("IPR&D"). The Sparta
research and development programs currently in process were valued as follows:
<TABLE>
<S> <C>
Oral anticancer drug for the treatment of breast, colorectal
and other cancers (5-FP, a prodrug of 5-FU)............... $3,430,000
Chronic metabolic disease drug (PZG)........................ 1,380,000
SPARTAJECT-TM- method for the delivery of certain
anti-cancer compounds..................................... 2,640,000
----------
$7,450,000
==========
</TABLE>
- 5-FP--We estimate that the remaining research and development efforts will
total more than $6 million over the next several years and that activities
necessary to obtain regulatory approval could be completed and revenues
begin to accrue to the Company with the projected introduction of a
product in 2003.
- PZG--We estimate that the remaining research and development efforts could
total more than $30 million over the next several years and that
activities necessary to obtain regulatory approval could be completed and
revenues begin to accrue to the Company with the projected introduction of
a product in 2005.
- Spartaject-TM- Drug Delivery Technology--We estimate that remaining
research and development efforts related to the application of the
Spartaject-TM- Drug Delivery Technology to busulfan for use in bone marrow
ablation and for the treatment of neoplastic meningitis could total more
than $8 million over the next several years and that activities necessary
to obtain regulatory approval could be completed and revenues begin to
accrue to the Company with the projected introduction of a product in
2001.
Acquired in-process research and development represents the value assigned
in a purchase business combination to research and development projects of the
acquired business that were commenced but not yet completed at the date of
acquisition and which, if unsuccessful, have no alternative future use in
research and development activities or otherwise. In accordance with Statement
of Financial Accounting Standards No. 2 "Accounting for Research and Development
Costs," as interpreted by FASB Interpretation No. 4, amounts assigned to
acquired in-process research and development meeting the above criteria must be
charged to expense at the date of consummation of the purchase business
combination. Accordingly, we recorded a non-recurring charge for this acquired
in-process research and development at the date of acquisition.
The allocation of the purchase price for Sparta resulted in goodwill of
approximately $1.4 million and intangibles and work force value of $500,000.
Goodwill and intangibles will be amortized over five years and work force value
over six months.
8
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 4. ACQUISITION ACTIVITY AND RELATED IN-PROCESS RESEARCH AND
DEVELOPMENT (CONTINUED)
DECITABINE
In September 1999, we acquired the worldwide rights to decitabine, a
chemotherapeutic agent owned by Pharmachemie B.V., a subsidiary of Teva
Pharmaceuticals. Decitabine, which has received "orphan drug" status from the
U.S. Food and Drug Administration (the "FDA"), is currently in clinical testing
for acute leukemias and other hematological malignancies. Each year, over 50,000
new cases of acute leukemias and hematological malignancies are reported in the
United States. The FDA has not granted marketing approval to use decitabine for
the treatment of any disease.
The acquisition involved an exchange of 171,123 shares of unregistered
SuperGen common stock valued at $3,400,000, which we charged to IPR&D. 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 decitabine has a unique
mechanism of action that may demonstrate its effectiveness in acute leukemias
and other hematological malignancies. We currently estimate that the completion
of the clinical trials and submission to the FDA of a New Drug Application could
occur in 2002 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 2002.
SURFACE SAFE-TM- PRODUCT LINE ACQUISITION
On July 1, 1999, SuperGen acquired the Surface Safe-TM- product line from
Aldorr Inc., a medical technology development company. Surface Safe-TM-is a
two-step towelette disposable cleaning system used to decontaminate work
surfaces where chemotherapeutic preparation is conducted. Aldorr assigned to
SuperGen patents and trademarks related to the Surface Safe-TM- product line and
granted to SuperGen an irrevocable, exclusive, worldwide, perpetual and
royalty-free license to use the licensed know-how and any other intellectual
property owned or licensed by Aldorr related to the Surface Safe-TM- product
line. Aldorr will provide technology transfer assistance over a brief
transitional period and has agreed not to compete with the Company in this
marketplace for a period of five years. SuperGen also obtained a customer list
from Aldorr, Inc. The aggregate value of the 79,546 shares of unregistered
SuperGen common stock paid to Aldorr, Inc. was estimated to be $1,040,000, and
was allocated to the covenant not to compete, the customer list, trademark, and
the developed technology based on estimated fair values on the acquisition date.
The recorded assets will be amortized over five years.
NOTE 5. STOCKHOLDERS' EQUITY
On August 9, 1999, we issued 463,600 shares of registered common stock to an
institutional investor. As part of this transaction we also issued to the
investor three-year warrants to purchase 231,800 shares of common stock at a
price of $18.00 per share and granted registration rights in connection with
these warrants. As partial compensation to the placement agent, we issued 25,498
five-year warrants to purchase unregistered common stock at $18.00 per share.
After deducting $414,000 in commissions and fees from the gross proceeds of
$7,520,000, the net proceeds from this transaction totaled $7,106,000.
9
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 5. STOCKHOLDERS' EQUITY (CONTINUED)
On September 1, 1999, we issued 561,000 shares of unregistered common stock
to an institutional investor. As part of this transaction we also issued to the
investor three-year warrants to purchase 336,600 shares of our common stock at a
price of $20.00 per share. As partial compensation to the placement agent, we
issued 30,855 five-year warrants to purchase unregistered common stock at $20.00
per share. After deducting $500,000 in commissions and fees from the gross
proceeds of $9,099,000, the net proceeds from this transaction totaled
$8,599,000.
On September 17, 1999, we issued 469,819 shares of unregistered common stock
to a group of institutional investors. As part of this transaction we also
issued to the investors three-year warrants to purchase 140,946 shares of our
common stock at a price of $22.50 per share. Additionally, the investors were
issued two-year warrants to purchase an aggregate of 140,946 shares of our
common stock, with 46,981, 46,981 and 46,984 warrants having exercise prices of
$30, $45 and $60 per share, respectively. As partial compensation to the
placement agent, we issued five-year warrants to purchase 26,161 shares of our
common stock at $22.075 per share. After deducting $495,000 in commissions and
fees from the gross proceeds of $8,250,000, the net proceeds from this
transaction totaled $7,755,000.
On September 27, 1999, we issued 64,243 shares of unregistered common stock
to an institutional investor. As part of this transaction we also issued
three-year warrants to purchase 19,273 shares of our common stock at a price of
$22.1875 per share. Additionally, the investor was issued two-year warrants to
purchase an aggregate of 19,273 shares of our common stock, with 6,244, 6,244
and 6,245 warrants having exercise prices of $30, $45 and $60 per share,
respectively. As partial compensation to the placement agent, we issued
five-year warrants to purchase 3,975 shares of our common stock at $22.01 per
share. After deducting $75,000 in commissions and fees from the gross proceeds
of $1,250,000, the net proceeds from this transaction totaled $1,175,000.
The stock issuance transactions noted above reflected discounts to the
market price of our stock at the transaction dates. These discounts resulted
from prior discussions with the investors and the selling prices per share were
based on a negotiated average market price. We believe that the selling prices
were reasonable in light of the volatility of our stock price, the magnitude of
the transactions, and our capital needs.
NOTE 6. COMPREHENSIVE LOSS
For the three months ended September 30, 1999 and 1998, total comprehensive
losses amounted to $18,221,000 and $4,257,000, respectively. For the nine months
ended September 30, 1999 and 1998, total comprehensive losses amounted to
$28,358,000 and $11,218,000, respectively.
NOTE 7. BASIC NET LOSS PER SHARE
We compute basic net loss per share by dividing our net loss by the weighted
average number of shares outstanding during each period. The exercise of options
and warrants is not assumed since the result would be antidilutive.
10
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SUPERGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 8. RELATED PARTY TRANSACTION
In September 1999, the Company and Tako Ventures, LLC ("Tako"), an
investment entity controlled by a director of the Company, agreed to terminate a
promissory note entered into earlier in the year thereby releasing any security
interest that Tako had in the assets of the Company. In connection with the
original transaction, the Company issued Tako a warrant to acquire unregistered
common stock of the Company. The value of this warrant was calculated to be
$2 million and recorded as a Prepaid Loan Commitment Fee. The Company was
amortizing this non-cash charge to operations through December 1999. The
termination of the note accelerates the amortization of the remaining loan
commitment fee of $1,304,000 into the quarter ended September 30, 1999.
NOTE 9. SUBSEQUENT EVENT
In November 1999, the Company and the Stehlin Foundation for Cancer Research
("Stehlin") entered into an amendment to their License Agreement dated
September 3, 1997. Pursuant to this amendment, the required aggregate payments
to Stehlin for funded research will be increased to $9.6 million. Additionally,
the amendment modifies: (i) the requirements related to the payment of cash or
stock upon the achievement of specified regulatory and marketing milestones, and
(ii) royalties on product sales.
11
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q 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:
- THE ADEQUACY OF OUR EXISTING CAPITAL RESOURCES
- THE TIMING AND PROGRESS OF THE DEVELOPMENT OF OUR PROPOSED PRODUCTS,
- FILING FOR AND RECEIVING REGULATORY APPROVALS,
- ACQUIRING ADDITIONAL PRODUCTS AND TECHNOLOGIES,
- ANTICIPATING THE MARKET OPPORTUNITIES FOR OUR EXTRA AND PROPRIETARY
PRODUCTS,
- MARKETING CURRENT AND PROPOSED PRODUCTS TO HOSPITAL BUYING GROUPS AND
OTHERS,
- DEVELOPING PARTNERSHIP RELATIONSHIPS,
- INCURRING OPERATING EXPENSES AND LOSSES AND REQUIRING ADDITIONAL CAPITAL.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF A VARIETY OF FACTORS, INCLUDING THOSE
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
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. 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
Nipent-Registered Trademark-, Mitomycin and rubitecan (formerly known as 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.
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 trade name 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.
Rubitecan 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.
12
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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 ingredient
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.
- 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 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.
In August 1999, we completed our acquisition of Sparta
Pharmaceuticals, Inc., a biopharmaceutical company engaged in developing
technologies and drugs for the treatment of a number of life-threatening
diseases, including cancer, cardiovascular disorders, chronic metabolic
diseases, and inflammation. Product candidates included in Sparta's portfolio
include:
- 5-FP, or 5-fluoro pyrimidinone, is a pyrimidinone-based prodrug that is
converted to 5-FU, or 5-fluorouracil by the liver.
- PZG, a drug candidate with potential utility in treating:
hypertriglyceridemia (a lipid disorder) that is unrelated to diabetes;
obesity; hypertension; the uremia of renal failure; and Syndrome X.
- Spartaject-TM- Drug Delivery Technology, a drug delivery system that
accommodates poorly water soluble and water insoluble compounds by
encapsulating them with a fatty (phospholipid) layer.
In September 1999, we acquired the worldwide rights to decitabine, a
chemotherapeutic agent owned by Pharmachemie B.V., a subsidiary of Teva
Pharmaceuticals. Decitabine, which has received "orphan drug" status from the
FDA, is currently in clinical testing for acute leukemias and other
hematological malignancies. Each year, over 50,000 new cases of acute leukemias
and hematological malignancies are reported in the United States. The FDA has
not granted marketing approval to use decitabine for the treatment of any
disease.
In July 1999, we acquired the Surface Safe-TM- product line from
Aldorr Inc., a medical technology development company. Surface Safe-TM-is a
two-step towelette disposable cleaning system used to decontaminate work
surfaces where chemotherapeutic preparation is conducted. The first towelette
contains chemicals recommended by both the Centers for Disease Control (CDC) and
the Occupational Safety and Health Administration (OSHA) to clean work surfaces.
The second towelette is used to deactivate the chemicals used in the first
towelette, in order to prevent damage to work surfaces through its potent
oxidizing process. Aldorr assigned to SuperGen patents and trademarks related to
the Surface Safe-TM- product line and granted to SuperGen an irrevocable,
exclusive, worldwide, perpetual and royalty-free license to use the licensed
know-how and any other intellectual property owned or licensed by Aldorr related
to the Surface Safe-TM- product line. Aldorr will provide technology transfer
assistance over a brief transitional period and has agreed not to compete with
us in this marketplace for a period of five years. SuperGen also obtained a
customer list from Aldorr, Inc. The target market for this product includes
hospital pharmacies and cancer centers nationwide, and will be sold to these
establishments by our direct sales force.
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We also 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.
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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998.
Net sales were $736,000 in the third quarter of 1999 compared to $537,000 in
the third quarter of 1998. The increase was due to higher sales volumes of
Nipent-Registered Trademark- and to a lesser extent, to sales of mitomycin,
which commenced in June 1998. Sales of chemotherapy drugs tend to decrease over
the summer months. Gross margins were 82% in 1999 compared to (38)% in 1998. In
1998, margins on sales of Nipent-Registered Trademark- were adversely affected
by a $253,000 charge to cost of sales for manufacturing capacity costs and lower
unit selling prices for sales outside North America. We are in the early stages
of Nipent-Registered Trademark-sales and manufacturing and current margins may
not be indicative of future margins due to possible variations in average
selling prices and manufacturing costs.
Research and development expenses in the third quarter of 1999 were
$3,934,000 compared to $2,592,000 in the same period in 1998. The increased
expense was primarily due to increased manufacturing costs, increased clinical
trial expenditures for rubitecan and Nipent-Registered Trademark-, and the
corresponding increase in the research and development staff.
Sales and marketing expenses were $1,774,000 in the third quarter of 1999
compared to $738,000 in the same period in 1998. This change was primarily due
to increased expenditures to support Nipent-Registered Trademark- sales,
including promotional materials, trades shows, and speakers programs, as well as
the costs associated with the expansion of our sales and professional services
staffs.
General and administrative expenses were $1,198,000 in the third quarter of
1999, compared to $947,000 in the same period in 1998. The increase was due
primarily to increased expenditures for investor relations and legal services.
Acquisition of in-process research and development amounted to $10,850,000
in the third quarter of 1999. Of this non-cash charge, $7,450,000 related to
drug candidates under development by Sparta at the time of its acquisition and
$3,400,000 related to the license of decitabine from Pharmachemie.
In September 1999, the Company and Tako Ventures, LLC ("Tako"), an
investment entity controlled by a director of the Company, agreed to terminate a
promissory note entered into earlier in the year thereby releasing any security
interest that Tako had in the assets of the Company. In connection with the
original transaction, we issued Tako a warrant to acquire unregistered common
stock of the Company. The value of this warrant was calculated to be $2 million
and recorded as a Prepaid Loan Commitment Fee. The Company was amortizing this
non-cash charge to operations through December 1999. The termination of the note
accelerates the amortization of the remaining loan commitment fee of $1,304,000
into the quarter ended September 30, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales were $3,076,000 in the first nine months of 1999 compared to
$2,089,000 in the same period in 1998. The increase was due to higher sales
volumes of Nipent-Registered Trademark- and to a lesser extent, to sales of
mitomycin, which commenced in June 1998. Gross margins were 57% in 1999 compared
to 36% in 1998. The increase in gross margin was due primarily to a larger
percentage of Nipent-Registered Trademark- units sold in 1998 at a lower unit
selling price under a supply agreement for sales outside North America and a
$253,000 charge
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<PAGE>
in 1998 to cost of sales for manufacturing capacity costs. We are in the early
stages of Nipent-Registered Trademark- sales and manufacturing and current
margins may not be indicative of future margins due to possible variations in
average selling prices and manufacturing costs.
Research and development expenses in the first nine months of 1999 were
$10,730,000 compared to $7,630,000 in the same period in 1998. The increased
expense was primarily due to increased manufacturing costs, increased clinical
trial expenditures for rubitecan and Nipent-Registered Trademark-, and the
corresponding increase in the research and development staff.
Sales and marketing expenses were $4,239,000 in the first nine months of
1999 compared to $2,185,000 in the same period in 1998. The increase was
primarily due to increased expenditures to support Nipent-Registered Trademark-
sales, including promotional materials, trades shows, and speakers programs, as
well as the costs associated with the expansion of our sales and professional
services staffs.
General and administrative expenses were $2,838,000 in the first nine months
of 1999, compared to $2,885,000 in the same period in 1998. The decline was due
a reduction in consulting fees, offset by increased expenditures for investor
relations and legal services.
Acquisition of in-process research and development amounted to $10,850,000
in the first nine months of 1999. Of this non-cash charge, $7,450,000 related to
drug candidates under development by Sparta at the time of its acquisition and
$3,400,000 related to the license of decitabine from Pharmachemie.
In September 1999, the Company and Tako agreed to terminate a promissory
note entered into earlier in the year thereby releasing any security interest
that Tako had in the assets of the Company. In connection with the original
transaction, we issued Tako a warrant to acquire unregistered common stock of
the Company. The Company calculated the value of the warrant to be $2 million
and recorded this amount as a Prepaid Loan Commitment Fee. The Company was
amortizing this non-cash charge to operations through December 1999. The
termination of the note accelerates the amortization of the remaining loan
commitment fee resulting in a total non-cash charge of $2 million for the first
nine months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our cash, cash equivalents and marketable securities totaled $32.9 million
at September 30, 1999 compared to $11.9 million at December 31, 1998.
During the fiscal third quarter, we raised $24.6 million in cash through the
private placement of our common stock with institutional investors. This
increased the total cash raised in private placements to $36.5 million for the
nine months ended September 30, 1999. To date, we have relied on external
financings to provide the capital necessary to fund the operations of the
Company. We believe that the need for additional funding will increase in the
future and that the continued ability to raise additional funds from external
sources will be critical to the success of the Company.
The net cash used in operating activities of $16.0 million in the first nine
months of 1999 primarily reflected the net loss for the period of
$28.4 million, offset by non-cash charges of approximately $14.1 million related
to the acquisition of in-process research and development, amortization of
prepaid loan commitment fees, and charges related to stock options and warrants
granted to non-employees.
We believe that our current cash, cash equivalents, and investments in debt
securities will satisfy our cash requirements at least through December 31,
2000. Our primary planned uses of cash during that period are:
- Funding operations;
- Conducting clinical testing of rubitecan, Nipent-Registered Trademark- and
other product candidates;
- Marketing for expanded indications for Nipent-Registered Trademark- that
may be developed; and
- Continuing other research and development programs.
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<PAGE>
As of September 20, 1999, the closing bid price of our common stock for the
preceding twenty consecutive trading days exceeded $18.00 per share. Under the
terms of the Warrant Agreement, dated March 12, 1996, between us and ChaseMellon
Shareholder Services LLC (the successor to First Interstate Bank of California),
on September 20, 1999 we were entitled to give notice of the redemption of
warrants issued under the Warrant Agreement (the "Warrants") that are
outstanding at a time at least thirty days from the date of our redemption
notice. Accordingly, on September 20, 1999 we gave notice to all Warrant holders
and to ChaseMellon Shareholder Services LLC that we will redeem all outstanding
Warrants on April 16, 2000. All rights of Warrant holders other than the right
to receive the redemption price per Warrant equal to $0.25 per Warrant will
terminate from and after April 16, 2000. Based on the number of Warrants
outstanding on November 3, 1999, the exercise of the outstanding Warrants could
result in an additional $34.0 million in cash for the Company and the issuance
of an additional 3,785,917 shares of common stock. See "The Redemption of Our
Outstanding Public Warrants May Cause the Price of Our Common Stock to Fall and
May Result in Dilution."
During the third quarter, we terminated a promissory note that provided up
to $5 million in available capital to the Company. The termination of the
promissory note eliminated any security interest in the assets of the Company
available to the note holder.
During the third quarter, we acquired a number of product candidates in
clinical trials through our acquisition of Sparta Pharmaceuticals, Inc. and our
acquisition of decitabine from Pharmachemie. These product candidates will
require significant additional expenditures to complete the clinical development
necessary to gain marketing approval from the FDA and equivalent foreign
regulatory agencies. The pace at which we develop these product candidates will
be constrained by availability of the human and financial resources necessary to
complete the regulatory process.
We continue to actively consider future contractual arrangements that would
require significant financial commitments. If we experience currently
unanticipated cash requirements, we could require additional capital in 2000.
We may seek such additional funding through public or private financings or
collaborative or other arrangements with third parties. We may not be able to
obtain additional funds on acceptable terms, if at all. See "We Will Need
Additional Funding Which May Not Be Readily Available."
ACQUISITION OF IN-PROCESS RESEARCH AND DEVELOPMENT AND RELATED ASSETS
SPARTA DRUG CANDIDATES
In August 1999, we completed our acquisition of Sparta
Pharmaceuticals, Inc., a biopharmaceutical company engaged in developing
technologies and drugs for the treatment of a number of life-threatening
diseases, including cancer, cardiovascular disorders, chronic metabolic
diseases, and inflammation.
Approximately $7,450,000 of the purchase price was allocated to acquired
in-process research and development ("IPR&D"). The Sparta research and
development programs currently in process were valued as follows:
<TABLE>
<S> <C>
Oral anticancer drug for the treatment of breast, colorectal
and other cancers (5-FP, a prodrug of 5-FU)............... $3,430,000
Chronic metabolic disease drug (PZG)........................ 1,380,000
SPARTAJECT method for the delivery of certain anti-cancer
compounds................................................. 2,640,000
----------
$7,450,000
==========
</TABLE>
- 5-FP, or 5-fluoro pyrimidinone, is a pyrimidinone-based prodrug that is
converted to 5-FU, or 5-fluorouracil by the liver. Prodrug technology
involves administering an inactive compound, known as a prodrug, which is
absorbed in the digestive tract and is converted to an active agent in the
liver
16
<PAGE>
by a localized enzyme. We estimate that the remaining research and
development efforts will total more than $6 million over the next several
years and that activities necessary to obtain regulatory approval could be
completed and revenues begin to accrue to the Company with the projected
introduction of a product in 2003.
- Animal studies and early clinical studies of PZG suggest that it may help
to control the blood sugar and lipid abnormalities of diabetes. In
addition, the pre-clinical and clinical studies of PZG suggest that the
drug may have utility in treating: hypertriglyceridemia (a lipid disorder)
that is unrelated to diabetes; obesity; hypertension; the uremia of renal
failure; and Syndrome X. We estimate that the remaining research and
development efforts could total more than $30 million over the next
several years and that activities necessary to obtain regulatory approval
could be completed and revenues begin to accrue to the Company with the
projected introduction of a product in 2005.
- Spartaject-TM- Drug Delivery Technology is a drug delivery system that
accommodates poorly water soluble and water insoluble compounds by
encapsulating them with a fatty (phospholipid) layer. Currently, there are
ongoing clinical trials applying the Spartaject-TM- Drug Delivery
Technology to busulfan for use in bone marrow ablation and for the
treatment of neoplastic meningitis. We estimate that remaining research
and development efforts could total more than $8 million over the next
several years and that activities necessary to obtain regulatory approval
could be completed and revenues begin to accrue to the Company with the
projected introduction of a product in 2001.
DECITABINE
In September 1999, we acquired the worldwide rights to decitabine, a
chemotherapeutic agent owned by Pharmachemie B.V., a subsidiary of Teva
Pharmaceuticals. Decitabine, which has received "orphan drug" status from the
U.S. Food and Drug Administration (the "FDA"), is currently in clinical testing
for acute leukemias and other hematological malignancies. Each year, over 50,000
new cases of acute leukemias and hematological malignancies are reported in the
United States. The FDA has not granted marketing approval to use decitabine for
the treatment of any disease.
The acquisition involved an exchange of 171,123 shares of unregistered
SuperGen common stock valued at $3,400,000, which we charged to IPR&D. 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 decitabine has a unique
mechanism of action that may demonstrate its effectiveness in acute leukemias
and other hematological malignancies. We currently estimate that the completion
of the clinical trials and submission to the FDA of a New Drug Application could
occur in 2002 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 2002.
FACTORS CONSIDERED WHEN EVALUATING IPR&D
Acquired in-process research and development represents the value assigned
in a purchase business combination to research and development projects of the
acquired business that were commenced but not yet completed at the date of
acquisition and which, if unsuccessful, have no alternative future use in
research and development activities or otherwise. In accordance with Statement
of Financial Accounting Standards No. 2 "Accounting for Research and Development
Costs," as interpreted by FASB Interpretation No. 4, amounts assigned to
acquired in-process research and development meeting the above criteria must be
charged to expense at the date of consummation of the purchase business
combination. Accordingly, the Company recorded a non-recurring charge for this
acquired in-process research and development at the date of acquisition.
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<PAGE>
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" 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.
FACTORS AFFECTING FUTURE OPERATING RESULTS
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING
SUPERGEN. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT
WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, RESULTS OF
OPERATIONS OR CASH FLOWS COULD BE ADVERSELY AFFECTED. IN THOSE CASES, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE.
WE HAVE INCURRED LOSSES AND MAY NEVER ACHIEVE SIGNIFICANT REVENUES OR
PROFITABLE OPERATIONS. We have incurred cumulative losses of $84.3 million from
our inception through September 30, 1999. These losses included non-cash charges
of $18.4 million for the acquisition of in-process research and development. We
have not achieved profitability and 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. Nipent-Registered Trademark- revenues were $2.8 million
in the first nine months of 1999, $2.7 million in 1998, $1.5 million in 1997 and
$225,000 in 1996. All of these revenues resulted from commercial sales. We will
need to successfully market Nipent-Registered Trademark- for other indications
and bring other proprietary products to market to become profitable. Our ability
to become profitable 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.
- 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. Clinical trials include the testing
of drug compounds upon human subjects.
- 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 burdensome regulatory environment
in which we operate. We cannot be certain that we will ever achieve significant
revenues or profitable operations.
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 the
results of our early stage clinical studies support further development of our
proposed 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 require extensive clinical testing before we can submit any
regulatory application for their commercial use.
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In contrast to our proposed proprietary products,
Nipent-Registered Trademark- and our generic version of mitomycin have been
approved for commercial use and we began sales of these drugs in 1996 and 1998,
respectively.
OUR BUSINESS COULD SUFFER IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP OUR
GENERIC PRODUCTS AND EXTRA PRODUCTS BASED ON GENERIC PRODUCTS BECAUSE THE
PATENTS FOR THE UNDERLYING DRUGS DO NOT EXPIRE. We plan to develop and market
several generic and Extra drugs, some of which are currently protected by one or
more patents. If the existing United States patent protection for these drugs is
maintained or extended, it is unlikely that we will be able to market our own
generic and Extra versions of those drugs. We do not believe it is financially
prudent to proceed with substantial development efforts for generic or Extra
drugs if we do not know if or when existing patent protection will cease.
WE WILL NEED ADDITIONAL FUNDING 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.
We believe that our current cash, cash equivalents and marketable
securities, will be adequate to fund operations and capital expenditures at
least through December 31, 2000. However, if we experience unanticipated cash
requirements during this period, we could require additional funds much sooner.
We may receive funds from the sale of equity securities or the exercise of
outstanding warrants and options to acquire common stock. However, those
fundings may not occur, or if they occur, they may not be on terms favorable to
us. Also, the dilutive effect of those fundings could adversely affect our
results per share.
THE REDEMPTION OF OUR OUTSTANDING PUBLIC WARRANTS MAY CAUSE THE PRICE OF OUR
COMMON STOCK TO FALL AND MAY RESULT IN DILUTION. On September 20, 1999, we
issued a notice of redemption of the common stock warrants (the "Warrants")
issued under the terms of the Warrant Agreement, dated March 12, 1996, between
us and ChaseMellon Shareholder Services LLC (the successor to First Interstate
Bank of California). The Warrants enable the holder to purchase shares of our
common stock at a price of $9.00 per share. As of November 3, 1999, there were
3,785,917 Warrants outstanding. We will redeem any of the Warrants that are
outstanding as of April 16, 2000 at a price of $0.25 per share. We expect that
holders of Warrants will choose to exercise the Warrants rather than have them
redeemed if the price of our common stock trades above $9.00 per share during
the period immediately preceding April 16, 2000. Our issuance of common stock at
a price of $9.00 per share may result in dilution to other holders of common
stock and may cause the price of our common stock to fall. In addition, if the
price of our common stock for the thirty day trading period following April 16,
2000 is less than $19.46, we may be required to issue additional shares of
common stock to investors that bought our common stock in privately negotiated
transactions in September 1999. Any such issuance would have a minor dilutive
effect on holders of our common stock.
OUR BUSINESS WILL SUFFER IF WE FAIL TO OBTAIN REGULATORY APPROVALS IN A
TIMELY MANNER, IF AT ALL. The United States Food and Drug Administration 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 marketing approval for
Nipent-Registered Trademark- and our internally developed generic version of
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, the FDA or other regulatory agencies may not approve 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
19
<PAGE>
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. Our business will be harmed 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.
We actively seek patent protection for our proprietary products and
technologies. We have a number of United States patents and also 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 the necessary 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.
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 the
litigation.
IF WE LOSE THE SERVICES OF CERTAIN KEY EMPLOYEES, OUR BUSINESS WILL BE
HARMED. Our success is dependent on key personnel, including Dr. Rubinfeld, our
President and Chief Executive Officer, and members of our senior management and
scientific staff. To successfully expand our operations, we will need to attract
and retain additional, highly skilled individuals, particularly in the areas of
clinical administration, manufacturing and finance. We compete with other
companies for the services of existing and potential employees. We believe our
compensation and benefits packages are competitive for our geographical region
and our industry group. However, we may be at a disadvantage to the extent that
potential employees may favor larger, more established employers.
IMPACT OF THE YEAR 2000 ISSUE
As is more fully described in our annual report on Form 10-K, we converted
to new accounting software in 1998 and that software properly recognizes dates
beyond December 31, 1999. Our assessment of the risks associated with Year 2000
are unchanged from that described in the 1998 annual report. We are in the final
stages of completing our contingency plan to address a worst case Year 2000
scenario which we intend to complete before December 31, 1999. We have received
assurances from our major business partners that their systems involving
invoicing and shipping, inventory production, and clinical trial documentation
are Year 2000 compliant.
ITEM 3--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.
20
<PAGE>
SUPERGEN, INC.
PART II--OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
RECENT SALES OF UNREGISTERED SECURITIES
On August 9, 1999, we issued 463,600 shares of registered common stock to
the SMALLCAP World Fund, Inc. ("SMALLCAP"), an institutional investor. As part
of this transaction, we also issued to the investor three-year warrants to
purchase 231,800 shares of our common stock at a price of $18.00 per share and
granted registration rights in connection with these warrants. As partial
compensation to the placement agent, we issued 25,498 five-year warrants to
purchase unregistered common stock at $18.00 per share. After deducting $414,000
in commissions and fees from the gross proceeds of $7,520,000, the net proceeds
from this transaction totaled $7,106,000.
On September 1, 1999, we issued 561,000 shares of unregistered common stock
to SMALLCAP. As part of this transaction, we also issued to the investor
three-year warrants to purchase 336,600 shares of our common stock at a price of
$20.00 per share. As partial compensation to the placement agent, we issued to
the placement agent 30,855 five-year warrants to purchase unregistered common
stock at $20.00 per share. After deducting $500,000 in commissions and fees from
the gross proceeds of $9,099,000, the net proceeds from this transaction totaled
$8,599,000.
On September 17, 1999, we issued 469,819 shares of unregistered common stock
to a group of institutional investors led by The Tail Wind Fund, Limited ("Tail
Wind"). As part of this transaction, we also issued to the investors three-year
warrants to purchase 140,946 shares of our common stock at a price of $22.50 per
share. Additionally, the investors were issued two-year warrants to purchase an
aggregate of 140,946 shares of our common stock, with 46,981, 46,981 and 46,984
warrants having exercise prices of $30, $45 and $60 per share, respectively. As
partial compensation to the placement agent, we issued to the placement agent
five-year warrants to purchase 26,161 shares of our common stock at $22.075 per
share. After deducting $495,000 in commissions and fees from the gross proceeds
of $8,250,000, the net proceeds from this transaction totaled $7,755,000.
On September 27, 1999, we issued 64,243 shares of unregistered common stock
to Tail Wind. As part of this transaction, we also issued three-year warrants to
purchase 19,273 shares of our common stock at a price of $22.1875 per share.
Additionally, the investor was issued two-year warrants to purchase an aggregate
of 19,273 shares of our common stock, with 6,244, 6,244 and 6,245 warrants
having exercise prices of $30, $45 and $60 per share, respectively. As partial
compensation to the placement agent, we issued to the placement agent five-year
warrants to purchase 3,975 shares of our common stock at $22.01 per share. After
deducting $75,000 in commissions and fees from the gross proceeds of $1,250,000,
the net proceeds from this transaction totaled $1,175,000.
The Company and the institutional investors named above entered into
purchase agreements for the aforementioned securities in reliance upon the
exemption from securities registration afforded by the provisions of
Regulation D, as promulgated by the U.S. Securities and Exchange Commission
under the Securities Act of 1933, as amended. Under all of the purchase
agreements, the Company was obligated to register the common stock sold (except
in the case of the August 9, 1999 sale to SMALLCAP) and the common stock
issuable upon exercise of most the warrants issued in connection with these
financings. The Company fulfilled its registration obligations through the
filing of a Registration Statement on Form S-3 on September 29, 1999.
In July 1999, we issued 79,546 shares of unregistered SuperGen common stock
valued at $1,040,000 to Aldorr, Inc. in exchange for the Surface Safe-TM-
product line.
21
<PAGE>
In September 1999, we issued 171,123 shares of unregistered SuperGen common
stock valued at $3,400,000, to Pharmachemie B.V., a subsidiary of Teva
Pharmaceuticals, in exchange for the worldwide rights to decitabine, a
chemotherapeutic agent.
USE OF PROCEEDS
On March 13, 1996, we commenced our initial public offering (the "IPO") of
4,025,000 units, which included the underwriter's over-allotment option of
525,000 units at a public offering price of $6.00 per unit. A unit consisted of
one share of Common Stock $0.001 par value per share, and a warrant to purchase
one share of Common Stock at $9.00. We commenced the IPO pursuant to a
registration statement on Form S-B (file no. 333-476 LA) filed with the
Securities and Exchange Commission. Of the units registered, 4,024,302 were
sold. Paulson Investment Company was the managing underwriter of the IPO.
Aggregate gross proceeds from the IPO (prior to deduction of underwriting
discounts and commissions and expenses of the offering and any exercises of the
warrants) were $24,146,000. All of the shares registered for the exercise of the
warrants have not yet been sold. 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 approximately $623,000. The net proceeds from the IPO through
September 30, 1999, including subsequent exercises of warrants to purchase
common stock, were $23,694,000.
From March 13, 1996, the effective date of the registration statement, to
September 30, 1999, (the Company's fiscal 1999 third quarter 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.......................... 17,132,000
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, owners of more than 10% of the outstanding stock of the Company or
affiliates of the Company, 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 our then
outstanding common stock; and
- Payments to directors and officers as compensation for services provided.
As of September 20, 1999, the closing bid price of SuperGen, Inc. common
stock for the preceding twenty consecutive trading days exceeded $18.00 per
share. Under the terms of the Warrant Agreement, dated March 12, 1996, between
us and ChaseMellon Shareholder Services LLC (the successor to First Interstate
Bank of California), on September 20, 1999 we were entitled to give notice of
the redemption of warrants issued under the Warrant Agreement (the "Warrants")
that are outstanding at a time at least thirty days from the date of our
redemption notice. Accordingly, on September 20, 1999 we gave notice to all
Warrant holders and to ChaseMellon Shareholder Services LLC that we will redeem
all outstanding Warrants on April 16, 2000. All rights of Warrant holders other
than the right to receive the redemption price per Warrant equal to $0.25 per
Warrant will terminate from and after April 16, 2000. Our providing notice of
the redemption of the Warrants does not preclude the earlier exercise of a
Warrant by a Warrant holder as permitted under the terms of the Warrant
Agreement. The Warrants are listed for trading on the Nasdaq National Market
under the symbol "SUPGW."
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No.
<TABLE>
<C> <S> <C>
10.1* Know-How Transfer and Cooperation Agreement dated
September 10, 1999 Between the Registrant and Pharmachemie
B.V.
10.2 Agreement To Terminate and Release of Collateral dated
September 30, 1999 between the Registrant and Tako
Ventures, LLC.
27.1 Financial Data Schedule--electronic filing only.
* Confidential treatment has been requested.
</TABLE>
(b) The following report was filed on Form 8-K during the quarter for which
this report is filed.
On August 26, 1999, the Company filed a report on Form 8-K describing its
acquisition of Sparta Pharmaceuticals, Inc. on August 12, 1999.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
SUPERGEN, INC.
Date: November 15, 1999 By: /s/ JOSEPH RUBINFELD
-----------------------------------------
Joseph Rubinfeld, Ph.D.
CHIEF EXECUTIVE OFFICER, PRESIDENT,
AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)
Date: November 15, 1999 By: /s/ RONALD H. SPAIR
-----------------------------------------
Ronald H. Spair
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
</TABLE>
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CONFIDENTIAL TREATMENT REQUEST
*Portions denoted with an asterisk have been omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment.
- -------------------------------------------------------------------------------
KNOW-HOW TRANSFER AND COOPERATION AGREEMENT
- -------------------------------------------------------------------------------
The undersigned:
1. PHARMACHEMIE B.V.
a company incorporated under the laws of the Netherlands and having its
registered seat at Haarlem, the Netherlands, duly represented by Mr.
Biense Th. Visser and Mr. Emile Loof hereinafter referred to as
"Pharmachemie"
and
2. SUPERGEN
a company incorporated under the laws of Delaware, USA and having its
registered seat at Two Annabel Lane, Suite 220, San Ramon, CA 94583,
USA, duly represented by Dr. Joseph Rubinfeld hereinafter referred to
as "SuperGen"
WHEREAS
1. Pharmachemie has developed a pharmaceutical product which offers a
unique approach in leukemia and other hematologic malignancies,
hereafter called "the Decitabine Project". Pharmachemie has conducted
extensive research and development activities including but not limited
to several clinical studies, the results whereof are laid down in
various reports and other documents.
2. Pharmachemie wishes to sell and transfer its know how related to the
Decitabine Project to SuperGen for the purpose of enabling SuperGen to
further develop the Decitabine Project, to manufacture products with
the
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CONFIDENTIAL TREATMENT REQUEST
benefit of the know how and to have such products registered and
approved by regulatory authorities.
PARTIES HEREWITH AGREE AS FOLLOWS
ARTICLE 1: DEFINITIONS
1.1. KNOW HOW: the reports, processes, recipes, formulae, designs, drawings
and technical information with regard to the Decitabine Product set out
in ATTACHMENT 1 to this Agreement;
1.2. KNOW HOW PRODUCTS: any pharmaceutical product which is manufactured
with the benefit of the Know How;
1.3. MANUFACTURING AGREEMENT, the agreement attached to this Agreement as
ATTACHMENT 2.
2. ARTICLE 2: SALE AND TRANSFER OF KNOW HOW
2.1. Pharmachemie hereby sells and transfers to SuperGen all rights and
title with respect to the Know How, including the exclusive world-wide
right to use the Know How for any purpose whatsoever, including the
filing of applications for marketing approval for the Know How Products
and intellectual property rights, such as patent applications.
2.2. Pharmachemie shall make available to SuperGen the Know How by providing
SuperGen with the documents set out in ATTACHMENT 1 to this Agreement.
2.3. Pharmachemie agrees to keep secret and confidential the Know How
subject to clause 10 of this agreement.
2.4. The purchase and sale provided for herein shall be subject to
satisfaction of the following conditions:
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CONFIDENTIAL TREATMENT REQUEST
a. This Agreement and the Manufacturing Agreement shall have been
executed by Pharmachemie and SuperGen.
b. The representations and warranties of the parties made herein
shall be true and correct.
c. No provisions of any applicable law or regulation and no
judgment, injunction order or decree shall prohibit the
consummation of the closing.
d. Each of Pharmachemie and SuperGen shall have received from the
other all documents that it may reasonably request relating to
the existence of the other party and its authority it enter
into this Agreement and the Manufacturing Agreement, and to
perform its obligations hereunder and thereunder.
e. SuperGen shall be reasonably satisfied that it shall have
received good title to the Know How.
ARTICLE 3: PURCHASE PRICE AND CLOSING
3.1. Upon the terms and subject to the conditions of this Agreement, in
consideration of Purchase of the Know How from Pharmachemie, SuperGen
shall deliver to Pharmachemie, promptly following the closing of the
transactions contemplated by this Agreement ("the Closing"), a stock
certificate representing a number of shares (the "Shares") of SuperGen
Common Stock equal to the quotient (rounded to the nearest whole share)
obtained by dividing (x) $4,000,000 by (y) the SuperGen Closing Market
Price. The "SuperGen Closing Market Price" shall mean the price per
share for SuperGen Common Stock equal to the closing price on September
10, 1999.
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CONFIDENTIAL TREATMENT REQUEST
3.2. On Closing Pharmachemie shall deliver to SuperGen the Know-how
specified in Attachment 1 to this Agreement, whereas SuperGen shall
deliver to Pharmachemie the appropriate instruction to its transfer
agent to issue the Shares as well as an update to the Disclosure Letter
accompanying this Agreement.
ARTICLE 4: PAYMENTS
4.1. All payments to be made by one party to the other under this Agreement
are exclusive of any value added tax and shall be paid gross without
deduction of any withholding or other income taxes.
ARTICLE 5: REPRESENTATIONS BY PHARMACHEMIE
Pharmachemie hereby represents and warrants to SuperGen as follows:
5.1. ACCREDITED INVESTOR; PURCHASE FOR INVESTMENT
Pharmachemie is experienced in evaluating and investing in companies
such as SuperGen, is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of the
investment and is prepared to hold the Shares for an indefinite period
of time. Pharmachemie is an "accredited investor" as that term is
defined in Rule 501 (a)(8) of regulation D as promulgated by the SEC
under the United States Securities Act of 1933, as amended ("Securities
Act"). Pharmachemie is acquiring the Shares for investment for its own
account and not with a view to, or for sale in connection with any
distribution thereof.
5.2. EXEMPT FROM REGISTRATION; RESTRICTED SECURITIES.
Pharmachemie understands that the sale of the Shares will not be
registered under the Securities Act on the basis that the sale provided
for in this Agreement is exempt from registration under of the
Securities Act and that the reliance of SuperGen on such exemption is
predicated in part on
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CONFIDENTIAL TREATMENT REQUEST
Pharmachemie's representations set forth in this Agreement.
Pharmachemie understands that the Shares are restricted securities
under the Securities Act, and may not be sold in the United States
or to a United States person as provided under the Securities Act
unless they are subsequently registered under the Securities Act or
an exemption from such registration is available.
5.3. LEGENDS
Pharmachemie agrees that the Shares will bear legends and be subject to
the restrictions on transfer provided for under the Securities Act. In
addition, Pharmachemie agrees that SuperGen may place stop transfer
orders with its transfer agents with respect to such instruments. The
stop transfer orders shall be removed promptly upon delivery to
SuperGen of such satisfactory evidence as reasonably may be required by
SuperGen that such stop orders are not required to ensure compliance
with the Securities Act.
5.4. ACCESS TO INFORMATION
Pharmachemie has had an opportunity to ask questions of and receive
answers from SuperGen regarding the terms and conditions of its
purchase of the Shares and regarding the business, financial affairs an
other aspects of SuperGen and it has further had the opportunity to
obtain any information (to the extent the SuperGen possesses or can
acquire such information without unreasonable effort or expense) which
it deems necessary to evaluate its investment or to verify the accuracy
of information otherwise provided to it.
5.5. ORGANIZATION AND STANDING
Pharmachemie is a corporation duly organized and validly existing
under, and by virtue of, the laws of the Netherlands and is in good
standing under such laws.
5.6. CORPORATE POWER
Pharmachemie has all requisite legal and corporate power and authority
to execute and deliver this Agreement, the Manufacturing Agreement and
the
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<PAGE>
CONFIDENTIAL TREATMENT REQUEST
other agreements called for thereby (the "Transaction Agreements")
and to consummate the transactions contemplated thereby.
5.7. AUTHORIZATIONS
All corporate action on the part of Pharmachemie, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of the Agreement and the Transaction Agreements by
Pharmachemie and the performance of all of Pharmachemie's obligations
under this agreement and the Manufacturing Agreement has been taken or
will be taken prior to the effectiveness of this Agreement. This
Agreement and the Manufacturing Agreement when executed and delivered
by Pharmachemie shall constitute valid and binding obligations of
Pharmachemie enforceable in accordance with their terms.
5.8. NON-CONTRAVENTION
The execution, delivery and performance by Pharmachemie of this
Agreement and the Manufacturing Agreement and the consummation of the
transactions contemplated thereby do not and will not
a. violate the organizational documents of Pharmachemie;
b. violate any applicable law, rule, regulation, judgment,
injunction, order or decree;
c. constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or
obligation of Pharmachemie or to a loss of any benefit to which
Pharmachemie is entitled under any provision of any material
agreement or other instrument binding upon Pharmachemie.
5.9. LITIGATION
There is no action, suit, proceeding or, to Pharmachemie's knowledge,
investigation pending or, to Pharmachemie's knowledge, currently
threatened against Pharmachemie that affects the practice of the Know
How or the use,
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<PAGE>
CONFIDENTIAL TREATMENT REQUEST
sale or manufacture of Know How Products, or questions the validity
of this Agreement or the Transaction Agreements, or the right of
Pharmachemie to enter into each such agreement, or to consummate the
transactions contemplated hereby or thereby, or challenges such
transactions. Pharmachemie is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality relating to the
practice of the Know How, which prohibits the transactions
contemplated by this Agreement or the Transaction Agreements. There
is no such action, suit of proceeding brought by Pharmachemie
currently pending or which Pharmachemie currently intends to
initiate.
5.10. CONSENTS AND APPROVALS
No consent, approval, filing, exemption, waiver or registration with
any governmental entity or any other person is required to be made or
obtained by Pharmachemie in connection with the execution, delivery or
performance of this Agreement or the Manufacturing Agreement or the
consummation of the transactions contemplated hereby.
5.11. TITLE
Pharmachemie has good and valid title to the Know How, free and clear
of any liens, encumbrances or right of others. Pharmachemie has not
received any notice of any claims of infringement of any intellectual
property rights relating to the practice of the Know How. To the best
of its knowledge, Pharmachemie at Closing does not infringe any
intellectual property rights of others with respect to the Know How.
ARTICLE 6: SUPERGEN REPRESENTATIONS AND WARRANTIES
SuperGen hereby represents and warrants to Pharmachemie, subject to the
exceptions specifically disclosed in writing in the disclosure letter
(indicating the relevant section of this Agreement) supplied by SuperGen to
Pharmachemie dated as of the date hereof
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<PAGE>
CONFIDENTIAL TREATMENT REQUEST
and certified by a duly authorized officer of SuperGen (the "SuperGen
Schedules"), as follows:
6.1. ORGANIZATION AND STANDING.
SuperGen is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
has the corporate power and authority to own, lease and operate its
assets and property and to carry on its business and is duly qualified
or licensed to do business and is in good standing in each jurisdiction
where the character of the properties owned, leased or operated by it
or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified would not have a
Material Adverse Effect (as defined below) on SuperGen. When used in
connection with SuperGen, the term "Material Adverse Effect" means, for
purposes of this Agreement, any development, change, event or effect
that is materially adverse to the business, assets (including
intangible assets), financial condition or results of operations, of
SuperGen and its subsidiaries taken as a whole.
6.2. SuperGen has delivered or made available to Pharmachemie a true and
correct copy of the Articles of Incorporation and Bylaws of SuperGen,
each as amended to date, and each such instrument is in full force and
effect. SuperGen is not in violation of any of the provisions of its
Articles of Incorporation or Bylaws.
6.3. SUPERGEN CAPITAL STRUCTURE.
The authorized capital stock of SuperGen and the shares thereof issued
and outstanding each as of the date indicated thereon, are as set forth
in SuperGen's most recent Form 10-K ("Form 10-K") or SuperGen's most
recent Form 10-Q ("Form 10-Q") filed with the Securities and Exchanges
Commission ("The SEC") pursuant to the Securities Exchange Act of 1934,
as amended ("the Exchange Act") or in other public filings made by
SuperGen with the SEC pursuant to the Exchange Act (collectively the
SEC filings")
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<PAGE>
CONFIDENTIAL TREATMENT REQUEST
except as set forth in the Disclosure Letter accompanying this
Agreement. All outstanding shares of SuperGen Common Stock are duly
authorized, validly issued, fully paid and nonassessable and except
as set forth in SuperGen SEC Reports with the SEC or in a Disclosure
Letter accompanying this Agreement, are not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws
of SuperGen or any agreement or document to which SuperGen is a
party or by which it is bound or any other understanding or
commitment of SuperGen to another party. The SuperGen Common Stock
issuable and deliverable pursuant to Article 3 hereof (the "SuperGen
Shares") will, when so issued and delivered, be duly authorized,
validly issued, fully paid and non-assessable.
6.4. AUTHORITY.
SuperGen has all requisite corporate power and authority to enter into
this Agreement and the Transaction Agreements and to consummate the
transactions contemplated thereby. The execution and delivery of the
Transaction Agreements and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary
corporate action on the part of SuperGen. The Transaction Agreements
have been duly executed and delivered by each of SuperGen and, assuming
the due authorization, execution and delivery by Pharmachemie,
constitute the valid and binding obligations of SuperGen, enforceable
in accordance with their terms, except as enforceability may be limited
by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of the Transaction Agreements by SuperGen
does not, and the performance thereof by SuperGen will not, (i)
conflict with or violate the Articles of Incorporation or Bylaws of
SuperGen, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to SuperGen or by which any of its
properties is bound or affected or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair SuperGen's rights or
alter the rights or obligations of
9
<PAGE>
CONFIDENTIAL TREATMENT REQUEST
any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets
of SuperGen pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which SuperGen or any subsidiary
is a party or by which SuperGen or any subsidiary or any of their
respective properties is bound or affected, in the case of clauses
(ii) and (iii) above, where a Material Adverse Effect could
reasonably be expected to result.
6.5. No consent, approval, order or authorization of, or registration,
declaration or filing with any governmental entity or other regulatory
or oversight body is required by or with respect to SuperGen in
connection with the execution and delivery of the Transaction
Agreements or the consummation of the transactions contemplated
thereby, except for (i) the filing of a Form S-3 Registration Statement
(the "Registration Statement") with the SEC in accordance with the
Securities Act to register the reoffer and resale of the SuperGen
Shares, and the SEC's declaration of the effectiveness of the
Registration Statement, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the
securities laws of the United States, which filings SuperGen has timely
made or will timely make, (iii) the filing of an Additional Listing
Application with The Nasdaq Stock Market to list the SuperGen Shares on
The Nadaq Stock Market National List, which filing SuperGen will timely
make, and (iv) such other consents, authorizations, filings, approvals
and registrations which if not obtained or made would not be material
to SuperGen or have a material adverse effect on the ability of the
parties to consummate the transactions under the Transaction
Agreements, except as disclosed in the SuperGen SEC Reports or in the
Disclosure letter accompanying this Agreement.
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<PAGE>
CONFIDENTIAL TREATMENT REQUEST
6.6. SEC FILINGS; SUPERGEN FINANCIAL STATEMENTS.
SuperGen has filed all forms, reports and documents required to be
filed with the SEC pursuant to the Exchange Act. All such required
forms, reports and documents (including those that SuperGen may file
subsequent to the date hereof) are referred to herein as the "SuperGen
SEC Reports." As of their respective dates, the SuperGen SEC Reports
(i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to
such SuperGen SEC Reports, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
6.7. Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in SuperGen SEC Reports (the
"SuperGen Financials"), including any SuperGen SEC Reports filed after
the date hereof until the Closing, as of their respective dates (x)
complied as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, (y) was prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto and,
in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act) and (z)
fairly presented in all material respects the consolidated financial
position of SuperGen and its subsidiaries as at the respective dates
thereof and the consolidated results of SuperGen's operations and cash
flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring
year-end adjustments. The balance sheet of SuperGen contained in
SuperGen SEC Reports as of June 30, 1999 is hereinafter referred to as
the "SuperGen Balance Sheet."
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CONFIDENTIAL TREATMENT REQUEST
6.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the date of the SuperGen Balance Sheet, there has not been any
Material Adverse Effect on SuperGen, except as may be disclosed in
SuperGen SEC Reports, (ii) any material change by SuperGen in its
accounting methods, principles or practices, except as required by
concurrent changes in GAAP, or (iii) any material revaluation by
SuperGen of any of its assets, including, without limitation, writing
down the value of capitalized inventory or writing off notes or
accounts receivable other than in the ordinary course of business.
6.9. LITIGATION.
There is no action, suit, proceeding or, to SuperGen's knowledge,
investigation pending or, to SuperGen's knowledge, currently threatened
against SuperGen that questions the validity of the Transaction
Agreements, or the right of SuperGen to enter into such agreements, or
to consummate the transactions contemplated thereby. SuperGen is not a
party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or governmental agency, authority or
instrumentality which prohibits the transactions contemplated by the
Transaction Agreements. There is no pending action, suit or proceeding
brought by SuperGen or which SuperGen currently intends to initiate.
7. ARTICLE 7: OBLIGATIONS OF SUPERGEN
7.1. SuperGen shall use its best efforts to further develop the Decitabine
Project for the purpose of manufacturing the Know How Products for the
sale in the United States, and other territories.
7.2. SuperGen shall purchase the Know How Products from Pharmachemie for a
minimum period of three years, starting on the date that any of the
Know How Products first enters the market in any territory, on the
terms and conditions attached to this agreement as ATTACHMENT 2.
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CONFIDENTIAL TREATMENT REQUEST
7.3. SuperGen is entitled to develop a second source of supply of Know How
Products, but will not activate this second source during the term of
the Manufacturing Agreement, unless in circumstances contemplated in
Article 12.3 of the Manufacturing Agreement.
ARTICLE 8: OBLIGATIONS OF PHARMACHEMIE
8.1. Pharmachemie shall manufacture the Know How Products on the terms and
conditions attached to this agreement as ATTACHMENT 2.
ARTICLE 9: ASSIGNMENT OF THE RIGHTS AND OBLIGATIONS OF PHARMACHEMIE
9.1. The rights and obligations of Pharmachemie under the agreements
arrangements listed in ATTACHMENT 3 to this agreement will be assigned
to SuperGen, such assignment to be conditional upon consent of
Pharmachemie's contractual parties. Pharmachemie will inform SuperGen
by not later than one month after the Closing whether such contractual
parties consent to this assignment.
9.2. The financial obligations of Pharmachemie under the agreements listed
in Attachment 3 incurred up to the Closing Date will be for the account
of Pharmachemie, financial obligations incurred after the Closing Date
will be for the account of SuperGen.
ARTICLE 10: CONFIDENTIALITY
10.1. Each party shall keep secret and confidential the Know How and other
information of a confidential nature, which has been communicated to it
by the other party either preparatory to or as a result of this
Agreement and shall not disclose the same or any part of the same to
any person whatsoever other than to its directors or employees directly
or indirectly concerned in the development, manufacture, use or sale of
the Know How Products to its legal
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CONFIDENTIAL TREATMENT REQUEST
counsel or financial advisors, and except as required by law or
pursuant to governmental process.
10.2. The provisions of article 10.1 shall not apply to such Know How which
is necessarily disclosed as a result of the sale or marketing of the
Know How Products.
10.3. The provisions of this article 10 shall remain in force notwithstanding
expiration or termination of this agreement for any reason.
ARTICLE 11: DURATION AND TERMINATION OF THE AGREEMENT
11.1. This Agreement shall come into force on the Closing Date.
11.2. The provisions of clause 10 (Confidentiality), clause 13.1 (liability)
shall continue following the Closing.
ARTICLE 12: INTELLECTUAL PROPERTY RIGHTS
12.1. All intellectual property rights related to the Know How shall belong
to SuperGen and will be deemed to be transferred from Pharmachemie to
SuperGen.
ARTICLE 13: LIABILITY
13.1. SuperGen shall at all times indemnify Pharmachemie and keep it
indemnified against all costs, claims, damages or expenses incurred by
Pharmachemie with respect to the Know How and/or any Know How Products
manufactured by SuperGen, except as a result of a breach of a
representation or warranty by Pharmachemie, or the fault or negligence
of Pharmachemie, or as to events initially occurring before the
Closing.
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CONFIDENTIAL TREATMENT REQUEST
13.2. Pharmachemie does not give any representations or warranties with
regard to the workings or the potential use of the Know How and/or the
Know How Products.
ARTICLE 14: MISCELLANEOUS
14.1. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of The Netherlands except that United States
federal and state securities laws shall apply to the issuance of the
Shares.
14.2. SuperGen has conducted a pharmaceutical, technical and legal due
diligence investigation with respect to the Know How. In this respect
SuperGen has visited the Pharmachemie manufacturing facilities in
Haarlem, the Netherlands, and has been granted access to a data room
which was set up by Pharmachemie and was furnished with information
pertaining to the Know How. Subsequent questions which have arisen on
the part of SuperGen have been answered by Pharmachemie in all material
respects.
SuperGen is aware of the fact that rights of publication have been
granted to investigators and that licenses have been granted to third
parties as disclosed in the documents in the dataroom.
14.3. Any dispute, controversy or claim arising out of or in connection with
this Agreement or any Agreement in furtherance thereof including
disputes with respect to the validity of those Agreements, shall be
finally and exclusively settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one arbitrator
or - if one of the parties so requires - by three arbitrators appointed
in accordance with the said Rules. The place of Arbitration shall be in
London, United Kingdom. The language of the Arbitration shall be the
English language.
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CONFIDENTIAL TREATMENT REQUEST
14.4. This Agreement and its Attachments constitute the entire agreement
between the parties relating to the Know How and the Know How Products
and no variation of this Agreement shall be effective unless it is in
writing and signed by a duly authorized officer of each party.
14.5. Nothing in this Agreement shall be deemed to constitute a partnership
between the parties nor shall either party be taken to have any
authority to bind or commit the other or be taken to have authority to
act as the agent of the other or in any other capacity.
14.6. Should any part, term or provision of this Agreement be declared by any
Court to be in conflict with the law or unenforceable, the validity and
enforceability of the remainder of the Agreement shall not be affected
thereby. In such an event the offending part, term or provision shall
be deemed not to be part of this Agreement and the parties shall
negotiate in good faith any consequential amendment.
14.7. Any notices required to be given under this Agreement shall be deemed
given if in writing and when delivered by courier or send by registered
mail addressed to
Pharmachemie B.V.
Attn. President
Address:
Swensweg 5
2031 GA HAARLEM
THE NETHERLANDS
Telefax: +31 23 5147192
SuperGen
Attn. President
Address:
Two Annabel Lane, Suite 220
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CONFIDENTIAL TREATMENT REQUEST
San Ramon,
CA 94583
USA
Telefax: +1 510 904 1918
or such other address as the party addressed shall have previously designated
by notice to the other party in accordance with this provision.
IN WITNESS WHEREOF:
The parties have caused this Agreement to be duly executed by duly appointed
officers and drawn up in duplicate original, on the date and in the place
hereinafter indicated:
PHARMACHEMIE B.V.
BY: /s/ BIENSE TH. VISSER
----------------------------
TITLE: PRESIDENT
DATE: 10 SEPTEMBER 1999
SUPERGEN
BY: /s/ JOSEPH RUBINFELD, PH.D.
----------------------------
TITLE: PRESIDENT & CEO
DATE: SEPTEMBER 10, 1999
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CONFIDENTIAL TREATMENT REQUEST
ATTACHMENTS:
A T T A C H M E N T 1 :
A list of documents to be provided is attached as Annex 1.
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A T T A C H M E N T 2 :
M A N U F A C T U R I N G A G R E E M E N T
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A T T A C H M E N T 3 :
L I S T O F A G R E E M E N T S
(numbers refer to numbers on Annex 1 to Attachment 1 to this Agreement)
1. C1/59 Overeenkomst tussen Pharmachemie en Product Surveillance for
Industries (PSI)
2. C3/61 Agreement L.A.B. Benelux/Pharmachemie B.V.
3. C7 Sponsored Clinical Study Agreement
4. C8 Clinical Trial Agreement
5. C9 Sponsored clinical study agreement
6. C10 Cooperative Research and Development Agreement
7. C11 Financial agreement hospitals
8. C12 Financial agreement data entry
9. C13 Financial agreement hospital
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ATTACHMENT 2
MANUFACTURING AGREEMENT
between
1. SUPERGEN, a corporation duly organized and existing under the laws of
Delaware, USA and having its registered seat at Two Annabel Lane, Suite
220, San Ramon, CA 94583, USA (hereinafter called "SuperGen")
and
2. PHARMACHEMIE B.V., a corporation duly organized and existing under the
laws of The Netherlands, having an office at Swensweg 5, 2031 GA
Haarlem, The Netherlands (hereinafter called "Pharmachemie")
PREAMBLE
- - WHEREAS Pharmachemie is engaged in the manufacturing of pharmaceutical
products;
- - WHEREAS SuperGen desires to appoint Pharmachemie as a contract manufacturer
for certain products.
NOW, THEREFORE Pharmachemie and SuperGen agree as follows:
1. DEFINITIONS
1.1. For the purpose of this Agreement, the following terms shall have the
following meanings:
1.2. The "Agreement Products" shall mean those pharmaceutical products
listed on Schedule A.
1.3. "Territory" shall mean the countries where SuperGen is or will be
allowed to sell Agreement Products.
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1.4. "Effective Date" shall mean the date mentioned in Article 9.01.
1.5. "Affiliated company" shall mean any corporation or other business
entity controlled by or under common control with such Party. "Control"
shall mean the direct or indirect ownership of fifty percent (50%) or
more of the voting interest in, or a fifty percent (50%) or more
interest in the income of, such corporation or other business entity,
or such other relationship as, in fact, constitutes actual control.
1.6. "Associated company" shall mean any company within the Teva-Group.
1.7. "Current Good Manufacturing Practices" (CGMPs) shall mean all
applicable standards relating to manufacturing practices for fine
chemicals, intermediates, bulk products or finished pharmaceutical
products (i) promulgated by any Governmental Body having jurisdiction
over the manufacture of the Agreement Products, in the form of laws or
regulations, (ii) promulgated by any Governmental Body having
jurisdiction over the manufacture of the Agreement Products, in the
form of guidance documents which guidance documents are being
implemented within the Pharmaceutical manufacturing industry for such
products or (iii) which Pharmachemie knows or reasonably should have
known to be current and shown to be feasible and valuable in ensuring
drug quality within the pharmaceutical industry for such products, in
each case as in effect at the effective time of the Agreement and as
amended, promulgated or accepted from time to time during the term of
this Agreement.
1.8. "Specifications" shall mean, with respect to any Agreement Product, all
specifications for materials, approved supplies, formula,
manufacturing, analytical and testing procedures, release, packaging,
labeling, artwork and other processes contained in any document
relating to Agreement Products, attached hereto and incorporated by
reference, including all master formulas, process flow diagrams and all
packaging and filling work orders.
1.9. "Governmental Body" shall mean any nation or governmental, any state,
province, or other political subdivision thereof or any entity with
legal authority to exercise
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executive, legislative, judicial, regulatory or administrative
functions.
2. APPOINTMENT
2.1. Subject to Pharmachemie's ability to timely supply Agreement Products
meeting the specifications described herein, SuperGen hereby appoints
Pharmachemie as SuperGen's sole and exclusive contract manufacturer for
the Agreement Products and Pharmachemie agrees to manufacture
SuperGen's requirements as may be ordered by SuperGen during the term
of this Agreement and the conditions set forth herein.
3. MANUFACTURING ARRANGEMENTS AND WARRANTIES
3.1. SPECIFICATIONS. Supplier shall manufacture, test, package, label and
deliver all Agreement Products in accordance with Specifications as
revised from time to time in accordance with the provisions of this
Agreement. SuperGen represents that the Specifications attached hereto
as Schedule A and incorporated herein by reference are SuperGen's
specification for the Agreement Products.
SuperGen shall be entitled to change the Specification for an Agreement
Product from time to time, and Pharmachemie shall make and validate all
revisions to the Specifications requested by SuperGen, unless
Pharmachemie notifies SuperGen of its objections against such changes
on the basis of own tests conducted by Pharmachemie with respect to
proposed Specifications and changes thereof and related product
characteristics.
Pharmachemie shall not make any revisions to the Specifications without the
prior written consent of SuperGen. SuperGen shall be under no
obligation to accept or approve or bear the cost of any suggested
changes. In the event Pharmachemie proposes any change to the
Specifications on the basis that the change is required to bring the
Specifications into conformity with CGMPS or any legal requirements,
then
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Pharmachemie shall notify SuperGen of the basis of its determination.
Any change in the Specifications initiated by SuperGen that will lead
to a change in the registration of Agreement Products will be the
financial responsibility of SuperGen, provided that prior to changing
the price, the parties agree on a cost estimate presented by
Pharmachemie. All other changes in Specifications are the financial
responsibility of Pharmachemie.
3.2. COMPLIANCE. The manufacture, generation, processing, distribution,
transport, treatment, storage, disposal and any other management of any
Agreement Product by Pharmachemie until delivery to a shipper shall
(i) be in accordance with and conform to the Agreement Product's
Specifications and Current Good Manufacturing Practice regulations;
(ii) be in accordance with and conform to any applicable standards
specified by the United States Pharmacopeia and Pharmacopeial Forum and
the European Pharmacopeia and Pharmacopeia Forum; and (iii) otherwise
conform to any provisions of the United States Food, Drug, and Cosmetic
Act not reflected in Current Good Manufacturing Practices.
SuperGen undertakes to inform Pharmachemie about CGMP-developments
related to Agreement Products, outside the United States, the European
Union, or Japan, particularly if these pertain to regulations or
practice not specifically promulgated by Governmental Bodies.
3.3. REGULATORY MATTERS: SuperGen shall, at its own expense, obtain and
maintain any Governmental Approvals which may from time to time be
required by any Governmental Body with respect to ownership of the
Investigational New Drug ("IND") application, New Drug Applications
("NDA") or Abbreviated New Drug Applications ("ANDA") or with respect
to the marketing, distribution, clinical investigation, import or
export of the Agreement Products. SuperGen shall, with Pharmachemie's
assistance and co-operation, be responsible for responding to all
requests for information required by SuperGen's Governmental Approvals
from,
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and making all legally required filings to SuperGen's Governmental
Approvals (including all annual reports for all of the Agreement
Products) with, any governmental Body having jurisdiction to make
such requests or required filing. The cost of Pharmachemie's
assistance associated with obtaining new Governmental Approvals will
be borne by SuperGen, whereas the cost of Pharmachemie's assistance
in other instances will be borne by Pharmachemie.
3.4. PHARMACHEMIE APPROVALS. Pharmachemie holds all Governmental Approvals
now required by Pharmachemie for the performance of its obligations
under this Agreement and shall at all times maintain the Governmental
Approval necessary from time to time to perform such obligations.
Pharmachemie shall be responsible, at its expense, for obtaining,
maintaining and complying with all Governmental Approvals which may
from time to time be required by any Governmental Body having
jurisdiction with respect to its manufacturing operations and
facilities and otherwise to be obtained by Pharmachemie to permit the
performance of its obligations hereunder. In the event any Governmental
Approval held by Pharmachemie relating to the manufacturing facility or
its ability to manufacture the Agreement Products in accordance with
this Agreement its hereafter suspended or revoked or Pharmachemie has
material restrictions imposed on it by any Governmental Body affecting
(i) any of the Agreement Products or (ii) the manufacturing facility,
Pharmachemie shall immediately notify SuperGen and shall promptly
provide a schedule for coming into compliance and such other
information related thereto as is reasonably requested by SuperGen. In
the event any Governmental Approval held by SuperGen relating directly
to any of the Agreement Products is hereafter suspended or revoked,
SuperGen shall promptly notify Pharmachemie of the event and shall
promptly inform Pharmachemie of SuperGen's general intentions with
respect to the affected Agreement Product.
3.5. INSPECTIONS. In the event that Pharmachemie is notified that any
Agreement Product of the manufacturing facility will be subject to an
inspection by any Governmental Body, Pharmachemie shall immediately
advise SuperGen by telephone and facsimile
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CONFIDENTIAL TREATMENT REQUEST
when Pharmachemie is notified that such an inspection will occur,
such notice to provide all relevant information known to
Pharmachemie regarding such investigation, including whether the
inspector is with the FDA Office of Criminal Investigations.
Pharmachemie shall promptly send to SuperGen a copy of any
inspection report observations related to the manufacture,
generation, processing, storage, transportation, distribution,
treatment, disposal or other management of Agreement Products as a
result of any such inspection as well as responses to any inspection
reports.
3.6. ACCESS. INSPECTION AND AUDITS. Pharmachemie shall provide personnel of
SuperGen or its designees with reasonable access to the manufacturing
facility, which shall mean during customary business hours and periods
of production at the facility. SuperGen will ensure that the SuperGen
visitors conduct their activities at the manufacturing facilities so as
to cause minimum interference to the normal operation of the
manufacturing facility. SuperGen or its designee shall have the right
to inspect those portions of Pharmachemie's facilities used in the
manufacture, generation, storage, testing, treatment, holding,
transportation, distribution or other management or receiving of the
Agreement Products and their components. SuperGen shall have the right
to inspect all inventory of Agreement Products contained at the
manufacturing facilities. Purposes for inspections may include CGMP
compliance, system audits, compiling information for reporting
obligations, compliance with Specifications and/or investigations of
complaints and/or compliance with any legal requirements or provisions
of the United States Food, Drug, and Cosmetic Act or the terms of this
Agreement. Pharmachemie shall retain all information, documents,
materials, items, records (in electronic or hard-copy form, as
designated by SuperGen) and samples of Agreement Products related to
Pharmachemie's performance under this Agreement, including: (i) samples
of the Agreement Products and other constituents used in the
manufacture of each batch of Agreement Product, (ii) samples of each
batch of any Agreement Product (iii) all batch production, stability,
study, testing and quality control records, (iv) all records relating
to complaint investigations for each Agreement Product, (v) all
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component labeling records, (vi) all records required for compliance
with applicable laws and regulations, (vii) all inventory records
relating to the Agreement Products, (viii) records relating to
compliance with any legal requirements or provisions of the United
States Food, Drug, and Cosmetic Act and the terms of this Agreement to
the extent required and for at least the periods of time required by
applicable laws and regulations and product registrations or licenses,
but in no event for less than seven years from the date of manufacture.
On request from SuperGen, Pharmachemie will provide SuperGen or its
designee with access to the documents and items set forth above and
shall make available to SuperGen or its designee copies of any of the
forgoing documents or items for review at the manufacturing facility.
In any event, Pharmachernie shall afford SuperGen the right to inspect
and copy such materials prior to any destruction thereof.
3.7. TESTING AND QUALITY ASSURANCE. Pharmachemie shall implement and perform
operating procedures and controls for sampling, stability and other
testing, validation, documentation and release of the Agreement
Products and such other quality assurance and quality control
procedures consistent with the Specifications and CGMP. In the event
that either party becomes aware that any shipment of Agreement Products
has a nonconformity, despite Pharmachemie's testing and quality
assurance activities and despite SuperGen's acceptance, such party
shall immediately notify the other party. "Nonconformity" shall mean a
product characteristic attributable to Pharmachemie's failure to
manufacture, - test, package or store any Agreement Product in
accordance with the Specifications and CGMP which was not discovered
prior to release of such Agreement Product.
3.8. REVIEW AND ACCEPTANCE. Prior to shipment of any complete or partial
batch of any Agreement Product. Pharmachemie shall: (i) perform testing
and quality assurance activities for each production batch of Agreement
Product in accordance with specifications; (ii) provide to SuperGen a
certificate of analysis containing the information specified in an
agreed format, with respect to each production batch (or portion
thereof to be shipped) of Agreement Product, certifying, warranting,
and
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reflecting that all Agreement Products therein fully and completely
comply with the Specifications; (iii) deliver, if applicable, a
Deviation Report as provided below; and (iv) have received from
SuperGen in writing or electronic form SuperGen's specify
authorization, based on SuperGen's review of the certificate of
analysis, for Pharmachemie to ship such complete or partial batch of
Agreement Product. SuperGen or a SuperGen designee may inspect and test
any Agreement Product upon receipt thereof or may, in reliance on
Pharmachemie's quality assurance activities and the information
contained in the certificate of analysis pursuant to this Agreement,
accept or reject Agreement Products upon Pharmachemie's certificate of
analysis. SuperGen covenants to conduct such inspection, testing or
review and to accept or reject Agreement Products and to provide such
authorization within seven (7) business days -from receipt of such
Agreement Products with a valid certificate of analysis.
3.9. DEVIATION. In the event that during the manufacture or other handling
of an Agreement Product by Pharmachemie (i) the process or analytical
limits exceed established report ranges, (ii) other events occur which
could affect quality or otherwise are unusual or not expected, (iii)
there is any reason to doubt full compliance of such Agreement Product
with the Specifications, or (iv) an unplanned processing event leads to
a deviation outside registered or defined processing parameters, then
Pharmachemie shall investigate and prepare a written report detailing
such factors (a Deviation Report). Attached as an exhibit to such
Deviation Report shall be copies of all relevant batch records.
3.10. SUPERGEN REJECTION. SuperGen shall notify Pharmachernie of SuperGen's
rejection of any batch (or part thereof) of any Agreement Product (the
"Rejected Quantity") within sixty (60) days after receipt of such
Rejected Quantity by SuperGen or SuperGen's designee that received such
Agreement Product. SuperGen's notice of rejection shall state the basis
for such rejection, including any information contained in the
certificate of analysis delivered by Pharmachemie or any testing or
inspection results. Failure to so notify Pharmachemie within such sixty
(60) day period shall
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constitute acceptance of any Agreement Product delivered; provided
however, that Pharmachemie shall continue to be liable for (i) the
failure of any Agreement Product to conform to Specifications and
CGMP in accordance with the provisions of this Agreement and (ii)
the failure of Pharmachemie to comply with all Legal Requirements
and the United States Food, Drug, and Cosmetic Act. If the parties
disagree as to whether a Rejected Quantity meets the Specifications,
then samples and/or batch records, as appropriate, from the batch
which is in dispute shall promptly be submitted for testing and
evaluation to an independent third party (including a testing
laboratory) as shall be agreed to in writing by both parties. The
determination of such third party as to whether the rejected
Quantity meets the Specifications will be final and binding. The
cost of the testing and evaluation by the third party shall be borne
by Pharmachemie if the third party determines that the Rejected
Quantity in question does not meet the Specifications and by
SuperGen if the third party determines the Rejected Quantity meets
the Specifications. If any sampled Rejected Quantity is found by the
third party not to conform to the Specifications, the Rejected
Quantity may be handled as provided below.
3.11. DISPOSITION OF CERTAIN PRODUCTS. In the event any Rejected Quantity is
found not to comply with Specifications, or in the event any recall,
withdrawal, field correction or third party return of any Agreement
Product is determined to be a result of Pharmachemie's failure to
manufacture, test, package or store that Agreement Product in
accordance with this Agreement, then SuperGen shall, upon written
agreement with Pharmachemie, either (i) return the Agreement Product to
Pharmachemie at Pharmachemie's expense for rework by Pharmachemie,
(ii) return the affected Agreement Product for destruction by
Pharmachemie; or (iii) have the Rejected Quantity destroyed, at
Pharmachemie's expense, in accordance with applicable law in the
jurisdiction in which destruction occurs. In addition, SuperGen may
seek a credit as provided below.
3.12. CREDITS. In the event any Rejected Quantity is found not to comply with
Specifications, or in the event any recall, withdrawal, field
correction or third-party
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return of any Agreement Product is determined to be a result of
Pharmachemie's failure to manufacture, test, package or store that
Agreement Product in accordance with the Specifications or CGMP,
Pharmachemie shall (i) reimburse or credit SuperGen the price paid
by SuperGen for the applicable Agreement Product, including any
freight and insurance charges, (ii) reimburse or credit SuperGen for
the actual costs incurred in shipping, applicable transit charges,
insurance premium, duties, taxes paid or any other out of pocket
charges incurred in connection with such Agreement Product; (iii)
reimburse or credit SuperGen for any out-of-pocket costs paid by
SuperGen to the parties for transportation and destruction of the
Agreement and (iv) pay or provide a credit to SuperGen the actual
administrative expenses and all other reasonable costs incurred by
SuperGen outside the ordinary course of business in connection with
the disposition of Agreement Product.
3.13. PRODUCT-COMPLAINT. Any and all complaints of which Pharmachemie
becomes aware relating to any Agreement Product shall promptly be
forwarded to SuperGen. SuperGen shall promptly inform Pharmachemie of
any and all complaints that SuperGen receives which implicate
Pharmachemie's manufacturing or other processes at the manufacturing
facility. Notification shall be given by telephone, with a facsimile
confirmation immediately following.
3.14. ADVERSE EVENTS. For the purposes of this Agreement, "Adverse Event"
shall mean any adverse event associated with the use of any Agreement
Product in humans, whether or not considered drug-related. The
definition includes an adverse event occurring in the course of the use
of an Agreement Product in professional practice, in studies, in
investigations or in tests. The definition also includes an adverse
event occurring from Agreement Product overdose (whether accidental or
intentional), from Agreement Product abuse, or from Agreement Product
withdrawal, as well as any toxicity, sensitivity, failure of expected
pharmacological action, or laboratory abnormality which is or is
thought by the reporter to be serious or associated with relevant
clinical signs or symptoms. For the purposes of this Agreement,
"Serious Adverse Event" shall mean an Adverse Event that is fatal,
life-threatening,
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permanently disabling or incapacitating, results in new or prolonged
in-patient hospitalization, is a congenital anomaly, cancer or
overdose. With respect to any Agreement Product, Pharmachemie shall
notify SuperGen, or any successor department specified by SuperGen,
as soon as possible, but (i) no later than twenty-four (24) hours
following its receipt of information concerning a possible Serious
Adverse Event and (ii) no later than forty-eight (48) hours
following its receipt of information of a possible Adverse Event
that is not a Serious Adverse Event. Notification shall be given by
telephone, with a facsimile confirmation immediately following.
Pharmachemie shall provide SuperGen all the information Pharmachemie
has available concerning the Adverse Event and shall cooperate fully
with any investigation conducted or directed by SuperGen, to the
extent an Adverse Event of which SuperGen becomes aware implicates
Pharmachemie's manufacturing or other processes at the facility,
SuperGen shall inform Pharmachemie of such Adverse Event and shall
disclose to Pharmachemie any information SuperGen has regarding that
Adverse Event which implicates Pharmachemie's manufacturing or other
processes at the manufacturing facility. Notification shall be given
by telephone, with a facsimile confirmation immediately following.
3.15. INVESTIGATIONS: PHARMACHEMIE OBLIGATIONS. SuperGen shall have the sole
right to control and direct the investigation of all Agreement Product
complaints and Adverse Events. SuperGen shall advise Pharmachemie of
SuperGen's intentions regarding control and direction of the
investigation with respect to any Agreement Product complaint or
Adverse Event of which Pharmachemie has been notified.
3.16. PHARMACHEMIE'S ASSISTANCE. Upon written request by SuperGen,
Pharmachemie shall provide all reasonably requested testing, assistance
and information to SuperGen in connection with an investigation of any
Agreement Product complaint or Adverse Event, including
chemical/microbial analysis of complaint samples (if available),
analysis of retained samples and review of batch documentation.
Pharmachemie shall have the right to conduct at its own expense any
further tests it
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deems appropriate regarding such investigation, provided that it
shall share the results with SuperGen.
3.17. REPORTING. Pharmachemie shall provide to SuperGen (i) a written report
of its determinations and conclusions from any such investigation,
testing or other requested assistance related to such investigation as
soon as reasonably practicable, but in no event later than thirty (30)
days from receipt of SuperGen's request and (ii) samples (if available)
of the affected Agreement Product. All communications related to such
investigation, testing or other requested assistance shall be held in
confidence by Pharmachemie.
3.18. NOTIFICATION AND COOPERATION. In the event SuperGen shall be required
(or shall voluntarily decide) to initiate a recall, withdrawal or field
correction of, or field alert report with respect to, any Agreement
Product manufactured by Pharmachemie pursuant to this Agreement,
whether or not such recall, withdrawal, field correction or field alert
report has been requested or ordered by any Governmental Body, SuperGen
shall notify Pharmachemie's and Pharmachemie shall fully cooperate with
SuperGen to implement the same.
3.19. COORDINATION OF EFFORTS. In the event Pharmachemie determines that a
recall, withdrawal, field correction or field alert report with respect
to any Agreement Product by SuperGen may be necessary and/or
appropriate, Pharmachemie shall immediately notify SuperGen's of its
determination. The parties shall cooperate with each other in
determining the necessity and nature of such action; provided, however,
that Pharmachemie shall take no action to effect the same without the
written concurrence of SuperGen. If SuperGen does not concur with any
recall, withdrawal, field correction or field alert recommended by
Pharmachemie, then SuperGen shall be liable for any losses incurred by
Pharmachemie or SuperGen arising solely out of the delay caused by
SuperGen in implementing the same, except to the extent Pharmachemie
withheld material information or misrepresented the material
information upon which SuperGen made its determination.
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3.20. CONTACTS AND STATEMENTS. With respect to any recall, withdrawal, field
correction or field alert report with respect to any Agreement Product
SuperGen shall make all contacts with the FDA and shall be responsible
for coordinating all of the necessary activities in connection with any
such recall, withdrawal, field correction or field alert report.
Pharmachemie agrees to make no statement to the media, unless otherwise
required by law and in any such event, Pharmachemie shall collaborate
with SuperGen on the content of any such statement.
3.21. The printing film for labels and packing inserts will be prepared by
SuperGen and printed and used by Pharmachemie. In this connection
SuperGen assumes entire responsibility for all damage, injuries or
claims resulting from defaults in the text of labeling and/or package
inserts.
3.22. The cost of the artwork, films, and any subsequent amendments thereto
shall be borne by SuperGen. In the event of a change in labelling
and/or package inserts, SuperGen shall bear the cost of the unused
packaging material and package inserts.
4. FORECAST
4.1. During the term of this Agreement, at least ninety (90) days prior to
the start of each calendar quarter ("Q 1 "), SuperGen shall provide
Pharmachemie with a rolling written forecast of the quantities of
Agreement Products estimated to be required on a month-by-month basis
during Q l and the next three (3) quarters ("Q2", "Q3" and "Q4",
respectively).
4.2. Together with each forecast provided under Article 4.1 above (the
"Current Forecast"), SuperGen shall place a firm order with
Pharmachemie for delivery in Q l the quantity of Product forecasted for
Q1 in the Current Forecast. Pharmachemie shall accept such orders from
SuperGen, subject to the remaining terms and conditions of this
Agreement.
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4.3. SuperGen's orders shall be made pursuant to a written purchase order
which is in a form mutually acceptable to the parties, and shall
provide for shipment in accordance with reasonable delivery schedules
and lead times as may be agreed upon from time to time by Pharmachemie
and SuperGen; provided that the maximum lead time within the current
quarter shall not exceed sixty (60) days unless otherwise mutually
agreed. The terms of this Agreement shall govern all purchases of
Agreement Products by SuperGen. Any additional or inconsistent terms or
conditions of any purchase order, acknowledgment or similar
standardized form given or received pursuant to this agreement shall
have no effect and such terms and conditions are hereby excluded.
5. PRICES AND TERMS
5.1. SuperGen shall pay to Pharmachemie for the manufacturing of Agreement
Products as follows:
*
5.2. Prices and terms shall be negotiated on an annual basis for years
following the initial contract year. The Parties contemplate that
outside factors that may influence the cost price of Pharmachemie,
including but not limited to changes in exchange rates, inflation,
competitive retail pricing, cost of raw material, labour, public
utilities etc. shall be taken into consideration by the Parties in the
process of renegotiating prices and terms. However, an increase of
Pharmachemie's cost of raw material of * or more will in any event lead
to a correspondent increase in the price for the next year and the cost
of labour will be amended in accordance with the CBS price index
("reeks werknemersgezinnen").
5.3. Notwithstanding the provisions of Article 5.2, the prices for any new
contractual year will not deviate more than * compared to the prices
agreed for the previous contractual year.
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5.4. Prices for batch sizes that deviate from the minimum batch size
specified in Article 5.1 will be quoted by Pharmachemie upon request by
SuperGen.
5.5. Any payments hereunder shall be in US dollars. The exchange rate used
for the transaction shall be the exchange rate of the US dollar versus
the Dutch guilder published by the Wall Street Journal on the Effective
Date of this Agreement, or, if not published on that date then on the
first business day thereafter for which the date is published. In case
the change of exchange rate is more than *, for more than one month,
both Parties shall meet and decide what will be the new fixed exchange
rate.
5.6. Except for assistance provided under the following sections: 3.3, 3.5,
3.6, 3.9, 3.14, 3.16, and 3.17, if SuperGen requests Pharmachemie's
assistance under any of the other provisions of this agreement, such
assistance will be provided by Pharmachemie at cost.
6. PATENT INFRINGEMENTS
6.1. Each party undertakes to inform the other of any infringement of any
patent of a third party that comes to its knowledge.
6.2. SuperGen shall defend, indemnify, and hold Pharmachemie harmless from
and against any and all damages, losses, expenses, costs, claims,
judgements, and liabilities including, without limitation, reasonable
attorneys' fees incurred by Pharmachemie arising from or in connection
with patent infringement regarding the Agreement Products.
7. INDEMNIFICATION
7.1. Each Party shall notify the other if it becomes aware of any claims,
actions, suits, liability, costs or expenses alleged to be caused by or
resulting from the use or consumption of the Agreement Product.
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CONFIDENTIAL TREATMENT REQUEST
7.2. Where a loss, claim or damage to persons or to property is caused by
the fault or negligence of Pharmachemie or its employees, arising out
of Pharmachemie's obligations pursuant to this Agreement, including but
not limited to the breach of any representation or warranty of
Pharmachemie contained herein or a recall of Agreement Products caused
by Pharmachemie, then Pharmachemie shall indemnify SuperGen and shall
hold harmless SuperGen from the loss, claim or damage. Pharmachemie
shall be liable in respect of any special, indirect or consequential
damages relating solely to product liability claims wherein the
liability is created due to an act or omission solely by Pharmachemie.
In respect to all other special, indirect or consequential damages,
including but not limited to lost profits, Pharmachemie shall not be
liable.
7.3. Where a loss, claim or damage to persons or to property is caused by
the fault or negligence of SuperGen or its employees, arising out of
SuperGen's obligations pursuant to this Agreement, including but not
limited to the breach of any representation or warranty of SuperGen
contained herein, then SuperGen shall indemnify Pharmachemie and shall
hold harmless Pharmachemie from the loss, claim or damage. SuperGen
shall be liable in respect of any special, indirect or consequential
damages relating solely to product liability claims wherein the
liability is created due to an act or omission solely by SuperGen. In
respect to all other special, indirect or consequential damages,
including but not limited to lost profits, SuperGen shall not be
liable.
7.4. SuperGen and Pharmachemie shall effect and shall maintain Agreement
Product liability insurance reasonably sufficient to cover damages as
might be caused by the Agreement Products sold by SuperGen in the
Territory, as referred to hereinabove. SuperGen shall at Pharmachemie's
request provide Pharmachemie the prove of such insurance.
7.5. SuperGen's and Pharmachemie's liability to each other as envisaged by
this article shall cease or shall be restricted in all events where
failure of SuperGen or Pharmachemie to adequately inform the other
Party as to any event in the Territory
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CONFIDENTIAL TREATMENT REQUEST
relevant to the damages in issue could lead to the termination
SuperGen's or Pharmachemie's rights of recourse against its insurer.
8. CONFIDENTIAL INFORMATION
8.1. Pharmachemie acknowledges access to valuable SuperGen proprietary
information, including but not limited to, technical data, all of which
are the property of SuperGen, which shall be maintained and shall be
designated to Pharmachemie as confidential and which are used in the
course of SuperGen's business. In addition, SuperGen acknowledges
access to valuable Pharmachemie proprietary information which shall be
so designated by Pharmachemie in writing, all of which shall be the
property of Pharmachemie and shall be maintained as confidential.
Neither Party shall disclose proprietary information of the other to
anyone other than those of its employees having a need to know and
shall refrain from use of such information that than in the performance
of this Agreement. In addition, each Party shall take all reasonable
precautions to protect the value and confidentiality of such
information to the other. Information and data shall not be considered
as confidential if such information and data:
i. is in the public domain or known by the recipient prior to
disclosure;
ii. becomes known to the public after disclosure, other than
through breach of this Agreement; or
iii. becomes known to the recipient from a source other than the
other Party hereto without breach of any obligation to
preserve such information in confidence by such source;
iv. is required by law to be disclosed.
9. TERM OF THE AGREEMENT
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CONFIDENTIAL TREATMENT REQUEST
9.1. This Agreement is entered into for a period of three years, starting on
the date that any of the Agreement Products first enters the market in
any country of the Territory.
After this initial period of three years this Agreement shall be
automatically extended for successive periods of one (1) year,
unless either Party shall give to the other written notice to the
contrary. Such notice shall be given in writing at least ninety (90)
days prior to the end of the one (1) year period.
10. TERMINATION
This Agreement will be terminated in the way and manner as described in
Article 9 and further as described below:
10.1. If one of the Parties to this Agreement commits a breach of any
provision of this Agreement and fails to remedy the breach within
thirty (30) days after written notification of the breach by the Party
not in default, the Party not in default shall have the right to
terminate this Agreement. If it is apparent that such breach is not
capable of remedy, the Party not in default will have the right to
terminate this Agreement immediately on the date of the delivery of the
written notification of the breach.
10.2. In the event that a Party to this agreement should be dissolved,
becomes insolvent, makes a voluntary or involuntary assignment of
assets for the benefit of creditors, be assigned in bankruptcy court,
or otherwise be faced with circumstances reasonably warranting the
conclusion that that Party will not be able within the foreseeable
future, to adequately comply with its obligations under this agreement,
then the other Party to this agreement may terminate the agreement
without notice, by giving notice of its intention to terminate in
writing, and without the Party thereby being terminated having any
entitlement to compensation under whatever title; without prejudice to
the right of the Party effecting termination as per this
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CONFIDENTIAL TREATMENT REQUEST
Article, to all damages and other remedies available on account of any
relevant events, including those which form the basis for the
termination.
10.3. A Party may terminate this Agreement in case of Force Majeure of the
other Party under the conditions mentioned in Article 12 under 3 and 4.
11. EFFECT OF TERMINATION
11.1. Upon termination of the Agreement, Pharmachemie as appropriate shall
complete the manufacturing of all Agreement Products as the case may be
then in process and shall deliver same together with all Agreement
Products then in its possession pursuant to SuperGen's orders and
SuperGen shall pay for the same.
11.2. At the Effective Date of termination SuperGen and Pharmachemie shall
return to each other all confidential information supplied by one Party
to the other, copies and originals, except for one archival copy for
compliance purposes.
12. FORCE MAJEURE
12.1. The obligations of either Party hereunder will be suspended during the
time and to the extent that such Party is prevented from complying
therewith due to any event or circumstances beyond the control and
without fault or negligence of that Party so affected (which
circumstance is hereinafter referred to as "Force Majeure") including
but not limited to inevitable accidents, perils of navigation, floods,
fire, storms, earthquake, explosion, hostilities, war (declared or
undeclared), orders or acts of any government, whether de jure or de
facto or any official purporting to act under the authority of any such
government, illegality arising from domestic or foreign laws or
regulations, insurrections, quarantine or custom restrictions, damage
in factories or warehouses, strikes, lockouts or any other labour
difficulty at the Parties and or suppliers of goods, raw materials
and/or excipients, lack of
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CONFIDENTIAL TREATMENT REQUEST
conveyance, breakdown of machinery or instruments or other
disturbances at the Parties or their suppliers, resulting in hindrance
of this Agreement.
12.2. As soon as possible after being affected by a Force Majeure the Party
so affected shall furnish to the other Party all particulars of the
Force Majeure and the manner in which its performance is thereby
prevented or delayed. The Party whose obligations hereunder have been
suspended shall promptly and diligently pursue appropriate action to
enable it to lift the Force Majeure situation, except that that Party
shall not be obligated to settle any strike, lockout or other labour
difficulty on terms contrary to its wishes.
12.3. In the event that Pharmachemie is not able to supply Agreement Products
to SuperGen after being affected by a Force Majeure situation SuperGen
shall have the right to seek another source to obtain products
replacing the Agreement Products. However, the term of this Agreement
as defined in Article 9 of this Agreement shall be prolonged after the
Force Majeure situation has been removed or overcome with the same
period that SuperGen has used another source to obtain products
replacing the Agreement Products.
12.4. In the event that it is evident to both Parties that a Force Majeure
cannot be removed or overcome at all, or if the Force Majeure situation
continues for more than sixty (60) days from the date that a Party
first became affected, then either Party may terminate this Agreement
immediately.
13. ASSIGNMENT
13.1. The Parties agree that their rights and obligations under this
Agreement may not be assigned or otherwise transferred to a third party
without the prior written consent of the other party hereto, which
consent may not be unreasonably withheld. Notwithstanding the
foregoing, either Party may transfer or assign its rights and
obligations under this Agreement to a successor to all or substantially
all, of its business or assets whether by sale, merger, operation of
law or otherwise; provided
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CONFIDENTIAL TREATMENT REQUEST
that such assignee or transferee has agreed to be bound by the terms
and conditions of this Agreement. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
14. INTELLECTUAL PROPERTY
14.1. Any intellectual property generated in the formulation of the Agreement
Products in the performance by Pharmachemie under this Agreement will
be the sole and exclusive property of SuperGen.
15. SEVERABILITY
15.1. In the event that single provisions of the Agreement should be or
become invalid or if there is a gap in the Agreement, the validity of
the other provisions shall not be affected. Instead of the invalid
provisions or in order to complete the Agreement a reasonable provision
shall be effective, approaching to what the Parties would have agreed
upon if they had considered that point.
16. BINDING
16.1. This Agreement shall be binding upon Pharmachemie and SuperGen and
Pharmachemie and SuperGen agree to take full responsibility for the
observance of the terms of this Agreement by their employees and
Affiliated companies.
17. APPLICABLE LAW
17.1. This Agreement shall be exclusively governed and construed in
accordance with Netherlands' law.
18. DISPUTE SETTLEMENT
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CONFIDENTIAL TREATMENT REQUEST
18.1. Any dispute, controversy or claim arising out of or in connection with
this Agreement or any Agreement in furtherance thereof including
disputes with respect to the validity of those Agreements, shall be
finally and exclusively settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one arbitrator
or - if one of the parties so requires - by three arbitrators,
appointed in accordance with the said Rules. The place of Arbitration
shall be in London, United Kingdom. The language of the Arbitration
shall be the English language.
19. MISCELLANEOUS
19.1. NOTICES. All notices or writings required hereunder shall be sent to
the Parties at the following address:
SUPERGEN:
SuperGen
Attn. President
Address:
Two Annabel Lane, Suite 220
San Ramon,
CA 94583
USA
Telefax: +1 510 904 1918
PHARMACHEMIE:
Pharmachemie B.V:
Swensweg 5
2031 GA Haarlem
The Netherlands
Attention: President
Telefax: 023-5147147
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CONFIDENTIAL TREATMENT REQUEST
19.2. MODIFICATION/AMENDMENT. This Agreement may not be modified or amended
in whole or in part except by a written document signed by both
Parties.
19.3. HEADINGS. The headings set forth in this Agreement are for convenience
only and shall not be relied upon by the Parties nor taken in
limitation nor extension of the meaning of the terms of this Agreement.
19.4. WAIVER. Failure by either Party to terminate this Agreement as a result
of a serious or persistent breach of the terms hereof, or to enforce
its rights hereunder as a result of certain specified action, by the
other Party, shall not prejudice the right of that Party subsequently
to terminate this Agreement or enforce its rights hereunder for a
subsequent breach of its obligations hereunder by the other Party.
19.5. ENTIRETIES. This Agreement embodies the entire agreement and
understanding between the Parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof.
19.6. No subsequently delivered invoice, purchase order, acknowledgement,
confirmation, standard terms and conditions, or similar document
containing terms inconsistent herewith shall be effective to amend or
modify this Agreement unless such document expressly states the
intention to do so and is signed by both Parties hereto.
19.7. ENGLISH VERSION. This Agreement is executed in duplicate in English.
In the event that this Agreement is translated into a language or
languages other than English, this version shall be controlling on all
questions of interpretation and performance.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their authorized representatives in duplicate originals,
FOR AND ON BEHALF OF FOR AND ON BEHALF OF
SuperGen Pharmachemie B.V.
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CONFIDENTIAL TREATMENT REQUEST
/s/ Joseph Rubinfeld /s/ Biense Th. Visser
- -------------------------------- --------------------------------
By : Joseph Rubinfeld, Ph.D. By : Biense Th. Visser
Title: President & CEO Title: President
Date : September 10, 1999 Date : September 10, 1999
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CONFIDENTIAL TREATMENT REQUEST
SCHEDULE A AGREEMENT PRODUCTS
As part of the Agreement between Pharmachemie and SuperGen
PRODUCTS MANUFACTURED BY PHARMACHEMIE ACCORDING TO THE SPECIFICATIONS ATTACHED
TO THIS SCHEDULE A AS ANNEX 1.W
This Schedule A is executed by the duly authorized representatives of
Pharmachemie B.V. and SuperGen in duplicate originals.
FOR AND ON BEHALF OF FOR AND ON BEHALF OF
SuperGen Pharmachemie
/s/ Joseph Rubinfeld /s/ Biense Th. Visser
- -------------------------------- --------------------------------
By : Joseph Rubinfeld, Ph.D. By : Biense Th. Visser
Title: President & CEO Title: President
Date : September 10, 1999 Date : September 10, 1999
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CONFIDENTIAL TREATMENT REQUEST
SCHEDULE B TERRITORY
As part of the Agreement between Pharmachemie and SuperGen
the Territory is worldwide
This Schedule B is executed by the duly authorized representatives of
Pharmachemie and SuperGen in duplicate originals.
FOR AND ON BEHALF OF FOR AND ON BEHALF OF
SuperGen Pharmachemie
/s/ Joseph Rubinfeld /s/ Biense Th. Visser
- -------------------------------- --------------------------------
By : Joseph Rubinfeld, Ph.D. By : Biense Th. Visser
Title: President & CEO Title: President
Date : September 10, 1999 Date : September 10, 1999
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CONFIDENTIAL TREATMENT REQUEST
SCHEDULE C PRICES
As part of the Agreement between Pharmachemie and SuperGen
PRICES
*
This Schedule C is executed by the duly authorized representatives of
Pharmachemie and SuperGen in duplicate originals.
FOR AND ON BEHALF OF FOR AND ON BEHALF OF
SuperGen Pharmachemie
/s/ Joseph Rubinfeld /s/ Biense Th. Visser
- -------------------------------- --------------------------------
By : Joseph Rubinfeld, Ph.D. By : Biense Th. Visser
Title: President & CEO Title: President
Date : September 10, 1999 Date : September 10, 1999
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CONFIDENTIAL TREATMENT REQUEST
SCHEDULE D TECHNICAL AGREEMENT
(SPECIFICATIONS)
The technical agreement is attached to this agreement as Annex 1
48
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AGREEMENT TO TERMINATE AND RELEASE OF COLLATERAL
This Agreement to Terminate and Release of Collateral ("Release") dated
this 30th day of September, 1999 is made by and between SuperGen, Inc., a
Delaware corporation ("SuperGen") and TAKO Ventures, LLC, a California limited
liability company ("TAKO") concerning a Secured Promissory Note dated March 25,
1999 ("Note"), pursuant to which TAKO agreed to make available a loan facility
to SuperGen subject to the terms and conditions contained therein. To secure the
obligations of SuperGen under the Note, SuperGen granted to TAKO a security
interest in the Collateral. (Capitalized terms which are not defined herein
shall have the meanings ascribed thereto in the Note.)
WHEREAS, SuperGen has not borrowed under the facility and there is no
loan outstanding between the parties, and the parties have agreed to terminate
the Note as of the date of this Release.
NOW THIS RELEASE WITNESSETH that:
1. The Note shall be terminated as of the date of this Release.
2. As of the date of this Release, TAKO hereby unconditionally
and irrevocably RELEASES the security interest in the
Collateral, including any Intellectual Property Collateral,
and DISCHARGES SuperGen from all its past, present and future
(actual or contingent) liabilities to TAKO under the Note,
including any liability with respect to the Collateral. Upon
the execution of this Release, the Collateral shall be
absolutely freed and discharged of and from TAKO's security
interest as provided in the Note.
3. Nothing in this Release shall adversely effect, in any manner
whatsoever, the warrants to purchase 500,000 shares of common
stock of SuperGen (including without limitation the existence,
availability or exercisability thereof) issued to TAKO in
connection with the original issuance of the Note, which
warrants shall remain in full force and effect.
4. TAKO further undertakes and agrees to do all acts and things
and/or execute any further documents as SuperGen may
reasonably request to carry into effect or to give legal
effect to the provisions of this Release.
5. This Release may not be changed except in a writing signed by
the party against whose interest such change shall operate.
This Release shall be governed by and construed under the laws
of the State of California without regard to principles of
conflicts of law.
IN WITNESS WHEREOF, this Release had been duly executed as of the day and year
first above written.
SUPERGEN, INC. TAKO VENTURES, LLC.
By: /s/ Joseph Rubinfeld By: Cephalopod Corporation, Member
-----------------------
Title: President/CEO By: /s/ Philip B. Simon
-----------------------
Title: President,
Cephalopod Corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERGEN,
INC. SEPTEMBER 30, 1999 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 31,844
<SECURITIES> 1,042
<RECEIVABLES> 980
<ALLOWANCES> 10
<INVENTORY> 1,631
<CURRENT-ASSETS> 37,865
<PP&E> 4,009
<DEPRECIATION> 1,193
<TOTAL-ASSETS> 46,762
<CURRENT-LIABILITIES> 3,231
<BONDS> 0
0
0
<COMMON> 128,802
<OTHER-SE> (998)
<TOTAL-LIABILITY-AND-EQUITY> 46,762
<SALES> 3,076
<TOTAL-REVENUES> 3,076
<CGS> 1,324
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 30,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (28,380)
<INCOME-TAX> 0
<INCOME-CONTINUING> (28,380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,380)
<EPS-BASIC> (1.29)
<EPS-DILUTED> (1.29)
</TABLE>
