<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1996
REGISTRATION NO. 333-12675
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------
CV THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8731 43-1570294
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
</TABLE>
------------------------------
3172 PORTER DRIVE
PALO ALTO, CA 94304
(415) 812-0585
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
LOUIS G. LANGE, M.D., PH.D.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
CV THERAPEUTICS, INC.
3172 PORTER DRIVE
PALO ALTO, CA 94304
(415) 812-0585
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN C. MENDELSON, ESQ. DAVID J. SEGRE, ESQ.
DEBORAH A. MARSHALL, ESQ. ISSAC J. VAUGHN, ESQ.
COOLEY GODWARD LLP BRIDGET LOGTERMAN, ESQ.
FIVE PALO ALTO SQUARE HAROLD DEGRAFF, ESQ.
3000 EL CAMINO REAL WILSON, SONSINI, GOODRICH & ROSATI,
PALO ALTO, CA 94306-2155 PROFESSIONAL CORPORATION
(415) 843-5000 650 PAGE MILL ROAD
PALO ALTO, CA 94306
(415) 493-9300
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(o) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value......... 2,875,000 $14.00 $40,250,000 $13,639(3)
</TABLE>
(1) Includes 375,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
(3) Of this amount, $11,897 was paid in connection with the initial filing of
the Registration Statement on September 25, 1996, with respect to a Proposed
Maximum Aggregate Offering Price of $34,500,000. The additional amount of
the registration fee has been calculated pursuant to Rule 457 with respect
to the additional $5,750,000 of the Proposed Maximum Aggregate Offering
Price.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
DATED NOVEMBER 7, 1996
2,500,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
All of the 2,500,000 shares of Common Stock (the "Common Stock") offered hereby
(the "Offering") are being sold by CV Therapeutics, Inc. ("CVT" or the
"Company").
Prior to this offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
for the Common Stock will be between $12.00 and $14.00 per share. See
"Underwriting" for factors to be considered in determining the initial public
offering price. The Company has applied for listing of the Common Stock on the
Nasdaq National Market under the symbol "CVTX."
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
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Per Share $ $ $
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Total (3) $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $925,000.
(3) The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 375,000
shares of Common Stock on the same terms as set forth above solely to cover
over-allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock offered by this Prospectus are being offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters. It is expected that delivery of the shares of Common Stock offered
hereby will be made against payment therefor on or about , 1996 at the
offices of J.P. Morgan Securities Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO.
INVEMED ASSOCIATES, INC.
UBS SECURITIES
, 1996
<PAGE>
Graphical description of molecular cardiology platform
Graphical description of the integration
of market needs and molecular cardiology
CVT's product development programs are at an early stage. Products, if any,
resulting from such programs cannot be made available for commercial sale unless
and until regulatory approval is obtained. The Company will be required to
complete clinical trials to demonstrate the safety and efficacy of any potential
products prior to filing for regulatory approval.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
<PAGE>
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company subsequent to the date hereof.
No action has been or will be taken in any jurisdiction by the Company or by any
Underwriter that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for the purpose is required, other than in the United States. Persons into whose
possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the offering of the Common Stock and the distribution of this Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 4
Risk Factors................................... 7
The Company.................................... 15
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Consolidated Financial Data........... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 19
<CAPTION>
PAGE
<S> <C>
Business....................................... 22
Management..................................... 38
Certain Transactions........................... 48
Principal Stockholders......................... 51
Description of Capital Stock................... 54
Shares Eligible for Future Sale................ 56
Underwriting................................... 58
Legal Matters.................................. 59
Experts........................................ 59
Additional Information......................... 59
Index to Consolidated Financial Statements..... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Company intends to furnish its stockholders with annual reports containing
audited consolidated financial statements examined by its independent auditors
and will make available quarterly reports containing interim unaudited
consolidated financial statements for each of the first three quarters of each
fiscal year.
CV Therapeutics, Inc. and the CV Therapeutics logo are trademarks of the
Company. All brand names or trademarks appearing in this Prospectus are the
property of their respective holders.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. THE DISCUSSION IN THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES
INCLUDING, BUT NOT LIMITED TO, THOSE SPECIFICALLY IDENTIFIED HEREIN. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," AS
WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES (I) A 1-FOR-10 REVERSE
SPLIT OF THE COMPANY'S OUTSTANDING COMMON STOCK EFFECTED IN OCTOBER 1996; (II)
THE ISSUANCE OF 792,898 SHARES OF COMMON STOCK UPON THE NET EXERCISE OF CERTAIN
WARRANTS UPON THE CLOSING OF THE OFFERING; (III) THE CONVERSION OF ALL
OUTSTANDING SHARES OF PREFERRED STOCK INTO SHARES OF COMMON STOCK TO BE EFFECTED
UPON THE CLOSING OF THE OFFERING; AND (IV) NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION.
THE COMPANY
The Company is a biopharmaceutical company focused exclusively on the
application of molecular cardiology to the discovery, development and
commercialization of novel, small molecule drugs for the treatment of chronic
cardiovascular diseases. Molecular cardiology was developed, in part, by CVT
scientists and their academic collaborators and is based upon the application of
molecular biology and genetics to cardiovascular diseases. This discipline has
yielded new insights into the mechanisms underlying chronic cardiovascular
diseases and has enhanced the search for innovative cardiovascular drugs by
providing an increasing number of new molecular targets for drug discovery. To
date, CVT has discovered five compounds and completed the strategic in-license
of a sixth compound for treatment of chronic cardiovascular diseases.
Cardiovascular disease is the leading cause of death in the United States,
claiming more than 950,000 lives in 1993. The American Heart Association
projects the total cost of cardiovascular medications in the United States for
1996 at $11 billion.
Two of the Company's drug candidates, CVT-124 and ranolazine, are in clinical
trials. CVT-124 is an adenosine A(1) receptor antagonist discovered by CVT.
Adenosine A(1) receptor antagonists block certain actions of adenosine, a
hormone that modulates different functions of the cardiovascular system. CVT-124
has potential applications in the treatment of edema (fluid accumulation)
associated with congestive heart failure ("CHF") and in the prevention and
treatment of acute renal failure. A Phase I/II study completed by the Company in
the United States indicated that CVT-124 is generally well tolerated and
produces diuretic activity in healthy volunteers. Approximately one-quarter of
the 875,000 patients in the United States hospitalized with a primary diagnosis
of CHF exhibit resistance to current intravenous diuretic treatments. The
Company believes that these patients would represent the initial target market
for CVT-124 in this indication.
The Company's second compound in clinical trials, ranolazine, is a novel
compound for the treatment of angina. Ranolazine was licensed from Syntex
(U.S.A.), Inc. ("Syntex"), an indirect subsidiary of Roche Holding Limited
("Roche"), in March 1996. Its novel metabolic mechanism of action was
discovered, in part, by cardiovascular researchers now at or associated with
CVT. In Phase I and Phase II clinical trials conducted by Syntex, an immediate
release formulation of ranolazine ("ranolazine IR") was administered to over
1,200 patients. These clinical trials have indicated that ranolazine IR improved
exercise tolerance in angina patients without adversely affecting heart rate or
decreasing blood pressure, a clinical profile absent from currently available
drugs. Based on these data, as well as Syntex pilot Phase II data from a
sustained release formulation of ranolazine ("ranolazine SR") for intermittent
claudication (pain in the legs due to insufficient blood flow), the Company
intends to commence further clinical trials of ranolazine SR. The Company
believes ranolazine could particularly benefit angina patients who also suffer
from CHF or remain symptomatic despite maximal doses of currently available
anti-anginal drugs. In the United States, approximately 6.7 million patients are
currently diagnosed with angina. Based on published studies, approximately
one-third, or 2.2 million, are either diagnosed with both angina and CHF or are
resistant to currently available treatments. The Company believes these patients
would represent the initial target market for ranolazine.
4
<PAGE>
The four other compounds discovered by the Company are in preclinical studies.
CVT-313 is a selective inhibitor of the cell cycle enzyme, cyclin-dependent
kinase 2 ("CDK2"). The Company believes that CVT-313 may be useful in a variety
of cellular proliferative disorders, including the prevention of restenosis, as
an adjunct to coronary artery bypass surgery and as a treatment for
cardiomyopathy (heart muscle damage). CVT-634, an inhibitor of another cell
cycle regulating enzyme, is also being evaluated in animal models of chronic
cardiovascular disease. CVT-609 and CVT-429 are highly selective adenosine A(1)
receptor agonists which the Company believes may have potential activity in
treating certain common cardiac arrhythmias. The Company believes that compared
to current therapies, these compounds may offer an improved clinical profile for
immediate treatment of these arrhythmias including avoiding unwanted blood
pressure lowering effects.
In addition, the Company has discovered a novel inflammatory factor found in
human cardiovascular diseases, which it partnered to Bayer AG for continued
development.
BUSINESS STRATEGY
The Company's strategy is to become a leader in the development of novel,
cost-effective treatments for chronic cardiovascular diseases by leveraging its
expertise in molecular cardiology. The Company is developing products based on
small molecules designed to (i) utilize novel mechanisms of action, (ii) address
segments of the cardiovascular patient population which are either underserved
or not treatable by existing therapies, and (iii) offer the currently served
cardiovascular patient population the potential for improved efficacy with fewer
side effects than currently available drugs.
The Company believes that it can best utilize its internal resources by
concentrating its activities on discovery, preclinical evaluation and early
clinical phases of drug development. The Company intends to establish
partnerships with pharmaceutical companies for later stage clinical trials and
marketing and sales activities for its products. The Company believes that such
partnerships will enable the Company to more effectively and economically
develop and market its initial products.
DRUG DISCOVERY PLATFORM
CVT's drug discovery platform supports several programs, including those focused
on the adenosine A(1) receptor, the cell cycle and chronic inflammation in the
cardiovascular system. These programs have produced compounds currently in
clinical or preclinical development or outlicensed for use in third party drug
discovery programs. CVT's expertise in molecular cardiology and drug development
has been critical to the identification of these drug candidates.
The Company believes that its drug discovery platform allows it to efficiently
select novel, clinically relevant drug candidates that have a significant
probability of commercial potential. CVT first evaluates new targets with
respect to clinical relevance and suitability for small molecule inhibition. CVT
then utilizes a highly integrated, multidisciplinary approach to produce novel
small molecules as drug candidates for these targets. The Company combines
molecular modeling and combinatorial chemistry to assemble targeted libraries of
new chemical entities, an approach which the Company believes expedites the
identification of potential drug leads. The Company has developed a
comprehensive proprietary database correlating biological activity of candidate
drugs with their structures. From this database, CVT identifies final lead
compounds based on predetermined development criteria including potency,
specificity, manufacturability, and pharmacologic activity in animal and IN
VITRO models. The Company determines the proper selection of cell-based assays
and animal models of disease to enhance development of the drug candidate based
on its projected use in the clinical setting.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. The principal
risks of the Offering include uncertainties related to the Company's early stage
of development, including the fact that the Company has no commercially
available products primarily due to the lack of marketing approval from
regulatory authorities, uncertainties related to clinical trials of ranolazine
and CVT-124 and has incurred significant losses to date. See "Risk Factors."
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
COMMON STOCK OFFERED........................ 2,500,000 shares
COMMON STOCK OUTSTANDING AFTER THE 6,949,166 shares (1)
OFFERING...................................
USE OF PROCEEDS............................. Research and development, including
preclinical testing, clinical trials and
certain milestone payments; repayment of
certain indebtedness; and working capital and
general corporate purposes.
PROPOSED NASDAQ NATIONAL MARKET SYMBOL...... "CVTX"
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED
INCEPTION (DEC. YEAR ENDED DECEMBER 31, SEPTEMBER 30,
IN THOUSANDS, EXCEPT PER SHARE 11, 1990) TO DEC. --------------------------------- ---------------------
DATA 31, 1992 1993 1994 1995 1995 1996
------------------ --------- ---------- ---------- ---------- ---------
(UNAUDITED)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
License revenue.................. $ - $ - $ - $ - $ - $ 250
Operating expenses:
Research and development....... 1,167 4,731 8,823 12,856 10,099 5,834
General and administrative..... 429 947 2,802 3,402 2,367 2,186
------- --------- ---------- ---------- ---------- ---------
Total operating expenses......... 1,596 5,678 11,625 16,258 12,466 8,020
------- --------- ---------- ---------- ---------- ---------
Loss from operations............. (1,596) (5,678) (11,625) (16,258) (12,466) (7,770)
Interest (income) expense, net... 34 (161) (258) 466 288 597
------- --------- ---------- ---------- ---------- ---------
Net loss....................... $ (1,630) $ (5,517) $ (11,367) $ (16,724) $ (12,754) $ (8,367)
------- --------- ---------- ---------- ---------- ---------
------- --------- ---------- ---------- ---------- ---------
Pro forma net loss per share
(2)............................. $ (4.33) $ (3.37) $ (1.78)
---------- ---------- ---------
---------- ---------- ---------
Shares used in computing pro
forma net loss per share (2).... 3,861 3,780 4,708
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
--------------------------
<S> <C> <C>
SEPTEMBER 30, 1996
--------------------------
IN THOUSANDS ACTUAL AS ADJUSTED(3)
---------- --------------
(UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments..................................... $ 10,484 $ 37,784
Working capital....................................................................... 8,689 35,989
Total assets.......................................................................... 15,661 42,961
Total debt and capital lease obligations.............................................. 5,027 3,027
Deficit accumulated during development stage.......................................... (43,628) (43,628)
Total stockholders' equity............................................................ 7,908 37,208
</TABLE>
- ------------------------
(1) Based on shares outstanding as of September 30, 1996. Includes 792,898
shares to be issued upon the net exercise of certain outstanding warrants upon
the closing of this Offering. Excludes as of September 30, 1996: (i) 803,338
shares of Common Stock issuable upon exercise of outstanding stock options at a
weighted average exercise price of $2.16 per share; (ii) 574,504 shares of
Common Stock issuable upon exercise of outstanding warrants at exercise prices
ranging from $2.50 to $25.00 per share and a weighted average exercise price of
$17.00; and (iii) 612,328 shares of Common Stock available for future grant
under the Company's 1992 Stock Option Plan, 1994 Equity Incentive Plan,
Non-Employee Directors' Stock Option Plan and Employee Stock Purchase Plan (the
"Stock Plans"). See "Management - Stock Plans", "- Director Compensation" and
"Description of Capital Stock."
(2) See Note 1 of Notes to Consolidated Financial Statements for a description
of the shares used in calculating pro forma net loss per share.
(3) Adjusted to give effect to the receipt of the estimated net proceeds from
the sale of 2,500,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $13.00 per share and the repayment of a
$2.0 million portion of a debt financing with entities associated with Hambrecht
& Quist Group. See "Use of Proceeds."
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider, in addition to
the other information contained in this Prospectus, the following risk factors
in evaluating the Company and the Common Stock offered hereby.
UNCERTAINTIES RELATED TO EARLY STAGE OF DEVELOPMENT
The Company is a development stage company and must be evaluated in light of the
uncertainties and complications present in an early stage biopharmaceutical
company. In addition, all of the Company's products are at an early stage of
development. Since the Company's inception in 1990, substantially all of the
Company's resources have been dedicated to research and development, and the
Company has not generated any product revenue. Because all of the Company's
potential products are in research, preclinical or clinical development, product
revenues will not be realized for at least several years, if at all. Drug
discovery methods based upon molecular cardiology are relatively new, and there
can be no assurance that the Company will be able to employ these methods of
drug discovery successfully or that these methods will lead to the development
of commercially viable pharmaceutical products. Certain of the Company's
compounds within the Company's cell cycle, chronic inflammation and adenosine
A(1) receptor programs are in the early stages of research and development and
the Company does not expect to commence clinical trials for such new compounds
for several years. There can be no assurance that any of the Company's product
development efforts will be successfully completed, that any of the Company's
products will be proven to be safe and effective, that regulatory approvals will
be obtained at all or be as broad as sought, that the Company's products will be
capable of being produced in commercial quantities or that any products, if
introduced, will achieve market acceptance.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
The Company's potential products are subject to the risks of failure inherent in
the development of pharmaceutical products. The Company currently has only two
products in clinical development, CVT-124 and ranolazine. The Company's product
candidates will require additional development, preclinical studies, clinical
trials and regulatory approval prior to commercialization. The results from
preclinical studies and early clinical trials may not be predictive of results
obtained in later clinical trials, and there can be no assurance that clinical
trials conducted by the Company will demonstrate sufficient safety and efficacy
to obtain the requisite approvals or that marketable products will result. For
example, in November 1995, based on unfavorable efficacy data from a Phase II
trial, the Company terminated its development program for the CVT-1 product for
treatment of primary hypercholesterolemia.
The rate of completion of the Company's clinical trials may be delayed by many
factors, including slower than anticipated patient enrollment, difficulty in
finding a sufficient number of patients fitting the appropriate trial profile or
in the acquisition of sufficient supplies of clinical trial materials or adverse
events occurring during the clinical trials. Completion of testing, studies and
trials may take several years, and the length of time varies substantially with
the type, complexity, novelty and intended use of the product. There can be no
assurance that the Company's drug discovery efforts will progress as expected or
that such efforts will lead to the discovery or development of any product. In
addition, data obtained from preclinical and clinical activities are susceptible
to varying interpretations, which could delay, limit or prevent regulatory
approval. Delays or rejections may be encountered based upon many factors,
including changes in regulatory policy during the period of product development.
No assurance can be given that any of the Company's development programs will be
successfully completed, that any investigational new drug ("IND") applications
will become effective or that additional clinical trials will be allowed by the
Food and Drug Administration ("FDA") or other regulatory authorities or that
clinical trials will commence as planned.
The Company's clinical development plan for ranolazine assumes that Phase I data
and data from several Phase II angina trials with ranolazine IR combined with
Phase I data and safety and tolerability data from a pilot Phase II trial for
intermittent claudication with ranolazine SR will be accepted by the FDA and
other regulatory authorities as a basis to initiate Phase III trials with
ranolazine SR. There can be no assurance that such clinical data will be
accepted by the FDA in support of initiation of such Phase III studies with
ranolazine SR for the treatment of angina or that the Company will not be
required or otherwise choose to conduct additional Phase II clinical trials of
ranolazine SR prior to commencement of Phase III clinical trials. As a result of
FDA reviews or
7
<PAGE>
complications that may arise in any phase of the clinical trial program, there
can be no assurance that the proposed schedules for IND and clinical protocol
submissions to the FDA, initiations of studies and completions of clinical
trials can be maintained. Any delays in the Company's clinical trials would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business - Government Regulation."
DEPENDENCE ON COLLABORATIVE AND LICENSING ARRANGEMENTS
The Company's strategy for the research, development and commercialization of
its product candidates has required, and will continue to require, the Company
to enter into various arrangements with corporate and academic collaborators,
licensors, licensees and others, and the Company will therefore be dependent
upon the success of these parties in performing their responsibilities. The
Company is currently seeking a corporate partner for ranolazine prior to
conducting Phase III studies for treatment of angina. The Company may also seek
a corporate partner for CVT-124. There can be no assurance that the Company will
be able to enter into collaborative arrangements or license agreements on
acceptable terms, or at all, or that any or all of the contemplated benefits
from such collaborative arrangements or license agreements will be realized.
Failure to obtain such arrangements or agreements would result in delays in the
development of the Company's proposed products or the inability to proceed with
the development, manufacture or sale of products, or the loss of third party
licenses or could require the Company to fund development internally. If the
Company were required to fund development internally, its future capital
requirements would increase substantially. There can be no assurance that the
Company could obtain additional funds to meet such increased capital
requirements on acceptable terms, or at all.
Certain of the collaborative arrangements that the Company may enter into in the
future may place responsibility on the collaborative partner for preclinical
testing and clinical trials, for manufacturing and for preparation and
submission of applications for regulatory approval of potential pharmaceutical
products. The Company cannot control the amount and timing of resources which
its collaborative partners devote to the Company's programs or potential
products. Should a collaborative partner fail to develop or commercialize
successfully any product candidate to which it has rights, the Company's
business may be materially and adversely affected. There can be no assurance
that collaborators will not pursue other technologies or product candidates
either on their own or in collaboration with others.
Collaborative arrangements may also require the Company to expend funds and to
meet certain milestones, and there can be no assurance that the Company will be
successful in doing so. The Company's agreement with the University of Florida
Research Foundation, Inc. in the area of adenosine receptors requires the
Company to reach certain preclinical and clinical milestones within defined time
periods to maintain exclusive rights under the license. The Company's agreement
with Syntex for ranolazine requires it to make certain payments based on the
time and progress of development activities. Failure of the Company to meet its
obligations under its collaborative arrangements could result in a termination
of those arrangements and the loss of rights to the compounds under development
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
There can be no assurance that disputes will not arise in the future with
respect to the ownership of rights to any technology developed with or by third
parties. These and other possible disagreements between collaborators and the
Company could lead to delays in the collaborative research, development or
commercialization of certain product candidates or could require or result in
litigation or arbitration, which would be time consuming and expensive, and
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business - Licenses and
Collaborations."
HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY; ACCUMULATED DEFICIT
Since its inception, the Company has been engaged in research and development
activities and has generated no product revenues. As of September 30, 1996, the
Company had an accumulated deficit of approximately $43.6 million. The process
of developing the Company's products will require significant additional
research and development, preclinical testing and clinical trials, as well as
regulatory approval. These activities, together with the Company's general and
administrative expenses, are expected to result in operating losses for the
foreseeable
8
<PAGE>
future. The Company will not receive product revenues unless and until it
completes clinical trials with respect to one or more products and successfully
commercializes such products. There can be no assurance that the Company will
generate revenues or achieve and sustain profitability in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NEED FOR ADDITIONAL FUTURE CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial additional funding after this Offering in
order to complete its research and development activities and commercialize any
potential products. The Company has financed its operations primarily through
the sale of preferred equity securities, equipment and leasehold improvement
financing and other debt financing. The Company has generated no product
revenue, and none is expected for at least several years. The Company
anticipates that its existing resources, including the proceeds of this Offering
and projected interest income, will enable the Company to maintain its current
and planned operations through 1998. However, there can be no assurance that the
Company will not require additional funding prior to such time. If the Company
is unable to establish and maintain additional corporate partnerships for the
development of CVT-124 and ranolazine, the Company's future capital requirements
will increase substantially. In addition, the Company's future capital
requirements will depend on many other factors, including scientific progress in
its research and development programs, the size and complexity of such programs,
the scope and results of preclinical studies and clinical trials, the ability of
the Company to establish and maintain corporate partnerships, the time and costs
involved in obtaining regulatory approvals, the costs involved in filing,
prosecuting and enforcing patent claims, competing technological and market
developments, the cost of manufacturing preclinical and clinical material and
other factors not within the Company's control. There can be no assurance that
such additional financing to meet the Company's capital requirements will be
available on acceptable terms or at all. Insufficient funds may require the
Company to delay, scale back or eliminate some or all of its research or
development programs or to lose rights under existing licenses or to relinquish
greater or all rights to product candidates at an earlier stage of development
or on less favorable terms than the Company would otherwise seek or may
adversely affect the Company's ability to operate as a going concern. If
additional funds are raised by issuing equity securities, substantial dilution
to existing stockholders may result. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
UNCERTAINTY OF MARKET ACCEPTANCE
The Company's future profitability is dependent on commercial acceptance of its
potential products. The Company believes that market acceptance of its potential
products will depend on the Company's ability to provide acceptable evidence of
the safety, efficacy and cost-effectiveness of its products, as well as the
marketing strength of the Company's corporate partners. In addition, third party
payors can indirectly affect the demand for the Company's potential products by
regulating the maximum amount of reimbursement that will be provided. There can
be no assurance that potential products developed by the Company will achieve
market acceptance among patients, physicians or third party payors, even if
necessary regulatory and reimbursement approvals are obtained. Failure to
achieve market acceptance would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -
Marketing and Sales" and "- Government Regulation."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
The pharmaceutical and biopharmaceutical industries are subject to intense
competition and significant, rapid technological change. If regulatory approvals
are received, certain of the Company's potential products will compete with well
established, FDA approved proprietary and generic therapies that have generated
substantial sales over a number of years and which are reimbursed from
government health administration authorities and private health insurers. In
addition, CVT is aware of companies which are developing products that will
compete for the same disease markets as its potential products. Many of the
Company's competitors and potential competitors have substantially greater
product development capabilities and financial, scientific, marketing and sales
resources than the Company. Other companies may succeed in developing products
earlier than the Company, obtaining approvals for such products from the FDA
more rapidly than the Company and its corporate partners, or developing products
that are safer or more effective than those under development or proposed to be
developed by the Company and its corporate partners. There can be no assurance
that research and development by others will not render the Company's technology
or its potential products obsolete or non-competitive. In
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<PAGE>
addition, there can be no assurance that the Company's competitors will not
develop more effective or more affordable products or achieve patent protection,
regulatory approval or product commercialization earlier than the Company. See
"Business - Competition."
UNCERTAINTY OF PATENT POSITION AND PROPRIETARY RIGHTS
The Company's success will depend to a significant degree on its ability to
obtain patents and licenses to patent rights, to maintain trade secrets and to
operate without infringing on the proprietary rights of others, both in the
United States and other countries. The Company has filed a number of United
States and foreign patent applications. In addition, in connection with its
corporate and academic collaborations, the Company has received licenses to a
number of issued patents and patent applications for CVT-124 and ranolazine. The
Company intends to continue to file applications as appropriate for patents
covering both its potential products and processes. There can be no assurance
that patents will issue from any of these applications, that any patent will
issue on technology arising from additional research or that patents that may
issue from such applications will be sufficient to protect the Company's
technology. Patent applications in the United States are maintained in secrecy
until a patent issues, and the Company cannot be certain that others have not
filed patent applications for technology covered by the Company's pending
applications or that the Company was the first to invent the technology that is
the subject of such patent applications. Competitors may have filed applications
for, or may have received patents and may obtain additional patents and
proprietary rights relating to, compounds, products or processes that block or
compete with those of the Company. If any of its competitors have filed patent
applications in the United States that claim technology also invented by the
Company, the Company may have to participate in interference proceedings
declared by the Patent and Trademark Office in order to determine priority of
invention and, thus, the right to a patent for the technology in the United
States, all of which could result in substantial cost to the Company. In
addition, litigation, which would result in substantial cost to the Company, may
be necessary to enforce any patents issued to the Company or to determine the
scope and validity of the proprietary rights of third parties. There can be no
assurance that any patents issued to the Company or to licensors from whom the
Company has licensed rights will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide proprietary protection or
commercial advantage to the Company.
The commercial success of the Company will depend in part on the Company not
infringing patents issued to competitors and not breaching the licenses that
might cover technology used in the Company's potential products. Failure by the
Company to obtain a license to any technology required to commercialize its
potential products could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company also relies on trade secrets to develop and maintain its competitive
position. Although the Company protects its proprietary technology in part by
confidentiality agreements with its employees, consultants, collaborators,
advisors and corporate partners, there can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach or that the Company's trade secrets will not otherwise become known or be
discovered independently by its competitors. See "Business - Patents and
Proprietary Technology."
DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND
CONSULTANTS
The Company is highly dependent on certain members of its management and
scientific staff. In addition, the Company relies on consultants and advisors.
The loss of any of these persons could have a material adverse effect on the
Company's business, financial condition and results of operations. In order to
pursue its research and product development plans, the Company will be required
to attract and retain additional qualified scientific and other personnel. There
can be no assurance that the Company will be successful in attracting and
retaining these skilled persons who generally are in high demand by
pharmaceutical and biopharmaceutical companies and by universities and other
research institutions. The failure to successfully attract and retain qualified
personnel, consultants and advisors may impede the achievement of development
objectives and have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, a substantial
portion of the stock options currently held by many of the Company's key
employees are vested and may be fully vested over the next several years before
the Company achieves significant revenues or profitability. The Company intends
to grant additional options and provide other forms of incentive compensation to
attract and retain such key personnel. See "Business - Scientific Advisory
Board" and "Management."
10
<PAGE>
LIMITED MANUFACTURING, MARKETING AND SALES EXPERIENCE
The Company has no experience in manufacturing, and currently lacks the
resources or capability to manufacture any of its potential products on a
clinical or commercial scale. The Company is currently, and will continue to be,
dependent on corporate partners, licensees or other third parties for the
manufacturing of clinical and commercial scale quantities of its products. There
can be no assurance that the Company will be able to maintain existing
agreements for manufacturing of clinical quantities of potential products, that
it will be able to enter into additional agreements with other third parties for
commercial scale manufacturing or that these parties will be able to develop
adequate manufacturing capabilities.
To date, the Company has no experience with sales, marketing or distribution.
The Company intends to rely on relationships with one or more pharmaceutical
companies with established distribution systems and direct sales forces to
market its products. In the event that the Company is unable to reach agreement
with one or more pharmaceutical companies to market its products, it may be
required to market its products directly and to develop a marketing and sales
force with technical expertise and with supporting distribution capability.
There can be no assurance that the Company will be able to establish in-house
sales and distribution capabilities or relationships with third parties, or that
it will be successful in commercializing any of its potential products. To the
extent that the Company enters into co-promotion or other licensing
arrangements, any revenues received by the Company will depend upon the efforts
of third parties, and there can be no assurance that such efforts will be
successful. See "Business - Marketing and Sales" and "- Manufacturing."
SIGNIFICANT GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The research, testing, manufacture and marketing of drug products is subject to
extensive regulation by numerous regulatory authorities in the United States and
other countries. Failure to comply with FDA or other applicable regulatory
requirements may subject a company to administrative or judicially imposed
sanctions such as civil penalties, criminal prosecution, injunctions, product
seizure or detention, product recalls, total or partial suspension of
production, and FDA refusal to approve pending new drug applications ("NDAs") or
supplements to approved NDAs. The Company has not received regulatory approval
in the United States or any foreign jurisdiction for the commercial sale of any
of its products. The process of obtaining FDA and other required regulatory
approvals, including foreign approvals, often takes many years and can vary
substantially based upon the type, complexity and novelty of the products
involved. Furthermore, such approval process is extremely expensive and
uncertain. There can be no assurance that the Company's potential products will
be approved for marketing by the FDA. Even if regulatory approval of a product
is granted, there can be no assurance that the Company will be able to obtain
the labeling claims necessary or desirable for the promotion of those products.
FDA requirements prohibit the marketing or promotion of a drug for unapproved
indications. Furthermore, regulatory marketing approval may entail ongoing
requirements for postmarketing studies. If regulatory approval is obtained, the
Company will be subject to ongoing FDA obligations and continued regulatory
review. In particular, the Company or its third party manufacturer will be
required to adhere to regulations setting forth current Good Manufacturing
Practices ("cGMPs"), which require that the Company manufacture its products and
maintain its records in a prescribed manner with respect to manufacturing,
testing and quality control activities. Further, the Company or its third party
manufacturer must pass a preapproval inspection of its manufacturing facilities
by the FDA before obtaining marketing approval. Failure to comply with
applicable regulatory requirements may result in penalties such as restrictions
on a product's marketing or withdrawal of the product from the market. In
addition, identification of certain side effects after a drug is on the market
or the occurrence of manufacturing problems could cause subsequent withdrawal of
approval, reformulation of the drug, additional preclinical testing or clinical
trials and changes in labeling of the product.
Prior to the submission of an NDA, drugs developed by the Company must undergo
rigorous preclinical and clinical testing, which may take several years and the
expenditure of substantial resources. Before commencing clinical trials in
humans, the Company must submit to the FDA and receive clearance of an IND.
There can be no assurance that submission of an IND for future clinical testing
of any products under development or other future products of the Company would
result in FDA permission to commence clinical trials or that the Company will be
able to obtain the necessary approvals for future clinical testing in any
foreign jurisdiction. Success in
preclinical studies or early stage clinical trials does not assure success in
later stage clinical trials. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay, limit
or
11
<PAGE>
prevent regulatory approval. Further, there can be no assurance that if such
testing of products under development is completed, any such drug compounds will
be accepted for formal review by the FDA or any foreign regulatory body, or
approved by the FDA for marketing in the United States or by any such foreign
regulatory bodies for marketing in foreign jurisdictions. Future federal, state,
local or foreign legislation or administrative acts could also prevent or delay
regulatory approval of the Company's products. See "Business - Government
Regulation."
UNCERTAINTY OF PRODUCT PRICING AND REIMBURSEMENT
The ability of the Company and its potential corporate partners to market and
sell its potential products successfully will depend in part on the extent to
which reimbursement for the cost of such potential products and related
treatments will be available from government health administration authorities,
private health insurers and other organizations. Third party payors are
increasingly challenging the price of medical products and services. Significant
uncertainty exists as to the reimbursement status of newly-approved health care
products. In addition, for sales of the Company's products in Europe, the
Company will be required to seek reimbursement on a country-by-country basis. If
the Company or any potential corporate partners succeed in bringing any products
to market, there can be no assurance that these products will be considered cost
effective, that reimbursement will be available, or if available, that the
payors' reimbursement policies will not adversely affect the Company's or any
such potential corporate partner's ability to sell such products on a profitable
basis.
PRODUCT LIABILITY EXPOSURE; AVAILABILITY OF INSURANCE
The manufacture and sale of biopharmaceutical products involve an inherent risk
of product liability claims and associated adverse publicity. The Company
currently has only limited product liability insurance for clinical trials and
no commercial product liability insurance. There can be no assurance that it
will be able to maintain existing or obtain additional product liability
insurance on acceptable terms or with adequate coverage against potential
liabilities. Such insurance is expensive, difficult to obtain and may not be
available on acceptable terms, or at all. An inability to obtain sufficient
insurance coverage on reasonable terms or to otherwise protect against potential
product liability claims could prevent or inhibit the commercialization of the
Company's potential products. A successful product liability claim brought
against the Company in excess of its insurance coverage, if any, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business - Product Liability Insurance."
HAZARDOUS AND RADIOACTIVE MATERIALS; ENVIRONMENTAL MATTERS
The Company's research and development processes involve the controlled use of
hazardous materials, chemicals and radioactive materials, and produce waste
products. The Company is subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
such materials and waste products. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by such laws and regulations, the risk of contamination or
injury from these materials cannot be eliminated completely. In such event, the
Company could be held liable for any damages that result and any such liability
could exceed the resources of the Company. Although the Company believes that it
is in compliance in all material respects with applicable environmental laws and
regulations, there can be no assurance that it will not be required to incur
significant costs to comply with environmental laws and regulations in the
future, or that the Company's business, financial condition or results of
operations will not be materially adversely affected by current or future
environmental laws or regulations. See "Business - Government Regulation."
ABSENCE OF PRIOR PUBLIC MARKET; VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active market will develop or be
maintained. The initial public offering price will be negotiated between the
Company and the representatives of the Underwriters and may not be indicative of
future market prices. See "Underwriting" for information related to the method
of determining the initial public offering price. The market price of the shares
of Common Stock, like that of the common stock of many other biopharmaceutical
companies, is likely to be highly volatile. Factors such as the Company's
operating results, developments in the Company's relationships with corporate
partners, developments affecting the Company's corporate partners, announcements
of results of preclinical studies and clinical trials by the Company, its
corporate partners or its competitors, negative
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<PAGE>
regulatory action or regulatory approval with respect to the Company or its
competitors, announcements of new products by the Company or its competitors,
developments related to patent or other proprietary rights by the Company or its
competitors, changes in the position of securities analysts with respect to the
Common Stock, and market conditions for biopharmaceutical or biotechnology
stocks in general, may cause the market price of the Common Stock to fluctuate,
perhaps substantially. In addition, in recent years the stock market in general,
and the shares of biopharmaceutical, biotechnology and healthcare companies in
particular, have experienced extreme price fluctuations. These broad market and
industry fluctuations may materially adversely affect the market price of the
Common Stock. In some future quarter the Company's operating results may be
below the expectations of public market analysts and investors, and, as a
result, the price of the Common Stock would likely be materially adversely
affected.
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER
PROVISIONS AND DELAWARE LAW
After this Offering, the Company's officers, directors and principal
stockholders will beneficially own approximately 17.96% of the outstanding
shares of Common Stock. As a result, such persons may have the ability to
effectively control the Company and direct its affairs and business. Such
concentration of ownership may also have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, the Company's Board
of Directors will have the authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by the stockholders. The
rights of the holders of Common Stock will be subject to, and may be materially
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. Furthermore, certain provisions of the
Company's Certificate of Incorporation may have the effect of delaying or
preventing changes in control or management of the Company, which could
adversely affect the market price of the Company's Common Stock. In addition,
the Company will be subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. See
"Principal Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial shares of Common Stock in the public market after the
Offering could adversely affect the market price of the Common Stock. Upon
completion of the Offering, the Company will have outstanding 6,949,166 shares
of Common Stock. All of the 2,500,000 shares sold in the Offering will be freely
transferable as of the date of this Prospectus by persons other than
"affiliates" of the Company without restriction or further registration under
the Securities Act of 1933, as amended (the "Securities Act"). The remaining
4,449,166 shares of Common Stock that will be outstanding upon completion of the
Offering (the "Restricted Shares") will be held by officers, directors,
employees, consultants and other stockholders of the Company. The Restricted
Shares were sold by the Company in reliance upon exemptions from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and are "restricted securities" under the Securities Act.
Certain holders of Restricted Shares have agreed not to sell their shares
without the prior written consent of J.P. Morgan Securities Inc. for a period of
180 days from the date of this Prospectus. Upon completion of the Offering,
92,785 shares will be eligible for sale in the public market immediately
following the Offering. Beginning 180 days after commencement of the Offering,
2,481,313 Restricted Shares that are subject to lock-up agreements will become
eligible for sale in the public markets subject to Rule 144 and Rule 701 under
the Securities Act. The remaining 1,875,068 Restricted Shares, which are also
subject to such lock-up agreements, will become eligible for sale under Rule 144
at various dates thereafter as the holding period provisions of Rule 144 are
satisfied. As of September 30, 1996, 803,338 shares were issuable upon exercise
of currently outstanding options, all of which are subject to the lock-up
agreements described above. Of these shares, 317,093 will be vested 180 days
after commencement of the Offering. As of September 30, 1996, 574,504 shares
were issuable upon exercise of currently outstanding warrants, of which 490,004
shares are subject to the lock-up agreements described above. Of these shares,
186,926 will become eligible for sale in the public markets subject to Rule 144
beginning 180 days after commencement of the Offering and 303,078 shares will
become eligible for sale subject to Rule 144 at various dates thereafter as the
holding provisions of Rule 144 are satisfied. In addition, 84,500 shares
issuable upon exercise of warrants which are not subject to lock-up agreements,
will
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<PAGE>
become eligible for sale in the public markets beginning after September 15,
1997 pursuant to the terms of the individual warrants, subject to Rule 144.
Certain holders of shares of Common Stock and securities convertible into or
exercisable for shares of Common Stock have certain registration rights under a
registration rights agreement among such holders and the Company and certain
other agreements. In addition, following completion of the Offering, the Company
intends to register under the Securities Act approximately 1,415,666 shares of
Common Stock subject to outstanding stock options or reserved for issuance under
the Company's Non-Employee Directors' Stock Option Plan, 1994 Equity Incentive
Plan, 1992 Stock Option Plan and Employee Stock Purchase Plan (the "Stock
Plans") as well as stock options granted outside the Stock Plans. See
"Management - Director Compensation," "- Stock Plans," "Shares Eligible for
Future Sale" and "Description of Capital Stock - Registration Rights of Certain
Holders."
DILUTION; ABSENCE OF DIVIDENDS
The initial public offering price will be substantially higher than the book
value per share of Common Stock. Investors purchasing shares of Common Stock in
this Offering will therefore incur immediate, substantial dilution of $7.65 per
share in the net tangible book value of Common Stock. Additional dilution will
occur upon the exercise of outstanding options and warrants. See "Dilution." The
Company has never paid any cash dividends and does not anticipate paying cash
dividends in the foreseeable future. See "Dividend Policy."
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<PAGE>
THE COMPANY
The Company was incorporated in Delaware in December 1990 and changed its name
to CV Therapeutics, Inc. in June 1992. The Company's executive offices are
located at 3172 Porter Drive, Palo Alto, California 94304, and its telephone
number is (415) 812-0585.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $29.3 million (approximately $33.8 million if
the over-allotment option is exercised in full) at an assumed initial public
offering price of $13.00 per share after deducting the estimated underwriting
discount and estimated offering expenses payable by the Company.
The Company anticipates using approximately $16.0 million of the net proceeds of
the Offering to fund research and development activities, including preclinical
testing, clinical trials in support of regulatory approvals and the payment of
development milestones. The Company currently intends to use approximately $2.0
million of the net proceeds of the Offering to repay a $2.0 million term loan
portion of a debt financing with entities associated with Hambrecht & Quist
Group. The $2.0 million term loan bears interest at the rate of 9% per year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources." The balance of the net proceeds
of the Offering are expected to be used for working capital and general
corporate purposes. In addition, a portion of the net proceeds may be used for
the acquisition of complementary businesses, products or technologies. The
Company has no present understandings, commitments or agreements, nor is it
engaged in any negotiations, with respect to any acquisition. Pending
application of the net proceeds of the Offering as described above, the Company
intends to invest such proceeds in short-term, investment-grade,
interest-bearing financial instruments.
The Company anticipates that its existing resources, including the net proceeds
of the Offering and projected interest income will enable the Company to
maintain its current and planned operations through 1998. The Company's forecast
of the period of time through which its financial resources will be adequate to
support its operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary as a result of a number of factors,
including those described in "Risk Factors" and elsewhere in this Prospectus.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital stock.
The Company currently intends to retain any future earnings to finance the
growth and development of its business and therefore does not anticipate paying
any cash dividends in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1996, (i) the pro forma
capitalization of the Company giving effect to the conversion of all outstanding
shares of Preferred Stock into Common Stock and the issuance of 792,898 shares
of Common Stock upon the net exercise of certain outstanding warrants upon the
closing of this Offering, and (ii) the pro forma capitalization as adjusted to
give effect to the receipt by the Company of the estimated net proceeds from the
sale of the shares of Common Stock offered hereby at an assumed initial public
offering price of $13.00 per share, after deducting the estimated underwriting
discount and estimated offering expenses payable by the Company, and the
repayment of the $2.0 million term loan portion of a debt financing with
entities associated with Hambrecht & Quist Group:
<TABLE>
<CAPTION>
----------------------
SEPTEMBER 30, 1996
----------------------
AS
IN THOUSANDS, EXCEPT PER SHARE DATA PRO FORMA ADJUSTED
---------- ----------
(UNAUDITED)
<S> <C> <C>
Total debt and capital lease obligations, less current portion...... $ 5,000 $ 3,000
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding, pro forma
and as adjusted.................................................. - -
Common stock, $0.001 par value; 30,000,000 shares
authorized; 4,449,166 shares issued and outstanding, pro forma;
6,949,166 shares issued and outstanding, as adjusted (1)......... 52,793 82,093
Warrants to purchase Common Stock................................. 1,225 1,225
Notes receivable issued for stock................................. (171) (171)
Deferred compensation............................................. (2,311) (2,311)
Deficit accumulated during the development stage.................. (43,628) (43,628)
---------- ----------
Total stockholders' equity.......................................... 7,908 37,208
---------- ----------
Total capitalization.............................................. $12,908 $40,208
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) Excludes as of September 30, 1996: (i) 803,338 shares of Common Stock
issuable upon exercise of outstanding stock options at a weighted average
exercise price of $2.16 per share; (ii) 574,504 shares of Common Stock issuable
upon exercise of outstanding warrants at exercise prices ranging from $2.50 to
$25.00 per share and a weighted average exercise price of $17.00 per share; and
(iii) 612,328 shares of Common Stock available for future grant under the Stock
Plans. See "Management - Stock Plans", "- Director Compensation" and
"Description of Capital Stock."
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DILUTION
The pro forma net tangible book value of the Company as of September 30, 1996
was approximately $7,908,000, or $1.78 per share of Common Stock. Pro forma net
tangible book value per share is determined by dividing the net tangible book
value (tangible assets less total liabilities) of the Company by the number of
shares of Common Stock outstanding at that date, after giving effect to the
issuance of 792,898 shares of Common Stock upon the net exercise of certain
outstanding warrants upon closing of this Offering. Without taking into account
any other changes in the net tangible book value after September 30, 1996, other
than to give effect to the receipt by the Company of the estimated net proceeds
from the sale of the 2,500,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $13.00 per share, the pro
forma net tangible book value of the Company as of September 30, 1996 would have
been $37,208,000, or $5.35 per share. This represents an immediate increase in
the pro forma net tangible book value of $3.57 per share to existing
stockholders and an immediate dilution of $7.65 per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price $13.00
Pro forma net tangible book value before the Offering $1.78
Increase attributable to new investors 3.57
----------
Pro forma net tangible book value after the Offering $5.35
----------
Dilution to new investors $7.65
----------
----------
</TABLE>
The following table summarizes, on a pro forma basis as of September 30, 1996,
after giving effect to the issuance of 792,898 shares of Common Stock upon the
net exercise of certain outstanding warrants upon closing of this Offering, the
difference between existing stockholders and purchasers of shares in the
Offering (at an assumed initial public offering price of $13.00 per share and
before deducting the underwriting discount and estimated offering expenses
payable by the Company) with respect to the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid:
<TABLE>
<CAPTION>
----------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ---------- ---------- ---------- ----------
Existing stockholders 4,449,166 64.0% $52,037,000 61.6% $11.69
<S> <C> <C> <C> <C> <C>
New investors 2,500,000 36.0 32,500,000 38.4 13.00
---------- ---------- ---------- ----------
Total 6,949,166 100.0% $84,537,000 100.0%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The foregoing computations exclude as of September 30, 1996: (i) 803,338 shares
of Common Stock issuable upon exercise of outstanding stock options, at a
weighted average exercise price of $2.16 per share; (ii) 574,504 shares of
Common Stock issuable upon exercise of outstanding warrants, at exercise prices
ranging from $2.50 to $25.00 per share and a weighted average exercise price of
$17.00 per share; and (iii) 612,328 shares of Common Stock available for future
grant under the Stock Plans. To the extent that options or warrants are
exercised and shares of Common Stock are issued, there will be further dilution
to new investors. See "Management - Stock Plans", "- Director Compensation" and
"Description of Capital Stock."
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to the
Company's consolidated statements of operations data for the years ended
December 31, 1993, 1994 and 1995 and the consolidated balance sheet data at
December 31, 1994 and 1995 are derived from the consolidated financial
statements of the Company included elsewhere in this Prospectus which have been
audited by Ernst & Young LLP, independent auditors. The consolidated statement
of operations data for the period from inception (December 11, 1990) to December
31, 1992 and the consolidated balance sheet data at December 31, 1992 and 1993
are derived from consolidated financial statements audited by Ernst & Young LLP
not included in this Prospectus. The consolidated statements of operations data
for the nine months ended September 30, 1995 and 1996 and for the period from
inception (December 11, 1990) to September 30, 1996 and the consolidated balance
sheet data at September 30, 1996, are derived from unaudited consolidated
financial statements that have been prepared on the same basis as the audited
consolidated financial statements and in the opinion of management contain all
adjustments, consisting only of normal recurring adjustments, necessary for fair
presentation of the financial position at such date and the results of
operations for such periods. The historical results are not necessarily
indicative of the results of operations to be expected for the entire year. The
data set forth below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
INCEPTION INCEPTION
(DEC. 11, NINE MONTHS ENDED (DEC. 11,
1990) TO YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1990) TO
DEC. 31, ------------------------------------- ------------------------ SEPTEMBER 30,
IN THOUSANDS, EXCEPT PER SHARE DATA 1992 1993 1994 1995 1995 1996 1996
----------- ----------- ----------- ----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
License revenue...................... $ - $ - $ - $ - $ - $ 250 $ 250
Operating expenses:
Research and development........... 1,167 4,731 8,823 12,856 10,099 5,834 33,411
General and administrative......... 429 947 2,802 3,402 2,367 2,186 9,766
----------- ----------- ----------- ----------- ----------- ----------- --------------
Total operating expenses............. 1,596 5,678 11,625 16,258 12,466 8,020 43,177
----------- ----------- ----------- ----------- ----------- ----------- --------------
Loss from operations................. (1,596) (5,678) (11,625) (16,258) (12,466) (7,770) (42,927)
Interest (income) expense, net....... 34 (161) (258) 466 288 597 678
----------- ----------- ----------- ----------- ----------- ----------- --------------
Net loss......................... $ (1,630) $ (5,517) $ (11,367) $ (16,724) $ (12,754) $ (8,367) $ (43,605)
----------- ----------- ----------- ----------- ----------- ----------- --------------
----------- ----------- ----------- ----------- ----------- ----------- --------------
Pro forma net loss per share (1)..... $ (4.33) $ (3.37) $ (1.78)
----------- ----------- -----------
----------- ----------- -----------
Shares used in computing pro forma
net loss per share (1).............. 3,861 3,780 4,708
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------
DECEMBER 31,
----------------------------------------------
IN THOUSANDS 1992 1993 1994 1995
---------- ---------- ---------- ---------- SEPTEMBER
30,
1996
------------
(UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short term $ 4,030 $ 5,466 $ 9,743 $ 5,569 $ 10,484
investments............................
Working capital......................... 3,904 5,196 7,686 271 8,689
Total assets............................ 5,375 7,662 16,099 11,448 15,661
Long-term portion of debt and capital 500 745 2,698 3,402 5,000
lease obligations......................
Deficit accumulated during development (1,653) (7,170) (18,537) (35,261) (43,628)
stage..................................
Total stockholders' equity.............. 4,568 6,363 10,561 1,804 7,908
</TABLE>
- ------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for a description
of the shares used in calculating pro forma net loss per share.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Prospectus contain forward-looking statements
which involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in "Risk Factors."
OVERVIEW
CVT is a development stage biopharmaceutical company focused exclusively on the
application of molecular cardiology to the discovery, development and
commercialization of novel small molecule drugs for the treatment of chronic
cardiovascular disease. Since its inception in December 1990, substantially all
of the Company's resources have been dedicated to research and development. To
date, CVT has not generated any product revenue and does not expect to generate
any such revenues for at least several years. As of September 30, 1996, the
Company has an accumulated deficit of approximately $43.6 million. The Company
expects its sources of revenue, if any, for the next several years to consist of
payments under future corporate partnerships and interest income. The process of
developing the Company's products will require significant additional research
and development, preclinical testing and clinical trials, as well as regulatory
approval. These activities, together with the Company's general and
administrative expenses, are expected to result in operating losses for the
foreseeable future. The Company will not receive product revenue unless it
completes clinical trials and successfully commercializes one or more of its
products.
CVT is subject to risks common to biopharmaceutical companies, including risks
inherent in its research and development efforts and clinical trials, reliance
on collaborative partners, enforcement of patent and proprietary rights, the
need for future capital, potential competition and uncertainty of regulatory
approval. In order for a product to be commercialized, it will be necessary for
CVT and its collaborators to conduct preclinical tests and clinical trials,
demonstrate efficacy and safety of the Company's product candidates, obtain
regulatory clearances and enter into manufacturing, distribution and marketing
arrangements, as well as obtain market acceptance. There can be no assurance
that the Company will generate revenues or achieve and sustain profitability in
the future.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
REVENUES. The Company recognized revenues of $250,000 for the nine months ended
September 30, 1996, compared to no revenues for the nine months ended September
30, 1995. The revenue in 1996 was attributed to a non-refundable, up-front fee
earned from a license agreement with Bayer AG.
RESEARCH AND DEVELOPMENT EXPENSES. The Company's research and development
expenses decreased to $5.8 million for the nine months ended September 30, 1996,
compared to $10.1 million for the nine months ended September 30, 1995. The
higher expenses in 1995 were largely due to higher development expenditures
associated with the CVT-1 hypercholesterolemia program, which was terminated in
late 1995 and for which minimal costs were incurred in 1996. In addition,
research and development expenses decreased in 1996 as a result of a decrease in
research personnel and related expenses resulting from a reduction in headcount
in November 1995, partially offset by a $750,000 license fee paid to a
collaborative partner in March 1996 in equity securities. Under a current
license agreement, the Company may be obligated to make milestone payments
totaling $3.0 million to Syntex in 1997 unless the Company elects to terminate
the agreement. In addition, the Company expects research and development
expenses to increase significantly over the next several years as the Company
expands research and product development efforts and amortizes deferred
compensation expense. See Note 8 of Notes to Consolidated Financial Statements.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$2.2 million for the nine months ended September 30, 1996 compared to $2.4
million for the nine months ended September 30, 1995.
19
<PAGE>
The Company expects general and administrative expense to increase in the future
due to an increase in the level of the Company's activities, additional expenses
associated with being a public company and amortization of deferred compensation
expense. See Note 8 of Notes to Consolidated Financial Statements.
INTEREST EXPENSE, NET. Interest expense, net increased to $597,000 for the nine
months ended September 30, 1996, compared to $288,000 for the nine months ended
September 30, 1995, as a result of higher loan balances and prepayment penalties
associated with a restructuring of the Company's debt, partially offset by
higher average cash balances. The Company expects that interest expense, net
will decrease as a result of lower debt costs associated with the Company's debt
restructuring and anticipated increases in interest income generated from the
proceeds of the Offering.
The Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the exercise price of options
granted and the deemed fair value of its Common Stock at the time of grant.
Options generally vest over four years. Deferred compensation of approximately
$2.3 million will be recorded and amortized to both research and development
expenses as well as general and administrative expenses over the related vesting
periods of the options granted during the nine months ended September 30, 1996.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
RESEARCH AND DEVELOPMENT EXPENSES. The Company's research and development
expenses increased to $12.9 million for the year ended December 31, 1995, from
$8.8 million for the year ended December 31, 1994, and $4.7 million for the year
ended December 31, 1993. Research and development expenses increased as a result
of higher development expenses primarily associated with the CVT-1 program which
was terminated in late 1995, along with higher expenses associated with the
hiring of additional personnel to support the Company's expanding research and
product development efforts.
GENERAL AND ADMINISTRATIVE EXPENSES. The Company's general and administrative
expenses increased to $3.4 million for the year ended December 31, 1995, from
$2.8 million for the year ended December 31, 1994, and $947,000 for the year
ended December 31, 1993, primarily as a result of costs associated with the
increasing level of the Company's activities, including increased headcount and
related expenses.
INTEREST EXPENSE, NET. Interest expense, net increased to $466,000 for the year
ended December 31, 1995, from interest (income), net of $(258,000) for the year
ended December 31, 1994, and interest (income), net of $(161,000) for the year
ended December 31, 1993. These changes relate primarily to increased debt
balances and decreased cash and investment balances.
The Company has not generated significant taxable income to date. At December
31, 1995, the net operating losses available to offset future taxable income for
federal income tax purposes were approximately $32.0 million. Because the
Company has experienced ownership changes, future utilization of the
carryforwards may be limited in any one fiscal year pursuant to Internal Revenue
Code regulations. The carryforwards expire at various dates beginning in 2007
through 2010 if not utilized. As a result of the annual limitation, a portion of
these carryforwards may expire before becoming available to reduce the Company's
federal income tax liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private placements of preferred equity securities, equipment and leasehold
improvement financing and other debt financing. As of September 30, 1996, the
Company had received approximately $50.4 million in net proceeds from the sale
of equity securities, and approximately $8.9 million from equipment and
leasehold financings and term loans. On September 30, 1996, the Company
refinanced its existing debt obligations with a $5 million debt financing with
entities associated with Hambrecht & Quist Group. See Note 5 of Notes to
Consolidated Financial Statements.
Cash, cash equivalents and short-term investments at September 30, 1996 totalled
$10.5 million compared to $5.6 million at December 31, 1995. The increase in
1996 was due to receipt of the net proceeds from the sale of equity securities.
The Company's funds are currently invested in short-term, investment grade,
interest-bearing debt obligations.
20
<PAGE>
Net cash used in operations for the nine months ended September 30, 1996 was
$6.2 million, compared to $10.6 million for the nine months ended September 30,
1995. The decrease in cash used in operations was primarily a result of a
decrease in development expenses and reduced headcount and related expenses. Net
cash used in operations in 1995 was $14.3 million, compared to $10.3 million in
1994. Net cash used in operations increased primarily due to the increase in
development expenses, most of which were related to clinical trials and other
development expenditures for the CVT-1 program.
Through September 30, 1996, the Company had invested approximately $6.1 million
in property and equipment, of which approximately $4.4 million was financed
through the Equipment and Leasehold Financings. Minimum payments made under the
equipment and leasehold financings and other debt financings were approximately
$1.6 million in the nine months ended September 30, 1996 and $1.1 million in the
year ended December 31, 1995.
On September 27, 1996, the Company completed a refinancing of its existing debt
obligations with $5.0 million of debt financing from entities associated with
Hambrecht & Quist Group (the H&Q Debt Financings). The H&Q Debt Financings
consist of a $3.0 million term loan which bears interest at the rate of 9.0% per
annum, secured by all of the assets of the Company, and has a final maturity in
September 1999, and a $2.0 million term loan which bears interest at 9.0% per
annum due January 1, 1997. The Company has the option on or before December 31,
1996 to convert the $2.0 million term loan to an equipment lease which would
bear interest at the rate of 9.0% per annum and would have a final maturity in
September 1999. The Company intends to convert the term loan into an equipment
lease if it does not complete the Offering prior to December 31, 1996. If the
Company does not raise a minimum of $13.0 million in gross proceeds through the
sale of equity securities by March 1998, the Company can elect to defer payments
under either the term loan (or the equipment lease) until March 1998 and minimum
subsequent payments would total $3.2 million in 1998 and $1.8 million in 1999.
Otherwise, maximum payments could total $2.0 million, $1.7 million, and $1.3
million in 1997, 1998 and 1999, respectively. The Company intends to use $2.0
million of the net proceeds from the Offering to repay the $2.0 million term
loan due January 1997. See Note 5 of Notes to Consolidated Financial Statements.
The Company will require substantial additional funding after this Offering in
order to complete its research and development activities and commercialize any
potential products. The Company currently estimates that its existing resources,
including the net proceeds from this Offering and projected interest income,
will enable the Company to maintain its current and planned operations through
1998. However, there can be no assurance that the Company will not require
additional funding prior to such time. The Company's forecast of the period of
time through which its financial resources will be adequate to support its
operations is a forward-looking statement that involves risks and uncertainties,
and actual results could vary as a result of a number of factors, including
those described in "Risk Factors" and elsewhere in this Prospectus. If the
Company is unable to establish corporate partnerships for development of CVT-124
and ranolazine, the Company's future capital requirements will increase
substantially. In addition, the Company's future capital requirements will
depend on many other factors, including scientific progress in its research and
development programs, the size and complexity of such programs, the scope and
results of preclinical studies and clinical trials, the ability of the Company
to establish and maintain corporate partnerships, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patent claims, competing technological and market developments, the
cost of manufacturing preclinical and clinical material and other factors not
within the Company's control. There can be no assurance that such additional
financing to meet the Company's capital requirements will be available on
acceptable terms or at all. Insufficient funds may require the Company to delay,
scale back or eliminate some or all of its research or development programs, to
lose rights under existing licenses or to relinquish greater or all rights to
product candidates at an earlier stage of development or on less favorable terms
than the Company would otherwise choose or may adversely affect the Company's
ability to operate as a going concern. If additional funds are raised by issuing
equity securities, substantial dilution to existing stockholders may result.
21
<PAGE>
BUSINESS
OVERVIEW
The Company is a biopharmaceutical company focused exclusively on the
application of molecular cardiology to the discovery, development and
commercialization of novel, small molecule drugs for the treatment of chronic
cardiovascular diseases. Molecular cardiology was developed, in part, by CVT
scientists and their academic collaborators and is based upon the application of
molecular biology and genetics to cardiovascular diseases. This discipline has
yielded new insights into the mechanisms underlying chronic cardiovascular
diseases and has enhanced the search for innovative cardiovascular drugs by
providing an increasing number of new molecular targets for drug discovery. To
date, CVT has discovered five compounds and completed the strategic in-license
of a sixth compound for treatment of chronic cardiovascular diseases.
Two of the Company's drug candidates, CVT-124 and ranolazine, are in clinical
trials. CVT-124 is an adenosine A(1) receptor antagonist discovered by CVT.
Adenosine A(1) receptor antagonists block certain actions of adenosine, a
hormone that modulates different functions of the cardiovascular system. CVT-124
has potential applications in the treatment of edema (fluid accumulation)
associated with congestive heart failure ("CHF") and in the prevention and
treatment of acute renal failure. A Phase I/II study completed by the Company in
the United States indicated that CVT-124 is generally well tolerated and
produces diuretic activity in healthy volunteers. Approximately one-quarter of
the 875,000 patients in the United States hospitalized with a primary diagnosis
of CHF exhibit resistance to current intravenous diuretic treatments. The
Company believes that these patients would represent the initial target market
for CVT-124 in this indication.
The Company's second compound in clinical trials, ranolazine, is a novel
compound for the treatment of angina. Ranolazine was licensed from Syntex in
March 1996. Its novel metabolic mechanism of action was discovered, in part, by
cardiovascular researchers now at or associated with CVT. In Phase I and Phase
II clinical trials conducted by Syntex, ranolazine IR was administered to over
1,200 patients. These clinical trials have indicated that ranolazine IR improved
exercise tolerance in angina patients without adversely affecting heart rate or
decreasing blood pressure, a clinical profile absent from currently available
drugs. Based on these data, as well as Syntex pilot Phase II data with
ranolazine SR for intermittent claudication (pain in the legs due to
insufficient blood flow), the Company intends to commence further clinical
trials of ranolazine SR. The Company believes ranolazine could particularly
benefit angina patients who also suffer from CHF or remain symptomatic despite
maximal doses of currently available anti-anginal drugs. In the United States,
approximately 6.7 million patients are currently diagnosed with angina. Based on
published studies, approximately one-third, or 2.2 million, are either diagnosed
with both angina and CHF or are resistant to currently available treatments. The
Company believes these patients would represent the initial target market for
ranolazine.
Four other compounds discovered by the Company are in preclinical studies.
CVT-313 is a selective inhibitor of the cell cycle enzyme, cyclin-dependent
kinase 2 ("CDK2"). The Company believes that CVT-313 may be useful in a variety
of cellular proliferative disorders, including the prevention of restenosis, as
an adjunct to coronary artery bypass surgery and as a treatment for
cardiomyopathy (heart muscle damage). CVT-634, an inhibitor of another cell
cycle regulating enzyme, is also being evaluated in animal models of chronic
cardiovascular disease. CVT-609 and CVT-429 are highly selective adenosine A(1)
receptor agonists which the Company believes may have potential activity in
treating certain common cardiac arrhythmias. The Company believes that compared
to current therapies, these compounds may offer an improved clinical profile for
immediate treatment of these arrhythmias without unwanted blood pressure
lowering effects.
In addition, the Company has discovered a novel inflammatory factor found in
human cardiovascular diseases, which it partnered to Bayer AG for continued
development.
BACKGROUND
The cardiovascular system is comprised of the heart, the blood vessels, the
kidneys and the lungs. Together, the components of the cardiovascular system
deliver oxygen and other nutrients to the tissues of the body and remove waste
products. The heart propels blood through a network of arteries and veins. The
kidneys closely regulate the blood volume and the balance of electrolytes (such
as sodium, potassium and chloride) in the blood, and the lungs oxygenate the
blood and remove carbon dioxide. To accomplish these tasks, the cardiovascular
system must
22
<PAGE>
maintain adequate blood flow, or cardiac output. Cardiac output is determined by
such factors as heart rate and blood pressure, which in turn are controlled by a
variety of hormones such as adrenaline, angiotensin and adenosine. These
hormones are small molecules which exert their effects by binding to specific
receptors on the surfaces of a variety of cell types in the heart, lungs, blood
vessels and kidneys. Any significant disruption of this system results in
cardiovascular disease.
Cardiovascular disease is the leading cause of death in the United States,
claiming more than 950,000 lives in 1993. The American Heart Association
projects the total cost of cardiovascular medications in the United States for
1996 at $11 billion.
Chronic cardiovascular diseases, including atherosclerosis (hardening of the
arteries), hypertension (high blood pressure) and others, may cause permanent
damage to the heart and blood vessels, leading to CHF, (4.7 million patients),
angina (6.8 million patients) and, heart attack (1.5 million patients). CHF
occurs when the heart becomes weakened and, as a result, can no longer maintain
adequate blood circulation throughout the body. The kidneys respond to this
decrease in blood flow by increasing the retention of salt and water, leading to
chronic symptoms such as shortness of breath and edema (fluid retention) in the
legs and lungs. Molecular cardiology has provided new insight into the
mechanisms underlying chronic cardiovascular diseases, thus creating the
opportunity for improved therapies.
Over the past twenty years, drugs such as nitrates, beta blockers, calcium
channel blockers and ACE inhibitors, have been developed to treat cardiovascular
diseases. These drugs have contributed to an increase in the survival of
patients who suffer from chronic cardiovascular disease; however, they also can
cause a variety of undesirable side effects, including fatigue, depression,
impotence, headaches, palpitations and edema.
BUSINESS STRATEGY
The Company's strategy is to become a leader in the development of novel,
cost-effective treatments for chronic cardiovascular diseases by leveraging its
expertise in molecular cardiology. The Company is developing products based on
small molecules designed to (i) utilize novel mechanisms of action, (ii) address
segments of the cardiovascular patient population which are either underserved
or not treatable by existing therapies, and (iii) offer the currently served
cardiovascular patient population the potential for improved efficacy with fewer
side effects than available drugs.
The Company believes that it can best utilize its internal resources by
concentrating its activities on discovery, preclinical evaluation and early
clinical phases of drug development. The Company intends to establish
partnerships with pharmaceutical companies for later stage clinical trials and
marketing and sales activities for its products. The Company believes that such
partnerships will enable it to more effectively and economically develop and
market its initial products.
DRUG DISCOVERY PLATFORM
CVT's drug discovery platform supports several programs, including those focused
on the adenosine A(1) receptor, the cell cycle and chronic inflammation in the
cardiovascular system. These programs have produced compounds currently in
clinical or preclinical development or outlicensed for use in third party drug
discovery programs. CVT's expertise in molecular cardiology and drug development
has been critical to the identification of these drug candidates.
The Company believes that its drug discovery platform allows it to efficiently
select novel, clinically relevant drug candidates that have a significant
probability of commercial potential. CVT first evaluates new targets with
respect to clinical relevance and suitability for small molecule inhibition. CVT
then utilizes a highly integrated, multidisciplinary approach to produce novel
small molecules as drug candidates for these targets. The Company combines
molecular modeling and combinatorial chemistry to assemble targeted libraries of
new chemical entities, an approach which the Company believes expedites the
identification of potential drug leads. The Company has developed a
comprehensive proprietary database correlating biological activity of candidate
drugs with their structures. From this database, CVT identifies final lead
compounds based on predetermined development criteria including potency,
specificity, manufacturability, and pharmacologic activity in animal and IN
VITRO models. The Company determines the proper selection of cell-based assays
and animal models of disease to enhance development of the drug candidate based
on its projected use in the clinical setting.
23
<PAGE>
PRODUCTS UNDER DEVELOPMENT
The Company's products under development include:
<TABLE>
<CAPTION>
PRODUCT TARGET INDICATION DEVELOPMENT STATUS(1)
- ---------- -------------------- --------------------------- --------------------------
<S> <C> <C> <C>
CVT-124 A(1) receptor Edema associated with CHF Phase I/II completed
(antagonist) Acute Renal Failure Phase I completed
RANOLAZINE Glucose metabolism Angina Phase II completed
Intermittent Claudication Pilot Phase II completed
CVT-609 A(1) receptor Supraventricular Preclinical
(agonist) Tachycardia
CVT-429 A(1) receptor Supraventricular Preclinical
(agonist) Tachycardia
CVT-313 CDK2 Restenosis, Arterial Bypass Preclinical
Graft, Cardomyopathy
CVT-634 Proteasomal protease Restenosis, Arterial Bypass Preclinical
Graft, Cardiomyopathy
</TABLE>
- ------------------------
(1) "Phase II" indicates initial efficacy testing in a limited patient
population.
"Phase I/II" indicates testing in humans for safety and preliminary indications
of biological activity.
"Phase I" indicates initial safety testing and pharmacological profiling in
humans.
"Preclinical" indicates lead compound selected for development which meets
predetermined criteria for potency, specificity, manufacturability, and
pharmacologic activity in animal and IN VITRO models.
CVT-124
The Company believes that CVT-124 is the most potent and selective adenosine
A(1) receptor antagonist reported to date. Preclinical studies and clinical
trials have shown statistically significant increases in sodium excretion in
response to CVT-124. Thus, the Company believes that CVT-124 has the potential
to be an effective new therapy for treatment of edema due to CHF and prevention
and treatment of acute renal failure and is developing it for these uses.
CVT-124 was identified in the Company's adenosine A(1) receptor program. This
program is focused on the development of agents that are highly selective for
the adenosine A(1) receptor and has produced both antagonists and agonists to
this class of receptors. The Company continues to explore additional
applications of the technology developed in the adenosine A(1) receptor program.
Adenosine is a naturally occurring hormone that modulates different functions of
the heart, brain, kidney and blood vessels. Its actions are mediated in these
organs by two classes of receptors, A(1) and A(2), that stimulate very different
physiological effects that can be separately targeted in drug development.
Adenosine A(1) receptors are located on the proximal tubules of the kidney where
they stimulate reabsorption of sodium and hence of water. The Company believes
that it was among the first to identify the presence of these adenosine A(1)
receptors in the proximal tubule of the kidney. In contrast to A(1) receptors,
adenosine A(2) receptors stimulate the dilation of blood vessels in the heart,
muscles and kidney thereby lowering blood pressure.
CVT has focused on creating an adenosine A(1) receptor antagonist specific
enough to avoid blocking the A(2) receptor and thus avoiding unintended side
effects. This concept was developed based on the Company's insight into the
newly discovered role of the A(1) receptor on the proximal tubule cell of the
kidney and its potential importance in treatment of edema states, such as CHF,
which are characterized by excessive accumulation of sodium and water in the
body.
24
<PAGE>
INDICATIONS
EDEMA ASSOCIATED WITH CONGESTIVE HEART FAILURE. Approximately 4.7 million
people in the United States suffer from CHF, with an estimated 400,000 new
diagnoses each year. These patients typically seek medical help because of
edema, an accumulation of fluid in the lungs and extremities. Approximately
875,000 patients are hospitalized each year in the United States with a primary
diagnosis of CHF, and CHF is the leading cause of hospital admissions among
patients over 65. Approximately one-quarter of these hospitalized patients
exhibit resistance to current intravenous diuretic treatments. The Company
believes that these patients would represent the initial target market for
CVT-124 in this indication.
Edema fluid accumulates in the body because of adaptations by the kidney during
CHF. Each kidney is comprised of approximately one million tiny blood filtering
units called nephrons. (See Figure 1) Normally in each nephron, blood is
filtered at the renal glomerulus and sodium and water are reabsorbed by the
kidney at three locations further along the nephron. Fifty to seventy percent of
the filtered sodium is reabsorbed at the proximal tubule, the portion of the
nephron closest to the glomerulus. Up to 40% is reabsorbed at the loop of Henle,
and the remaining portion, usually less than 10%, is reabsorbed at the distal
tubule. The filtered, non-reabsorbed impurities wash out into the urine. In
patients suffering from CHF, blood flow through the kidney decreases because of
the poor pumping function of the heart. The kidney interprets this event as
blood loss and attempts to increase its retention of salt and water to maintain
blood pressure. It does this by shifting more (up to 99%) of its reabsorption of
sodium to the proximal tubule. The result is the harmful build-up of salt and
water in the body, leading to edema.
Graphical description of sodium reabsorption in the kidney
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Current treatment of CHF consists of therapy designed to improve the pumping
function of the heart combined with the administration of diuretics to eliminate
excess sodium and water from the body by blocking reabsorption in the kidney.
However, current diuretic therapies inhibit sodium reabsorption either at the
loop of Henle (furosemide) or the distal tubule (thiazides and spironolactone),
where as little as one percent of reabsorption of sodium can take place in
patients with advanced CHF. Since increasing amounts of sodium are reabsorbed
proximally as CHF worsens, distally acting drugs are correspondingly less
effective over time and patients become more symptomatic. Approximately one
quarter of hospitalized CHF patients exhibit resistance to current intravenous
diuretic therapies due to excessive fluid reabsorption in the proximal tubule,
and no therapy currently exists which targets this site of the disease process.
The dosage for the most commonly prescribed diuretics for edema associated with
CHF are often increased as the disease progresses, and therefore are
increasingly associated with toxic side effects, including potassium loss, which
may lead to an increased incidence of cardiac arrhythmias if potassium is not
monitored and replaced, and uric acid build-up which may lead to gout.
Preclinical studies conducted by the Company have indicated that CVT-124 acts as
a potent diuretic by blocking the adenosine A(1) receptors in the proximal
tubule that would ordinarily stimulate sodium reabsorption at that site. These
studies also indicated that CVT-124 acted at the distal tubule to reduce sodium
reabsorption and minimize potassium excretion. This combination of diuretic
mechanisms indicates a unique clinical profile as compared to currently
available drugs and suggests that CVT-124 may be particularly useful in the
treatment of edema associated with CHF on an acute and chronic basis.
Presentation of potential advantages of CVT over existing diuretics
CVT completed a double-blind, placebo-controlled Phase I/II trial of intravenous
CVT-124 in 26 healthy volunteers. Data from this trial support CVT-124's
combination of diuretic mechanisms. Statistically significant, dose-related
increases in sodium excretion were observed in response to CVT-124, amounting to
a doubling or more in the excretion of sodium compared to placebo. In contrast,
mean potassium excretion did not show clinically significant increases. Uric
acid excretion was also significantly increased by CVT-124 compared to placebo.
CVT-124 was generally well-tolerated.
ACUTE RENAL FAILURE. Acute renal failure is a decline in kidney function that
may require temporary or chronic therapy with dialysis procedures. Acute renal
failure is a complication of certain general medical conditions associated with
low blood flow and certain commonly used medications or diagnostic agents, such
as
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cyclosporine, gentamicin, amphotericin, cisplatin, and radiocontrast dye used in
x-ray studies. Because the A(1) receptor may be relevant in this type of kidney
failure, CVT is planning clinical trials in acute renal failure to assess the
opportunity for its treatment and prevention by CVT-124.
FUTURE DEVELOPMENT OF CVT-124
While the Company's clinical trials to date have utilized an intravenous
formulation of CVT-124, the Company intends to develop CVT-124 in intravenous
and oral formulations, both for the treatment of edema in fluid-retaining states
like CHF and for the treatment or prevention of acute renal failure. There can
be no assurance that CVT-124 will prove to be safe or efficacious in humans or
that CVT-124 will obtain FDA or other regulatory or foreign marketing approval
for any indication.
The Company is currently planning three clinical trials: a Phase II intravenous
trial in stable CHF (18-24 patients); a Phase II intravenous trial in renal
transplant patients with acute renal failure (30-40 patients); and a Phase I
trial to explore the feasibility of an oral formulation (6-8 patients). The
first of these trials is planned to begin in the first half of 1997. The
Company's current estimate of the commencement of various clinical trials
included in this Prospectus are forward-looking statements that involve risks
and uncertainties. The actual clinical trial dates could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the Company's success in completing preclinical development
and the other factors set forth under "Risk Factors" and elsewhere in this
Prospectus.
RANOLAZINE
Ranolazine is a patented compound which has been tested by Syntex in Phase I and
Phase II trials in patients with angina. The compound fits the Company's
criteria for development candidates as it is a small molecule which works
through a novel mechanism of action. The Company successfully obtained a license
for ranolazine from Syntex in March 1996, after the acquisition of Syntex by
Roche. The Company is developing ranolazine to treat angina because the Company
believes it does not impair blood pressure or heart rate and has an improved
tolerability profile.
Ranolazine acts by modulating the body's metabolism to shift the source of
energy for the heart from fatty acid toward glucose. Ranolazine decreases the
heart's oxygen demand for a given level of cardiac work because less oxygen is
required to produce an equivalent amount of energy from glucose than from fatty
acids. The Company believes this effect on muscle metabolism may also benefit
patients suffering from intermittent claudication.
INDICATIONS
ANGINA. Angina is a clinical syndrome manifested by chest pain caused by
myocardial ischemia (insufficient blood flow to the heart muscle) due to
blockage of the coronary arteries. Patients usually experience chest pain on
exertion which can become more severe over time. In the United States,
approximately 6.7 million patients are currently diagnosed with angina. Based on
a published multicenter study involving over 5,000 angina patients, over half of
these patients are currently being treated with multiple medications, including
nitrates, beta blockers and calcium channel blockers. These anti-anginal drugs
accounted for over $3.0 billion in U.S. sales in 1995. Based on published
studies, approximately one-third, or 2.2 million, of angina patients are either
diagnosed with both angina and CHF or are resistant to currently available
treatments. The Company believes these patients would represent the initial
target market for ranolazine.
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All currently available drugs to treat angina reduce the heart's oxygen demand
by reducing cardiac work via hemodynamic mechanisms (reduction of pump function,
heart rate, and/or blood pressure). These hemodynamic effects can limit or
prevent the use of currently available drugs in patients whose blood pressure or
cardiac function is already decreased. These effects can be particularly
pronounced when these drugs are used in combination. Additional adverse effects
include lower extremity edema associated with calcium channel blockers,
impotence and depression associated with beta blockers and headaches associated
with nitrates. Consequently, for some patients, presently available medical
treatment cannot provide complete relief of angina without unacceptable adverse
effects. The following table sets forth the mechanisms through which
anti-anginal drugs operate:
<TABLE>
<CAPTION>
MECHANISMS FOR ANTI-ANGINAL AGENTS
CHANGE IN CHANGE IN BLOOD
THERAPY HEART RATE PRESSURE MECHANISM
<S> <C> <C> <C>
Nitrates None down arrow Vasodilation
Beta Blockers down arrow down arrow Decreased Pump Function
Calcium Channel Blockers down arrow down arrow Decreased Pump Function, Vasodilation
Ranolazine None None Metabolic Modulation
</TABLE>
Ranolazine IR has been administered to over 200 healthy human volunteers and
over 1,200 patients with ischemic heart disease or CHF in clinical trials
conducted by Syntex. Placebo controlled ranolazine IR trials involving treadmill
testing in patients with chronic stable angina have demonstrated statistically
significant and clinically meaningful increases in (i) exercise time to onset of
angina, (ii) total exercise duration, and (iii) exercise time to onset of an
electrocardiographic change associated with insufficient blood flow to the heart
muscle. The anti-anginal effect of ranolazine IR was observed in these trials
regardless of whether the drug was given alone or in combination with beta
blockers or calcium channel blockers, and the drug was generally well tolerated
without a significant incidence of adverse events.
In initial clinical trials, ranolazine IR was administered on a three times
daily schedule. To achieve a more commercially attractive product with a
twice-daily dosing schedule, Syntex developed ranolazine SR. In volunteer trials
conducted by Syntex, the SR formulation maintained ranolazine plasma
concentrations in the range associated with increased exercise times in the
stable angina trials of ranolazine IR.
Although CVT intends to pursue regulatory approval for treatment of all patients
with chronic angina, the Company believes angina patients who are resistant to
currently available treatments and those with angina and CHF would represent the
initial market for ranolazine.
INTERMITTENT CLAUDICATION. Intermittent claudication is a clinical syndrome
manifested by pain in the legs during exercise. Like angina, this syndrome is
caused by blockage or narrowing of arteries. These patients generally either
limit their activity or in severe cases undergo vascular surgery. Over two
million people in the United States suffer from intermittent claudication. Only
one drug is approved by the FDA to treat this condition in the United States,
and worldwide sales in 1995 were approximately $400 million.
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A pilot trial of ranolazine SR in patients with intermittent claudication was
completed by Syntex in 1994. Ranolazine SR was generally well tolerated and
exhibited a trend toward prolongation of exercise duration and time to onset of
claudication. This clinical trial was not intended to be large enough to
demonstrate statistical significance. Further trials will be required to
demonstrate the utility of ranolazine SR for this indication.
DEVELOPMENT HISTORY OF RANOLAZINE
Following the acquisition of Syntex by Roche in 1994, ranolazine clinical
development was discontinued. Previously, Syntex had met with the FDA to
establish a Phase III clinical development program for ranolazine SR in both
angina and intermittent claudication and had begun enrollment in an angina Phase
III trial in late 1994.
FUTURE DEVELOPMENT OF RANOLAZINE
CVT is actively seeking a corporate partner for the development of ranolazine,
prior to initiating new Phase III trials in angina which the Company currently
expects to involve several hundred patients. The Company's clinical development
plan for ranolazine assumes that Phase I data and several Phase II angina trials
with ranolazine IR combined with Phase I data and safety and tolerability data
from a pilot Phase II trial for intermittent claudication with ranolazine SR
will be accepted by the FDA to initiate Phase III trials with ranolazine SR.
There can be no assurance that such clinical data will be accepted by the FDA in
support of initiation of such Phase III trials with ranolazine SR or that the
Company will not be required or otherwise choose to conduct additional Phase II
clinical trials of ranolazine SR prior to commencement of Phase III clinical
trials. Commencement of the Phase III trials by Syntex in 1994 was based upon
Phase I and II ranolazine IR data combined with Phase I ranolazine SR data. The
Company has initiated pharmacological and mechanism studies and is engaged in
the transfer of manufacturing technology from Syntex. There can be no assurance
that the Company will obtain a corporate partner to initiate Phase III trials,
that ranolazine will obtain FDA or other regulatory or foreign marketing
approval for any indication.
CVT-609 AND CVT-429
CVT-609 and CVT-429 were designed and synthesized in the Company's adenosine
A(1) receptor program. The Company believes that CVT-609 and CVT-429 may have
potential application in treating supraventricular tachycardia, as well as
additional applications. Based on preclinical data, the Company believes CVT-609
and CVT-429 are among the most selective adenosine A(1) receptor agonists
reported. Preclinical studies conducted by the Company indicated that CVT-609
and CVT-429 slowed electrical impulses in the conduction tissue of the heart by
stimulating the adenosine A(1) receptor.
Supraventricular tachycardias (atrial fibrillation, atrial flutter and AV nodal
re-entrant tachycardias) are among the most common cardiac arrhythmias
complicating ischemic heart disease and cardiac surgical procedures and account
for over 300,000 new hospital admissions in the United States each year. They
originate in the atria as rapid and irregular heart beats that then spread to
the ventricles. The ventricular contractions stimulated by the atrial impulses
can be so fast and irregular that cardiac function can be severely compromised,
resulting in dangerously low blood pressure, fluid in the lungs, and ischemic
damage to the heart, brain and other organs.
Because of the severity of these conditions and the need to treat patients
quickly, intravenous therapies are typically used. Current medical therapies aim
to slow the heart to a normal rate but have significant limitations in the acute
care setting. Digitalis is effective in controlling heart rate, but requires a
long time to take effect, which can be dangerous in patients with a failing
heart. Calcium channel blockers, beta blockers and adenosine act quickly but are
themselves associated with hypotension and depressed cardiac function,
potentially exacerbating the condition of patients already experiencing cardiac
dysfunction as a complication of the tachycardia.
For the treatment of supraventricular tachycardia, selective stimulation of the
A(1) receptor is required to slow the heart rate without significant stimulation
of the A(2) receptor which would lower blood pressure. The Company has
identified CVT-609 and CVT-429 as candidates for clinical development of
intravenous agents and is proceeding with preclinical studies.
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CVT-313 AND CVT-634
CVT-313 and CVT-634 were designed and synthesized in the Company's cell cycle
inhibitor program. The goal of this program is to develop a new class of
therapeutics that suppresses abnormal cellular proliferation, which contributes
to progressive cardiovascular diseases. Excessive proliferation of
cardiovascular connective tissue cells or vascular smooth muscle cells causes
the scarring and loss of function that is characteristic of chronic diseases of
the heart, blood vessels and kidneys. Several of the Company's scientists and
scientific advisors have been among the leaders in identifying the role of cell
proliferation in causing a variety of cardiovascular diseases. As part of its
drug discovery strategy, the Company has focused upon newly discovered enzymes
referred to collectively as the cell cycle enzymes that regulate cellular
proliferation. In particular, two important targets identified by the Company,
CDK2 and the proteasomal protease, may have different clinical applications. The
Company is continuing to explore other cell cycle regulatory enzymes as
potential targets in this program. CVT 313 is a novel compound which
specifically inhibits CDK2, a critical regulatory protein which participates in
the control of the cell cycle. CDK2, whose three dimensional structure was first
determined by academic collaborators of the Company, is central to cellular
proliferation and was chosen as the Company's first target in the cell cycle
inhibitor program. Preclinical studies have shown significant reduction of
restenosis after vascular injury, both confirming the appropriate selection of
the target and identifying a potential initial clinical application.
CVT-634, also identified in this program, has been shown to be a potent
inhibitor of proteasomal protease, which regulates both CDK2 activation and
macrophage activation. CVT-634 has been shown in preclinical studies to control
smooth muscle cell proliferation. This compound is undergoing further
preclinical testing.
CHRONIC ANTI-INFLAMMATORY INHIBITORS
CVT is seeking to address chronic inflammatory diseases of the cardiovascular
system by targeting macrophage infiltration into the heart and kidney. Activated
macrophages are a type of white blood cell found in lesions associated with
virtually all chronic cardiovascular diseases, including atherosclerotic plaque,
and are known to secrete growth factors which promote cellular proliferation and
scarring. The Company has discovered a novel inflammatory factor in this program
which has been partnered to Bayer AG for continued development.
LICENSES AND COLLABORATIONS
CVT has licensed certain chemical compounds from academic collaborators and
other companies and has applied its drug discovery strategies to analog and
optimize these structures and to identify applications for preclinical and
clinical development. Once these drug candidates enter clinical trials, the
Company intends to establish strategic partnerships to expedite development and
commercialization. For those programs which provide knowledge useful in the
identification of compounds with potential application outside of chronic
cardiovascular disease, the Company intends to find corporate partners at the
preclinical stage. The Company's licenses and collaborations currently in effect
include:
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION
In June 1994, the Company entered into a license agreement with the University
of Florida Research Foundation, Inc. ("UFRFI") under which the Company received
exclusive worldwide rights to develop adenosine A(1) receptor antagonists and
agonists for the detection, prevention and treatment of human and animal
diseases. In consideration for the license, the Company paid UFRFI an initial
license fee and is obligated to pay royalties based on net sales of products
which utilize the licensed technology. Pursuant to the agreement, the Company
must exercise commercially reasonable efforts to develop and commercialize one
or more products covered by the licensed technology and is obligated to meet
milestones in completing certain preclinical work. In the event the Company
fails to reach those milestones, UFRFI may convert the exclusive license into a
non-exclusive license. As part of the license agreement with UFRFI, the Company
entered into a research agreement with the University of Florida.
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SYNTEX/ROCHE
In March 1996, the Company entered into a license agreement with Syntex for
United States and foreign patent rights to a compound having the generic name of
ranolazine for products treating angina and certain other cardiovascular
indications. The agreement provides for Syntex to also supply certain quantities
of the compound to the Company. The license agreement is exclusive and worldwide
except for the following countries which Syntex licensed exclusively to Kissei
Pharmaceuticals, Ltd. of Japan: Japan, Korea, China, Taiwan, Hong Kong, the
Philippines, Indonesia, Singapore, Thailand, Malaysia, Vietnam, Myanmar, Laos,
Cambodia and Brunei. Under the license agreement, the Company paid an initial
license fee. In addition, the Company is obligated to make payments on the
achievement of certain development milestones and to make royalty payments based
on net sales of products which utilize the licensed technology. The Company is
required to use commercially reasonable efforts to develop the compound for
angina within certain milestone guidelines. The Company may be obligated to make
milestone payments totaling $3.0 million to Syntex in 1997 unless the Company
elects to terminate the agreement. The license agreement also sets milestones
within which the Company must launch products in each country covered by the
license or lose exclusivity in such territories.
BAYER AG
In May 1996, the Company granted an exclusive worldwide license to Bayer AG for
a novel inflammatory factor for preclinical and clinical development for any
therapeutic, prophylactic or diagnostic use in humans or animals. In
consideration of this license, Bayer AG paid the Company a non-refundable
license fee of $250,000, and agreed to make certain cash milestone payments
related to the progress of product development. Bayer AG is also obligated to
pay the Company royalties based on net sales of products which utilize the
licensed technology. The Company is responsible for the expenses of patent
prosecution for the licensed technology. Bayer AG may terminate the agreement
for any reason upon written notice to the Company.
MARKETING AND SALES
The Company currently has no sales, marketing or distribution capability. The
Company intends to rely on relationships with one or more pharmaceutical
companies with established distribution systems and direct sales forces to
market its products. In the event that the Company is unable to reach agreement
with one or more pharmaceutical companies to market its products, it may be
required to market its products directly and to develop a marketing and sales
force with technical expertise and with supporting distribution capability.
There can be no assurance that the Company will be able to establish in-house
sales and distribution capabilities or relationships with third parties, or that
it will be successful in commercializing any of its potential products. To the
extent that the Company enters into co-promotion or other licensing
arrangements, any revenues received by the Company will depend upon the efforts
of third parties, and there can be no assurance that such efforts will be
successful.
MANUFACTURING
CVT does not currently operate manufacturing facilities for clinical or
commercial production of its proposed products. The Company has no experience
in, and currently lacks the resources and capability to, manufacture any of its
proposed products on a commercial scale. Accordingly, the Company is, and will
continue to be, dependent on corporate partners, licensees or other third
parties for clinical and commercial scale manufacturing. The Company does have
experience in the transfer of synthetic technology from discovery to scale-up
manufacturing facilities, having successfully executed technology transfer for
the manufacture of clinical supplies of one orally administered agent and one
intravenously administered agent. CVT-124 is currently being manufactured to
supply clinical trials by a third party, and the Company is currently
negotiating with third party manufacturers for clinical scale production of
ranolazine. There can be no assurance that the Company will be able to reach
satisfactory agreements with its partners or third parties or that such parties
will be able to develop adequate manufacturing capabilities for commercial scale
quantities of products.
PATENTS AND PROPRIETARY TECHNOLOGY
Patents and other proprietary rights are important to the Company's business.
The Company's policy is to file patent applications and to protect technology,
inventions and improvements to inventions that are commercially
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important to the development of its business. The Company also relies on trade
secrets, confidentiality agreements and other protective measures to protect its
technology and proposed products. The Company's failure to obtain patent
protection or otherwise protect its proprietary technology or proposed products
may have a material adverse effect on the Company's competitive position and
business prospects.
The Company owns four pending patent applications in the United States relating
to an inflammatory factor licensed to Bayer AG, CVT-609/429, CVT-313 and
CVT-634, as well as one foreign patent application with respect to the
inflammatory factor licensed to Bayer. In addition, the Company has acquired an
exclusive license to one United States issued patent, two United States patent
applications and related foreign patent applications related to CVT-124. The
Company also has acquired a license which is exclusive in certain territories to
three United States issued patents, one United States patent application and
related foreign patent applications related to ranolazine. The patent
application process takes several years and entails considerable expense. There
is no assurance that patents will issue from these applications or, if patents
do issue, that the claims allowed will be sufficient to protect the Company's
technology. One of the primary patents relating to ranolazine will expire in May
2003 unless the Company is granted an extension based upon delays in the FDA
approval process.
Patent applications in the United States are maintained in secrecy until a
patent issues, and the Company cannot be certain that others have not filed
patent applications for technology covered by the Company's pending applications
or that the Company was the first to invent the technology that is the subject
of such patent application. Competitors may have filed applications for, or may
have received patents and may obtain additional patents and proprietary rights
relating to, compounds, products or processes that block or compete with those
of the Company. There can be no assurance that third parties will not assert
patent or other intellectual property infringement claims against the Company
with respect to its products or technology or other matters. There may be third
party patents and other intellectual property relevant to the Company's products
and technology which are not known to the Company.
Patent litigation is becoming more widespread in the biopharmaceutical industry.
Litigation may be necessary to defend against or assert claims of infringement,
to enforce patents issued to the Company, to protect trade secrets or know-how
owned by the Company, or to determine the scope and validity of the proprietary
rights of third parties. Although no third party has asserted that the Company
is infringing such third party's patent rights or other intellectual property,
there can be no assurance that litigation asserting such claims will not be
initiated, that the Company would prevail in any such litigation, or that the
Company would be able to obtain any necessary licenses on reasonable terms, if
at all. Any such claims against the Company, with or without merit, as well as
claims initiated by the Company against third parties, can be time-consuming and
expensive to defend or prosecute and to resolve. If other companies prepare and
file patent applications in the United States that claim technology also claimed
by the Company, the Company may have to participate in interference proceedings
to determine priority of invention which could result in substantial cost to the
Company even if the outcome is favorable to the Company.
The Company also relies on trade secrets, confidentiality agreements and other
protective measures to protect its technology and proposed products. There can
be no assurance that third parties will not independently develop equivalent
proprietary information or techniques, will not gain access to the Company's
trade secrets or disclose such technology to the public, or that the Company can
maintain and protect unpatented proprietary technology. The Company typically
requires its employees, consultants, collaborators, advisors and corporate
partners to execute confidentiality agreements upon commencement of employment
or other relationships with the Company. There can be no assurance, however,
that these agreements will provide meaningful protection or adequate remedies
for the Company's technology in the event of unauthorized use or disclosure of
such information, or that the parties to such agreements will not breach such
agreements.
GOVERNMENT REGULATION
FDA REQUIREMENTS FOR DRUG COMPOUNDS. The research, testing, manufacture and
marketing of drug products are extensively regulated by numerous governmental
authorities in the United States and other countries. In the United States,
drugs are subject to rigorous regulation by the FDA. The federal Food, Drug and
Cosmetic Act, as amended (the "FDC Act"), and the regulations promulgated
thereunder, and other federal and state statutes and regulations, govern, among
other things, the research, development, testing, manufacture, storage,
recordkeeping,
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labeling, promotion and marketing and distribution of pharmaceutical products.
Failure to comply with applicable regulatory requirements may subject a company
to administrative or judicially imposed sanctions such as civil penalties,
criminal prosecution, injunctions, product seizure or detention, product
recalls, total or partial suspension of product, and FDA refusal to approve
pending NDA applications or NDA supplements to approved applications.
The steps ordinarily required before a new pharmaceutical product may be
marketed in the United States include: (i) preclinical laboratory tests, IN VIVO
preclinical studies and formulation studies; (ii) the submission to the FDA of
an IND, which must become effective before clinical testing may commence; (iii)
adequate and well-controlled clinical trials to establish the safety and
effectiveness of the drug for each indication; (iv) the submission of a NDA to
the FDA; and (v) FDA review and approval of the NDA prior to any commercial sale
or shipment of the drug. Preclinical tests include laboratory evaluation of
product chemistry and formulation, as well as animal studies to assess the
potential safety and efficacy of the product. Preclinical tests must be
conducted in compliance with Good Laboratory Practice regulations and compounds
for clinical use must be formulated according to cGMP requirements. The results
of preclinical testing are submitted to the FDA as part of an IND. A 30-day
waiting period after the filing of each IND is required prior to the
commencement of clinical testing in humans. If the FDA has not commented on or
questioned the IND within this 30-day period, clinical studies may begin. If the
FDA has comments or questions, the questions must be answered to the
satisfaction of the FDA before initial clinical testing can begin. In addition,
the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If
the FDA imposes a clinical hold, clinical trials cannot commence or recommence
without FDA authorization and then only under terms authorized by the FDA. In
some instances, the IND application process can result in substantial delay and
expense.
Clinical trials involve the administration of the investigational new drug to
healthy volunteers or patients under the supervision of a qualified principal
investigator. Clinical trials are conducted in accordance with Good Clinical
Practice regulations under protocols detailing the objectives of the study, the
parameters to be used in monitoring safety and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical study must be conducted under the auspices of an
independent Institutional Review Board ("IRB") at the institution at which the
study will be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects and the possible liability of the
institution. Clinical trials to support NDAs are typically conducted in three
sequential phases, but the phases may overlap. In Phase I, the initial
introduction of the drug into healthy human subjects or patients, the drug is
tested to assess metabolism, pharmacokinetics and pharmacological actions and
safety, including side effects associated with increasing doses. Phase II
usually involves studies in a limited patient population to (i) determine the
efficacy of the drug in specific, targeted indications, (ii) determine dosage
tolerance and optimal dosage and (iii) identify possible adverse effects and
safety risks. If a compound is found to be effective and to have an acceptable
safety profile in Phase II evaluations, Phase III trials are undertaken to
further evaluate clinical efficacy and to further test for safety within an
expanded patient population at geographically dispersed clinical study sites.
There can be no assurance that Phase I, Phase II or Phase III testing will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's products subject to such testing.
After completion of the required clinical testing, generally an NDA is
submitted. FDA approval of the NDA is required before marketing may begin in the
United States. The NDA must include the results of extensive clinical and other
testing and the compilation of data relating to the product's chemistry,
pharmacology and manufacture, the cost of all of which is substantial. The FDA
reviews all NDAs submitted before it accepts them for filing and may request
additional information rather than accepting an NDA for filing. In such an
event, the NDA must be resubmitted with the additional information and, again,
is subject to review before filing. Once the submission is accepted for filing,
the FDA begins an in-depth review of the NDA. Under the FDC Act, the FDA has 180
days in which to review the NDA and respond to the applicant. The review process
is often significantly extended by FDA requests for additional information or
clarification regarding information already provided in the submission. The FDA
may refer the application to the appropriate advisory committee, typically a
panel of clinicians, for review, evaluation and a recommendation as to whether
the application should be approved. The FDA is not bound by the recommendation
of an advisory committee. If FDA evaluations of the NDA and the manufacturing
facilities are favorable, the FDA may issue either an approval letter or an
approvable letter, which usually
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contains a number of conditions that must be met in order to secure final
approval of the NDA. When and if those conditions have been met to the FDA's
satisfaction, the FDA will issue an approval letter, authorizing commercial
marketing of the drug for certain indications. As a condition of NDA approval,
the FDA may require postmarketing testing and surveillance to monitor the drug's
safety or efficacy. If the FDA's evaluation of the NDA submission or
manufacturing facilities is not favorable, the FDA may refuse to approve the NDA
or issue a not approvable letter, outlining the deficiencies in the submission
and often requiring additional testing or information. Notwithstanding the
submission of any requested additional data or information in response to an
approvable or not approvable letter, the FDA ultimately may decide that the
application does not satisfy the regulatory criteria for approval. Once granted,
product approvals may be withdrawn if compliance with regulatory standards is
not maintained or problems occur following initial marketing.
MANUFACTURING. Each domestic drug manufacturing facility must be registered
with FDA. Domestic drug manufacturing establishments are subject to periodic
inspection by the FDA and must comply with cGMP. Further, the Company or its
third party manufacturer must pass a preapproval inspection of its manufacturing
facilities by the FDA before obtaining marketing approval of any products. To
supply products for use in the United States, foreign manufacturing
establishments must comply with cGMP and are subject to periodic inspection by
the FDA or corresponding regulatory agencies in countries under reciprocal
agreements with the FDA. Drug product manufacturing establishments located in
California must be licensed by the State of California in compliance with local
regulatory requirements, and other states may have comparable regulations. The
Company uses and will continue to use third party manufacturers to produce its
products in clinical and commercial quantities. There can be no guarantee that
future FDA inspections will proceed without any compliance issues requiring the
expenditure of money or other resources.
FOREIGN REGULATION OF DRUG COMPOUNDS. Whether or not FDA approval has been
obtained, approval of a product by comparable regulatory authorities may be
necessary in foreign countries prior to the commencement of marketing of the
product in such countries. The approval procedure varies among countries, can
involve additional testing, and the time required may differ from that required
for FDA approval. Although there are some procedures for unified filings for
certain European countries with the sponsorship of the country which first
granted marketing approval, in general each country has its own procedures and
requirements, many of which are time consuming and expensive. Thus, there can be
substantial delays in obtaining required approvals from foreign regulatory
authorities after the relevant applications are filed. In Europe, marketing
authorizations may be submitted at either a centralized, a decentralized or a
national level. The centralized procedure is mandatory for the approval of
biotechnology products and provides for the grant of a single marketing
authorization which is valid in all European Community member states. As of
January 1995, a mutual recognition procedure is available at the request of the
applicant for all medicinal products which are not subject to the centralized
procedure. The Company will choose the appropriate route of European regulatory
filing to accomplish the most rapid regulatory approvals. There can be no
assurance that the chosen regulatory strategy will secure regulatory approvals
on a timely basis or at all.
HAZARDOUS MATERIALS. The Company's research and development processes involve
the controlled use of hazardous materials, chemicals and radioactive materials
and produce waste products. The Company is subject to federal, state and local
laws and regulations governing the use, manufacture, storage, handling and
disposal of such materials and waste products. Although the Company believes
that its safety procedures for handling and disposing of such materials comply
with the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from these materials cannot be eliminated
completely. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company. Although the Company believes that it is in compliance in all
material respects with applicable environmental laws and regulations, there can
be no assurance that it will not be required to incur significant costs to
comply with environmental laws and regulations in the future, or that the
operations, business or assets of the Company will not be materially adversely
affected by current or future environmental laws or regulations.
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<PAGE>
COMPETITION
The pharmaceutical and biopharmaceutical industries are subject to intense
competition and rapid and significant technological change. While several of
CVT's products target diseases for which there are presently no effective
therapies, CVT nevertheless is aware of companies which are developing products
that will compete for the same disease markets. For example, Kyowa Hakko Co.,
Ltd., Fujisawa Pharmaceutical, Japan and Discovery Therapeutics, Inc., are each
developing adenosine A(1) receptor antagonists. In addition, Sandoz and Glaxo
Wellcome P.L.C. both have adenosine A(1) receptor agonists under development. If
regulatory approvals are received, ranolazine may compete with several classes
of existing drugs for the treatment of angina, some of which are available in
generic form, including calcium channel blockers, beta blockers and nitrates.
There are also non-pharmacologic treatments such as coronary artery bypass
grafting ("CABG") and percutaneous transluminal coronary angioplasty ("PTCA").
However, for those patients who do not respond adequately to existing therapies
and remain symptomatic despite maximal treatment with existing anti-anginal
drugs and who are not candidates for CABG or PTCA, there is no currently
effective treatment. In refractory patients who are candidates for CABG or PTCA,
there is no effective pharmacologic treatment available. In the treatment of
intermittent claudication, ranolazine may compete with Trental, an FDA approved
drug developed by Hoechst Marion Roussel, Inc., beraprost, a prostaglandin being
developed by Bristol-Myers Squibb, Cilostazol, a prostaglandin E(1) derivative
being developed by Otsuka Pharmaceutical Co., Ltd., and L-carnitine, an amino
acid derivative being developed by Sigma Tau Pharmaceuticals, Inc.
CVT believes that the principal competitive factors in the markets for
ranolazine and CVT-124 will include the length of time to receive regulatory
approval, product performance, product price, product supply, marketing and
sales capability and enforceability of patent and other proprietary rights. CVT
believes that it is or will be competitive with respect to these factors.
Nonetheless, because the Company's products are still under development, the
relative competitive position of the Company in the future is difficult to
predict.
The Company expects that the pharmaceutical and biopharmaceutical industries
will continue to experience rapid technological development which may render the
Company's potential products non-competitive or obsolete. Many current and
potential competitors have substantially greater product development
capabilities and financial, marketing, scientific, and human resources than the
Company. Other companies may succeed in developing products earlier than the
Company, obtaining approvals for such products from the FDA more rapidly than
the Company or developing products that are safer and more effective than those
under development or proposed to be developed by the Company. While the Company
will seek to expand its technological capabilities in order to remain
competitive, there can be no assurance that research and development by others
will not render its technology or potential products obsolete or non-competitive
or result in treatments or cures superior to any therapy developed by the
Company, or that therapy developed by the Company will be preferred to any
existing or newly developed technologies.
PRODUCT LIABILITY INSURANCE
The manufacture and sale of human therapeutic products involve an inherent risk
of product liability claims and associated adverse publicity. The Company has
only limited product liability insurance for clinical trials and no commercial
product liability insurance. There can be no assurance that it will be able to
maintain existing or obtain additional product liability insurance on acceptable
terms or with adequate coverage against potential liabilities. Such insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms, or at all. An inability to obtain sufficient insurance
coverage on reasonable terms or to otherwise protect against potential product
liability claims could prevent or inhibit the commercialization of the Company's
potential products. A product liability claim brought against the Company in
excess of its insurance coverage, if any, or a product withdrawal could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
EMPLOYEES
As of September 30, 1996, CVT employed 44 individuals full-time, including 15
who hold doctoral degrees. Of the Company's total work force, 30 employees are
engaged in or directly support research and development
35
<PAGE>
activities and 14 are engaged in business development, finance and
administrative activities. The Company's employees are not represented by a
collective bargaining agreement. The Company believes its relations with its
employees are good.
FACILITIES
The Company currently leases a 61,081 square foot building in Palo Alto,
California, of which approximately 33,783 square feet are subleased to two third
parties. The initial term of the lease expires in February 2002 with an option
to renew for five years, and the subleases expire in March 1997 and March 1998,
respectively. CVT believes that this facility will be adequate to meet the
Company's needs for the foreseeable future.
SCIENTIFIC ADVISORY BOARD
CVT's Scientific Advisory Board ("SAB") consists of academic and industry
experts in the fields of medicine, chemistry and molecular and cellular biology.
The SAB reviews and evaluates the Company's research programs and advises the
Company with respect to technical matters. Each SAB member has entered into a
consulting agreement with the Company specifying the terms and scope of the
advisory relationship. All SAB members own shares or have been granted options
to acquire Common Stock of the Company. All of the SAB members are employed by
employers other than the Company and may have other commitments and consulting
contracts with other entities which may compete for such member's time with
their obligations to the Company. The Company's Scientific Advisory Board
includes the following individuals:
VICTOR J. DZAU, M.D. is Chairman of the Scientific Advisory Board. Dr. Dzau is
one of the world's leading researchers in the molecular and cellular biology of
cardiovascular diseases. Since September 1996, he has served as Chairman of the
Department of Medicine and Physician-in-Chief at the Brigham and Women's
Hospital in Boston, and as Hersey Professor of the Theory and Practice of
Medicine at Harvard Medical School. Between 1990 and September 1996, he served
as the William G. Irwin Professor of Medicine and chief of cardiovascular
medicine at Stanford University School of Medicine. In early 1995, he was
promoted to Arthur L. Bloomfield Professor and Chairman of Medicine at Stanford.
Previously, Dr. Dzau held several clinical and research appointments in
cardiology at Massachusetts General Hospital and Harvard Medical School, where
he was a postdoctoral fellow. He received his M.D. degree from McGill
University.
STUART A. AARONSON, M.D. is director of the Deraid H. Ruttenberg Cancer Center
at Mount Sinai School of Medicine, New York City, and is a world renowned growth
factor researcher and tumor biologist. He has established the role of numerous
cytokines in the function of blood vessels. He obtained his M.D. degree from the
University of California, San Francisco.
CHRISTOPHER FIELDING, PH.D. has been a faculty member at the University of
California, San Francisco over the past two decades, where he has served as the
Neider Professor of Cardiovascular Physiology since 1985. A recognized expert in
the field of cholesterol metabolism, Dr. Fielding received his Ph.D. from the
University of London and completed postdoctoral work in cell metabolism at
Oxford University.
RICHARD J. HAVEL, M.D. is a professor of medicine, Chief of Metabolism and past
Director of the Cardiovascular Research Institute at the University of
California, San Francisco. As a leader in both basic lipid research and clinical
lipid investigations for several decades, Dr. Havel is known for his pioneering
research on lipoprotein metabolism and for designing and conducting clinical
investigations of lipid reduction and coronary atherosclerosis. He recently
served on the Executive Committee of the Adult Treatment Panel of the National
Cholesterol Education Program. Dr. Havel is a member of the National Academy of
Sciences and received his M.D. degree from the University of Oregon.
RICHARD M. LAWN, PH.D. has served on part-time basis as the Vice President,
Molecular Cardiology at CVT since 1992. Since 1990 has been a Professor of
Medicine in the Division of Cardiovascular Medicine, Stanford University School
of Medicine. From 1980 to 1990, Dr. Lawn served as a senior scientist and later
as a staff scientist at Genentech, Inc. He received his Ph.D. in molecular,
cellular and developmental biology from the University of Colorado.
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<PAGE>
JEFFREY M. LEIDEN, M.D., PH.D. is the Frederick H. Rawson Professor of Medicine
and Pathology, and Chief of the Section of Cardiology at the University of
Chicago and a former Howard Hughes medical investigator. He is a leading
researcher in the areas of transcriptional regulation during mammalian
development and the development of novel gene therapy approaches for
cardiovascular disease. Dr. Leiden received his M.D. and Ph.D. degrees from the
University of Chicago and completed his postdoctoral and cardiology fellowships
at the Brigham and Women's Hospital, Harvard University.
PETER SCHULTZ, PH.D. is a professor of chemistry at the University of
California, Berkeley. He is recognized as an expert in protein
structure/function and pioneered combinatorial methods and the development of
catalytic antibodies. Dr. Schultz has received numerous awards including the
National Science Foundation Alan T. Waterman Award, the American Chemical
Society Award in Pure Chemistry and the Wolf Price in Chemistry. He is a
founding scientific advisor of Affymax, N.V. In 1993, Dr. Schultz was elected to
the National Academy of Sciences. He received his Ph.D. from California
Institute of Technology and worked as a National Institutes of Health
postdoctoral fellow at the Massachusetts Institute of Technology.
ERIC J. TOPOL, M.D. is the Chairman, Department of Cardiology and the Director,
Joseph J. Jacobs Center for Thrombosis and Vascular Biology at the Cleveland
Clinic Foundation. A noted clinician and expert on ischemic/ atherosclerotic
heart disease, Dr. Topol is chairman of several large multicenter, randomized
clinical trials of specific interventional procedures and therapeutics. He has
also served as an advisor to the National Institutes of Health and currently
serves on the FDA's advisory panel on cardiology. Dr. Topol received his M.D.
degree from the University of Rochester and completed his cardiology fellowship
at Johns Hopkins University.
SIR JOHN VANE, D.SC., F.R.S. is the Director General of the William Harvey
Research Institute at St. Bartholomew's Hospital Medical College in London.
Prior to joining that institution, he spent 12 years as group research and
development director at the Wellcome Foundation, Ltd. He was awarded the Nobel
Prize in 1982 for his work in prostaglandins and for discovering the mode of
action of aspirin. Sir John was a research scientist for 18 years at the Royal
College of Surgeons of England. He is highly regarded for his continuing
research in the areas of cardiovascular disease and chronic inflammation. Sir
John holds both a D.Phil. and D.Sc. and is a Fellow of the Royal Society, the
Royal College of Physicians and the Royal College of Surgeons.
37
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company and their
ages as of September 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------------------------
<S> <C> <C>
Louis G. Lange, M.D., Ph.D. 48 Chairman of the Board and Chief Executive Officer
Kathleen A. Stafford 38 Chief Financial Officer
Michael M. Wick, M.D., Ph.D. 50 Senior Vice President, Research
George F. Schreiner, M.D., Ph.D. 47 Vice President, Medical Science and Preclinical Research
Andrew A. Wolff, M.D. 41 Vice President, Clinical Research and Development
Michael J. Sterns, D.V.M. 38 Director of Business Development
Samuel D. Colella (1)(2) 56 Director
Thomas L. Gutshall (2) 58 Director
Barbara J. McNeil, M.D., Ph.D. (2) 55 Director
J. Leighton Read, M.D. (1) 45 Director
Costa G. Sevastopoulos, Ph.D. (1) 53 Director
Isaac Stein (2) 49 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
LOUIS G. LANGE, M.D., PH.D., was a founder of the Company and has served as its
Chairman of the Board and Chief Executive Officer since August 1992. From July
1980 to August 1992, Dr. Lange served on the faculty of Washington University
School of Medicine, including as Chief of Cardiology at Jewish Hospital in St.
Louis, Missouri from May 1985 to August 1992, and as a full professor of
medicine from July 1990 until August 1992. Dr. Lange is internationally
recognized as an expert in the field of molecular mechanisms of cardiovascular
disease. He holds an M.D. from Harvard Medical School and a Ph.D. in
biochemistry from Harvard University.
KATHLEEN A. STAFFORD has served as Chief Financial Officer of the Company since
December 1995. From May 1995 to December 1995, Ms. Stafford served as a
consultant to the Company in the area of financial affairs. From January 1994 to
October 1994, Ms. Stafford served as a Vice President and the Chief Financial
Officer for ONYX Pharmaceuticals, Inc., a biotechnology company. From February
1989 until January 1994, Ms. Stafford served as Treasurer for Amgen, Inc., a
biopharmaceutical company. Ms. Stafford holds a B.S. in combined science from
Santa Clara University and an M.B.A. from Virginia Polytechnic Institute.
MICHAEL M. WICK, M.D., PH.D., has served as Senior Vice President, Research for
the Company since November 1995. From May 1995 to November 1995, Dr. Wick served
as Vice President, Biological Chemistry for the Company. From September 1990
until May 1995, he served as the Executive Director of Oncology-Immunology
Research and Discovery at Lederle Laboratories, American Cyanamid Inc., a
pharmaceutical company. In addition, from May 1994 to May 1995, he served as the
Executive Director of Clinical Research for Oncology and Chairman of the Joint
Immunex American Cyanamid Research and Development Committee. He holds an M.D.
from Harvard Medical School and a Ph.D. in chemistry from Harvard University.
GEORGE F. SCHREINER, M.D., PH.D., has served as Vice President, Medical Science
& Preclinical Research for the Company since January 1993. Dr. Schreiner has
also served as a consulting professor of medicine at Stanford University since
May 1993. From July 1989 to December 1992, he was an associate professor of
medicine and pathology and served as an associate physician at Washington
University School of Medicine in St. Louis. Dr. Schreiner holds an M.D. from
Harvard Medical School and a Ph.D. in immunology from Harvard University.
ANDREW A. WOLFF, M.D., has served as Vice President of Clinical Research and
Development for the Company since September 1996. From September 1994 to
September 1996, Dr. Wolff served as Vice President of Clinical Research for the
Company. From June 1993 until September 1994, Dr. Wolff served as the Executive
Director of Medical Research and New Molecules Clinical Programs Leader for
Syntex, a pharmaceutical and healthcare
38
<PAGE>
company. In addition, from August 1992 to February 1993, he served as the acting
Associate Director for Europe, Institute for Cardiovascular and Central Nervous
System Clinical Research, Maidenhead, England. From July 1990 until June 1993,
Dr. Wolff served as the Director, Department for Cardiovascular Therapy for
Syntex. Since June 1988, Dr. Wolff has served also as an assistant clinical
professor of medicine in the Cardiology Division of the University of
California, San Francisco. He holds an M.D. from the Washington University
Medical School.
MICHAEL J. STERNS, D.V.M., has served as the Director of Business Development
for the Company since February 1995. From March 1993 until February 1995, Dr.
Sterns served as the Senior Director, Business Development for Microcide
Pharmaceuticals, Inc., a biopharmaceutical company. From October 1990 to March
1993, he served as Director, Business Development for ALZA Corporation, a
pharmaceutical company. Dr. Sterns holds a D.V.M. from the University of
California at Davis and an M.B.A. from the University of California at Berkeley.
SAMUEL D. COLELLA has served as a director of the Company since October 1992.
Since November 1984, Mr. Colella has been a General Partner of Institutional
Venture Partners, a private venture capital firm. He currently serves as
Chairman of the Board of Directors of ONYX Pharmaceuticals, Inc. He also serves
as a director of Genta Incorporated, Imagyn Medical, Inc., Pharmacopeia, Inc.
and Vivus, Inc. Mr. Colella holds a B.S. in business and engineering from the
University of Pittsburgh and an M.B.A. from Stanford University.
THOMAS L. GUTSHALL has served as a director of the Company since December 1994.
Since August 1996, Mr. Gutshall has served as the Chief Executive Officer of
Cepheid Corporation, a diagnostics company. From January 1995 to September 1996,
he served as President and Chief Operating Officer of the Company. From June
1989 until December 1994, Mr. Gutshall served as an Executive Vice President at
Syntex Corporation, a pharmaceutical and healthcare company. Mr. Gutshall earned
a B.S. in chemical engineering from the University of Delaware and completed the
Executive Marketing Management Program at Harvard Business School.
BARBARA MCNEIL, M.D., PH.D., has served as a director of the Company since
December 1994. Since 1990, Dr. McNeil has served as the Ridley Watts Professor
of Health Care Policy at Harvard Medical School. In addition, since July 1988,
she has served as the Chair of the Department of Health Care Policy at Harvard
Medical School. Since 1983, she has been a professor of radiology at both
Harvard Medical School and Brigham and Women's Hospital in Boston. Dr. McNeil
holds an M.D. from Harvard Medical School and a Ph.D. in biological chemistry
from Harvard University.
J. LEIGHTON READ, M.D., has served as a director of the Company since September
1992. Dr. Read founded Aviron, a biopharmaceutical company, and has served as
its Chairman and Chief Executive Officer since April 1992. From July 1991 to
July 1993, Dr. Read was a principal with Interhealth Limited, an investment
partnership. From January 1989 to July 1991, Dr. Read served as a managing
director of Affymax N.V., a biopharmaceutical company, which he co-founded in
1989. Dr. Read holds a B.S. in biology and psychology from Rice University and
an M.D. from the University of Texas Health Science Center at San Antonio.
COSTA G. SEVASTOPOULOS, PH.D., has served as a director of the Company since
October 1992. Since May 1994, Dr. Sevastopoulos has been an independent
consultant and a limited partner of Delphi Ventures I and II, both venture
capital partnerships. From April 1988 to April 1994, he served as a general
partner of Delphi BioVentures, a venture capital partnership, which he
co-founded. Dr. Sevastopoulos currently serves as Chairman of the Board of
Directors of Metra Biosystems, Inc. He holds a B.S. in physics from the
University of Athens, Greece, an M.S. in electrical engineering from the
California Institute of Technology, an M.B.A. from the European Institute of
Business Administration in Fontainebleau, France, and a Ph.D. in molecular
biology from the University of California at Berkeley.
ISAAC STEIN has served as a director of the Company since March 1995. Since its
inception, Mr. Stein has served as the President of Waverly Associates, Inc., a
private investment firm, which he founded in 1983. In addition, Mr. Stein
currently serves as Chairman of Stanford Health Services and is a director of
Stanford University Hospital and a Trustee of Stanford University. From February
1993 to February 1994, Mr. Stein served as a special assistant to the President
of Stanford University. From July 1990 to December 1992, he served as Chairman
of Esprit de Corp., an apparel company, and from March 1991 to February 1992, he
served as its
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<PAGE>
acting President and Chief Executive Officer. Mr. Stein currently serves as a
director of ALZA Corporation and Raychem Corporation. Mr. Stein holds a B.A. in
economics and mathematics from Colgate University, an M.B.A. from Stanford
Business School and a J.D. from Stanford Law School.
BOARD COMPOSITION
The Company currently has authorized seven directors. These directors are
elected to serve until the next annual meeting of stockholders or until their
earlier resignation or removal. In accordance with the terms of the Company's
Restated Certificate of Incorporation, at such time as the Company is no longer
subject to Section 2115 of the California Corporations Code, the terms of office
of the Board of Directors will be divided into three classes: Class I, whose
term will expire at the annual meeting of stockholders to be held in 1997; Class
II, whose term will expire at the annual meeting of stockholders to be held in
1998; and Class III, whose term will expire at the annual meeting of
stockholders to be held in 1999. See "Description of Capital Stock - General."
The Class I directors are Mr. Gutshall and Dr. Sevastopoulos, the Class II
directors are Drs. McNeil and Read, and the Class III directors are Dr. Lange
and Messrs. Colella and Stein. At each annual meeting of stockholders after the
initial classification, the successors to directors whose term will then expire
will be elected to serve from the time of election and qualification until the
third annual meeting following election. In addition, the Company's Restated
Certificate of Incorporation provides that the authorized number of directors
may be changed only by resolution of the Board of Directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the Board of
Directors may have the effect of delaying or preventing changes in control or
management of the Company. Although directors of the Company may be removed for
cause by the affirmative vote of the holders of a majority of the voting power
of all the then-outstanding shares of voting stock of the Corporation entitled
to vote at an election of directors (the "Voting Stock"), the Company's Restated
Certificate of Incorporation provides that holders of two-thirds of the Voting
Stock must vote to approve the removal of a director without cause.
BOARD COMMITTEES
The Audit Committee of the Company's Board of Directors consists of Messrs.
Colella, Gutshall and Stein and Dr. McNeil. The Audit Committee reviews the
internal accounting procedures of the Company and consults with and reviews the
services provided by the Company's independent auditors.
The Compensation Committee of the Company's Board of Directors currently
consists of Mr. Colella and Drs. Read and Sevastopoulos. The Compensation
Committee reviews and recommends to the Board the compensation and benefits of
all officers of the Company and reviews general policy relating to compensation
and benefits of employees of the Company. The Compensation Committee also
administers the issuance of stock options and other awards under the Company's
stock plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From the Company's inception through 1994, the Board of Directors made all
determinations with respect to executive officer compensation. In the fiscal
year ended December 31, 1995, a Compensation Committee consisting of Mr.
Colella, Dr. Lange, the Company's Chief Executive Officer, and Drs. Read and
Sevastopoulos, made all determinations relating to executive officer
compensation.
DIRECTOR COMPENSATION
Other than Isaac Stein and Barbara McNeil, who receive $1,000 per meeting
attended, the Company's directors currently do not receive cash compensation for
service on the Board of Directors or any committee thereof, but directors may be
reimbursed for reasonable expenses in connection with attendance at Board and
committee meetings.
In July 1994, the Board of Directors adopted and in July 1995, the stockholders
approved the Non-Employee Directors' Stock Option Plan (the "Directors' Plan").
The Directors' Plan was amended and restated in September 1996, subject to
stockholder approval. The Company has reserved 250,000 shares of Common Stock
for issuance under the Directors' Plan. The Directors' Plan provides for
automatic grants of options to purchase shares of Common Stock to non-employee
directors of the Company ("Non-Employee Directors"). Pursuant to the terms of
the Directors' Plan, each Non-Employee Director is automatically granted an
option to purchase shares of
40
<PAGE>
Common Stock. Commencing with the adoption of the Directors' Plan, each newly
elected Non-Employee Director was granted an option to purchase 1,000 shares of
Common Stock, and on each anniversary of the adoption of the Directors' Plan,
each Non-Employee Director was granted an option to purchase 500 shares. These
options vest at the rate of 1/36 per month. Upon the amendment and restatement
of the Directors' Plan, each Non-Employee Director was granted an option to
purchase 15,000 shares, subject to stockholder approval. Each subsequently
elected Non-Employee Director will also be granted an option to purchase 15,000
shares at his or her election. These options for 15,000 shares vest as to 33.33%
of the shares 12 months from the date of grant, and at the rate of 1/36 per
month thereafter, if the Non-Employee Director provides services to the Company
or its affiliates through the applicable vesting date. In addition, at each
annual meeting of the Company's stockholders after the effectiveness of this
Offering, each Non-Employee Director will be granted an option to purchase 5,000
shares, which will vest 12 months from the date of grant if the Non-Employee
Director provides services to the Company or its affiliates through such date.
As of September 30, 1996, options to purchase 100,000 shares have been granted
under the Directors' Plan.
The exercise price of options granted under the Directors' Plan must equal the
fair market value of the Common Stock on the date of grant; provided, however,
that prior to the September 1996 amendment and restatement of the Directors'
Plan, the exercise price of options granted to any person possessing more than
10% of the total combined voting power of all classes of stock of the Company or
of any of its affiliates was 110% of the fair market value on the date of grant.
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from date it was granted. No option may be transferred
by the optionee other than by will or the laws of descent or distribution,
provided that an optionee may designate a beneficiary who may exercise the
option following the optionee's death. The Directors' Plan will terminate in
September 2006, unless earlier terminated by the Board.
Upon certain changes in control of Company, outstanding options will be assumed
or substituted by the surviving corporation.
In July 1994, the Company entered into a Consulting Agreement for Individual
Consultants with Barbara J. McNeil, M.D., Ph.D., a director of the Company,
pursuant to which Dr. McNeil agreed to serve on the Board of Directors and to
provide other advice and consultation. Under the terms of the agreement, the
Company agreed to pay a fixed fee of $1,000 per day as compensation for Dr.
McNeil's services. In the fiscal year ended December 31, 1995, Dr. McNeil
received $10,000 as compensation for her services. The Company may terminate
this agreement for any reason upon written notice. In addition, in July 1994,
the Board of Directors of the Company granted Dr. McNeil an option to purchase
2,500 shares of Common Stock at an exercise price of $2.50 per share. The option
vests over a three year period. As a result of this option grant, Dr. McNeil did
not receive an initial option to purchase 1,000 shares of Common Stock pursuant
to the Directors' Plan upon joining the Board.
In March 1995, the Company entered into a Consulting Agreement for Individual
Consultants with Isaac Stein, a director of the Company, pursuant to which Mr.
Stein agreed to provide advice and consultation to the Company. As compensation
for his services in the fiscal year ended December 31, 1995, Mr. Stein received
$3,000 and an option to purchase 9,000 shares of Common Stock outside the
Directors' Plan at an exercise price of $2.50 per share. The option vests over a
three year period. The Company may terminate the agreement for any reason upon
written notice.
In September 1996, in consideration for consulting services, the Company granted
an option to purchase 10,000 shares of Common Stock to Mr. Stein and an option
to purchase 5,000 shares of Common Stock to Dr. Sevastopoulos, at an exercise
price of $2.50 per share. The option grants vest over a three year period. In
addition, the Company agreed to pay Dr. Sevastopoulos $30,000 for consulting
services rendered.
See "Management - Employment Agreements and Termination of Employment
Agreements" for description of the Separation and Consulting Agreement with
Thomas L. Gutshall.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware Law, the Company's Restated Certificate of
Incorporation provides that no director of the Company will be personally liable
to the Company or its stockholders for monetary damages for breach of
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fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or to its stockholders, (ii) for acts
or omissions not made in good faith or which involved intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware Law,
relating to prohibited dividends or distributions or the repurchase or
redemption of stock, or (iv) for any transaction from which the director derives
an improper personal benefit. In addition, the Company's Restated Certificate of
Incorporation provides that any director or officer who was or is a party or is
threatened to be made a party to any action or proceeding by reason of his or
her services to the Company will be indemnified to the fullest extent permitted
by the Delaware Law.
The Company has entered into indemnification agreements with each of its
directors and officers for the indemnification of and advancement of expenses to
such persons to the full extent permitted by law and the Company currently
maintains directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or officer of
the Company as to which indemnification is being sought, nor is the Company
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the fiscal year ended December 31, 1995 to its Chief Executive
Officer and the Company's next four most highly compensated executive officers
during the fiscal year ended December 31, 1995 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
----------------------------------------------------------
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
---------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (#) COMPENSATION(1)
- --------------------------------- ------------- ------------- ------------- -------------
Louis G. Lange, M.D., Ph.D., $250,000 - 55,000 $30,000
Chairman of the Board and Chief
Executive Officer
<S> <C> <C> <C> <C>
George F. Schreiner, M.D., Ph.D. 159,750 - 12,800 26,625
Vice President, Medical Science
and Preclinical Research
Andrew W. Wolff, M.D. 175,500 $17,500 7,500 -
Vice President, Clinical
Research
and Development
Thomas L. Gutshall (2) 211,435 - 77,500 -
President and Chief Operating
Officer
Mark B. Hirsch (3) 182,500 - 23,600 -
Vice President, Corporate
Development
</TABLE>
- ------------------------------
(1) All Other Compensation consists of amounts forgiven on loan obligations.
(2) Mr. Gutshall terminated his employment in September 1996 but continues to
serve as a member of the Company's Board of Directors and as a consultant to
the Company.
(3) Mr. Hirsch terminated his employment with the Company in April 1996.
42
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1995, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES PRICE APPRECIATION FOR
OPTIONS IN FISCAL EXERCISE OPTION TERM(3)
GRANTED YEAR PRICE EXPIRATION ----------------------
NAME (#) (%)(1) ($/SH)(2) DATE 5% ($) 10% ($)
- ---------------------- ---------- ---------- ---------- ---------- ---------- ----------
Louis G. Lange, M.D., 55,000(4) 14.00% $2.50 06/07/05 $1,027,160 $1,717,026
Ph.D.
<S> <C> <C> <C> <C> <C> <C>
George F. Schreiner, 12,800(4) 3.25 2.50 04/25/05 239,048 399,599
M.D., Ph.D.
Andrew A. Wolff, M.D. 2,500(4) 0.63 2.50 04/25/05 46,689 78,047
5,000(4) 1.27 2.50 12/06/05 93,378 156,093
Thomas L. Gutshall (5) 7,500 1.90 2.50 03/31/99 140,067 234,140
5,000 1.27 2.50 03/31/99 93,378 156,093
65,000 16.54 2.50 03/31/99 1,213,916 2,029,212
Mark B. Hirsch (6) 23,600 6.00 2.50 05/01/96 440,745 736,760
</TABLE>
- ------------------------------
(1) Based on an aggregate of options to purchase 392,986 shares of the Company's
Common Stock granted to employees and directors of, and consultants to, the
Company during fiscal year ended December 31, 1995, including the Named
Executive Officers.
(2) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the assumed
initial public offering price of $13.00 per share appreciates from the date of
grant at the indicated annual rate compounded annually for the entire term of
the option and the option is exercised and sold on the last day of its term for
the appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term.
(4) Twenty-four percent of the option vests one year from the vesting
commencement date, with subsequent vesting at a rate of two percent each
month for 38 months. The option expires ten years from the date of grant or
earlier upon termination of employment.
(5) Mr. Gutshall's option for 7,500 shares is fully vested. Under Mr. Gutshall's
Separation and Consulting Agreement, (i) the 5,000 share option vested as to
2,000 shares through September 2, 1996 and 3,000 shares were repurchased by the
Company for an aggregate purchase price of $7,500; (ii) the 65,000 share option
vested as to 26,000 shares through September 2, 1996 and 39,000 shares were
canceled on September 2, 1996.
(6) In connection with the termination of Mr. Hirsch's employment, the option to
purchase 23,600 shares was canceled on May 1, 1996.
AGGREGATE OPTION EXERCISES IN FISCAL 1995 AND DECEMBER 31, 1995 OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the fiscal year ended December 31, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1995:
<TABLE>
<CAPTION>
---------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT AT
ACQUIRED DECEMBER 31, DECEMBER 31,
ON VALUE 1995(#) 1995($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE(2) UNEXERCISABLE
- -------------------------- --------- ----------- ----------------- --------------------
Louis G. Lange, M.D.,
Ph.D. 15,000(3) $157,500 145,000/0 $1,603,300/0
<S> <C> <C> <C> <C>
George F. Schreiner, M.D.,
Ph.D. -- -- 53,025/0 608,975/0
Andrew A. Wolff, M.D. -- -- 30,000/0 315,000/0
Thomas L. Gutshall 30,000(3) 315,000 47,500/0 498,750/0
Mark B. Hirsch -- -- 64,025/0 719,875/0
</TABLE>
- ------------------------------
(1) Value realized and value of unexercised in-the-money options is based on a
value of $13.00 per share of the Company's Common Stock, the assumed initial
public offering price, even though at the time of grant the fair market value of
the Common Stock was determined by the Board of Directors to range from $0.80 to
$2.50 per share. Amounts reflected are based on the assumed value minus the
exercise price multiplied by the number of shares acquired on exercise and do
not indicate that the optionee sold such stock.
43
<PAGE>
(2) As of December 31, 1995, of the 145,000, 53,025, 30,000, 47,500 and 64,025
option shares held by Louis G. Lange, M.D., Ph.D., George F. Schreiner,
M.D., Ph.D., Andrew A. Wolff, M.D., Thomas L. Gutshall and Mark B. Hirsch,
respectively, 99,750, 31,143, 24,375, 46,253 and 46,652 option shares,
respectively, were unvested and subject to repurchase by the Company, if
exercised.
(3) As of December 31, 1995, all of these shares were subject to repurchase by
the Company.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
In January 1996, the Company entered into a letter agreement with Mark B.
Hirsch. Pursuant to the agreement, the Company accepted Mr. Hirsch's resignation
as Vice President, Corporate Development effective October 31, 1995, but
retained Mr. Hirsch as an employee of the Company through April 30, 1996. Under
the terms of the agreement, Mr. Hirsch was compensated through April 30, 1996 at
the same compensation level in effect prior to his resignation.
The Company entered into a Separation and Consulting Agreement with Thomas L.
Gutshall effective as of September 2, 1996. Pursuant to the agreement, the
Company accepted Mr. Gutshall's resignation as President and Chief Operating
Officer effective September 2, 1996. Mr. Gutshall agreed to continue to serve as
a member of the Company's Board of Directors and to serve as a consultant to the
Company through December 31, 1998. Under the terms of the agreement, Mr.
Gutshall will receive consulting fees starting at $8,750 per month in September
1996 and declining to $3,500 per month effective November 1, 1996 and continuing
at that rate thereafter. In addition, Mr. Gutshall's stock option grant for
5,000 shares vested as to 2,000 shares through September 2, 1996 and 3,000
shares were repurchased by the Company. His stock option grant for 65,000 shares
vested as to 26,000 shares through September 2, 1996 and 39,000 shares were
canceled on September 2, 1996.
Each officer and salaried employee has entered into a standard form of
Employment, Confidential Information and Invention Assignment Agreement which
provides that the employment is at-will, that the employee will not disclose any
confidential information of the Company received during the course of the
employment and that, with certain exceptions, the employee will assign to the
Company any and all inventions conceived or developed during the course of the
employment.
401(K) PLAN
As of October 1, 1993, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering the Company's employees. Pursuant
to the 401(k) Plan, eligible employees may elect to reduce their current
compensation by up to the lesser of 15% of their annual compensation or the
statutorily prescribed annual limit ($9,500 in 1996) and have the amount of such
reduction contributed to the 401(k) Plan. The 401(k) Plan provides for
additional matching contributions by the Company in an amount determined by the
Company. To date, the Company has not provided any matching contributions. The
trustees under the 401(k) Plan, at the direction of each participant, invest the
assets of the 401(k) Plan in designated investment options. The 401(k) Plan is
intended to qualify under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code"), so that contributions to the 401(k) Plan, and income
earned on the 401(k) Plan contributions, are not taxable until withdrawn, and so
that the contributions by the Company will be deductible when made.
STOCK PLANS
1994 EQUITY INCENTIVE PLAN. The Company's 1994 Equity Incentive Plan (the
"Incentive Plan") was adopted by the Board of Directors in February 1994,
approved by the stockholders in March 1994, amended by the Board in February
1995 and April 1995 and subsequently approved by the stockholders in July 1995.
The Incentive Plan was amended in September 1996, subject to stockholder
approval. There are currently 800,000 shares of Common Stock authorized for
issuance under the Incentive Plan.
The Incentive Plan provides for the grant of incentive stock options under the
Code and stock appreciation rights appurtenant thereto, to employees (including
officers and employee-directors) and nonstatutory stock options, restricted
stock purchase awards and stock bonuses to employees, directors and consultants.
The Incentive Plan is administered by the Compensation Committee of the Board of
Directors, which has been delegated the Board's authority to administer the
Plan. The Compensation Committee determines recipients and types of awards to be
granted, including the exercise price, number of shares subject to the award and
the exercisability thereof.
The terms of stock options granted under the Incentive Plan generally may not
exceed 10 years. The exercise price for an incentive stock option cannot be less
than 100% of the fair market value of the Common Stock on
44
<PAGE>
the date of the option grant and the exercise price for a nonstatutory stock
option cannot be less than 85% of the fair market value of the Common Stock on
the date of option grant. Options granted under the Incentive Plan vest at the
rate specified in the option agreement. Options may include provisions allowing
exercise of any part or all of the options prior to full vesting. Any unvested
shares so purchased shall be subject to a repurchase right in favor of the
Company or to any other restriction the Board determines to be appropriate. No
stock option may be transferred by the optionee other than by will or the laws
of descent or distribution, provided that a nonstatutory stock option may be
transferred pursuant to a domestic relations order and the Board of Directors
may grant a nonstatutory stock option that is transferable, and provided further
that an optionee may designate a beneficiary who may exercise the option
following the optionee's death. An optionee whose relationship with the Company
or any related corporation ceases for any reason (other than by death or
permanent and total disability) may exercise options in the period specified by
the Board following such cessation. Options may be exercised for up to twelve
months after an optionee's relationship with the Company and its affiliates
ceases due to disability, and up to eighteen months following an optionee's
death (unless such options expire sooner or later by their terms).
No incentive stock option may be granted to any person who, at the time of the
grant, owns (or is deemed to own) stock possessing more than 10% of the total
combined voting power of the Company or any affiliate of the Company, unless the
option exercise price is at least 110% of the fair market value of the stock
subject to the option on the date of grant, and the term of the option does not
exceed five years from the date of grant. To the extent an optionee would have
the right in any calendar year to exercise for the first time one or more
incentive stock options for shares having an aggregate fair market value (under
all plans of the Company and its affiliates and determined for each share as of
the date the option to purchase the shares was granted) in excess of $100,000,
any such excess options will be treated as nonstatutory stock options. No person
may be granted options and stock appreciation rights covering more than 100,000
shares of Common Stock per calendar year, provided that this limit shall not
apply until the expiration of the transition period under Section 162(m) of the
Code for privately held companies that become publicly held.
Shares subject to stock awards that have expired or otherwise terminated without
having been exercised in full (or vested in the case of restricted stock awards)
shall again become available for the grant of awards under the Incentive Plan.
Shares subject to exercised stock appreciation rights shall not again become
available for the grant of new awards.
The Board of Directors has the authority, with the consent of affected holders,
to reprice outstanding options and stock appreciation rights and to offer
optionees the opportunity to replace outstanding options or stock appreciation
rights with new options or stock appreciation rights for the same or a different
number of shares.
Restricted stock purchase awards granted under the Incentive Plan may be granted
pursuant to a repurchase option in favor of the Company in accordance with a
vesting schedule and at a price determined by the Board of Directors. Stock
bonuses may be awarded in consideration of past services without a purchase
payment. Rights under a stock bonus or restricted stock bonus agreement may not
be transferred except where such assignment is required by law or expressly
authorized by the terms of the applicable stock bonus or restricted stock
purchase agreement. Stock appreciation rights granted under the Incentive Plan
may be tandem rights, concurrent rights or independent rights.
Upon certain changes in control of the Company, not subject to Board approval,
outstanding options shall be fully vested. In addition, outstanding stock awards
shall be assumed, substituted or continued by the surviving corporation or
parent thereof. In the event the surviving corporation or its parent refuses to
assume, substitute or continue such awards, then such awards shall be terminated
if not exercised prior to the change of control.
As of September 30, 1996, options to purchase 649,214 shares of Common Stock had
been granted under the Incentive Plan, at a weighted average exercise price of
$2.49, 75,406 shares of Common Stock had been issued upon the exercise of
options, options to purchase 425,798 shares of Common Stock were outstanding and
298,796 shares remained available for future grant. As of September 30, 1996, no
restricted stock awards, stock appreciation rights or stock bonuses had been
granted under the Incentive Plan.
The Incentive Plan will terminate in September 2006 unless sooner terminated by
the Board of Directors.
45
<PAGE>
1992 STOCK OPTION PLAN. The Company's 1992 Stock Option Plan (the "1992 Stock
Plan") was adopted by the Board of Directors in November 1992, amended in March
1993 and September 1993, approved by its stockholders in November 1993 and
amended in September 1996, subject to stockholder approval. The Company has
reserved 345,000 shares of Common Stock for issuance under the 1992 Stock Plan.
The 1992 Stock Plan provides for grants of incentive stock options to employees
and nonstatutory stock options to employees, directors and consultants of the
Company. Shares subject to options which expire or otherwise terminate without
having been exercised may again be subject to options under the 1992 Stock Plan.
The 1992 Stock Plan is administered by the Compensation Committee of the Board
of Directors, which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award and the
exercisability thereof.
The term of a stock option granted under the 1992 Stock Plan generally may not
exceed 10 years. Options granted pursuant to the 1992 Stock Plan become
exercisable at a rate specified in the option agreement. Options may include
provisions allowing exercise of any part or all of the options prior to full
vesting. Any unvested shares so purchased shall be subject to a repurchase right
in favor of the Company or to any other restriction the Board determines to be
appropriate. The exercise price of options granted under the 1992 Stock Plan is
determined by the Board of Directors; provided that, in the case of an incentive
stock option, the exercise price cannot be less than 100% of the fair market
value of the Common Stock on the date of grant or, in the case of 10%
stockholders, not less than 110% of the fair market value of the Common Stock on
the date of grant, and in the case of a nonstatutory stock option, the exercise
price cannot be less than 85% of the fair market value of the Common Stock on
the date of grant. To the extent an optionee would have the right in any
calendar year to exercise for the first time one or more incentive stock options
for shares having an aggregate fair market value (under all plans of the Company
and its affiliates and determined for each share as of the date the option to
purchase the shares was granted) in excess of $100,000, any such excess options
will be treated as nonstatutory stock options. No option may be transferred by
the optionee other than by will or the laws of descent or distribution, provided
that an optionee may designate a beneficiary who may exercise the option
following the optionee's death. An optionee whose employment with the Company
ceases for any reason (other than by death or permanent and total disability)
may exercise options in the three month period following such termination
(unless such options terminate or expire sooner by their terms). The three month
post-termination exercise period is extended to 12 months for termination due to
death or disability.
Upon certain changes in control of the Company, not subject to Board approval,
outstanding options shall be fully vested and shall be assumed, substituted or
continued by the surviving corporation or parent thereof. In the event the
surviving corporation or its parent refuses to assume, substitute or continue
such options, then such options shall be terminated if not exercised prior to
the change of control.
As of September 30, 1996, options to purchase 448,566 shares of Common Stock had
been granted under the 1992 Stock Plan, at a weighted exercise price of $1.41,
80,428 shares of Common Stock had been issued upon the exercise of options,
options to purchase 263,540 shares of Common Stock were outstanding and 1,032
shares remained available for future grant.
The 1992 Stock Plan will terminate in November 2002, unless terminated sooner by
the Board of Directors.
EMPLOYEE STOCK PURCHASE PLAN. In September 1996, the Company's Board of
Directors approved the Employee Stock Purchase Plan (the "Purchase Plan")
covering an aggregate of 150,000 shares of Common Stock. The Purchase Plan is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Code. Under the Purchase Plan, the Board of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The offering period for
any offering will be no more than 27 months. The Board of Directors has not
currently authorized an offering under the Purchase Plan.
Employees are eligible to participate if they are employed by the Company or an
affiliate of the Company designated by the Board of Directors provided that
employees who are not employed at least 20 hours per week or five months per
year may be excluded. Employees who participate in an offering can have up to
15% (or such lower percentage specified by the Board of Directors) of their
earnings withheld pursuant to the Purchase Plan
46
<PAGE>
and applied, on specified dates determined by the Board of Directors, to the
purchase of shares of Common Stock. The price of Common Stock purchased under
the Purchase Plan may not be less than 85% of the lower of the fair market value
of the Common Stock on the commencement date of each offering period or the
relevant purchase date. Employees may end their participation in an offering at
any time during the offering period, and participation will end automatically on
termination of employment with the Company. Rights under the Purchase Plan may
not be transferred by employees other than by will or the laws of descent or
distribution, provided that an employee may designate a beneficiary who may
receive shares and cash, if any, from the employee's account under the Purchase
Plan in the event of such employee's death.
In the event of certain changes of control, the Company and the Board of
Directors has discretion to provide that each right to purchase Common Stock
will be assumed or an equivalent right substituted by the successor corporation,
or the Board may shorten the offering period and provide for all sums collected
by payroll deductions to be applied to purchase stock immediately prior to the
change in control.
The Purchase Plan will terminate at the Board's discretion.
47
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENT TRANSACTIONS
All of the Preferred Stock issued in the Company's private placement
transactions (collectively, the "Private Placement Transactions") will convert
into Common Stock on a 1-for-10 basis upon the closing of the Offering. The
price per share and number of shares presented herein reflect the 1-for-10
reverse stock split of the Company's Common Stock effected in October 1996.
Since January 1993, the Company has issued in Private Placement Transactions
shares of Preferred Stock and warrants as follows: an aggregate of 550,582
shares of Series C Preferred Stock at $12.50 per share in July 1993; an
aggregate of 829,657 shares of Series D Preferred Stock at $20.00 per share and
warrants to purchase an aggregate of 21,926 shares of Series D Preferred Stock
at an exercise price of $20.00 per share in March 1994 and April 1994; an
aggregate of 392,159 shares of Series E Preferred Stock and warrants to purchase
an aggregate of 196,078 shares of Series E Preferred Stock at a purchase price
of $20.00 per unit (with each unit consisting of one share and one warrant to
purchase one-half share of Series E Preferred Stock at an exercise price of
$20.00 per share) in September 1995 and November 1995; and an aggregate of
653,592 shares of Series G Preferred Stock and warrants to purchase an aggregate
of 980,392 shares of Common Stock at a purchase price of $20.00 per unit (with
each unit consisting of one share of Series G Preferred Stock and one warrant to
purchase 1.50 shares of Common Stock at an exercise price of $2.50 per share) in
March 1996 and May 1996.
The following table summarizes the shares of Preferred Stock and warrants
purchased by executive officers, directors and 5% stockholders of the Company
and persons and entities associated with them in the Private Placement
Transactions:
<TABLE>
<CAPTION>
--------------------------------------------------
SERIES C SERIES D SERIES E SERIES G
PREFERRED PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK(1) STOCK(2)
----------- ----------- ----------- -----------
INVESTOR
- -------------------------------------------------------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Louis G. Lange, M.D., Ph.D............................. -- -- -- 1,250
Kathleen A. Stafford................................... -- -- 7,500 2,500
Michael M. Wick, M.D., Ph.D............................ -- -- -- 1,250
Thomas L. Gutshall(3).................................. -- -- 1,500 1,250
J. Leighton Read, M.D.................................. 800 500 -- --
Isaac Stein(4)......................................... -- -- 1,875 1,250
ENTITIES AFFILIATED WITH DIRECTORS
Entities affiliated with Institutional Venture
Management V, L.P.(5)................................. 120,000 40,000 60,000 45,000
OTHER 5% STOCKHOLDERS
Zesiger Capital Group, LLC............................. -- -- -- 150,000
Entities affiliated with BankAmerica Ventures.......... -- -- -- 150,000
Entities affiliated with Delphi Ventures II, L.P.(6)... 59,999 27,999 38,248 26,700
Entities affiliated with Asset Management Associates,
1989, L.P............................................. 60,000 23,000 28,500 38,350
Entities affiliated with Sequoia Capital V............. 100,000 25,500 18,749 6,249
</TABLE>
- ------------------------
(1) Includes 2,500, 500, 625, 20,000, 12,749, 9,500 and 6,249 shares to be
issued to Ms. Stafford, the Gutshall Family Trust, the Stein 1995 Revocable
Trust, entities affiliated with Institutional Venture Management V, L.P.,
entities affiliated with Delphi Ventures II, L.P., entities affiliated with
Asset Management Associates, 1989, L.P. and entities affiliated with Sequoia
Capital V, respectively, upon the exercise of outstanding warrants to purchase
shares of Series E Preferred Stock.
(2) Excludes warrants to purchase 1,875, 3,750, 1,875, 1,875, 1,875, 67,500,
181,716, 225,000, 40,050, 57,525 and 9,374 shares of Common Stock issued in
conjunction with the private placement of Series G Preferred Stock to Dr. Lange,
Ms. Stafford, Dr. Wick, the Gutshall Family Trust, the Stein 1995 Revocable
Trust, entities affiliated with Institutional Venture Management V, L.P.,
Zesiger Capital Group, LLC, entities affiliated
48
<PAGE>
with BankAmerica Ventures, entities affiliated with Delphi Ventures, II, L.P.,
entities affiliated with Asset Management Associates, 1989, L.P. and entities
affiliated with Sequoia Capital V, respectively. The warrants will be net
exercised upon the closing of the Offering.
(3) Mr. Gutshall claims beneficial ownerhip of the shares and warrants held by
the Gutshall Family Trust.
(4) Mr. Stein claims beneficial ownership of the shares and warrants held by
the Stein 1995 Revocable Trust.
(5) Mr. Colella, a director of the Company, is a general partner of
Institutional Ventures Management V, L.P., the general partner of Institutional
Venture Partners V, L.P. He disclaims beneficial ownership of the shares held by
those entities, except to the extent of his pecuniary interests therein.
(6) Dr. Sevastopoulos, a director of the Company, is a limited partner of
Delphi Management Partners II, which is the general partner of Delphi Ventures
II, L.P. He disclaims beneficial ownership of the shares held by those entities,
except to the extent of his pecuniary interests therein.
LOANS
The Company has provided Louis G. Lange, M.D., Ph.D., Chairman of the Board of
Directors and Chief Executive Officer, with several loans. In August 1992, the
Company provided a loan in the principal amount of $500,000 at an annual
interest rate of 7.0%, pursuant to a promissory note secured by a deed of trust
on Dr. Lange's residence (the "1992 Note"). In June 1993, the Company provided a
loan in the principal amount of $25,000 at an annual interest rate of 5.33%,
pursuant to a promissory note secured by a stock pledge of 2,500 shares of
Common Stock held by Dr. Lange. In June 1995, in connection with the exercise of
an option to purchase Common Stock, the Company provided a loan in the principal
amount of $37,500 at an annual interest rate of 7.31%, pursuant to a promissory
note secured by a pledge of 15,000 shares of Common Stock held by Dr. Lange. In
August 1996, the Company provided a loan to Dr. Lange in the principal amount of
$25,000, at an annual interest rate of 6.84%, pursuant to a promissory note
secured by a pledge of 2,500 shares of Common Stock held by Dr. Lange. As of
September 30, 1996, an aggregate principal amount of $587,500 remained
outstanding on the four notes.
In April 1995, the Company forgave $30,000 in interest due on the notes. In
September 1996, the Company amended all four notes. Under the terms of each
amended note, the loans bear interest at the rate of 6.53% compounded
semi-annually and the outstanding principal amount is due on the earliest of
December 31, 2001, the termination of employment or a change in control. At the
same time, the Company forgave all interest due on the four loans as of December
31, 1995 (estimated at $93,880). In addition, the Company will pay Dr. Lange an
amount necessary to compensate him for any taxes that he may incur due to the
interest forgiveness and the payment of this additional amount as well as the
following amounts for mortgage assistance: $50,000 in 1997, $40,000 in 1998,
$30,000 in 1999, $20,000 in 2000 and $10,000 in 2001.
In connection with the 1992 Note, the Company entered into a letter agreement of
Credit Terms and Conditions with Imperial Bank, dated August 11, 1992, pursuant
to which Imperial Bank provided a loan to the Company in the principal amount of
$500,000, at an annual interest rate equal to the greater of 2.0% per year in
excess of Imperial Bank's prime lending rate or $250 (the "Imperial Loan"). The
loan was guaranteed by Institutional Venture Partners V, L.P. ("IVP") pursuant
to a Continuing Guarantee dated August 11, 1992 (the "IVP Guarantee"). Mr.
Colella, a director of the Company, is a General Partner of IVP. In
consideration for the IVP Guarantee, Dr. Lange executed a Guaranty and Pledge
Agreement dated August 18, 1992 in which he provided a guarantee of
reimbursement and pledged shares in favor of IVP. The Company paid off the
Imperial Loan in September 1996.
Upon the closing of this Offering, Dr. Lange will sell a sufficient number of
shares of Common Stock at the price per share set in the Offering to the Company
to satisfy $150,000 of his $500,000 loan and the tax obligations arising from
such sale.
In August 1995, in connection with the exercise of an option to purchase 30,000
shares of Common Stock, the Company provided a loan to Michael M. Wick, M.D.,
Ph.D., Senior Vice President, Research, in the principal
49
<PAGE>
amount of $75,000, at an annual interest rate of 6.56%, pursuant to a promissory
note secured by a pledge of 7,500 shares of Common Stock held by Dr. Wick. In
December 1995, the Company repurchased the 30,000 shares for an aggregate amount
of $75,000. Payment was made by cancellation of the note.
In June 1995, in connection with the exercise of an option to purchase Common
Stock, the Company provided a loan to Thomas L. Gutshall, a director of the
Company who then served as President and Chief Operating Officer, in the
principal amount of $62,500, at an annual interest rate of 7.31%, pursuant to a
promissory note secured by a pledge of 25,000 shares of Common Stock held by Mr.
Gutshall. Pursuant to a Separation and Consulting Agreement effective as of
September 2, 1996, the Company agreed to amend the note. Under the terms of the
amended note, the loan bears interest at the rate of 6.53% compounded
semi-annually and the outstanding principal amount is due on the earliest of
December 31, 2001, the voluntary termination of association or a change in
control. As of September 30, 1996, an aggregate principal amount of $62,500
remained outstanding on the note.
In November 1992, the Company provided two loans to George F. Schreiner, M.D.,
Ph.D., Vice President, Medical Science and Preclinical Research, both in the
principal amounts of $75,000, at an annual interest rate of 6.5%. The
outstanding principal amount and accrued interest on the first loan was forgiven
in three equal amounts on the last day of the year of 1993, 1994 and 1995. The
second loan was made pursuant to a promissory note secured by a deed of trust on
Dr. Schreiner's residence. In September 1996, the Company amended the note.
Under the terms of the amended note, the loan bears interest at the rate of
6.53% compounded semi-annually and the outstanding principal amount is due on
the earliest of December 31, 2001, the termination of employment or a change in
control. As of September 30, 1996, an aggregate of $75,000 in principal amount
remained outstanding on the second loan. In December 1992, the Company provided
a third loan to Dr. Schreiner in the principal amount of $50,000, at an annual
interest rate of 6.5%, pursuant to a promissory note secured by a deed of trust
on Dr. Schreiner's residence (the "December Note"). Dr. Schreiner repaid the
outstanding principal amount and accrued interest on the December Note in May
1993.
The forgiveness of the accrued interest on the notes to Dr. Lange and Dr.
Schreiner was accounted for as compensation expense to the related employees, in
the period in which the interest was deemed to have been forgiven.
OTHER TRANSACTIONS/RELATIONSHIPS
In May 1995, the Company entered into a Consulting Agreement with Kathleen A.
Stafford, Chief Financial Officer of the Company. As compensation for her
services under the agreement, Ms. Stafford received $1,900 per week as well as
an option to purchase 10,000 shares of Common Stock at an exercise price of
$2.50 per share, with vesting over a twenty-four month period. The agreement
terminated when Ms. Stafford became Chief Financial Officer on December 1, 1995,
but the option continues to vest.
In April 1993, the Company entered into a Collaborative Research and Development
Agreement with Genta Incorporated and Genta Jago Technologies B.V. (the "Genta
Agreement"). Mr. Colella, a director of the Company, is also a director of Genta
Incorporated. Pursuant to the terms of the Genta Agreement, the parties agreed
to engage in a five-year collaboration to design, develop and commercialize
certain products utilizing the technology which was the subject of a License
Agreement between the Company and Genta Incorporated on the one hand and the
Board of Trustees of the Leland Stanford Junior University on the other hand
(the "Stanford License"). The parties have terminated the collaboration effort,
and the Stanford License has been terminated.
In October 1996, the Company entered into indemnification agreements with its
directors and officers for the indemnification of, and advancement of expenses
to, such persons to the full extent permitted by law. The Company intends to
execute such agreements with its future directors and officers.
The Company believes that the foregoing transactions were in its best interest.
As a matter of policy the transactions were, and all future transactions between
the Company and any of its officers, directors or principal shareholders will
be, approved by a majority of the independent and disinterested members of the
Board of Directors, will be on terms no less favorable to the Company than could
be obtained from unaffiliated third parties and will be in connection with bona
fide business purposes of the Company.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1996 and as adjusted
to reflect the sale of the Common Stock being offered hereby by: (i) each
stockholder who is known by the Company to own beneficially more than 5% of the
Common Stock; (ii) each Named Executive Officer of the Company; (iii) each
director of the Company; and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
-----------------------------------
SHARES BENEFICIALLY OWNED(1)
-----------------------------------
PERCENT PERCENT
PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL HOLDER NUMBER OFFERING OFFERING
- ------------------------------------------------------------------ --------- ----------- -----------
Samuel D. Colella (2) 611,518 13.56% 8.72%
<S> <C> <C> <C>
Entities affiliated with Institutional Venture Management V, L.P.
(3) 594,518 13.23 8.50
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Entities affiliated with Delphi Ventures II, L.P. (4) 372,792 8.35 5.35
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Zesiger Capital Group, LLC (5) 331,766 7.46 4.77
320 Park Avenue
New York, NY 10022
Entities affiliated with BankAmerica Ventures (6) 331,730 7.45 4.77
950 Tower Lane, Suite 700
Foster City, CA 94404
Entities affiliated with Asset Management Associates, 1989, L.P.
(7) 321,311 7.21 4.62
2275 East Bayshore Road, Suite 150
Palo Alto, CA 94303
Louis G. Lange, M.D., Ph.D. (8) 333,341 7.18 4.67
Entities affiliated with Sequoia Capital V (9) 283,067 6.35 4.07
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
George F. Schreiner, M.D., Ph.D. (10) 68,025 1.51 *
Thomas L. Gutshall (11) 58,978 1.32 *
Andrew A. Wolff, M.D. (12) 52,500 1.17 *
Barbara J. McNeil, M.D., Ph.D. (13) 18,499 * *
J. Leighton Read, M.D. (14) 23,221 * *
Costa G. Sevastopoulos, Ph.D. (15) 21,292 * *
Isaac Stein (16) 40,638 * *
Mark B. Hirsch 24,365 * *
All directors and executive officers as a group (11 persons)(17) 1,353,304 26.87 17.96
</TABLE>
- ------------------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Beneficial ownership also includes
shares of stock subject to options and warrants currently exercisable or
convertible, or exercisable or convertible within 60 days of the date of this
table. Except as indicated by footnote, and subject to community property laws
where applicable, to the knowledge of the Company, all persons named in the
table above have sole voting and investment power with respect to all shares of
Common Stock, shown as beneficially owned by them. Percentage of beneficial
ownership is based on 4,449,166 shares of Common Stock outstanding as of
September 30, 1996 and 6,949,166 shares of Common Stock outstanding after
completion of the Offering.
51
<PAGE>
(2) Includes 17,000 shares issuable upon the exercise of options, 16,055 of
which would be subject to repurchase by the Company as of November 29,
1996, if issued. Also includes the shares identified in footnote (3) below. Mr.
Colella is a general partner of IVM, the general partner of IVP. Mr. Colella
disclaims beneficial ownership of the shares listed in footnote (3), except to
the extent of his pecuniary interests therein.
(3) Consists of 8,650 shares held by Institutional Ventures Management V, L.P.
("IVM"), 486,350 shares held by Institutional Venture Partners V, L.P.
("IVP"), 1,090 shares to be issued to IVM upon the net exercise of an
outstanding warrant upon the closing of the Offering, 53,428 shares to be issued
to IVP upon the net exercise of an outstanding warrant upon the closing of the
Offering, 775 shares issuable upon the exercise of outstanding warrants held by
IVM exercisable within 60 days of September 30, 1996 and 44,225 shares issuable
upon the exercise of outstanding warrants held by IVP exercisable within 60 days
of September 30, 1996. Mr. Colella, a director of the Company, is a general
partner of IVM. IVM is the general partner of IVP. Mr Colella disclaims
beneficial ownership of the shares held by IVM and IVP, except to the extent of
his pecuniary interests therein.
(4) Consists of 1,764 shares held by Delphi BioInvestments II, L.P.
("BioInvestments"), 325,932 shares held by Delphi Ventures II, L.P.
("Ventures"), 164 shares to be issued to BioInvestments upon the net exercise of
an outstanding warrant upon the closing of the Offering, 32,183 shares to be
issued to Ventures upon the net exercise of an outstanding warrant upon the
closing of the Offering, 64 shares issuable upon the exercise of an outstanding
warrant held by BioInvestments exercisable within 60 days of September 30, 1996
and 12,685 shares issuable upon the exercise of an outstanding warrant held by
Ventures exercisable within 60 days of September 30, 1996. Dr. Sevastopoulos, a
director of the Company, is a limited partner of Delphi Management Partners II,
which is the general partner of BioInvestments and Ventures. Dr. Sevastopoulos
disclaims beneficial ownership of the shares held by BioInvestments and
Ventures, except to the extent of his pecuniary interests therein.
(5) Consists of 150,000 shares and 181,716 shares to be issued upon the net
exercise of outstanding warrants upon the closing of this Offering over
which Zesiger Capital Group, LLC has dispositive power pursuant to authority
granted by its investment clients. Zesiger Capital Group, LLC disclaims
beneficial ownership of all such shares.
(6) Consists of 15,000 shares held by BA Venture Partners II ("BA"), 135,000
shares held by BankAmerica Ventures ("BankAmerica"), 18,173 shares to be
issued to BA upon the net exercise of an outstanding warrant upon the closing of
this Offering and 163,557 shares to be issued to BankAmerica upon the net
exercise of an outstanding warrant held by BankAmerica upon the closing of this
Offering.
(7) Consists of 247,100 shares held by Asset Management Associates 1989, L.P.
("AMA"), 18,250 shares held by Asset Management Partners ("AMP"), 24,351
shares to be issued to AMA upon the net exercise of an outstanding warrant upon
the closing of the Offering, 22,110 shares to be issued to AMP upon the net
exercise of an outstanding warrant upon the closing of the Offering and 9,500
shares issuable upon the exercise of an outstanding warrant held by AMA
exercisable within 60 days of September 30, 1996.
(8) Includes 195,000 shares issuable upon the exercise of options, 128,266 of
which would be subject to repurchase by the Company as of November 29,
1996, if issued and 1,514 shares to be issued upon the net exercise of an
outstanding warrant upon the closing of the Offering. Also includes 7,500 shares
held in the Louis Lange Family Trust. Dr. Lange disclaims beneficial ownership
of the shares held in the Louis Lange Family Trust, except to the extent of his
pecuniary interests therein.
(9) Consists of 246,652 shares held by Sequoia Capital V, 11,827 shares held by
Sequoia Technology Partners V, 5,000 shares held by Sequoia XXII, 4,000
shares held by Sequoia XXIII, 1,020 shares held by Sequoia XXIV, 750 shares held
by Sequoia 1995 L.L.C., 7,041 shares to be issued to Sequoia Capital V upon the
net exercise of an outstanding warrant upon the closing of the Offering, 226
shares to be issued to Sequoia Technology Partners V upon the net exercise of an
outstanding warrant upon the closing of the Offering, 302 shares to be issued to
Sequoia 1995 upon the net exercise of an outstanding warrant upon the closing of
the Offering, 5,812 shares issuable upon the exercise of an outstanding warrant
held by Sequoia Capital V exercisable within 60 days of September 30, 1996, 187
shares issuable upon the exercise of an outstanding warrant held by Sequoia
Technology Partners V exercisable within 60 days of September 30, 1996 and 250
shares issuable upon the exercise of an outstanding warrant held by Sequoia 1995
exercisable within 60 days of September 30, 1996.
(10) Consists of 68,025 shares issuable upon the exercise of options, 34,276 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued.
(11) Includes 27,714 shares issuable upon the exercise of options, 15,944 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued. Also includes 2,250 shares held in the Gutshall Family Trust, 1,514
shares to be issued to the Gutshall Family Trust upon the net exercise of an
outstanding warrant upon the closing of the Offering and 500 shares issuable
upon the exercise of an outstanding warrant held in the Gutshall Family Trust
exercisable within 60 days of September 30, 1996.
(12) Consists of 52,500 shares issuable upon the exercise of options, 41,800 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued.
(13) Includes 16,000 shares issuable upon the exercise of options, 15,777 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued.
(14) Includes 15,500 shares issuable upon the exercise of options, 15,472 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued.
(15) Includes 21,000 shares issuable upon the exercise of options, 20,777 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued.
(16) Includes 26,000 shares issuable upon the exercise of options, 25,777 of
which would be subject to repurchase by the Company as of November 29, 1996,
if issued. Also includes 2,500 shares held in the Stein 1995 Revocable Trust,
1,514 shares to be issued to the Stein 1995 Revocable Trust upon the net
exercise of an outstanding warrant upon the closing of the Offering and 625
shares issuable upon the exercise of an outstanding warrant held in the Stein
1995 Revocable Trust exercisable within 60 days of September 30, 1996.
(17) Includes 586,864 shares issuable upon the exercise of options and warrants
held by all directors and executive officers that are exercisable within 60
days from September 30, 1996, 393,853 of which would be subject to repurchase by
the Company as of November 29,1996, if issued. Also includes 1,514, 1,514,
1,514, 3,028 and 1,514 shares to be issued to Dr. Lange, the Gutshall Family
Trust, the Stein 1995 Revocable Trust, Ms. Stafford and Dr. Wick, respectively,
upon the net exercise of outstanding warrants upon the closing of the Offering.
See footnotes (2), (8) and (10) - (16).
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the closing of this Offering, the authorized capital stock of the Company
will consist of 30,000,000 shares of Common Stock, $.001 par value, and
5,000,000 shares of Preferred Stock, $.001 par value.
The Company may be subject to Section 2115 of the California Corporations Code
("Section 2115"). Section 2115 provides that, regardless of a company's legal
domicile, certain provisions of California corporate law will apply to that
company if the Company meets certain requirements relating to its property,
payroll and sales in California and if more than one-half of its outstanding
voting securities are held of record by persons having addresses in California.
Section 2115 limits the ability of the Company to, among other things, elect a
classified board of directors. The Company will not be subject to Section 2115
(i) at such time as the Company is qualified for trading as a national market
security on the Nasdaq system and has 800 stockholders as of the record date of
its most recent annual meeting or (ii) at the end of any income year during
which a certificate of state connections pursuant to Section 2108 of the
California Corporations Code shall have been filed showing that less than
one-half of its outstanding voting securities are held of record by persons
having addresses in California or that one of the other tests of Section 2115 is
not met. The Company expects that it will no longer be subject to Section 2115
by the record date of its 1997 annual meeting of stockholders.
COMMON STOCK
As of September 30, 1996, there were 4,449,166 shares of Common Stock
outstanding (assuming the conversion of all outstanding Preferred Stock upon the
closing of this Offering) held of record by approximately 220 stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this Offering will be, fully
paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.
WARRANTS
As of September 30, 1996, the Company had outstanding warrants to purchase
570,754 shares of Common Stock at exercise prices ranging from $2.50 to $25.00
per share. In addition, in December 1995, the Company issued a warrant to
purchase 2,500 units at a price of $.50 per unit to Cooley Godward LLP, the
Company's counsel, with each unit consisting of 1 share of Common Stock and one
warrant to purchase 1/2 share of Common Stock at an exercise price of $20.00 per
share. Each warrant is exercisable immediately with the exception of two
warrants to purchase an aggregate of 84,500 shares of Common Stock which are not
exercisable until after September 15, 1997. Each warrant contains provisions for
the adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant under certain circumstances, including stock
dividends, stock splits, reorganizations and reclassifications. Each warrant may
be exercised, without the payment of cash, for a
53
<PAGE>
number of shares of Common Stock determined pursuant to a net issue exercise
formula contained in the warrant. Each warrant holder has certain registration
rights. See "Description of Capital Stock - Registration Rights of Certain
Holders." Generally, the warrants expire at various times from September 1997 to
April 2005.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Following this Offering, holders of 4,030,002 shares of Common Stock and
warrants to purchase 574,504 shares of Common Stock will be entitled to certain
rights with respect to the registration of their shares under the Securities
Act. These rights are provided under the terms of an Investors' Rights
Agreement, dated May 29, 1996, and certain other agreements (the "Agreements").
Pursuant to the terms of the Agreements, if the Company proposes to register any
of its securities under the Securities Act, either for its own account or the
account of others, the holders are entitled to notice of such registration and
are entitled to include, at the Company's expense, their shares of Common Stock;
provided, among other conditions, that the underwriters of any offering have the
right to limit the number of such shares included in such registration or
exclude such shares entirely. The holders may also require the Company, on no
more than one occasion over any twelve month period, at the Company's expense,
to register all or a portion of their shares of Common Stock on Form S-3 when
such form becomes available to the Company, subject to certain conditions and
limitations. Further, holders of 4,030,002 shares of Common Stock and warrants
to purchase 534,504 shares of Common Stock may require the Company, beginning
180 days after the date of the Prospectus, on not more than two occasions, to
file a registration statement under the Securities Act at the Company's expense
with respect to their shares of Common Stock, and the Company is required to use
its best efforts to effect such registration, subject to certain conditions and
limitations. All rights described in this paragraph terminate at such time as
such shares of Common Stock may be sold in the public market.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware Law, an
anti-takeover law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of Section 203, a
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The Company's Restated Certificate of Incorporation and Restated Bylaws also
require that, effective upon the closing of this Offering, any action required
or permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer of the Company or by any
person or persons holding shares representing at least 10% of the outstanding
capital stock. The Company's Restated Certificate of Incorporation also provides
for a classified Board which will be instituted at such time as the Company is
no longer subject to Section 2115 and specifies that the authorized number of
directors may be changed only by resolution of the Board of Directors. See
"Management - Board Composition." These provisions may have the effect of
deterring hostile takeovers or delaying changes in control or management of the
Company.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A. has been appointed as the transfer agent and
registrar for the Company's Common Stock.
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 6,949,166 shares of
Common Stock outstanding, assuming the net exercise of certain outstanding
warrants for Common Stock and the conversion of all outstanding Preferred Stock
but no exercise of other outstanding warrants and options. Of these shares, the
2,500,000 shares sold in this Offering will be freely transferable without
restriction under the Securities Act unless they are held by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act. The
remaining 4,449,166 shares of Common Stock (the "Restricted Shares") held by
officers, directors, employees, consultants and other stockholders of the
Company were sold by the Company in reliance on exemptions from the registration
requirements of the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act and may not be sold publicly unless
they are registered under the Securities Act or are sold pursuant to Rule 144 or
another exemption from registration.
The officers, directors, employees and certain stockholders of the Company have
agreed not to sell their shares without the prior written consent of J.P. Morgan
Securities Inc. for a period of 180 days from the date of this Prospectus. Upon
completion of the Offering, 92,785 shares will be eligible for sale in the
public market immediately following the Offering. Beginning 180 days after
commencement of this Offering, 2,481,313 Restricted Shares that are subject to
lock-up agreements (as described below under "Underwriting") will become
eligible for sale in the public market subject to Rule 144 and Rule 701 under
the Securities Act. The remaining 1,875,068 Restricted Shares, which are also
subject to such lock-up agreements, will have been held for less than two years
upon the expiration of such lock-up agreements and will become eligible for sale
under Rule 144 at various dates thereafter as the holding period provisions of
Rule 144 are satisfied.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned Restricted Shares for at least
two years, including persons who may be deemed "affiliates" of the Company, is
entitled to sell, within any three month period commencing 90 days after this
Offering, a number of shares that does not exceed the greater of 1% of the
number of shares of Common Stock then outstanding (approximately 70,000 shares
immediately after this Offering, assuming no exercise of the Underwriters' over-
allotment option) or the average weekly trading volume of the Common Stock as
reported through the Nasdaq National Market during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company. In addition, a person who is not deemed to have been an affiliate of
the Company at any time during the 90 days preceding a sale, and who has
beneficially owned for at least three years the shares proposed to be sold,
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above.
Under Rule 701 under the Securities Act, any employee, officer or director of or
consultant to the Company, who is not an affiliate of the Company, and who
purchased shares pursuant to a written compensatory plan or contract, including
the Company's stock option plans, is entitled to sell such shares without having
to comply with the public information, holding period, volume limitation or
notice provisions of Rule 144, and affiliates of the Company are permitted to
sell such shares without having to comply with the Rule 144 holding period
restrictions, in each case commencing 90 days after this Offering.
The Company presently intends to file a registration statement under the
Securities Act on Form S-8 to register approximately 1,415,666 shares of Common
Stock subject to outstanding stock options or reserved for issuance under the
Incentive Plan, the 1992 Stock Plan and the Directors' Plan (the "Plans") as
well as stock options granted outside the Plans and shares reserved for issuance
under the Purchase Plan. As of September 30, 1996, 803,338 shares were issuable
upon exercise of currently outstanding options, all of which are subject to the
lock-up agreements described above. Of these shares, 317,093 will be vested 180
days after commencement of this Offering and eligible for sale, subject, in the
case of sales by affiliates, to the volume, manner of sale, notice and public
information requirements of Rule 144. See "Management - Stock Plans" and
"Management - Directors' Compensation."
As of September 30, 1996, 574,504 shares were issuable upon exercise of
currently outstanding warrants of which 490,004 shares are subject to the
lock-up agreements described above. Of these shares, 186,926 will
55
<PAGE>
become eligible for sale in the public markets subject to Rule 144 beginning 180
days after commencement of this Offering and 303,078 shares will become eligible
for sale subject to Rule 144 at various dates thereafter as the holding
provisions of Rule 144 are satisfied. In addition, 84,500 shares issuable upon
exercise of warrants which are not subject to lock-up agreements, will become
eligible for sale in the public markets beginning after September 15, 1997
pursuant to the terms of the individual warrants, subject to Rule 144.
The holders of 4,030,002 shares of Common Stock and the holders of warrants
exercisable for 574,504 additional shares of Common Stock are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. See "Description of Capital Stock - Registration Rights of
Certain Holders." Registration of such shares under the Securities Act would
result in such shares becoming freely tradable without restriction under the
Securities Act (except for shares purchased by affiliates of the Company)
immediately upon the effectiveness of such registration. If certain of such
holders, by exercising their demand registration rights, cause a larger number
of securities to be registered and sold in the public market, such sales could
have an adverse effect on the market price for the Common Stock. If the Company
were to include in a Company-initiated registration any Registrable Securities
pursuant to the exercise of piggyback registration rights, such sales may have
an adverse effect on the Company's ability to raise needed capital.
Prior to this Offering, there has been no public market for the Common Stock of
the Company. No predictions can be made of the effect if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of a substantial amount of
such shares by existing stockholders or by stockholders purchasing in the
Offering could have a negative impact on the market price of the Common Stock.
56
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
Underwriters named below, for whom J.P. Morgan Securities Inc., Invemed
Associates, Inc. and UBS Securities LLC are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell them, the respective numbers of shares of Common Stock set forth
opposite their names below. Under the terms and conditions of the Underwriting
Agreement, the Underwriters are obligated to take and pay for all such shares of
Common Stock, if any are taken. Under certain circumstances, the commitments of
nondefaulting Underwriters may be increased as set forth in the Underwriting
Agreement.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------- ------------
<S> <C>
J.P. Morgan Securities Inc.................................................
Invemed Associates, Inc....................................................
UBS Securities LLC.........................................................
------------
Total..................................................................
------------
------------
</TABLE>
The Underwriters propose initially to offer the Common Stock directly to the
public at the price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of per share to certain other dealers. After the initial public
offering of the Common Stock, the public offering price and such concession may
be changed.
The Company has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
375,000 additional shares of Common Stock at the initial public offering price,
less the underwriting discount. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any. To the extent the
Underwriters exercise the option, each Underwriter will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage of
such additional shares as the number set forth next to such Underwriter's name
in the preceding table bears to the total number of shares of Common Stock
offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company's officers, directors and certain other stockholders of the Company
have agreed, subject to certain exceptions, not to, directly or indirectly, (i)
sell, grant any option to purchase or otherwise transfer or dispose of any
shares of Common Stock or securities convertible into or exchangeable or
exercisable for shares of Common Stock or file a registration statement under
the Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement or transaction that transfers, in whole or in part, the economic
consequence of ownership of the Common Stock, without the prior written consent
of J.P. Morgan Securities Inc., for a period of 180 days after the date of this
Prospectus. The foregoing does not prohibit the Company's issuance of shares
pursuant to the exercise of the Underwriters over-allotment option or under the
Incentive Plan, the 1992 Stock Plan, the Directors' Plan or the Purchase Plan.
J.P. Morgan Securities Inc. may, in its sole discretion at any time or from time
to time, without notice, release all or any portion of the shares subject to the
lock-up agreements.
The Underwriters have advised the Company that they do not expect that sales to
accounts over which they exercise discretionary authority will exceed 5% of the
shares offered hereby.
57
<PAGE>
Prior to this Offering, there has been no public market for the Common Stock.
The initial public offering price for the shares of Common Stock offered hereby
will be determined through negotiations among the Company and the Underwriters.
Among the factors to be considered in making such determination are the history
of and the prospects for the industry in which the Company operates, an
assessment of the Company's management, the present operations of the Company,
the historical results of operations of the Company, the prospects for future
earnings of the Company, the general conditions of the securities markets at the
time of the Offering and the prices of similar securities of generally
comparable companies.
There can be no assurance that an active trading market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to the Offering at or above the initial public offering price.
From time to time in the ordinary course of their respective businesses, the
Representatives and their respective affiliates may in the future provide
investment banking and other financial services to the Company and its
affiliates.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward LLP ("Cooley"), Palo Alto, California. Certain legal
matters in connection with this Offering will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, a Professional Corporation,
Palo Alto, California. As of the date of this Prospectus, Cooley owns a warrant
to purchase 2,500 units at a price of $.50 per unit with each unit consisting of
1 share of Common Stock and one warrant to purchase 1/2 share of Common Stock at
an exercise price of $20.00 per share. GC&H Investments, a general partnership
formed by the partners of Cooley for investment purposes, owns 18,761 shares of
the Company's Common Stock, 1,514 shares of Common Stock issuable upon the net
exercise of an outstanding warrant upon the closing of the Offering and a
warrant to purchase 875 shares of Series E Preferred Stock, convertible into 875
shares of the Company's Common Stock. Alan C. Mendelson and Deborah A. Marshall,
partners at Cooley, are Secretary and Assistant Secretary of the Company,
respectively.
EXPERTS
The consolidated financial statements of CV Therapeutics, Inc. as of December
31, 1994 and 1995 and for each of the three years in the period ended December
31, 1995 appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby (the "Registration Statement"). This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and such Common Stock, reference is made to the
Registration Statement and the exhibits and schedules thereto filed as a part
thereof. Statements contained herein as to the contents of any documents are not
necessarily complete. In each instance, reference is made to the copy of such
document filed as an exhibit to the Registration Statement, and each such
statement is qualified in its entirety by such reference. Copies of the
Registration Statement, including exhibits and schedules filed therewith, may be
inspected without charge at the Commission's principal office in Washington,
D.C. or obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission through the Electronics Data
Gathering, Analysis and Retrieval System. The Company intends to distribute to
its stockholders annual reports containing audited financial statements and will
make available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited interim financial information.
58
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2
Consolidated Balance Sheets................................................................................ F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statement of Stockholders' Equity............................................................. F-5
Consolidated Statements of Cash Flows...................................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
CV Therapeutics, Inc.
We have audited the accompanying consolidated balance sheets of CV Therapeutics,
Inc. (a development stage company) as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995 and for
the period from inception (December 11, 1990) to December 31, 1995 (not
separately presented herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CV
Therapeutics, Inc. (a development stage company) at December 31, 1994 and 1995,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 and for the period from
inception (December 11, 1990) to December 31, 1995 (not separately presented
herein) in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 23, 1996, except for
Note 10, as to which the date is
October 29, 1996
F-2
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
------------------------------------------
PRO FORMA
STOCKHOLDERS'
EQUITY AT
DECEMBER 31, SEPTEMBER SEPTEMBER
-------------------- 30, 30,
1994 1995 1996 1996
--------- --------- --------- ---------
IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,742 $ 5,569 $ 6,478
Short-term investments 6,001 - 4,006
Interest receivable and other
current assets 266 221 236
--------- --------- ---------
Total current assets 10,009 5,790 10,720
Notes receivable from officers
and employees 650 625 625
Property and equipment, net 4,487 4,120 3,332
Intangible and other assets,
net of accumulated
amortization of $45, $60 and
$72 at December 31, 1994 and
1995, and September 30, 1996,
respectively 953 913 984
--------- --------- ---------
$ 16,099 $ 11,448 $ 15,661
--------- --------- ---------
--------- --------- ---------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 205 $ 405 $ 557
Accrued liabilities 731 1,549 1,447
Current portion of long-term
debt 1,201 3,341 -
Current portion of capital
lease obligation 186 224 27
--------- --------- ---------
Total current liabilities 2,323 5,519 2,031
Long-term portion of long-term
debt 2,322 3,250 5,000
Long-term portion of capital
lease obligation 376 152 -
Accrued rent 517 723 722
Commitments
Stockholders' equity:
Preferred stock (pro forma),
$0.001 par value, 5,000,000
shares authorized, none
issued and outstanding - - - $ -
Convertible preferred stock,
$0.001 par value, 42,000,000
preferred shares authorized
(none pro forma), issuable
in series; 21,549,445,
25,471,045 and 32,382,015
convertible preferred shares
issued and outstanding at
December 31, 1994 and 1995,
and September 30, 1996,
respectively; at amounts
paid in; aggregate
liquidation preference of
$37,516 and $51,338 at
December 31, 1995 and
September 30, 1996,
respectively 28,591 36,388 50,130 -
Common stock, $0.001 par
value, 30,000,000 shares
authorized; 254,197, 368,081
and 418,083 shares issued
and outstanding at December
31, 1994 and 1995, and
September 30, 1996,
(4,449,166 - pro forma)
respectively, less 95,000
shares held in treasury; at
amounts paid in 37 258 2,663 52,793
Warrants to purchase
preferred stock (common
stock - pro forma) 495 544 1,225 1,225
Notes receivable issued for
stock (25) (125) (171) (171)
Deferred compensation - - (2,311) (2,311)
Deficit accumulated during
the development stage (18,537) (35,261) (43,628) (43,628)
--------- --------- --------- ---------
Total stockholders' equity 10,561 1,804 7,908 $ 7,908
--------- --------- --------- ---------
---------
$ 16,099 $ 11,448 $ 15,661
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION
NINE MONTHS ENDED (DECEMBER 11,
YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1990)
------------------------------- -------------------- SEPTEMBER 30,
1993 1994 1995 1995 1996 1996
--------- --------- --------- --------- --------- ----------------
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
License revenue $ - $ - $ - $ - $ 250 $ 250
Operating expenses:
Research and development 4,731 8,823 12,856 10,099 5,834 33,411
General and
administrative 947 2,802 3,402 2,367 2,186 9,766
--------- --------- --------- --------- --------- ----------------
Total operating expenses 5,678 11,625 16,258 12,466 8,020 43,177
--------- --------- --------- --------- --------- ----------------
Loss from operations (5,678) (11,625) (16,258) (12,466) (7,770) (42,927)
Interest income 182 526 416 338 383 1,551
Interest expense (21) (268) (882) (626) (980) (2,229)
--------- --------- --------- --------- --------- ----------------
Net loss $ (5,517) $ (11,367) $ (16,724) $ (12,754) $ (8,367) $(43,605)
--------- --------- --------- --------- --------- ----------------
--------- --------- --------- --------- --------- ----------------
Pro forma net loss per
share $ (4.33) $ (3.37) $ (1.78)
--------- --------- ---------
--------- --------- ---------
Shares used in computing
pro forma net loss per
share 3,861 3,780 4,708
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-4
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (DECEMBER 11, 1990) TO SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK
--------------------
WARRANTS DEFICIT
SHARES TO NOTES ACCUMULATED
--------- COMMON STOCK PURCHASE RECEIVABLE DURING THE
IN THOUSANDS, EXCEPT SHARE AND PER -------------------- PREFERRED FROM DEFERRED DEVELOPMENT
SHARE AMOUNTS AMOUNT AMOUNT STOCK OFFICERS COMPENSATION STAGE
--------- SHARES --------- ---------- ---------- ---------- ----------
---------
Issuance of common stock to founders at
$0.01 per share in January 1991 for
cash - - 250,000 $ 2 - - - -
Issuance of common stock to investors
and consultants at $0.60 per share in
April 1992 for cash - - 28,500 17 - - - -
Issuance of Series A convertible
preferred stock at $0.80 per share to
investors in October 1992 for cash and
conversion of bridge loans of $1,198,
net of $2 of issuance costs 7,746,973 6,195 - - - - - -
Issuance of common stock to investors
at $0.60 per share in October and
November 1992 for cash and conversion
of bridge loans of $5 - - 12,036 7 - - - -
Repurchase of the Company's common
stock from investors at $0.60 per
share in November 1992 for cash - - (40,000) - - - - (23)
Repurchase of the Company's common
stock at $0.60 per share in November
1992 in exchange for a warrant to
purchase 250,000 shares of Series A
preferred stock at $0.80 per share - - (25,000) (15) 15 - - -
Net loss - - - - - - - (1,630)
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Balances at December 31, 1992 7,746,973 6,195 225,536 11 15 - - (1,653)
Issuance of common stock to investors
at approximately $0.80 per share in
April 1993 for cash, net of repurchase - - 10,938 9 - - - -
Sale of warrant in April 1993 to Genta
to purchase 1,000,000 shares of Series
B preferred stock at $2.50 per share,
for cash - - - - 480 - - -
Issuance of Series C convertible
preferred stock at $1.25 per share to
investors in July 1993 for cash, net
of $34 of issuance costs 5,505,865 6,848 - - - - - -
Notes receivable from officers for
exercise of certain stock options - - - - - (25) - -
Net loss - - - - - - - (5,517)
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Balances at December 31, 1993 13,252,838 13,043 236,474 20 495 (25) - (7,170)
Exercise of stock options at $0.80,
$2.00 and $2.50 per share during the
year for cash - - 17,723 17 - - - -
Issuance of Series D preferred stock at
$2.00 per share to investors in March
and April 1994 for cash, net of $1,045
of issuance costs 8,296,607 15,548 - - - - - -
Net loss - - - - - - - (11,367)
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Balances at December 31, 1994 (carried
forward) 21,549,445 $28,591 254,197 $ 37 $ 495 (25) - $(18,537)
<CAPTION>
<S> <C>
TOTAL
IN THOUSANDS, EXCEPT SHARE AND PER STOCKHOLDERS'
SHARE AMOUNTS EQUITY
----------
Issuance of common stock to founders at
$0.01 per share in January 1991 for
cash $ 2
Issuance of common stock to investors
and consultants at $0.60 per share in
April 1992 for cash 17
Issuance of Series A convertible
preferred stock at $0.80 per share to
investors in October 1992 for cash and
conversion of bridge loans of $1,198,
net of $2 of issuance costs 6,195
Issuance of common stock to investors
at $0.60 per share in October and
November 1992 for cash and conversion
of bridge loans of $5 7
Repurchase of the Company's common
stock from investors at $0.60 per
share in November 1992 for cash (23)
Repurchase of the Company's common
stock at $0.60 per share in November
1992 in exchange for a warrant to
purchase 250,000 shares of Series A
preferred stock at $0.80 per share -
Net loss (1,630)
----------
Balances at December 31, 1992 4,568
Issuance of common stock to investors
at approximately $0.80 per share in
April 1993 for cash, net of repurchase 9
Sale of warrant in April 1993 to Genta
to purchase 1,000,000 shares of Series
B preferred stock at $2.50 per share,
for cash 480
Issuance of Series C convertible
preferred stock at $1.25 per share to
investors in July 1993 for cash, net
of $34 of issuance costs 6,848
Notes receivable from officers for
exercise of certain stock options (25)
Net loss (5,517)
----------
Balances at December 31, 1993 6,363
Exercise of stock options at $0.80,
$2.00 and $2.50 per share during the
year for cash 17
Issuance of Series D preferred stock at
$2.00 per share to investors in March
and April 1994 for cash, net of $1,045
of issuance costs 15,548
Net loss (11,367)
----------
Balances at December 31, 1994 (carried
forward) $ 10,561
</TABLE>
See accompanying notes.
F-5
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
PERIOD FROM INCEPTION (DECEMBER 11, 1990) TO SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK
--------------------
WARRANTS DEFICIT
SHARES TO NOTES ACCUMULATED
--------- COMMON STOCK PURCHASE RECEIVABLE DURING THE
IN THOUSANDS, EXCEPT SHARE AND PER -------------------- PREFERRED FROM DEFERRED DEVELOPMENT
SHARE AMOUNTS AMOUNT AMOUNT STOCK OFFICERS COMPENSATION STAGE
--------- SHARES --------- ---------- ---------- ---------- ----------
---------
Balances at December 31, 1994 (brought
forward) 21,549,445 $28,591 254,197 $ 37 $ 495 $ (25) - $(18,537)
Exercise of stock options at $0.80,
$2.00 and $2.50 per share during the
year for cash - - 143,884 296 - - - -
Issuance of units consisting of one
share of Series E preferred stock
and one warrant to purchase half of
one share of Series E preferred
stock at $2.00 per share. In October
and November 1995, 3,921,600 units
were issued at $2.00 per unit for
cash, net of $46 of issuance costs 3,921,600 7,797 - - - - - -
Issuance of warrant in December 1995
to the Company's counsel to purchase
25,000 units consisting of one share
of Series E preferred stock and one
warrant to purchase half of one
share of Series E preferred stock at
$2.00 per share at $0.05 per unit
for legal services rendered - - - - 49 - - -
Repurchase of the Company's common
stock from investors at $2.50 per
share in December 1995 in exchange
for cancellation of a promissory
note - - (30,000) (75) - - - -
Notes receivable issued to officers
for exercise of certain stock
options - - - - - (100) - -
Net loss - - - - - - - (16,724)
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Balances at December 31, 1995 25,471,045 36,388 368,081 258 544 (125) - (35,261)
Exercise of stock options at prices
ranging from $0.80 to $2.50 per
share for cash and notes (unaudited) - - 53,002 91 - - - -
Issuance of units consisting of one
share of Series E preferred stock
and one warrant to purchase one-half
of one share of Series E preferred
stock for $2.00 per share. In March,
1996 375,000 units were sold at
$2.00 per unit in consideration for
an up-front license fee owed to
Syntex (U.S.A.) Inc. (unaudited) 375,000 750 - - - - - -
Issuance of units consisting of one
share of Series G convertible
preferred stock and one warrant to
purchase 0.15 of one share of common
stock at $20.00 per share. In March
and May 1996, 6,535,970 units were
sold for $2.00 per unit in cash, net
of $80,000 of issuance cost
(unaudited) 6,535,970 12,992 - - - - - -
Value ascribed to warrant as a result
of change in terms of the warrant,
causing a new measurement date for
accounting purposes (unaudited) - - - - 160 - - -
Warrant issued in connection with
debt financing in September 1996.... - - - - 521 - - -
Repurchase of the Company's common
stock from investor's in September
1995 at $2.50 per share............. - - (3,000) (8) - - - -
Notes receivable from officers for
exercise of certain stock options
(unaudited) - - - - - (46) - -
Deferred compensation related to
grants of certain stock options
(unaudited) - - - 2,322 - - (2,322) -
Amortization of deferred compensation
(unaudited)......................... - - - - - - 11 -
Net loss (unaudited) - - - - - - - (8,367)
--------- --------- --------- --------- ---------- ---------- ---------- ----------
Balances at September 30, 1996
(unaudited) 32,382,015 $ 50,130 418,083 $ 2,663 $ 1,225 $ (171) $ (2,311) $(43,628)
--------- --------- --------- --------- ---------- ---------- ---------- ----------
--------- --------- --------- --------- ---------- ---------- ---------- ----------
<CAPTION>
<S> <C>
TOTAL
IN THOUSANDS, EXCEPT SHARE AND PER STOCKHOLDERS'
SHARE AMOUNTS EQUITY
----------
Balances at December 31, 1994 (brought
forward) $ 10,561
Exercise of stock options at $0.80,
$2.00 and $2.50 per share during the
year for cash 296
Issuance of units consisting of one
share of Series E preferred stock
and one warrant to purchase half of
one share of Series E preferred
stock at $2.00 per share. In October
and November 1995, 3,921,600 units
were issued at $2.00 per unit for
cash, net of $46 of issuance costs 7,797
Issuance of warrant in December 1995
to the Company's counsel to purchase
25,000 units consisting of one share
of Series E preferred stock and one
warrant to purchase half of one
share of Series E preferred stock at
$2.00 per share at $0.05 per unit
for legal services rendered 49
Repurchase of the Company's common
stock from investors at $2.50 per
share in December 1995 in exchange
for cancellation of a promissory
note (75)
Notes receivable issued to officers
for exercise of certain stock
options (100)
Net loss (16,724)
----------
Balances at December 31, 1995 1,804
Exercise of stock options at prices
ranging from $0.80 to $2.50 per
share for cash and notes (unaudited) 91
Issuance of units consisting of one
share of Series E preferred stock
and one warrant to purchase one-half
of one share of Series E preferred
stock for $2.00 per share. In March,
1996 375,000 units were sold at
$2.00 per unit in consideration for
an up-front license fee owed to
Syntex (U.S.A.) Inc. (unaudited) 750
Issuance of units consisting of one
share of Series G convertible
preferred stock and one warrant to
purchase 0.15 of one share of common
stock at $20.00 per share. In March
and May 1996, 6,535,970 units were
sold for $2.00 per unit in cash, net
of $80,000 of issuance cost
(unaudited) 12,992
Value ascribed to warrant as a result
of change in terms of the warrant,
causing a new measurement date for
accounting purposes (unaudited) 160
Warrant issued in connection with
debt financing in September 1996.... 521
Repurchase of the Company's common
stock from investor's in September
1995 at $2.50 per share............. (8)
Notes receivable from officers for
exercise of certain stock options
(unaudited) (46)
Deferred compensation related to
grants of certain stock options
(unaudited) -
Amortization of deferred compensation
(unaudited)......................... 11
Net loss (unaudited) (8,367)
----------
Balances at September 30, 1996
(unaudited) $ 7,908
----------
----------
</TABLE>
See accompanying notes.
F-6
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------------------
INCEPTION
(DECEMBER
11, 1990)
NINE MONTHS ENDED TO
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER
------------------------------- -------------------- 30,
IN THOUSANDS 1993 1994 1995 1995 1996 1996
--------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $ (5,517) $(11,367) $(16,724) $(12,754) $(8,367) $(43,607)
Adjustments to
reconcile net loss
to net cash used in
operating
activities:
Amortization of
deferred
compensation...... - - - - 11 11
Depreciation and
amortization 167 672 1,102 820 822 2,804
Write off of
warrant issued
under capital
lease - - - - 160 160
Forgiveness of
notes receivable 75 25 25 - - 200
Issuance of stock
warrant for legal
services received - - 49 - - 49
Issuance of
preferred stock
and warrant for
payment of license
fee - - - - 750 750
Change in assets
and liabilities:
Other current
assets (155) 19 45 (136) (15) (236)
Intangible and
other assets (164) (739) 24 (52) 438 (535)
Accounts payable,
accrued rent and
other accrued
liabilities 55 1,091 1,224 1,503 49 2,728
--------- --------- --------- --------- --------- ---------
Net cash used in
operating activities (5,539) (10,299) (14,255) (10,619) (6,152) (37,676)
--------- --------- --------- --------- --------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of
short-term
investments - (51,900) (1,202) - (4,006) (57,108)
Maturity of
short-term
investments (93) 45,899 7,203 6,001 - 53,102
Capital expenditures - (4,067) (719) (716) (23) (5,314)
Notes receivable from
officers and
employees - - - - - (825)
Cash received from
disposal of asset - 5 - - - 5
--------- --------- --------- --------- --------- ---------
Net cash provided by
(used in) investing
activities (93) (10,063) 5,282 5,285 (4,029) (10,140)
--------- --------- --------- --------- --------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Payments on capital
lease obligation (44) (150) (186) - (349) (729)
Borrowings under
long-term debt (200) 3,571 4,148 3,847 5,000 13,219
Repayments of
long-term debt - (348) (1,080) (581) (6,591) (8,218)
Proceeds from
issuances of common
stock (and bridge
loans subsequently
converted into
common stock), net
of repurchases (16) 17 121 187 38 186
Proceeds from
issuance of warrant 480 - - - - 480
Proceeds from bridge
loans - - - - - 1,198
Proceeds from
issuance of
convertible
preferred stock 6,848 15,548 7,797 5,051 12,992 48,182
Payments to
stockholders to
repurchase the
Company's common
stock - - - - - (24)
--------- --------- --------- --------- --------- ---------
Net cash provided by
financing activities 7,068 18,638 10,800 8,504 11,090 54,294
--------- --------- --------- --------- --------- ---------
Net (decrease)
increase in cash and
cash equivalents 1,436 (1,724) 1,827 3,170 909 6,478
Cash and cash
equivalents at
beginning of period 4,030 5,466 3,742 3,742 5,569 -
--------- --------- --------- --------- --------- ---------
Cash and cash
equivalents at end
of period $ 5,466 $ 3,742 $ 5,569 $ 6,912 $ 6,478 $ 6,478
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
F-7
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------
INCEPTION
(DECEMBER
11, 1990)
NINE MONTHS ENDED TO
YEAR ENDED DECEMBER 31, SEPTEMBER 30, SEPTEMBER
------------------------------- -------------------- 30,
IN THOUSANDS 1993 1994 1995 1995 1996 1996
--------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
SUPPLEMENTAL
DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid for
interest $ 50 $ 287 $ 883 $ 610 $ 755 $ 2,258
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Conversion of bridge
loans into Series A
convertible
preferred stock $ - $ - $ - $ - $ - $ 1,198
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Conversion of bridge
loans into common
stock $ - $ - $ - $ - $ - $ 5
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Acquisition of
property and
equipment under
capital leases $ 683 $ 73 $ - $ - $ - $ 756
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Notes receivable from
officers in
connection with
exercise of certain
stock options $ 25 $ - $ 100 $ 100 $ 21 $ 146
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Issuance of warrants
in connection with
debt financing $ - $ - $ - $ - $ 681 $ 681
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See accompanying notes.
F-8
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
CV Therapeutics, Inc. (the "Company"), a development stage biopharmaceutical
company, was incorporated in the State of Delaware on December 11, 1990 to focus
exclusively on the application of molecular cardiology to the discovery,
development and commercialization of novel, small molecule drugs for the
treatment of chronic cardiovascular diseases. The Company's primary activities
since incorporation have been establishing its offices and research facilities,
recruiting personnel, conducting research and development, performing business
and financial planning and raising capital.
Since inception, the Company has accumulated a deficit of approximately $43.6
million. Management expects to incur additional losses to complete product
development, and commercialization, as necessary, and recognizes the need to
raise additional funds from outside sources. In March and May 1996 the Company
successfully consummated an equity financing transaction which raised
approximately $13.0 million and has completed a refinancing of its existing debt
obligations (see Note 5). Management believes that it will be able to obtain
additional funds through either public or private equity or debt financings,
collaborative and other arrangements with corporate partners or from other
sources. If adequate funds are not available, the Company may be required to
reduce its level of spending, or eliminate one or more of its research and
development programs.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, CV Therapeutics International, which was
incorporated in December 1993 in the Cayman Islands. All significant
intercompany balances have been eliminated.
INTERIM FINANCIAL INFORMATION
The financial information at September 30, 1996 and for the nine months ended
September 30, 1995 and 1996 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. Results for the nine months
ended September 30, 1996 are not necessarily indicative of results for the
entire year.
RESEARCH AND DEVELOPMENT
Research and development expenses consist of costs incurred for independent
research and development. These costs include direct and research-related
overhead expenses.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with a maturity from date of
purchase of three months or less to be cash equivalents. Cash equivalents
consist primarily of money market funds. All other liquid investments are
classified as short-term investments. Short-term investments at December 31,
1994 consist primarily of auction market preferred stock, money market capital
notes, and bank notes. At September 30, 1996, all short-term investments are in
U.S. government bonds. The Company limits its concentration of risk by
diversifying its investments among a variety of issuers.
Management determines the appropriate classification of investment securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. At December 31, 1994 and 1995 and September 30, 1996, all investment
securities are designated as available-for-sale. Available-for-sale securities
are carried at fair value, with the unrealized gains and losses reported in
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income.
F-9
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are
included in interest income.
Realized gains and losses and declines in value judged to be other than
temporary for available-for-sale securities are included in the statement of
operations. There have been no such transactions through December 31, 1995.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets, generally three to five years.
Leasehold improvements are amortized over the lesser of the lease term or the
estimated useful lives of the related assets, generally two to three years.
Organization costs are amortized over a period of five years.
REVENUE RECOGNITION
Revenues related to license agreements with noncancelable, nonrefundable terms
and no significant future obligations are recognized upon execution of the
agreements. Milestone payments will be recognized pursuant to collaborative
agreements upon the achievement of specified milestones.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NET LOSS PER SHARE
Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
are excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission ("SEC") Staff Accounting
Bulletins, common and common equivalent shares issued during the 12-month period
prior to the initial filing of the proposed offering at prices below the assumed
public offering price have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method for stock
options at the estimated public offering price).
Historical net loss per share information is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
IN THOUSANDS, EXCEPT PER ------------------------------- --------------------
SHARE AMOUNTS 1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Net loss per share $(3.58) $(7.32) $(10.20) $(7.85) $(4.95)
<S> <C> <C> <C> <C> <C>
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in computing net
loss per share 1,540 1,553 1,640 1,625 1,691
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Pro forma net loss per share has been computed as described above and also gives
effect to the conversion of convertible preferred shares not included above that
will automatically convert upon completion of the Company's initial public
offering (using the if-converted method) from the original date of issuance.
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
If the offering contemplated by this Prospectus is consummated, all of the
convertible preferred stock outstanding as of the closing date will
automatically be converted into 3,238,185 shares of common stock, based on the
F-10
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
shares of convertible preferred stock outstanding as of September 30, 1996. In
addition, 792,898 shares will be issued in connection with the net exercise of
certain warrants upon the closing of the initial public offering. Pro forma
stockholders' equity at September 30, 1996, as adjusted for the conversion of
preferred stock and the net exercise of certain warrants, is disclosed on the
balance sheet.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal years beginning
after December 15, 1995. Under SFAS 123, stock-based compensation expense is
measured using either the intrinsic-value method as prescribed by Accounting
Principle Board Opinion No. 25 or the fair-value method described in SFAS 123.
The Company plans to implement SFAS 123 in 1996 using the intrinsic-value
method; accordingly, there will be no effect upon adopting SFAS 123 on the
Company's financial position or results of operations.
2. LICENSE AND COLLABORATION AGREEMENTS
GENTA INCORPORATED
In January 1993, the Company, along with Genta Incorporated (collectively
referred to as "Licensees"), entered into a worldwide license agreement with the
Board of Trustees of the Leland Stanford Junior University ("Stanford"). Under
the terms of the agreement, Stanford granted the Licensees rights with respect
to certain patents to make, use and sell products for the treatment of coronary
restenosis and other vascular and associated human conditions. In consideration
for these patent rights, the Licensees paid a $100,000 licensing fee upon
signing the agreement. The Licensees provided for certain nonrefundable annual
royalties and nonrefundable milestone royalties over the term of the agreement,
and royalties on net sales of licensed products.
On June 28, 1996, the Company and Stanford agreed upon the terms pursuant to
which the January 1993 license agreement referred to above was terminated.
GENTA/GENTA JAGO TECHNOLOGIES B.V.
On April 9, 1993, the Company entered into a five-year research and development
collaboration with Genta, Incorporated ("Genta") and Genta Jago Technologies
B.V. ("GJT") to design, develop and commercialize certain products utilizing the
technology which is the subject of the Stanford license agreement described
above. The agreement obligated the Company, Genta and GJT to jointly fund
certain research costs.
In connection with this agreement, Genta acquired a warrant to purchase
1,000,000 shares of the Company's Series B preferred stock at $2.50 per share
(100,000 shares of common stock at $25.00 per share on an as-if converted
basis). The purchase price for the warrant was $0.48 per underlying share or
$480,000 (100,000 shares of common stock at $4.80 on an as-if converted basis).
The warrant is exercisable immediately and expires on April 7, 2003.
As stated above, in June 1996, the Company and Stanford agreed upon the terms
pursuant to which the license terminated and, consequently, there are no further
obligations to perform under this collaboration agreement. Although the
agreements with Genta and GJT have not been terminated, the Company believes
that neither party is currently pursuing the collaborative research.
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
In June 1994, the Company entered into a license agreement with the University
of Florida Research Foundation, Inc. ("UFRFI") under which the Company received
exclusive worldwide rights with respect to certain
F-11
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
2. LICENSE AND COLLABORATION AGREEMENTS (CONTINUED)
patents to develop adenosine A(1) receptor antagonists and agonists for the
detection, prevention and treatment of human and animal diseases. In
consideration for the license, the Company paid UFRFI an initial license fee and
is obligated to pay royalties based on net sales of products which utilize the
licensed technology.
Pursuant to the agreement, the Company must exercise commercially reasonable
efforts to develop and commercialize one or more products covered by the
licensed technology and is obligated to meet milestones in completing certain
preclinical work. In the event the Company fails to reach those milestones,
UFRFI may convert the exclusive license into a non-exclusive license. As part of
the license agreement with UFRFI, the Company entered into a research agreement
with the University of Florida.
SYNTEX (U.S.A.) INC.
In March 1996, the Company entered a license agreement with Syntex (U.S.A.) Inc.
("Syntex"), which is an indirect subsidiary of Roche Holding Limited, pursuant
to which the Company was granted an exclusive license in certain territories
under Syntex patents and know-how for the sale of products incorporating the
licensed technology, in exchange for an up front license fee, milestone payments
and royalties. In consideration for the up front license fee of $750,000, the
Company issued to Syntex 375,000 shares of Series E preferred stock and a five
year warrant to purchase 187,500 shares of Series E preferred stock at $2.00 per
share (18,750 shares of common stock at $20.00 per share on an as-if converted
method).
BAYER AG
On May 7, 1996, the Company entered a License Agreement with Bayer AG in the
area of inflammatory diseases. Pursuant to this agreement, the Company has
granted Bayer AG an exclusive worldwide license under the Company's patents and
know-how to research, develop and market products incorporating the licensed
technology. In exchange for the license, the Company received a $250,000 up
front non-refundable license fee and is entitled to receive milestone payments
and royalties in the future.
3. INVESTMENTS
The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
-------------------------------------
ESTIMATED FAIR VALUE
-------------------------------------
DECEMBER 31,
------------------------ SEPTEMBER
IN THOUSANDS 1994 1995 30, 1996
----------- ----------- -----------
Cash equivalents:
<S> <C> <C> <C>
Money market funds $1,072 $5,701 $5,175
Commercial paper 1,983 - -
----------- ----------- -----------
3,055 5,701 5,175
Short-term investments:
U. S. government bonds - - 4,006
Auction market preferred stock 4,000 - -
Money market capital notes 1,000 - -
Bank notes 1,001 - -
----------- ----------- -----------
$9,056 $5,701 $9,181
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
As of December 31, 1995 and September 30, 1996, the difference between the fair
value and the amortized cost of available-for-sale securities was insignificant.
F-12
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
3. INVESTMENTS (CONTINUED)
As of December 31, 1994 and September 30, 1996, the average contractual maturity
was approximately three months and six months, respectively, with no single
investment's maturity exceeding one year. Excluded from short-term investments
above is $700,000 and $713,000 of certificates of deposit at December 31, 1994
and 1995, respectively, held as collateral against loans and which is included
in "Intangibles and other assets" on the balance sheet.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
-------------------------------------
DECEMBER 31,
------------------------ SEPTEMBER
IN THOUSANDS 1994 1995 30, 1996
----------- ----------- -----------
Machinery and equipment $ 2,220 $ 2,407 $ 2,419
<S> <C> <C> <C>
Furniture and fixtures 425 556 568
Leasehold improvements 2,662 3,064 3,063
----------- ----------- -----------
5,307 6,027 6,050
Less accumulated depreciation and
amortization (820) (1,907) (2,718)
----------- ----------- -----------
----------- ----------- -----------
$ 4,487 $ 4,120 $ 3,332
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Property and equipment include $756,000 recorded under capital leases at
December 31, 1994, 1995, and September 30, 1996. Accumulated amortization
related to leased assets totaled $275,000, $500,000 and $685,000 at December 31,
1994 and 1995, and September 30, 1996, respectively.
F-13
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
-----------------------------------------
<S> <C> <C> <C>
DECEMBER 31,
---------------------------- SEPTEMBER
IN THOUSANDS 1994 1995 30, 1996
------------- ------------- -----------
Corporate loan at 9.0%, principal
and interest due January 1, 1997,
subject to the Company's right of
deferral $ - $ - $2,000
Corporate loan at 9.0%, principal
payments in equal installments
monthly beginning April 1, 1998
through September 1, 1999. Interest
due monthly subject to rights of
deferral - - 3,000
Corporate term loan at 15.03%,
interest only until December 31,
1995, followed by monthly
installments through December 31,
1997 - 4,000 -
Bank term loan at prime, plus 3.0%,
which is subject to periodic reset,
due in monthly installments through
December 31, 1997 1,714 1,143 -
Bank term loan at prime, plus 2.5%,
which is subject to periodic reset,
due in monthly installments through
December 31, 1997 1,436 1,226 -
Bank note at prime, plus 2%, which
is subject to periodic reset, due
in quarterly installments through
June 30, 1997 250 150 -
Other 123 72 27
------ ------ -----------
3,523 6,591 5,027
Less current portion (1,201) (3,341) (27)
------ ------ -----------
Long-term portion $ 2,322 $ 3,250 $5,000
------ ------ -----------
------ ------ -----------
</TABLE>
The indebtedness to banks is secured by interests in equipment, furniture and
fixtures.
The carrying value of the corporate term loan approximates fair value at
December 31, 1995 and September 30, 1996. The fair value of the corporate term
loan was estimated using discounted cash flow analysis, based on the incremental
borrowing rates currently available to the Company for borrowings with similar
terms and maturity.
On September 27, 1996, the Company completed a refinancing of its existing debt
obligations with $5.0 million of debt financing from entities associated with
Hambrecht & Quist Group. (the H&Q Debt Financings). The H&Q Debt Financings
consist of a $3.0 million term loan which bears interest at the rate of 9.0% per
annum, secured by all of the assets of the Company, and has a final maturity in
September 1999, and a $2.0 million term loan which bears interest at 9.0% per
annum due January 1, 1997. The Company has the option on or before December 31,
1996 to convert the $2.0 million term loan to an equipment lease which would
bear interest at the rate of 9.0% per annum and would have a final maturity in
September 1999. The Company intends to convert the term loan into an equipment
lease if it does not complete its initial public offering by December 31, 1996.
Therefore, the term loan has been classified as long term in the balance sheet
at September 30, 1996. If the Company does not raise a minimum of $13.0 million
in gross proceeds through the sale of equity securities, the Company can elect
to defer payments under either the term loan (or the equipment lease) until
March 1998 and
F-14
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
minimum subsequent payments would total $3.2 million in 1998 and $1.8 million in
1999. Otherwise, maximum payments could total $2.0 million, $1.7 million and
$1.3 million in 1997, 1998 and 1999, respectively. Also, see Note 8.
6. LEASES
The Company leases certain equipment and furniture under noncancelable capital
leases. The Company leases its facilities under noncancelable operating leases.
The facilities lease expires February 2002 and includes an option to renew the
lease for an additional five years. In October 1995, the Company entered into a
noncancelable sublease agreement whereby it leased additional space to two
separate companies for eight months and 17 months, respectively. Aggregate
future minimum rentals to be received as of December 31, 1995 totaled $487,000.
Following is a schedule of future minimum lease payments at December 31, 1995,
net of sublease rentals in 1996 and 1997:
<TABLE>
<CAPTION>
------------------------
<S> <C> <C>
OPERATING CAPITAL
IN THOUSANDS LEASES LEASES
----------- -----------
Year ending December 31,
1996 $ 653 $ 264
1997 1,069 159
1998 1,193 -
1999 1,244 -
2000 1,254 -
Thereafter 1,499 -
----------- -----
Total minimum payments required $ 6,912 423
-----------
-----------
Less amount representing interest (47)
-----
Present value of future lease payments 376
Less current portion (224)
-----
Noncurrent portion $ 152
-----
-----
</TABLE>
Rent expense, net of sublease rentals, for the years ended December 31, 1993,
1994 and 1995, for the nine months ended September 30, 1995 and 1996 and for the
periods from inception (December 11, 1990) to September 30, 1996 was
approximately $123,000, $662,000, $840,000, $578,000, $305,000 and $1,958,000,
respectively.
7. RELATED PARTY TRANSACTIONS
During 1992 and 1993, the Company issued loans to certain of the Company's
officers and employees related to relocation, purchases of stock and other
purposes of which loans aggregating $675,000, $750,000 and $796,000 were
outstanding at December 31, 1994 and 1995, and September 30, 1996, respectively.
These loans bear interest at 5.33% to 7.31% per annum. The amounts are repayable
from December 31, 1997 to June 8, 2005. As of September 30, 1996 loans for
$625,000 are secured by personal residences, and loans for the remaining
$171,000 are secured by the individuals' common stock. As of December 31, 1994,
1995 and September 30, 1996, loans for $25,000, $125,000 and $171,000 related to
the purchase of common stock and have been included in stockholders' equity. The
Company forgave $91,500 and $47,400 of accrued interest in the year
F-15
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
ended December 31, 1995 and the nine months ended September 30, 1996,
respectively, on several of these notes. The forgiveness was accounted for as
compensation expense to the related employees in the period in which the
interest was deemed to have been forgiven.
8. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Preferred stock as of September 30, 1996 consists of the following ($0.001 par
value):
<TABLE>
<CAPTION>
----------------------------------
SHARES
SHARES ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING PREFERENCE
---------- ---------- ----------
Series A 8,000,000 7,746,973 6,197,578
<S> <C> <C> <C>
Series B 1,000,000 - -
Series C 6,000,000 5,505,865 6,882,331
Series D 12,500,000 8,296,607 16,593,214
Series E 7,500,000 4,296,600 8,593,200
Series G 7,000,000 6,535,970 13,071,940
---------- ---------- ----------
Total 42,000,000 32,382,015 51,338,263
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Preferred stockholders are entitled to noncumulative dividends at the rate of
$0.08, $0.25, $0.125, $0.20, $0.20 and $0.20 per annum, for each share of Series
A, Series B, Series C, Series D, Series E and Series G preferred stock
outstanding, respectively, if declared by the board of directors, payable in
preference to common stock dividends. No dividends have been declared or paid by
the Company.
Pursuant to the Company's Restated Certificate of Incorporation, as amended, the
liquidation preference includes all declared but unpaid dividends, if any. None
have been declared to date. After payment has been made to the preferred
stockholders, holders of the common stock and preferred stock shall receive the
remaining assets. Such assets shall be distributed ratably among such holders in
proportion to the shares of stock held by them.
Each share of preferred stock votes equally with shares of common stock on an
"if-converted" basis at any annual or special meeting of the Company, and may
act by written consent in the same manner as the common stock. Series A, Series
B (if and when issued) Series C, Series D, Series E and Series G preferred
stockholders have the right of first refusal with respect to additional equity
financings the Company undertakes.
Each share of preferred stock is convertible at any time at the option of the
holder. After giving effect to the reverse stock split which occurred on October
29, 1996, the conversion ratio is 1-for-10. Conversion of the preferred stock is
automatic upon the closing of an initial public offering with gross proceeds in
excess of $10,000,000. See Note 10. The Company has reserved 3,238,185 shares of
its common stock for the conversion of its outstanding preferred stock.
If the Company issues stock for a price per share less than the Series E
conversion price, then the Series E and Series G conversion prices shall be
reduced to the amount equal to the consideration per share for which such
additional shares of stock are issued. This provision shall terminate upon the
first to occur of the closing of an initial public offering in excess of
$10,000,000 or a merger, reorganization or sale of substantially all of the
assets of the Company or the closing of the Company's next financing of at least
$5,000,000.
F-16
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
In November 1992, the Company repurchased 40,000 shares of its common stock from
its founders for $0.60 per share. The original purchase price was recorded as a
reduction to common stock, at stated cost, and the excess over the original
purchase price, or $23,600, was recorded in the caption "deficit accumulated
during the development stage."
1992 STOCK OPTION PLAN
The Company has reserved 345,000 common shares for issuance under its revised
1992 Stock Option Plan which provides for common stock options to be granted to
employees (including consultants, officers, and directors). The exercise price
of each incentive stock option shall be not less than the 100% of the fair value
of the stock subject to the option on the date the option is granted. The
exercise price of each nonstatutory stock option shall be not less than 85% of
the fair value of the stock subject to the option on the date the option is
granted. All options are to have a term not greater than 10 years from the date
of grant. Options are exercisable upon vesting, which is generally ratable over
a five-year period, unless otherwise approved by the board of directors.
1994 EQUITY INCENTIVE PLAN
In February 1994, the Company's board of directors adopted the 1994 Equity
Incentive Plan. Under the Plan, up to 500,000 shares of the Company's common
stock may be granted to employees of and consultants to the Company and its
affiliates. The Plan allows for the grant of incentive stock options,
nonstatutory stock options, stock bonuses, rights to purchase restricted stock
and stock appreciation rights. Options granted under this plan expire no later
than 10 years from the date of grant. The exercise price of each incentive stock
option shall be not less than 100% of the fair value of the stock subject to the
option on the date the option is granted. The exercise price of each
nonstatutory option shall be not less than 85% of the fair value of the stock
subject to the option on the date the option is granted. The vesting provisions
of individual options may vary but in each case will provide for vesting of at
least 20% of the total number of shares subject to the option per year.
NON-EMPLOYEE DIRECTOR'S STOCK OPTION PLAN
In September 1994, the Company's board of directors adopted the Non-Employee
Director's Stock Option Plan. Under the Plan, options for up to 20,000 shares of
common stock may be granted to directors of the Company who is not otherwise an
employee of or consultant to the Company or of any affiliate of the Company.
Options granted under this plan expire no later than 10 years from the date of
grant. The exercise price of each option shall be the fair value of the stock
subject to such option on the date such option is granted. The options generally
vest in increments over a period of three years from the date of grant.
Outside of Stock Option Plans, from May 1993 through June 1995 the Company
granted options to purchase 85,500 shares of Common Stock to employees and
consultants. The exercise prices ranged from $0.80 to $2.50 per share, which
exercise prices represent the fair value of common stock at the respective grant
dates. The stock option terms vary between the individual grants and were
approved by the board of directors.
F-17
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes option activity under all plans:
<TABLE>
<CAPTION>
-----------------------------------------------
OUTSTANDING OPTIONS
SHARES -----------------------------------
IN THOUSANDS, EXCEPT PER AVAILABLE NUMBER OF PRICE PER AGGREGATE
SHARE AMOUNTS FOR GRANT SHARES SHARE PRICE
---------- ---------- ----------- ----------
Shares authorized 299 - $ - -
<S> <C> <C> <C> <C>
Options granted (184) 184 0$.80-$0-88 $ 150
---------- ---------- ----------
Balance at December 31,
1992 115 184 0$.80-$0.88 150
Shares authorized 74 - $ - -
Options granted (123) 123 0$.80-$1.30 120
Options canceled 9 (9) $ 0.80 (7)
Options exercised - - $ 0.80 -
---------- ---------- ----------
Balance at December 31,
1993 75 298 0$.80-$1.30 263
Shares authorized 238 - $ - -
Options granted (230) 230 2$.00-$2.50 542
Options canceled 9 (9) 0$.80-$2.00 (8)
Options exercised - (18) 0$.80-$2.50 (17)
---------- ---------- ----------
Balance at December 31,
1994 92 501 0$.80-$2.50 780
Shares authorized 340 - $ - -
Options granted (393) 393 $ 2.50 982
Options canceled 37 (37) 0$.80-$2.50 (62)
Options exercised - (144) 0$.80-$2.50 (296)
---------- ---------- ----------- ----------
Balance at December 31,
1995 76 713 0$.80-$2.50 1,404
Shares authorized 529 - $ - -
Options granted (348) 348 $ 2.50 871
Options canceled 202 (202) $0.80-2.50 (446)
Options repurchased 3 (3) 2.50 (8)
Options exercised - (53) 0$.80-$2.50 (83)
---------- ---------- ----------- ----------
Balance at September 30,
1996 462 803 0$.80-$2.50 $1,738
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
At December 31, 1994 and 1995 and September 30, 1996, options to purchase
144,679, 203,613 and 284,459 common shares were exercisable, respectively. At
September 30, 1996, the Company has reserved 1,480,500 shares of authorized
common stock for issuance under all plans.
In March and June 1996, options to purchase 8,835 and 40,505 shares were granted
at $2.50 per share. Deferred compensation of $172,000 was recorded on these
option grants based on the deemed fair value of common stock of approximately
$6.25. In September 1996, the Company granted options to purchase a total of
296,500 shares at an exercise price of $2.50 per share and additional deferred
compensation of approximately $2,150,000 was recorded based on the deemed fair
value of common stock of approximately $9.75.
WARRANTS
In connection with the sale of Series A preferred stock, the Company acquired
25,000 shares of its common stock from an investor for $0.60 per share by
issuing a warrant to purchase 250,000 shares of the Company's Series A preferred
stock at $0.80 per share (25,000 shares of common stock at $8.00 per share on an
as-if-converted
F-18
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
basis). This warrant is exercisable immediately and expires at the earlier of
September 8, 1997 or an initial public offering in excess of $7,500,000 at an
offering price of not less than $5.00 per share as adjusted for any stock
dividends, stock split, recapitalization or consolidation of the Company's
common stock. As of December 31, 1995, 25,000 shares of common stock have been
reserved for the exercise of this warrant.
In connection with the equipment lease entered into in 1993, the Company issued
a warrant to purchase 2,812 shares of the Company's common stock at $8.00 per
share. This warrant is exercisable immediately and expires at the earlier of
March 18, 1999 or an initial public offering in excess of $7,500,000 or a merger
or consolidation of the Company with or into another corporation or entity. As
of December 31, 1995, 2,812 shares of the Company's common stock have been
reserved for the exercise of the warrant.
In connection with the 1993 facility lease, the Company issued warrants to
purchase 30,000 shares of the Company's Series C preferred stock at $1.25 per
share (3,000 shares of common stock at $12.50 per share on an as-if-converted
basis). The warrants expired in August 1996.
In connection with the sale of Series D preferred stock, the Company issued
warrants to purchase 219,266 shares of the Company's Series D preferred stock at
$2.00 per share (21,926 shares of common stock at $20.00 per share on an
as-if-converted basis).
In connection with the corporate term loan obtained in April 1995, the Company
issued warrants to purchase 400,000 shares of the Company's Series D preferred
stock at $2.50 per share (40,000 shares of common stock at $25.00 per share on
an as-if-converted basis). The warrant is exercisable immediately and expires on
April 24, 2005. As of December 31, 1995, 40,000 shares of common stock have been
reserved for the exercise of the warrant. In June 1996, the warrant agreement
was amended to change the exercise price of the warrants from $25.00 per share
to $8.90 per share, in exchange for the elimination of certain loan covenants.
This change in terms resulted in a new measurement date for the warrants for
accounting purposes, and, therefore, a value of $160,000 has been recorded in
June 1996 based on the deemed fair value of the warrants at that date. The
warrant value was initially amortized over the remaining life of the loan.
However, on September 30, 1996, the Company repaid the remaining balance of the
loan and expensed the unamortized portion of the warrant value at that date. The
warrants are exercisable immediately and expire on March 23, 1999. As of
December 31, 1995, 21,926 shares of common stock have been reserved for the
exercise of the warrants.
In connection with the sale of Series E preferred stock, the Company issued
warrants to purchase 1,960,800 shares of the Company's Series E preferred stock
at $2.00 per share (196,078 shares of common stock at $20.00 per share on an
as-if-converted basis). The warrants are exercisable immediately and expire at
the earlier of September 7, 2000, an initial public offering of common stock at
an offering price of not less than $5.00 per share as adjusted for any stock
dividends, combinations or stock split with respect to such stock or a merger,
reorganization or sale of substantially all of the assets of the Company. As of
December 31, 1995, 196,078 shares of common stock have been reserved for the
exercise of the warrants.
In 1995, the Company issued its corporate attorneys a warrant to purchase 25,000
units consisting of one share of the Company's Series E preferred stock (2,500
shares of common stock on an as-if converted basis) and one warrant to purchase
half of one share of Series E preferred stock for $2.00 per share (1,250 shares
of common stock at $20.00 per share on an as-if-converted basis). The warrant
was issued in lieu of payment for legal services rendered totaling $48,750 and
is separately disclosed in the statement of stockholders' equity. The warrant is
exercisable immediately and expires at the earlier of December 2000 or upon the
consummation of a qualified initial public offering, as defined in the related
agreement. Shares of common stock totaling 3,750 have been reserved for issuance
upon exercise of the warrant.
F-19
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
In connection with the sale of Series G preferred stock in March and May 1996,
the Company issued warrants to purchase 980,392 shares of common stock at $2.50
per share. These warrants expire March 28, 1999 or at the closing of a qualified
initial public offering, as defined in the related agreement.
In September 1996, in connection the debt financing described in Note 5, the
Company issued five year warrants to purchase 84,500 shares of common stock at
an exercise price of $20.00 per share, and five year warrants to purchase 84,500
shares of common stock at an exercise price of $2.50 per share. These warrants
were valued at $521,000 based on the value of common stock on the date of the
transaction and based on the terms of the respective warrant agreements.
The following table summarizes the warrants outstanding as of September 30, 1996
(on an as-if converted basis):
<TABLE>
<CAPTION>
-------------------------------------------------------------
DATE OF ISSUED FOR EXERCISE NUMBER OF
ISSUANCE UNDERLYING STOCK PRICE WARRANTS
- -------------------------- ------------------------------------- ----------- ---------
October 1992 Series A preferred stock $ 8.00 25,000
<S> <C> <C> <C>
April 1993 Series B preferred stock $ 25.00 100,000
March and April 1994 Series D preferred stock $ 20.00 21,926
April 1995 Series D preferred stock $ 8.90 40,000
September and November
1995 Series E preferred stock $ 20.00 196,078
December 1995 Series E preferred stock $ 20.00 3,750
March 1996 Series E preferred stock $ 20.00 18,750
September 1996 Common stock $ 20.00 84,500
September 1996 Common stock $ 2.50 84,500
---------
Total 574,504
</TABLE>
Common stock to be issued on the net exercise of outstanding warrants, upon the
closing of an initial public offering, assuming an initial offering price of
$13.00 per share:
<TABLE>
<CAPTION>
March 1993 Common Stock $ 8.00 2,812
<S> <C> <C> <C>
March and May 1996 Common Stock $ 2.50 980,392
---------
983,204
---------
---------
Less shares due to net exercise (190,306)
---------
Expected shares to be net exercised 792,898
---------
Total warrants outstanding as of September 30, 1996 1,367,402
---------
---------
</TABLE>
9. INCOME TAXES
As of December 31, 1995, the Company had federal net operating loss
carryforwards of approximately $32,000,000. The Company also had research and
development tax credit carryforwards of approximately $1,200,000. The difference
between the federal net operating loss carryforwards and the accumulated deficit
relates to losses generated by the Company's wholly owned subsidiary, CV
Therapeutics, International. The net operating loss and credit carryforwards
will expire at various dates beginning on 2007 through 2010, if not utilized.
Utilization of the net operating losses and credits may be subject to an annual
limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
F-20
<PAGE>
CV THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
9. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amount used for income tax purposes. Significant components of the
Company's deferred tax assets as of December 31 are as follows:
<TABLE>
<CAPTION>
-----------------------
DECEMBER 31,
-----------------------
IN THOUSANDS 1994 1995
----------- ----------
Net operating loss carryforward $ 5,400 $11,600
<S> <C> <C>
Research credits (expiring 2007-2010) 800 1,700
Capitalized research and development 800 800
Other, net - 100
----------- ----------
Total deferred tax assets 7,000 14,200
Valuation allowance for deferred tax assets (7,000) (14,200)
----------- ----------
Total $ - $ -
----------- ----------
----------- ----------
</TABLE>
The valuation allowance increased by $4,000,000, during the year ended December
31, 1994.
10. SUBSEQUENT EVENTS
In September 1996, the board of directors authorized management of the Company
to file a registration statement with the SEC permitting the Company to sell
shares of its common stock to the public. If the initial public offering is
closed under the terms presently anticipated, all of the preferred stock
outstanding will automatically convert into 3,238,185 shares of common stock.
Unaudited pro forma stockholders' equity, as adjusted for the assumed conversion
of the preferred stock, is set forth on the balance sheet.
Also in September 1996, the board of directors of the Company authorized a
1-for-10 reverse stock split, in which ten shares of common stock were exchanged
for one share of common stock. Following stockholder approval, the stock split
was effected on October 29, 1996. Effective upon the closing of the initial
public offering, the Company will become authorized to issue 5,000,000 shares of
$0.001 par value preferred stock and 30,000,000 shares of $0.001 par value
common stock. All par value, share and per share amounts, as well as the
dividend and liquidation preferences for preferred stock, included in the
accompanying financial statements have been retroactively adjusted to reflect
the reverse stock split.
In September 1996, the board of directors adopted the Employee Stock Purchase
Plan, the amended and restated Non-Employee Directors' Stock Option Plan and the
amended and restated 1992 Stock Option Plan and the amended and restated 1994
Equity Incentive Plan. In September 1996, the stockholders approved such plans.
A total of 1,545,000 shares of common stock have been reserved for issuance
thereunder, subject to stockholder approval.
On August 25, 1996, a promissory note was executed in favor of the Company by an
officer, for $25,000, bearing interest at 6.84%, per annum. The principal is due
and payable on August 25, 2001. The note is secured by a pledge of shares of the
Company's common stock.
F-21
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the registrant in connection with the
distribution of the Common Stock being registered. All amounts are estimated,
except the SEC Registration Fee, the NASD Filing Fee and the Nasdaq National
Market Filing Fee:
<TABLE>
<S> <C>
SEC Registration Fee 13,639
NASD Filing Fee 4,525
Nasdaq National Market Filing Fee 33,880
Blue Sky Fees and Expenses 15,000
Accounting Fees 140,000
Legal Fees and Expenses 325,000
Transfer Agent and Registrar Fees 10,000
Directors and Officers Insurance 175,000
Printing and Engraving 175,000
Miscellaneous 32,956
Total $ 925,000
---------
---------
</TABLE>
- ------------------------
ITEM 14 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Restated Certificate of Incorporation provides that directors
of the Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director, to
the fullest extent permitted by the General Corporation Law of the State of
Delaware. The Registrant's Restated Bylaws provide for indemnification of
officers and directors to the full extent and in the manner permitted by
Delaware law. Section 145 of the Delaware General Corporation Law makes
provision for such indemnification in terms sufficiently broad to cover officers
and directors under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act").
The Registrant has entered into indemnification agreements with each officer and
director which provide indemnification under certain circumstances for acts and
omissions which may not be covered by any directors' and officers' liability
insurance.
The form of Underwriting Agreement, to filed as Exhibit 1.1 to the Registration
Statement, provides for indemnification of the Registrant and its controlling
persons against certain liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since September 1, 1993, the Company has sold and issued the following
unregistered securities:
(1) Since September 1, 1993, the Company has granted stock options to
purchase 1,014,080 shares of Common Stock to a total of 107 employees,
consultants and non-employee directors at a weighted average exercise price
of $2.41 per share pursuant to the 1992 Stock Plan, the Incentive Plan, the
Directors' Plan, as well as outside these plans.
(2) In September 1993, the Company issued warrants to purchase 30,000
shares of Series C Preferred Stock, convertible into 3,000 shares of Common
Stock, at a pre-conversion exercise price of $1.25 per share to two
accredited investors. Both warrants have expired.
(3) In March and April 1994, the Company issued and sold 8,296,607 shares
of Series D Preferred Stock, convertible into 829,657 shares of Common
Stock, to a total of 94 accredited investors, including one director and two
officers, for cash in the aggregate amount of $16,593,214. In connection
with the private placement, the Company paid commissions to the placement
agent equal to $802,251.18 and issued warrants to purchase 219,266 shares of
Series D Preferred Stock, convertible into 21,926 shares of Common Stock, at
a pre-conversion exercise price of $2.00 per share.
II-1
<PAGE>
(4) In April 1995, the Company issued warrants to purchase an aggregate of
500,000 shares of Series D Preferred Stock, convertible into an aggregate of
50,000 shares of Common Stock, at a pre-conversion exercise price of $2.50
per share to two accredited investors pursuant to the terms of a Loan and
Security Agreement, dated April 24, 1995, as amended March 8, 1996. These
warrants were amended and restated in August 1996 to purchase 100,000 and
300,000 shares of Series D Preferred Stock, convertible into 10,000 and
30,000 shares of Common Stock, at a pre-conversion exercise price of $.89
per share.
(5) In September and November 1995, the Company issued and sold 3,921,600
shares of Series E Preferred Stock, convertible into 392,159 shares of
Common Stock, and warrants to purchase 1,960,800 shares of Series E
Preferred Stock, convertible into 196,078 shares of Common Stock at a
pre-conversion exercise price of $2.00 per share to a total of 37 accredited
investors, including one director and one individual who was an officer and
a director, for cash in the aggregate amount of $7,843,200.
(6) In December 1995, the Company issued a warrant to purchase 25,000 units
at a price of $.50 per unit, with each unit consisting of 1 share of Series
E Preferred Stock, convertible into 2,500 shares of Common Stock, and one
warrant to purchase 1/2 share of Series E Preferred Stock, convertible into
1,250 shares of Common Stock, at a pre-conversion exercise price of $2.00
per share to Cooley Godward LLP, in connection with cancellation of accounts
payable.
(7) In March 1996, the Company issued and sold 375,000 shares of Series E
Preferred Stock, convertible into 37,500 shares of Common Stock, and
warrants to purchase 187,500 shares of Series E Preferred Stock, convertible
into 18,750 shares of Common Stock, at a pre-conversion exercise price of
$2.00 per share to an accredited investor pursuant to the terms of a License
Agreement dated March 27, 1996.
(8) In March and May 1996, the Company issued and sold 6,535,970 shares of
Series G Preferred Stock, convertible into 653,592 shares of Common Stock,
and warrants to purchase 980,392 shares of Common Stock, convertible into
980,392 shares of Common Stock, at an exercise price of $2.50 per share to a
total of 64 accredited investors, including one director, three officers and
two individuals who were officers and directors, for cash in the aggregate
amount of $13,071,940.
(9) In September 1996, the Company issued warrants to purchase an aggregate
of 84,500 shares of Common Stock, at an exercise price of $20.00 per share,
and warrants to purchase an aggregate of 84,500 shares of Common Stock, at
an exercise price of $2.50 per share, to two accredited investors in
connection with a $5.0 million debt financing and pursuant to the terms of a
Common Stock Warrant Purchase Agreement.
The share amounts set forth give effect to the Company's 1-for-10 reverse stock
split of the Company's Common Stock effected in October 1996. The sales and
issuances of securities in the transactions described in paragraphs (2)-(9) were
deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2), Regulation D or Regulation S promulgated thereunder. With respect
to the grant of stock options described in paragraph (1), an exemption from
registration was unnecessary in that none of the transactions involved a "sale"
of securities as such term is used in Section 2(3) of the Securities Act.
Appropriate legends are affixed to the stock certificate issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients received adequate
information about the Company or had access, through employment or other
relationships, to such information.
ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
1.1+ Underwriting Agreement.
3.1+ Restated Certificate of Incorporation of the Registrant, as amended.
3.2+ Bylaws of the Registrant.
3.3+ Certificate of Amendment of the Restated Certificate of Incorporation of the
Registrant.
3.4+ Restated Certificate of Incorporation of the Registrant to be effective upon closing
of the Offering.
3.5+ Restated Bylaws of the Registrant to be effective upon the closing of the Offering.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.1 Reference is made to Exhibits 3.1 through 3.5.
4.2+ Specimen Common Stock Certificate.
5.1+ Opinion of Cooley Godward LLP as to legality of the Common Stock.
10.1+ 1992 Stock Option Plan, as amended.
10.2+ 1994 Equity Incentive Plan, as amended.
10.3+ Non-Employee Directors' Stock Option Plan, as amended.
10.4+ Form of Incentive Stock Option Grant.
10.5+ Form of Non-Incentive Stock Option Grant.
10.6+ Employee Stock Purchase Plan.
10.7+ Amended and Restated Promissory Note for $500,000 between Registrant and Louis G.
Lange, M.D., Ph.D., effective as of September 23, 1996.
10.8+ Amended and Restated Promissory Note between Registrant and George F. Schreiner,
M.D., Ph.D., effective as of September 23, 1996.
10.9+ Separation and Consulting Agreement between Registrant and Thomas L. Gutshall,
effective as of September 2, 1996.
10.10+ Form of Indemnification Agreement between Registrant and its directors and officers.
10.11+ Amended and Restated Investor Rights Agreement between the Registrant and the
stockholders named therein, dated May 29, 1996.
10.12+ Form of Series A Preferred Stock Warrant, and amendment thereto.
10.13+ Amended and Restated Series B Preferred Stock Warrant to Genta Incorporated.
10.14+ Form of Series D Preferred Stock Warrant to Alex Brown & Sons Incorporated.
10.15+ Form of Amended and Restated Series D Preferred Stock Warrant.
10.16+ Form of Series E Preferred Stock Warrant.
10.17+ Series E Preferred Stock Warrant to Cooley Godward LLP.
10.18+ Series E Preferred Stock Warrant to Syntex (U.S.A.) Inc.
10.19+ Form of Common Stock Warrant issued in connection with the Company's Series G private
financing.
10.20+ Common Stock Warrant to Lease Management Services, Inc.
10.21 License Agreement between the Registrant and University of Florida Research
Foundation, Inc., dated June 27, 1994.*
10.22 Research Agreement between the Registrant and University of Florida, dated June 27,
1994.*
10.23 License Agreement between Registrant and Syntex (U.S.A.) Inc., dated March 27, 1996.*
10.24 License Agreement between Registrant and Bayer AG, dated May 7, 1996.*
10.25+ Lease Agreement between Registrant and Matadero Creek, dated August 6, 1993 and
addendum thereto; Letter Amendment to Lease Agreement, dated June 30, 1994 and
Second Amendment to Lease Agreement, dated June 30, 1994.
10.26+ Amended and Restated Promissory Note for $37,500 between Registrant and Louis G.
Lange, M.D., Ph.D., effective as of September 23, 1996.
10.27+ Amended and Restated Promissory Note for $25,000 between Registrant and Louis G.
Lange, M.D., Ph.D., effective as of September 23, 1996.
10.28+ Amended and Restated Promissory Note for $25,000 between Registrant and Louis G.
Lange, M.D., Ph.D., effective as of September 23, 1996.
10.29+ Amended and Restated Promissory Note between Registrant and Thomas L. Gutshall,
effective as of September 23, 1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.30+ Master Lease Agreement between Registrant and Hambrecht & Quist Guaranty Finance,
LLC, dated September 27, 1996.
10.31+ Finance Agreement between Registrant and Hambrecht & Quist Guaranty Finance, LLC,
dated September 27, 1996.
10.32+ Business Loan Agreement between Registrant and Hambrecht & Quist Guaranty Finance,
LLC, dated September 27, 1996.
10.33+ Business Loan Agreement between Registrant and Hambrecht & Quist Transition Capital,
LLC, dated September 27, 1996.
10.34+ Promissory Note between Registrant and Hambrecht & Quist Guaranty Finance, LLC, dated
September 27, 1996.
10.35+ Promissory Note between Registrant and Hambrecht & Quist Transition Capital, LLC,
dated September 27, 1996.
10.36+ Security Agreement between Registrant and Hambrecht & Quist Guaranty Finance, LLC,
dated September 27, 1996.
10.37+ Security Agreement between Registrant and Hambrecht & Quist Transition Capital, LLC,
dated September 27, 1996.
10.38+ Form of Common Stock Warrant exercisable immediately, dated September 27, 1996.
10.39+ Form of Common Stock Warrant, dated September 27, 1996.
11.1+ Statement re computation of net loss per share.
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-7).
23.2+ Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1+ Power of Attorney.
27.1+ Financial Data Schedule.
</TABLE>
- ------------------------
+ Previously filed.
* Confidential treatment is being sought for portions of this exhibit.
(b) Financial Statement Schedules
Consolidated Schedules are omitted because they are not applicable, or because
the information is included in the Financial Statements or the Notes thereto.
ITEM 17. UNDERTAKINGS.
A. The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
B. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
C. The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CV Therapeutics,
Inc. has duly caused this Amendment to Registration Statement to be signed on
its behalf, by the undersigned, thereunto duly authorized, in the City of Palo
Alto, County of Santa Clara, State of California, on November 6, 1996.
CV THERAPEUTICS, INC.
By: __________/S/____LOUIS G. LANGE, M.D., PH.D._________
Louis G. Lange, M.D., Ph.D.
Chairman of the Board and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------- ---------------------
<C> <S> <C>
Chairman of the Board & Chief
/S/LOUIS G. LANGE, M.D., PH.D. Executive Officer (Principal November 6, 1996
Louis G. Lange, M.D., Ph.D. Executive Officer)
/S/KATHLEEN A. STAFFORD Chief Financial Officer (Principal
Kathleen A. Stafford Financial and Accounting Officer) November 6, 1996
*
Samuel D. Colella Director November 6, 1996
*
Thomas L. Gutshall Director November 6, 1996
*
Barbara J. McNeil, M.D., Ph.D. Director November 6, 1996
*
Costa G. Sevastopoulos, Ph.D. Director November 6, 1996
*
J. Leighton Read, M.D. Director November 6, 1996
*
Isaac Stein Director November 6, 1996
*By: /S/LOUIS G. LANGE, M.D., PH.D.
Louis G. Lange, M.D., Ph.D.
*By: /S/KATHLEEN A. STAFFORD
Kathleen A. Stafford
</TABLE>
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
February 23, 1996 (except for Note 10, as to which the date is October 29,
1996), in Amendment No. 4 to the Registration Statement (Form S-1, No.
333-12675) and related Prospectus of CV Therapeutics, Inc. for the registration
of 2,875,000 shares of common stock.
/s/ ERNST & YOUNG LLP
Palo Alto, California
November 6, 1996
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
- --------- --------------------------------------------------------------------------------------------
<C> <S> <C>
1.1+ Underwriting Agreement.
3.1+ Restated Certificate of Incorporation of the Registrant, as amended.
3.2+ Bylaws of the Registrant.
3.3+ Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant.
3.4+ Restated Certificate of Incorporation of the Registrant to be effective upon closing of the
Offering.
3.5+ Restated Bylaws of the Registrant to be effective upon the closing of the Offering.
4.1 Reference is made to Exhibits 3.1 through 3.5.
4.2+ Specimen Common Stock Certificate.
5.1+ Opinion of Cooley Godward LLP as to legality of the Common Stock.
10.1+ 1992 Stock Option Plan, as amended.
10.2+ 1994 Equity Incentive Plan, as amended.
10.3+ Non-Employee Directors' Stock Option Plan, as amended.
10.4+ Form of Incentive Stock Option Grant.
10.5+ Form of Non-Incentive Stock Option Grant.
10.6+ Employee Stock Purchase Plan.
10.7+ Amended and Restated Promissory Note for $500,000 between Registrant and Louis G. Lange,
M.D., Ph.D., effective as of September 23, 1996.
10.8+ Amended and Restated Promissory Note between Registrant and George F. Schreiner, M.D.,
Ph.D., effective as of September 23, 1996.
10.9+ Separation and Consulting Agreement between Registrant and Thomas L. Gutshall, effective as
of September 2, 1996.
10.10+ Form of Indemnification Agreement between Registrant and its directors and officers.
10.11+ Amended and Restated Investor Rights Agreement between the Registrant and the stockholders
named therein, dated May 29, 1996.
10.12+ Form of Series A Preferred Stock Warrant, and amendment thereto.
10.13+ Amended and Restated Series B Preferred Stock Warrant to Genta Incorporated.
10.14+ Form of Series D Preferred Stock Warrant to Alex Brown & Sons Incorporated.
10.15+ Form of Amended and Restated Series D Preferred Stock Warrant.
10.16+ Form of Series E Preferred Stock Warrant.
10.17+ Series E Preferred Stock Warrant to Cooley Godward LLP.
10.18+ Series E Preferred Stock Warrant to Syntex (U.S.A.) Inc.
10.19+ Form of Common Stock Warrant issued in connection with the Company's Series G private
financing.
10.20+ Common Stock Warrant to Lease Management Services, Inc.
10.21 License Agreement between the Registrant and University of Florida Research Foundation,
Inc., dated June 27, 1994.*
10.22 Research Agreement between the Registrant and University of Florida, dated June 27, 1994.*
10.23 License Agreement between Registrant and Syntex (U.S.A.) Inc., dated March 27, 1996.*
10.24 License Agreement between Registrant and Bayer AG, dated May 7, 1996.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
- --------- --------------------------------------------------------------------------------------------
10.25+ Lease Agreement between Registrant and Matadero Creek, dated August 6, 1993 and addendum
thereto; Letter Amendment to Lease Agreement, dated June 30, 1994 and Second Amendment to
Lease Agreement, dated June 30, 1994.
<C> <S> <C>
10.26+ Amended and Restated Promissory Note for $37,500 between Registrant and Louis G. Lange,
M.D., Ph.D., effective as of September 23, 1996.
10.27+ Amended and Restated Promissory Note for $25,000 between Registrant and Louis G. Lange,
M.D., Ph.D., effective as of September 23, 1996.
10.28+ Amended and Restated Promissory Note for $25,000 between Registrant and Louis G. Lange,
M.D., Ph.D., effective as of September 23, 1996.
10.29+ Amended and Restated Promissory Note between Registrant and Thomas L. Gutshall, effective as
of September 23, 1996.
10.30+ Master Lease Agreement between Registrant and Hambrecht & Quist Guaranty Finance, LLC, dated
September 27, 1996.
10.31+ Finance Agreement between Registrant and Hambrecht & Quist Guaranty Finance, LLC, dated
September 27, 1996.
10.32+ Business Loan Agreement between Registrant and Hambrecht & Quist Guaranty Finance, LLC,
dated September 27, 1996.
10.33+ Business Loan Agreement between Registrant and Hambrecht & Quist Transition Capital, LLC,
dated September 27, 1996.
10.34+ Promissory Note between Registrant and Hambrecht & Quist Guaranty Finance, LLC, dated
September 27, 1996.
10.35+ Promissory Note between Registrant and Hambrecht & Quist Transition Capital, LLC, dated
September 27, 1996.
10.36+ Security Agreement between Registrant and Hambrecht & Quist Guaranty Finance, LLC, dated
September 27, 1996.
10.37+ Security Agreement between Registrant and Hambrecht & Quist Transition Capital, LLC, dated
September 27, 1996.
10.38+ Form of Common Stock Warrant exercisable immediately, dated September 27, 1996.
10.39+ Form of Common Stock Warrant, dated September 27, 1996.
11.1+ Statement re computation of net loss per share.
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-7).
23.2+ Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1+ Power of Attorney.
27.1+ Financial Data Schedule.
</TABLE>
- ------------------------
+ Previously filed.
* Confidential treatment is being sought for portions of this exhibit.
Brackets indicate portions of text that have been omitted. A separate filing
of such omitted text has been made with the Commission as part of the
Company's application for confidential treatment.
<PAGE>
Confidential treatment has been requested for portions of this document.
Brackets indicate portions of text that have been omitted. A separate filing
of such omitted text has been made with the Commission as part of the
Company's application for confidential treatment.
LICENSE AGREEMENT
BETWEEN
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
AND
CV THERAPEUTICS, INC.
JUNE 27, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
Article I - Definitions...................................................... 1
Article II - Grant........................................................... 4
Article III - Due Diligence.................................................. 5
Article IV - Royalties....................................................... 6
Article V - Reports And Records.............................................. 8
Article VI - Patent Prosecution and Infringement............................ 9
Article VII - Product Liability.............................................. 10
Article VIII - Confidentiality............................................... 11
Article IX - Export Controls................................................. 12
Article X - Non-Use Of Names................................................. 12
Article XI - Assignment...................................................... 12
Article XII - Term and Termination........................................... 12
Article XIII - Payments, Notices And Other Communications.................... 14
Article XIV - Miscellaneous Provisions....................................... 15
APPENDIX A...................................................................A-1
i
<PAGE>
LICENSE AGREEMENT
This Agreement is made and entered into this 27th day of June, 1994, (the
Effective Date) by and between THE UNIVERSITY OF FLORIDA RESEARCH FOUNDATION,
INC., a not-for-profit corporation duly organized and existing under the laws of
the State of Florida and having its principal office at 223 Grinter Hall,
Gainesville, Florida 32611-2037 (hereinafter referred to UFRFI), and CV
THERAPEUTICS, INC., a corporation duly organized under the laws of Delaware and
having its principal office at 1615 Plymouth Street, Mountain View, CA 94043
(hereinafter referred to as Licensee).
WITNESSETH
WHEREAS, UFRFI is the owner of certain "Patent Rights" (as later defined
herein) by assignment from the University of Florida (hereinafter referred to as
University) and the University of South Florida relating to UFRFI Case No.1195
"Adenosine Receptors" invented by Dr. Luiz Belardinelli, Dr. Stephen Baker and
Dr. Ray Olsson and has the right to grant licenses under said Patent Rights;
WHEREAS, said Patent Rights were invented pursuant to an American Heart
Association sponsored research grant;
WHEREAS, Dr. Belardinelli and Dr. Baker are employees of the University of
Florida and Dr. Olsson is an employee of the University of South Florida;
WHEREAS, UFRFI desires to have the Patent Rights and Know-How utilized in
the public interest and is willing to grant a license thereunder;
WHEREAS, Licensee desires to obtain a license under the Patent Rights and
Know-How in order to develop, market and sell Licensed Products as provided
herein;
WHEREAS, Licensee and the University of Florida have entered into a
Research Agreement of even date herewith providing for certain additional
research and the parties have agreed that any inventions within the scope of
such research program shall be included in the Patent Rights and Know-How
licensed hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein the parties hereto agree as follows:
ARTICLE I- DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
1.
<PAGE>
1.1 "FIELD OF USE" shall mean the detection, prevention and treatment of
human and animal diseases and disorders relating adenosive receptors and analogs
thereof.
1.2 "JOINT INVENTIONS" shall mean individually and collectively all
inventions, improvements and/or discoveries, patentable or unpatentable, which
are conceived and/or made jointly by one or more employee of either of the
Universities and one or more employee of Licensee as a result of the Project
Work relating to adenosine receptors or analogs thereof, whether conceived or
made in connection with the Project Work or otherwise. For the purposes of this
Agreement, the "making" of inventions shall be governed by U.S. laws of
inventorship.
1.3 "JOINT PATENTS" shall mean individually and collectively any and all
United States and foreign patent applications and any and all issued United
States Letters Patent and foreign patents which are conceived and/or made
jointly by one or more employee of either of the Universities and one or more
employee of Licensee which pertain to Joint Inventions.
1.4 "KNOW-HOW" shall mean any and all technical data, information, or
knowledge related to or described in the Patent Rights or created or discovered
in the course of the Project Work. Upon the reasonable request of Licensee to
Dr. Belardinelli or Dr. Baker for other information relating to the manufacture,
marketing, registration, purity, quality, potency, safety, and efficacy of the
Licensed Products, including without limitation, any University Inventions and
Joint Inventions, UFRFI shall provide such information provided that the
Licensee shall reimburse UFRFI for out-of-pocket expenses, if any, associated
with providing such information. Said information provided by Dr. Belardinelli
or Dr. Baker to Licensee shall be deemed Know-How for purposes of this
Agreement.
1.5 "LICENSEE" shall mean all of the following:
(a) a related company of Licensee, the voting stock of which is
directly or indirectly at least fifty percent (50%) owned or
controlled by Licensee;
(b) an organization which directly or indirectly controls more
than fifty percent (50%) of the voting stock of Licensee;
and
(c) an organization, the majority ownership of which is directly
or indirectly common to the ownership of Licensee.
1.6 A "LICENSED PRODUCT" shall mean any product or part thereof which:
(a) is covered in whole or in part by an issued, unexpired claim
or a pending claim contained in the Patent Rights in the
country in which such product or part thereof is made, used
or sold; or
(b) is manufactured by using a process which is covered in whole
or in part by an issued, unexpired claim or a pending claim
contained in the Patent
2.
<PAGE>
Rights in the country in which any such process is used or in
which such product or part thereof is used or sold; or
(c) is derived from any of the Know-How not otherwise includable
in the Patent Rights; and
(d) is sold, manufactured or used in any country under this
Agreement.
1.7 "NET SALES" shall mean Licensee's billings and its sublicensees'
receipts (except as provided below) for Licensed Products sold hereunder less
the sum of the following:
(a) discounts allowed in amounts customary in the trade;
(b) sales taxes, tariff duties and/or use taxes directly imposed
and with reference to particular sales;
(c) outbound transportation prepaid or allowed; and
(d) amounts allowed or credited on returns.
No deductions shall be made for commissions paid to individuals whether they be
with independent sales agencies or regularly employed by Licensee and on its
payroll, or for cost of collections. If Licensee receives royalties from any
sublicensee on the basis of such sublicensee's billings for Licensed Products,
it shall pay royalties UFRFI on the basis of such sublicensee's billings.
1.8 "PATENT RIGHTS" shall mean all of the following intellectual
property owned or controlled by UFRFI:
(a) the United States patent application listed in Appendix A
and any foreign patent applications thereof;
(b) United States and foreign patents issued from such
applications and from divisionals and continuations of these
applications;
(c) claims of U.S. and foreign continuation-in-part
applications, and of the resulting patents, which are
directed to subject matter specifically described in the
U.S. and foreign applications listed in Appendix A;
(d) any reissues of United States patents described in (a), (b)
or (c) above.
The Patent Rights shall include, without limitation, any University
Patents and UFRFI's rights under any Joint Patents.
3.
<PAGE>
1.9 "PROJECT WORK" shall mean that research work to be performed by
University pursuant to the Research Agreement.
1.10 "RESEARCH AGREEMENT" shall mean that agreement attached hereto as
Exhibit B.
1.11 "UNIVERSITIES" shall mean individually and collectively the
University of Florida and the University of South Florida.
1.12 "UNIVERSITY INVENTIONS" shall mean individually and collectively all
inventions, improvements and/or discoveries, patentable or unpatentable, which
are conceived and/or made by one or more employees of the Universities, during
the course of the Project Work, including without limitation, all inventions,
improvements and/or discoveries relating to adenosine receptors or analogs
thereof made by Dr. Belardinelli, Dr. Baker and/or one or more of employees of
the University of Florida working directly for either Dr. Belardinelli or Dr.
Baker during the period beginning with the Effective Date and terminating on the
first anniversary of the Effective Date.
1.13 "UNIVERSITY PATENTS" shall mean individually and collectively any
and all United States and foreign patent applications and any and all issued
United States Letters Patent and foreign patents owned solely by Universities
which pertain to University Inventions.
ARTICLE II - GRANT
2.1 UFRFI hereby grants to Licensee the exclusive, worldwide right and
license, under the Patent Rights and Know-How and in the Field of Use, subject
to the terms and conditions of this Agreement to make, have made, use and sell
the Licensed Products.
2.2 Licensee agrees that Licensed Products sold in the United States
shall be manufactured substantially in the United States if said Licensed
Products were invented in whole or in part with federal government research
support. Licensee further agrees that it shall abide by all rights and
limitations of U.S. Code, Title 35, Chapter 38, and implementing regulations
thereof, for all patent applications and patents invented in whole or in part
with federal money.
2.3 In order to establish exclusivity for Licensee, UFRFI hereby
represents that it has not, and agrees that it shall not, grant any other
license under the Patent Rights and Know-How and in the Field of Use to make,
have made, use and sell Licensed Products during the term of this Agreement.
2.4 UFRFI reserves the right for the Universities to practice under the
Patent Rights and Know-How and to use and distribute to third parties the
tangible property described in the Patent Rights and Know-How solely for its own
noncommercial research purposes.
2.5 Licensee shall have the right to enter into sublicensing agreements
for the rights, privileges and licenses granted hereunder. However, Licensee
shall notify UFRFI in writing
4.
<PAGE>
within ten (10) business days of the initiation of license negotiations with all
potential sublicensees.
2.6 Licensee hereby agrees that every sublicensing agreement to which it
shall be a party and which shall relate to the rights, privileges and license
granted hereunder shall contain a statement setting forth the date upon which
Licensee's exclusive rights, privileges and license hereunder shall terminate.
2.7 Licensee agrees that the terms of any sublicense granted hereunder
shall be consistent with the terms of this Agreement. Licensee further agrees
to attach copies of the following provisions of this Agreement to sublicense
agreements: I (Definitions); II (Grant); V (Reports and Records); VI (Patent
Prosecution and Infringement); VII (Product Liability); IX (Export Controls); X
(Non-Use of Names); XII (Termination) and XIV (Miscellaneous).
2.8 Licensee agrees to forward to UFRFI a copy of any and all sublicense
agreements within thirty (30) days of the execution of such sublicense
agreements and further agrees to forward to UFRFI annually a copy of such
reports received by Licensee from its sublicensees during the preceding twelve
(12) month period under the sublicenses as shall be pertinent to a royalty
accounting under said sublicense agreements.
2.9 Licensee shall not receive from sublicenses anything of value in
lieu of cash payments in consideration for any sublicense under this Agreement,
without the express prior written consent of UFRFI.
2.10 The license granted hereunder shall not be construed to confer any
rights upon Licensee by implication, estoppel or otherwise as to any technology
not specifically set forth herein.
ARTICLE III - DUE DILIGENCE
3.1 Licensee shall use commercially reasonable efforts to develop and
commercialize, one or more Licensed Products to market through a thorough and
diligent program for the exploitation of the right and license granted in this
Agreement and to create, supply and service as extensive a market for Licensed
Products as is reasonably possible in order to maximize its sale of Licensed
Products.
3.2 In addition, Licensee shall adhere to the following milestones:
(a) Licensee shall deliver to UFRFI on or before December 27, 1994
a project plan showing the projected amount of money, number
and kind of personnel and time budgeted and planned for each
phase of development of the Licensed Products and Licensed
Processes and shall provide similar reports to UFRFI on an
annual basis on or before the ninetieth (90th) day following
the close of Licensee's fiscal year. The parties acknowledge
5.
<PAGE>
that the Licensed Products relate to pharmaceutical and
diagnostic products which typically require long periods for
development and with respect to which estimates are subject to
substantial uncertainty as to time, technology and funding
requirements.
(b) Licensee shall permit an in-plant inspection by UFRFI on or
before June 27, 1995, and thereafter permit in-plant
inspections at regular intervals with at least twelve (12)
months between each such inspection. All such inspections
shall be on reasonable notice to Licensee and during normal
business hours.
(c) Licensee shall notify UFRFI of any outside preclinical and
clinical studies to be performed relating to the Licensed
Products and UFRFI shall have thirty (30) days from such
notice in which to submit to Licensee a proposal for
participation; after such thirty (30) day period, Licensee
shall have the right to solicit proposals from any third
party.
(d) Licensee (or any of its sublicensees) shall file, or have
filed on its behalf, an investigational new drug application
in the U.S. within one (1) year following completion of the
Project Work and after completion of any other necessary and
sufficient preclinical safety and efficacy studies,
manufacturing, quality control and clinical investigation
documentation. Licensee agrees that it will complete such
safety and efficacy studies within one (1) year following
completion of the Project Work.
(e) Licensee (or any of its sublicensees) will promote market
and sell a Licensed Product in a country in the Territory
within [ ] of receipt of all
governmental approvals necessary for the commercial sale of
such Licensed Product.
3.3 If Licensee fails to perform in accordance with Paragraphs 3.1 and
3.2, UFRFI shall have the right, effective upon thirty (30) days written notice
to Licensee, during which period Licensee may cure such default, to convert the
license granted under Paragraph 2.1 to a non-exclusive license.
3.4 If Licensee has not commenced clinical trials relating to the
Licensed Products by January 1, 1999, then, UFRFI may, but shall not be
obligated to, terminate this Agreement upon sixty (60) days written notice to
Licensee.
ARTICLE IV - ROYALTIES
4.1 Licensee shall pay license fees, royalties and sublicense fees to
UFRFI as follows:
6.
<PAGE>
(a) [
] which said [ ]
shall be deemed earned and due [
].
(b) [
]
PROVIDED, HOWEVER, that in countries where neither [
] such
[ ] shall be [
] of any given year.
(c) [
] excluding amounts paid to Licensee [
].
Upon request from UFRFI, Licensee shall provide written
evidence that such excluded amounts are [
].
4.2 No [ ] shall be payable because any [
] under this Agreement.
4.3 [ ] shall be paid in United States dollars in
Gainesville, Florida or at such other place as UFRFI may reasonably designate
consistent with the laws and regulations controlling in any foreign country. If
any currency conversion shall be required in connection with the payment of [
] hereunder, such conversion shall be made by using the exchange rate
prevailing at the Chase Manhattan Bank (N.A.) on the last business day of the
calendar quarterly reporting period to which such royalty payments relate.
4.4 In the event the [ ] set forth herein are higher than the [
] permitted by the law or regulations of a particular country, the [
] for sales in such country shall be equal to the [
] under such law or regulations. Notice of said event shall be provided to
UFRFI. An authorized representative of Licensee shall notify UFRFI, in writing,
within thirty (30) days of discovering that [ ] are approaching or
have reached the [ ], and shall provide UFRFI with written
documentation regarding the laws or regulations establishing such maximum.
4.5 In the event that any taxes, withholding or otherwise, are levied by
any taxing authority in connection with accrual or payment of any royalties
payable by Licensee under this Agreement, and Licensee determines in good faith
that it must pay such taxes, Licensee shall have the right to pay such taxes to
the local tax authorities on behalf of UFRFI and payment of the net amount due
after reduction by the amount of such taxes, shall fully satisfy Licensee's
royalty obligations under this Agreement. Licensee shall provide UFRFI with
appropriate receipts or other documentation supporting such payment. Licensee
shall inform UFRFI in
7.
<PAGE>
writing, within thirty (30) days of notification that taxes will or have been
levied by a taxing authority.
ARTICLE V - REPORTS AND RECORDS
5.1 Licensee shall keep full, true and accurate books of account
containing all particulars that may be necessary for the purpose of showing the
amounts payable to UFRFI hereunder. Said books of account shall be kept at
Licensee's principal place of business or the principal place of business of the
appropriate division of Licensee to which this Agreement relates. Said books
and the supporting data shall be open at all reasonable times for five (5) years
following the end of the calendar year to which they pertain, to the inspection
of UFRFI or its agents for the purpose of verifying Licensee's royalty statement
or compliance in other respects with this Agreement.
5.2 Licensee, within ninety (90) days after March 31, June 30, September
30 and December 31, of each year, shall deliver to UFRFI true and accurate
reports, giving such particulars of the business conducted by Licensee and its
sublicensees during the preceding three-month period under this Agreement as
shall be pertinent to a royalty accounting hereunder. These shall include at
least the following;
(a) [
], if any.
(b) [ ].
(c) deductions applicable [ ].
(d) [ ].
(e) names and addresses of all sublicensees of Licensee.
(f) A progress report on [
] covering
Licensed Products or Licensed Processes.
5.3 With each such report submitted, Licensee shall pay to UFRFI the
royalties due and payable under this Agreement. If no royalties shall be due,
Licensee shall so report.
5.4 On or before the ninetieth (90th) day following the close of
Licensee's fiscal year, Licensee shall provide UFRFI with Licensee's [
] including, at a minimum, [
].
5.5 The [ ] and [
] set forth in this Agreement shall, if overdue, bear interest until
payment at the monthly rate of [ ]
8.
<PAGE>
[ ]. The payment of such interest shall not foreclose UFRFI from
exercising any other rights it may have as a consequence of the lateness of any
payment.
ARTICLE VI - PATENT PROSECUTION AND INFRINGEMENT
6.1 During the term of this Agreement, [ ] will be responsible for
filing, prosecuting and maintaining patent applications with respect to the
Patent Rights, at its own expense. [ ] will retain patent counsel of its
choosing but reasonably acceptable to [ ] in connection with the
performance of [ ] obligations under this Section 6.1 and shall
designate [ ] as an additional client with respect to such representation.
As an additional client, [ ] shall be entitled to receive copies of
correspondence and filings with the U.S. Patent and Trademark office and foreign
equivalents and to be consulted regarding such patent applications.
6.2 [ ] will cooperate with [ ] in the preparation, filing,
prosecution and maintenance of patents and patent applications with respect to
the Patent Rights by disclosing such information as may be necessary and by
promptly executing such documents as [ ] may reasonably request to effect
such efforts.
6.3 If [ ] wishes to file a patent application with respect to any
invention claimed in the Patent Rights in any jurisdiction in which no
application has yet been filed, [ ] will so notify [ ] in writing,
upon receipt of which [ ] will have ninety (90) days to file such patent
application. If [ ] declines or fails to file such patent application, [
] may file and prosecute such patent application, at [ ] own expense.
In such event, [ ] will have no rights under Section 2.1 to practice the
invention disclosed in such patent application in such jurisdiction.
6.4 If [ ] intends to abandon all claims under all patent
applications contained in the Patent Rights in a particular jurisdiction, it
will notify [ ] within ninety (90) days of its proposed abandonment, but no
later than thirty (30) days prior to any deadline for filing any response or
taking any action necessary to maintain such application. Upon receipt of such
notice [ ] may, by written notice to [ ], elect to continue the
prosecution of such application. The costs and expenses associated such
prosecution will be borne solely by [ ]; provided, however, that if [ ]
obtains issuance of any such patent application, [ ] shall reimburse [
] for such costs and expenses. [ ] determination to abandon any patent
application hereunder will have no force and effect upon the license granted
with respect to such patent application pursuant to Section 2.1.
6.5 For so long as [ ] under this
Agreement, [
] shall be responsible, solely at its expense, for
defending and enforcing the Patent Rights. However, [ ] shall receive
notice of and shall have the right, at its expense, to participate in the
protection and defense of the Patent Rights. [ ] shall have the right to
settle and compromise any dispute with third parties, with the prior written
consent of [ ], which consent shall not be unreasonably withheld. All
costs, fees and expenses incurred in connection
9.
<PAGE>
with the defense and enforcement of the Patent Rights shall be borne by [
] , provided, however, that [
] and [
] in connection therewith. Said [ ] shall begin no
earlier than the date [
]. Any [
] pursuant to this
Article VI. [
] To the extent that [
] shall be entitled to [
] under this
Agreement.
[ ] agrees to cooperate reasonably in any such litigation initiated by [
] including participating as a necessary party, supplying essential
documentary evidence and making essential witnesses in [ ] employment
available.
6.6 If [ ] does not, within ninety (90) days after receiving
notice or otherwise becoming aware of a third party infringement of any of the
Patent Rights, take appropriate action to address such third party infringement,
then [ ] may take such legally permissible action as it deems necessary or
appropriate to enforce the Patent Rights and restrain such infringement. In
such event, all costs, fees and expenses incurred in connection with the defence
and enforcement of the Patent Rights shall be borne by [ ]. [ ]
agrees to cooperate reasonably in any such litigation initiated by [ ]
including participating as a necessary party, supplying essential documentary
evidence and making essential witnesses in [ ] 's employment available.
If [ ] shall prevail in such proceeding, either by way of judgment or
settlement or compromise, any amounts recovered by [ ] shall be divided
equally between the parties, net of expenses incurred in connection therewith,
with the payment made promptly after such receipt of such amounts.
6.7 If [ ] has a [ ] under this Agreement,
the parties shall discuss [ ].
ARTICLE VII - PRODUCT LIABILITY
7.1 Licensee shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold UFRFI, the USF Research Foundation Inc.
and the Universities, their trustees, officers, employees and affiliates,
harmless against all claims and expenses, including legal expenses and
reasonable attorneys' fees, whether arising from a third party claim or
resulting from UFRFI's enforcing this indemnification clause against Licensee,
arising out of the death of or injury to any person or persons or out of any
damage to property and against any other claim, proceeding, demand, expense and
liability of any kind whatsoever resulting from the production, manufacture,
sale, use, consumption or advertisement of the Licensed Product(s) or arising
from any obligation of Licensee hereunder.
10.
<PAGE>
7.2 Licensee shall obtain and carry in full force and effect liability
insurance, in amounts customary in the biotechnology industry, which shall
protect Licensee, UFRFI and the USF Research Foundation Inc. in regard to events
covered by Paragraph 7.1 above.
7.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, UFRFI
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR
PENDING.
ARTICLE VIII - CONFIDENTIALITY
8.1 Anything in this Agreement to the contrary notwithstanding, any and
all knowledge, know-how, practices, process or other information of any kind and
in any form (hereinafter referred to as "Confidential Information") disclosed or
submitted, either orally, in writing or in other tangible or intangible form
which is designated as Confidential Information, to either party by the other
shall be received and maintained by the receiving party in strict confidence and
shall not be disclosed to any third party. Furthermore, neither party shall use
the said Confidential Information for any purpose other than those purposes
specified in this Agreement. The parties may disclose Confidential Information
to the minimum number of its employees reasonably requiring access thereto for
the purposes of this Agreement provided, however, that prior to making any such
disclosures each such employee shall be apprised of the duty and obligation to
maintain Confidential Information in confidence and not to use such information
for any purpose other than in accordance with the terms and conditions of this
Agreement.
8.2 Nothing contained herein will in any way restrict or impair either
parties right to use, disclose, or otherwise deal with any Confidential
Information which at the time of its receipt:
(a) Is generally available in the public domain, or thereafter
becomes available to the public through no act of the receiving party; or
(b) Was independently known prior to receipt thereof, or made
available to such receiving party as a matter of lawful right by a third party.
8.3 Each party may disclose any Confidential Information to the extent
that such party has been advised by counsel that such disclosure is necessary
for such party to comply with laws or regulations, provided that the party
proposing to make such disclosure shall give the other party reasonable advance
notice of such disclosure and shall use its best efforts to secure confidential
treatment of such Information to be disclosed.
8.4 The obligations of this Article VIII shall continue until the later
of the term of this Agreement and for a period of five (5) years thereafter or
for so long as any Confidential
11.
<PAGE>
Information not otherwise includable in the Patent Rights or Know-How is being
utilized in connection with any Licensed Product.
8.5 Each party agrees that remedies at law may be inadequate to protect
against breach of this Article VIII, and hereby agrees to the granting of
injunctive relief, without proof of actual damages.
ARTICLE IX - EXPORT CONTROLS
Licensee hereby agrees that it shall not sell, transfer, export or reexport
any Licensed Products or related information in any form, or any direct products
of such information, except in compliance with all applicable laws, including
the export laws of any U.S. government agency and any regulations thereunder,
and will not sell, transfer, export or reexport any such Licensed Products or
information to any persons or any entities with regard to which there exist
grounds to suspect or believe that they are violating such laws. Licensee shall
be solely responsible for obtaining all licenses, permits or authorizations
required from the U.S. and any other government for any such export or reexport.
To the extent not inconsistent with this Agreement, UFRFI agrees to provide
Licensee with such assistance as it may reasonably request in obtaining such
licenses, permits or authorization.
ARTICLE X - NON-USE OF NAMES
Licensee shall not use the names of the Universities or UFRFI nor of any of
their employees, nor any adaptation thereof, in any advertising, promotional or
sales literature without prior written consent obtained from UFRFI in each case,
except that Licensee may state that it is licensed by UFRFI under one or more of
the patents and/or applications comprising the Patent Rights. The parties agree
to issue a mutually agreed press release on or after the Effective Date.
ARTICLE XI - ASSIGNMENT
Licensee shall have the right to assign its rights or obligations under
this Agreement in connection with a merger or similar reorganization or the sale
of all or substantially all of the assets to which this Agreement pertains, or
otherwise with the prior written consent of UFRFI. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
Licensee. Any assignment not in accordance with this Agreement shall be void.
ARTICLE XII - TERM AND TERMINATION
12.1 Unless sooner terminated as provided herein, this Agreement will
expire on the later of the date on which the last to expire of the Patent Rights
shall expire or fifteen (15) years from the first commercial sale of a Licensed
Product. Upon such expiration of this Agreement, Licensee shall have a fully
paid-up worldwide right and license under the Patents and Know-How for any
purpose.
12.
<PAGE>
12.2 If Licensee shall cease to carry on its business, this Agreement
shall terminate upon notice by UFRFI.
12.3 In the event either party files for bankruptcy or a receiver is
appointed, this Agreement may immediately thereafter be terminated at the option
of the other party.
12.4 Should Licensee fail to pay UFRFI [ ] due
and payable hereunder, UFRFI shall have the right to terminate this Agreement on
[ ] notice, unless Licensee shall pay UFRFI within the [
] period, all such royalties and fees and interest due and
payable. Upon the expiration of the [ ] period, if
Licensee shall not have paid all such royalties and fees and interest due and
payable, the rights, privileges and license granted hereunder shall terminate.
12.5 Upon any material breach or default of this Agreement by Licensee,
other than under Sections 3.1, 3.2 and 3.4 and those occurrences set out in
Paragraphs 12.2 and 12.4 hereinabove, which shall always take precedence in that
order over any material breach or default referred to in this Paragraph 12.5,
UFRFI shall have the right to terminate this Agreement and the rights,
privileges and license granted hereunder by [ ] notice to
Licensee. Such termination shall become effective unless (i) Licensee shall
have cured any such breach or default prior to the expiration of the [
] period or (ii) Licensee shall have demonstrated substantial efforts to cure
such breach or default, which efforts shall be reasonably satisfactory to UFRFI.
12.6 Licensee shall have the right to terminate this Agreement at any
time on six (6) months' written notice to UFRFI, and upon payment of all
amounts due UFRFI through the effective date of the termination.
12.7 UFRFI may [
].
12.8 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination. Licensee and any sublicensee
thereof may, however, after the effective date of such termination, sell all
Licensed Products, and complete Licensed Products in the process of manufacture
at the time of such termination and sell the same, provided that Licensee shall
pay to UFRFI the royalties thereon as required by Article IV of this Agreement
and shall submit the reports required by Article V hereof on the sales of
Licensed Products.
12.9 Upon termination of this Agreement for any reason, any sublicensee
not then in default under its sublicense agreement with Licensee shall
automatically have [
] under this Agreement [
] on economic terms [
] and otherwise with the [ ]
hereunder, provided, however, that Sublicensee shall have [
] from notice by [ ] ] in order to:
13.
<PAGE>
(i) pay any [ ] due and
payable or
(ii) cure any such breach or default in any manner [
] or [
] cure such breach or default, which [
];
or [ ].
12.10 Upon termination of this Agreement for any reason, all intellectual
property rights licensed hereunder, including without limitation all Patent
Rights and rights in and to the Know-How, University Patents and University
Inventions shall [ ](except to the extent assumed by
sublicensees pursuant to Section 12.9) and [ ] shall have no further
right to or continuing interest herein. In addition, upon termination of this
Agreement, to the extent that [
].
ARTICLE XIII - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
Any payment, notice or other communication pursuant to this Agreement shall
be sufficiently made or given on the date of mailing if sent to such party by
certified first class mail or air courier, postage prepaid, addressed to it at
its address below or at it shall designate by written notice given to the other
party:
In the case of UFRFI:
President
University of Florida Research Foundation, Inc.
223 Grinter Hall
Gainesville, Florida 32611
With a copy to:
Director
Office of Patent, Copyright and Technology Licensing
186 Grinter Hall
Gainesville, Florida 32611
All payments to:
Director
Office of Patent, Copyright and Technology Licensing
186 Grinter Hall
Gainesville, Florida 32611
14.
<PAGE>
PLEASE MAKE ALL CHECKS PAYABLE TO:
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
In the case of Licensee:
CV Therapeutics, Inc.
1615 Plymouth Street
Mountain View, CA 94043
Attention: President and CEO
ARTICLE XIV - MISCELLANEOUS PROVISIONS
14.1 Each party represents and warrants that it has the authority to
enter into this Agreement and that the execution, delivery and performance of
this Agreement do not conflict with any agreement or understanding, either
written or oral, to which it is a party or to which it is otherwise bound.
14.2 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the State of Florida, U.S.A., except that
questions affecting the construction and effect of any Patent Rights shall be
determined by the law of the country in which the patent was granted.
14.3 The parties hereto acknowledge that this Agreement sets forth the
entire agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto.
14.4 If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any extent, be held
to be invalid or unenforceable, then (i) the remainder of this Agreement, or the
application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law; and (ii) the
parties hereto covenant and agree to renegotiate any such term, covenant or
application thereof in good faith in order to provide a reasonably acceptable
alternative to the term, covenant or condition of this Agreement or the
application thereof that is invalid or unenforceable, it being the intent of the
Parties that the basic purposes of this Agreement are to be effectuated.
14.5 Licensee agrees to mark the Licensed Products sold in the United
States with all applicable United States patent numbers. All Licensed Products
shipped to or sold in other countries shall be marked in such a manner as to
conform with the patent laws and practice of the country of manufacture or sale.
15.
<PAGE>
14.6 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and
duly executed this Agreement the day and year set forth below.
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
By /s/ Karen Holbrook
-----------------------------
Name
------------------------------------
Title President
-----------------------------------
Date 7/6/94
------------------------------------
CV THERAPEUTICS, INC.
By /s/ Louis G. Lange
--------------------------------------
Name
------------------------------------
Title Chief Executive Officer
-----------------------------------
Date 8/30/94
- ----------------------------------------
16.
<PAGE>
APPENDIX A
[
]
U.S.S.N. [ ]
By [ ]
Filed [ ]
A-1
<PAGE>
Confidential treatment has been requested for portions of this document.
Brackets indicate portions of text that have been omitted. A separate filing
of such omitted text has been made with the Commission as part of the
Company's application for confidential treatment.
RESEARCH AGREEMENT
This AGREEMENT entered into this 27th day of June, 1994 (the "Effective
Date"), by and between CV Therapeutics, Inc., having its principal office at
1615 Plymouth St., Mountain View, CA 94043 (hereinafter referred to as
"Sponsor"), and the UNIVERSITY OF FLORIDA, a non-profit educational institution
of the State of Florida located in Gainesville, Florida (hereinafter referred to
as the "University").
WITNESSETH:
WHEREAS, Sponsor desires the research assistance of certain technically
qualified persons having access to certain facilities and equipment;
WHEREAS, Sponsor desires to fund said research entitled "Adenosine
Receptor" attached hereto as Appendix A;
WHEREAS, Sponsor has entered into a License Agreement with the University
of Florida Research Foundation, Inc. ("UFRFI") dated June 27, 1994, for the
Field of Use described as human pharmaceuticals. UFRFI and the University of
Florida, an educational institution having its principal office at 223 Grinter
Hall, Gainesville, Florida 32611 (hereinafter referred to as "University"), have
agreed that the research described herein shall be conducted by University;
WHEREAS, University is willing to cooperate with and assist Sponsor by
furnishing such personnel, and facilities as may be required;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
I DEFINITIONS:
As used herein, the following terms shall have the following meanings:
1.1 "CONTRACT PERIOD" is June 27, 1994, through June 26, 1996,
which shall be extended through June 26, 1997, unless Sponsor has also
terminated the License Agreement, during which the University shall perform the
Project Work.
1.2 "LICENSE AGREEMENT" shall mean that certain License Agreement dated
June 27, 1994, to which this Research Agreement is attached.
1.3 "PROJECT DESCRIPTION" shall mean the description of the Project
Work, including budget, as described in Appendix A.
1
<PAGE>
1.4 "PROJECT WORK" shall mean the research work, as described in
Appendix A hereof to be performed by University under this Agreement.
1.5 "RESEARCHER(S)" shall mean individually and collectively Dr. Luiz
Belardinelli (hereinafter referred to as the "Principal Investigator"), Dr.
Stephen Baker, graduate students, other professional personnel and/or other
employees of University participating in the actual performance of the Project
Work.
1.6 "SPONSOR" shall mean the Licensee defined and described in the
License Agreement between Licensee and UFRFI.
II RESEARCH WORK
2.1 University shall perform the Project Work substantially in
accordance with the terms and conditions of this Agreement.
2.2 University agrees that Dr. Belardinelli shall act as the Principal
Investigator for the Project Work. If Dr. Belardinelli leaves University, or
terminates his involvement in this Agreement, University shall use its best
efforts to find a replacement acceptable to Licensee. If University fails to do
so, Licensee shall have the right to terminate this Agreement on thirty (30)
days written notice.
2.3 The parties acknowledge that certain portions of the Project Work
may be performed by Dr. Ray Olsson at the University of South Florida under a
subcontract of this Agreement. University shall not subcontract the Project
Work to any other third party without the prior written consent of Sponsor,
which consent shall not be unreasonably withheld. University agrees that any
such subcontract shall provide that any University Patents and University
Inventions conceived pursuant to such subcontract shall be assigned to
University and shall be subject to the License Agreement.
III REPORTS AND CONFERENCES
3.1 University shall disclose to Sponsor, on a semi-annual basis and in
writing, all of the results of the Project Work including but not limited to all
University Inventions, Joint Inventions, know-how, data, conclusions, results,
observations, procedures and the like; all of which shall be deemed to be
subject to Sponsor's license under the Patent Rights and Know-How pursuant to
the License Agreement. Sponsor shall disclose to University, on a semi-annual
basis and in writing, all of its results of the Project Work including but not
limited to all Joint Inventions, know-how, data, conclusions, results,
observations, procedures and the like.
3.2 If requested by Sponsor, during the term of this Agreement,
representatives of the University will meet with representatives of Sponsor at
times and places mutually agreed upon to discuss the progress and results, as
well as ongoing plans, or changes therein, of the Project Work to be performed
hereunder. Sponsor will reimburse the University for reasonable travel and
living expenses incurred in connection with such meetings.
2
<PAGE>
IV RESEARCH FUNDING
4.1 Subject to the terms and conditions of this Agreement, Sponsor
shall support the Project Work by a [
] payable as follows:
4.1.1 Commencing on [ ], Sponsor
shall pay the University [
] and
4.1.2 At [ ], commencing on [
] Sponsor shall pay the University [
].
4.2 Such grant amount shall cover both [ ] and shall be
allocated according to the Project Description. Unless otherwise agreed in
writing, the total costs to Sponsor for the Project Work shall not exceed [
].
4.3 Should this Agreement be terminated pursuant to Section IX hereof
prior to its expiration, Sponsor shall [
] provided, however, that Sponsor shall [
] which shall include [ ] and [
]. After [
], any obligation of [
]. In addition, if this Agreement is [
].
V PUBLICITY
5.1 Sponsor shall not use the names of the University or UFRFI nor of
any of their employees, nor any adaptation thereof, in any advertising,
promotional or sales literature without prior written consent obtained from
UFRFI in each case, except that Sponsor may state that it is licensed by UFRFI
under one or more of the patents and/or applications comprising the Patent
Rights. The parties agree to issue a mutually press release, on or after the
Effective Date.
VI PUBLICATIONS
6.1 Sponsor recognizes that under University academic policy, the
results of a University research project must be publishable and agrees that
Researchers engaged in the Project Work shall be permitted to present at
symposia, national or regional professional meetings and to publish in journals,
theses or dissertations, or otherwise of their own choosing, methods and results
of Project Work or any of the University Inventions or Joint Inventions,
provided, however, that Sponsor shall have been furnished copies of any proposed
publication
3
<PAGE>
or presentation at least forty (40) days in advance of the submission of such
proposed publication or presentation to a journal, editor or other third party.
Sponsor shall have thirty (30) days, after receipt of said copies, to object to
such proposed presentation or proposed publication either because there is
patentable subject matter which needs protection and/or there is Confidential
Information of Sponsor contained in the proposed publication or presentation.
In the event that Sponsor makes such objection, the said Researcher(s) shall
refrain from making such publication or presentation for a maximum of three (3)
months in order for the University to file patent application(s) with the United
States Patent and Trademark Office and/or foreign patent office(s) directed to
the patentable subject matter contained in the proposed publication or
presentation.
VII CONFIDENTIALITY
7.1 Anything in this Agreement to the contrary notwithstanding, any and
all knowledge, know-how, practices, process or other information of any kind and
in any form (hereinafter referred to as "Confidential Information") disclosed or
submitted, either orally, in writing or in other tangible or intangible form
which is designated as Confidential Information, to either party by the other
shall be received and maintained by the receiving party in strict confidence and
shall not be disclosed to any third party. Furthermore, neither party shall use
the said Confidential Information for any purpose other than those purposes
specified in this Agreement. The parties may disclose Confidential Information
to the minimum number of its employees reasonably requiring access thereto for
the purposes of this Agreement provided, however, that prior to making any such
disclosures each such employee shall be apprised of the duty and obligation to
maintain Confidential Information in confidence and not to use such information
for any purpose other than in accordance with the terms and conditions of this
Agreement.
7.2 Nothing contained herein will in any way restrict or impair either
parties right to use, disclose, or otherwise deal with any Confidential
Information which at the time of its receipt:
7.2.1 Is generally available in the public domain, or thereafter
becomes available to the public through no act of the receiving party; or
7.2.2 Was independently known prior to receipt thereof, or made
available to such receiving party as a matter of lawful right by a third party.
7.3 Each party may disclose any Confidential Information to the extent
that such party has been advised by counsel that such disclosure is necessary
for such party to comply with laws or regulations, provided that the party
proposing to make such disclosure shall give the other party reasonable advance
notice of such disclosure and shall use its best efforts to secure confidential
treatment of such Information to be disclosed.
7.4 The obligations of this Article VII shall continue until the later
of the term of this Agreement and for a period of five (5) years thereafter or
for so long as any Confidential
4
<PAGE>
Information not otherwise includable in the Patent Rights or Know-How is being
utilized in connection with any Licensed Product.
7.5 Each party agrees that remedies at law may be inadequate to protect
against breach of this Article VII, and hereby agrees to the granting of
injunctive relief, without proof of actual damages.
VIII INVENTIONS IMPROVEMENTS AND DISCOVERIES
8.1 University will promptly notify Sponsor of any University
Inventions and Joint Inventions and Sponsor will promptly notify Licensee of any
Joint Inventions. This obligation shall survive any termination of this
Agreement.
8.2 All rights and title to University Inventions arising under Project
Work and conceived and/or made by one or more employees of University shall
belong to University. The University and Sponsor shall own jointly all
University Inventions arising under Project Work and conceived and/or made
jointly by University and Sponsor. For the purposes of this Agreement, the
"making" of inventions shall be governed by U.S. laws of inventorship. All the
University's right and title to such University Inventions is hereby assigned to
UFRFI and shall be subject to the terms and conditions of this Agreement and the
License Agreement.
8.3 Rights to inventions, improvements and/or discoveries, whether
patentable or not, relating to Project Work made solely by employees of Sponsor
shall belong to Sponsor, and such invention, improvements and/or discoveries
shall not be subject to the terms and conditions of this Agreement or the
License Agreement.
IX TERM AND TERMINATION
9.1 This Agreement shall become effective upon the Effective Date and
shall continue until June 26, 1996, unless sooner terminated in accordance
with the provisions of this Section IX. Sponsor shall extend this Agreement
until June 26, 1997, unless Sponsor has also [
].
9.2 Notwithstanding anything to the contrary in this Agreement, Sponsor
shall have the right to terminate this Agreement, for any reason, on ninety
(90) days written notice to the University; provided that Sponsor has also
terminated the License Agreement. In such event, Sponsor shall have the
obligations set forth in Section 4.3.
9.3 In the event that either party hereto shall commit any breach of or
default in any of the terms or conditions of this Agreement, and also shall fail
to remedy such default or breach within [ ] after receipt of
written notice thereof from the other party hereto, the party giving notice may,
at its option and in addition to any other remedies which it may have at law or
in equity, terminate this Agreement by sending notice of termination in
writing to the other party to such effect, and such termination shall be
effective as of the date of the receipt of such notice.
5
<PAGE>
9.4 Termination of this Agreement by either party for any reason shall
not affect the rights and obligations of the parties accrued prior to the
effective date of termination of this Agreement. No termination of this
Agreement, however effectuated, shall release the parties hereto from their
rights and obligations under Sections III, IV, V, VI, VII, or VIII.
X MISCELLANEOUS
10.1 The parties recognize that inventions, copyrightable works or other
proprietary information may arise from research sponsored in whole or in part by
agencies of the federal government. The parties hereto agree that any such
developments shall be governed by the provisions of Public Law 96-517, or as
amended, during the term of this Agreement.
10.2 In the performance of all services hereunder:
10.2.1 UFRFI shall be deemed to be and shall be an independent
contractor and as such University shall not be entitled to any benefits
applicable to employees of Sponsor;
10.2.2 University and UFRFI shall comply with all governmental laws
and regulations, such as EPA, OSHA and like regulations, which are applicable to
the University and its performance of the Project Work hereunder;
10.2.3 Neither party is authorized or empowered to act as agent for
the other for any purpose and shall not on behalf of the other enter into any
contract, warranty or representation as to any matter. Neither shall be bound
by the acts or conduct of the other.
XI INDEMNITY/INSURANCE
11.1 University warrants and represents that, as part of the State of
Florida, University is self-funded for liability insurance under Chapter 284,
FLORIDA STATUTES, such protection being applicable to officers, employees and
agents while acting within the scope of their employment by University and
University has no liability insurance policy as such that can extend protection
to any other person.
11.2 Each party hereby assumes any and all risks of personal injury and
property damage attributable to the negligent acts or omissions of that party
and the officers, employees and agents thereof.
11.3 The parties further agree that nothing contained herein shall be
construed or interpreted as denying to either party any remedy or defense
available to such party under the laws of the State of Florida; the consent of
the State of Florida or its agents and agencies to be sued by reason hereon; or
as a waiver of sovereign immunity of the State of Florida beyond the waiver
provided in Section 768.28, FLORIDA STATUTES (1991).
6
<PAGE>
XII GOVERNING LAW
12.1 This Agreement shall be governed and interpreted in accordance with
the internal law of the State of Florida without regard to its conflict of laws.
XIII ASSIGNMENT
13.1 Sponsor shall have the right to assign its rights or obligations
under this Agreement in connection with a merger or similar reorganization or
the sale of all or substantially all of the assets to which this Agreement
pertains, or otherwise with the prior written consent of University. This
Agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of Sponsor. Any assignment not in accordance with this
Agreement shall be void.
XIV AGREEMENT MODIFICATION
14.1 Any agreement changing the terms of this Agreement in any way shall
be valid only if the change is made in writing and approved by authorized
representatives of the parties hereto.
XV NOTICES
15.1 Notices, invoices, communications and payments hereunder shall be
deemed made if given by registered or certified mail, postage prepaid, and
addressed to the party to receive such notice, invoice or communication at the
address given below, or such other address as may hereafter be designated by
notice IN writing:
If to Sponsor: CV Therapeutics, Inc.
1615 Plymouth Street
Mountain View, CA 94043
Attention:
If to UFRFI: Karen A. Holbrook
President
University of Florida Research Foundation, Inc.
223 Grinter Hall
Gainesville, Florida 32611-2037
Technical Matter: Luiz Belardinelli, M.D.
Professor of Medicine University of Florida
P.O. Box 100277
Gainesville, Florida 32610
7
<PAGE>
PAYMENTS SHALL BE MADE IN UNITED STATES DOLLARS TO THE UNIVERSITY OF
FLORIDA RESEARCH FOUNDATION, INC. AT THE FOLLOWING ADDRESS:
223 Grinter Hall
Gainesville, Florida 32611-2037
The date of giving any notice, invoice or other communication, and the date of
making any such payment, provided that such payment is received, shall be the
date on which such envelope is deposited with the appropriate U.S. Post Office.
The postal service receipt showing the date of such deposit shall be PRIMA FACIE
evidence of these facts.
XVI ENTIRE AGREEMENT
16.1 This Agreement represents the entire understanding between the
parties, and supersedes and merges all understanding between the parties, and
supersedes and merges all other agreements, express or implied, discussions or
understandings between the parties with respect to the subject matter hereof. It
shall be interpreted in conjunction and consistent with the License Agreement to
which this is an Exhibit.
IN WITNESS WHEREOF, the parties have caused these presents to be executed
in duplicate as of the day and year first above written.
CV THERAPEUTICS, INC. UNIVERSITY OF FLORIDA
By: /s/ Louis G. Lange By: /s/ Karen A. Holbrook
---------------------------- ------------------------
Title: Chief Executive Officer Title: President
8
<PAGE>
APPENDIX A
PROJECT DESCRIPTION
There are 3 main areas of work that the University of Florida Scientists are
committed to under the UFDRI/CVT License Agreement. The budgets for this work
is detailed below.
1. [ ] Pharmacology. Dr. Belardinelli, Dr. Baker, and the
University of Florida will undertake certain molecular, cellular and
isolated tissue pharmacology studies on [ ] in collaboration
with CVT. CVT will provide the material for these studies and the
University of Florida Scientists will investigate [ ].
2. Development of [ ] University of Florida
will work in conjunction with CVT Chemists to develop [ ]. In
particular the [ ] which confers such [ ]
therefore [ ]. CVT and University of Florida Scientists will
work together [ ]. These [ ] may be the
subject of [ ].
3. [ ] The scope of the [ ] allows for the
development of [ ] based upon [ ] will be
undertaken initially by the inventors at the University of Florida and
University of South Florida with preliminary pharmacological evaluation
at the University of Florida and then further [ ] evaluations
at CV Therapeutics. University of Florida Scientists will carry out
additional experiments to develop [
] with further financial support from CV
Therapeutics as appropriate.
The primary workload for CV Therapeutics will be to [ ]
with the University of Florida Scientists landing support and technical
assistance. While these are the immediate goals of the CVT/University of
Florida collaboration it is anticipated that within the time frame of the
agreements we shall explore [ ].
<PAGE>
BUDGET FOR
APPENDIX A
Total: [ ]
Budgeted for research contract for years [ ] and [ ] to be paid by
CV Therapeutics to University of Florida investigators (Belardinelli and Baker).
1. Personnel [ ] at [ ] [ ]
2. Supplies and animals [ ]
3. Indirect cost [ ]
TOTAL [ ]
/s/ Luiz Belardinelli, M.D. /s/ Stephen P. Baker, Ph.D.
---------------------------- ----------------------------
Professor of Medicine Chairman, Department of
Pharmacology
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Confidential treatment has been requested for portions of this document.
Brackets indicate portions of text that have been omitted. A separate filing
of such omitted text has been made with the Commission as part of the
Company's application for confidential treatment.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT made and effective as of March 27, 1996 between
SYNTEX (U.S.A.) INC., 3401 Hillview Avenue, Palo Alto, California 94303
(hereinafter referred to as "Syntex") and CV THERAPEUTICS, INC., 3172 Porter
Drive, Palo Alto, California 94304 (hereinafter referred to as "CVT").
RECITALS
WHEREAS, Syntex has developed a compound having the generic name of
ranolazine, with the Syntex code number RS-43285-193 (the "Compound" as
hereinafter defined) and is the owner of patent rights and know-how relating to
the Compound;
WHEREAS, Syntex desires to have CVT develop and register in specified
countries (the "CVT Territory" as hereinafter defined) pharmaceutical products
containing the Compound for the treatment of angina pectoris, and, at CVT's
discretion, certain other Cardiovascular Indications (as hereinafter defined);
1.
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WHEREAS, CVT desires to develop, manufacture, and commercialize Licensed
Products (as hereinafter defined) in the CVT Territory either by itself or with
another party (the "CVT Partner") with whom CVT will collaborate in developing
and/or marketing such products and to receive the right and license under the
Syntex Patents and Know-How (as hereinafter defined) to make, have made, use,
sell, offer for sale and import in the CVT Territory Licensed Products under
CVT's trademark;
WHEREAS, Syntex is willing to grant in the CVT Territory the above-
mentioned rights and license to CVT under Syntex Patents and Know-How relating
to the Licensed Products;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
The following terms as used in this License Agreement shall have the
meanings respectively set forth in this Article:
1.1 "AFFILIATED COMPANY" or "AFFILIATE" shall mean
(a) an organization fifty percent (50%) or more of the voting
stock, or comparable ownership interest, of which is owned and/or controlled
directly or indirectly by either party to this Agreement;
(b) an organization that directly or indirectly owns and/or
controls fifty percent (50%) or more of the voting stock, or comparable
ownership interest, of either party of this Agreement;
2.
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(c) an organization that is directly or indirectly under common
control with either party to this Agreement through common share holdings.
1.2 "CARDIOVASCULAR INDICATIONS" shall mean the treatment and
prevention of any disorders of the heart, blood vessels, or kidney and disorders
due to ischemia or hypoxia of any organ or tissue except the brain.
1.3 "COMPOUND" shall mean the chemical substance having the chemical
name ( )N-(2,6-dimethylphenyl)-4-[2-hydroxy-3-(2-methoxyphenoxy)propyl]-1-
piperazine acetamide dihydrochloride. The Compound has the generic name
ranolazine, further identified by Syntex's code number RS-43285-193.
1.4 "CVT KNOW-HOW" shall mean all materials and information developed
relating to the mechanism of action, all preclinical and clinical research, and
processes and inventions useful for the formulation, development, manufacture,
delivery or use of the Licensed Products, that are owned and/or controlled by
CVT.
1.5 "CVT PATENT RIGHTS" shall mean all patents and patent applications,
both foreign and domestic, including without limitation all provisionals,
divisionals, continuations, continuations-in-part, substitutions, extensions,
reissues, renewals, supplementary protection certificates and inventors'
certificates, owned and/or controlled by CVT that cover inventions or
discoveries relating to the Licensed Products.
1.6 "CVT PATENTS AND KNOW-HOW" shall mean CVT Patent Rights and CVT
Know-How.
3.
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1.7 "CVT TERRITORY" shall mean all countries in the world, excluding
Japan, Korea, China, Taiwan, Hong Kong, the Phillipines, Indonesia, Singapore,
Thailand, Malaysia, Vietnam, Myanmar, Laos, Cambodia and Brunei.
1.8 "LICENSED COMPOUND(S)" shall mean the Compound and any other
compound claimed in U.S. Patent No. 4,567,264 granted January 28, 1986 and in
European Patent No. 126,449, granted December 23, 1987.
1.9 "LICENSED PRODUCT(S)" shall mean human therapeutic product(s)
containing any Licensed Compound as an active ingredient for the treatment of
angina pectoris and, at CVT's discretion, certain other Cardiovascular
Indications, in such formulations and modes of administration as determined by
CVT.
1.10 "NET SALES" shall mean the gross sales of the Licensed Product
invoiced by CVT, its Affiliates, the CVT Partner and other sublicensees, as the
case may be, to non-Affiliated third parties, less [
], as computed on [ ]for the [
] (hereinafter referred to as "adjusted gross
sales"). From the adjusted gross sales there shall be [
], computed in accordance with Section 5.7, for [
].
4.
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[ ].
1.11 "SYNTEX KNOW-HOW" shall mean all materials and information
developed relating to the mechanism of action, all preclinical and clinical
research, and processes and inventions useful for the formulation, development,
manufacture, delivery or use of the Licensed Products, that are owned and/or
controlled by Syntex as of the effective date of this Agreement and thereafter
acquired during and in the course of performance of the Agreement to the extent
that Syntex is free to disclose without restriction. Information received by
Syntex from the Third Party Licensee will be expressly excluded from Syntex
Know-How. Syntex shall not license such information to another third party in
the CVT Territory for use in Cardiovascular Indications.
1.12 "SYNTEX PATENT RIGHTS" shall mean all patents and patent
applications, both foreign and domestic, including without limitation all
provisionals, divisionals, substitutions, continuations, continuations-in-part,
extensions, reissues, renewals, supplementary protection certificates and
inventors' certificates, that are owned and/or controlled by Syntex and that
cover inventions or discoveries relating to the Licensed Products. As of the
effective date of this Agreement, Syntex Patent Rights shall mean those patents
and applications set out in Appendix A attached hereto.
1.13 "SYNTEX PATENTS AND KNOW-HOW" shall include Syntex Patent Rights
and Syntex Know-How.
5.
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1.14 "THIRD PARTY LICENSEE" shall mean the third party to which Syntex
has granted a license of rights to the Compound in the countries outside the CVT
Territory as of the effective date of this Agreement, or any future licensee of
Syntex of the Compound or other compounds encompassed by the Licensed Products
outside of the CVT Territory.
2. GRANT OF RIGHTS.
2.1 Syntex herewith grants to CVT under the Syntex Patent Rights and
Syntex Know-How for the Cardiovascular Indications:
(a) an exclusive right and license to develop and register the
Licensed Product(s) in the CVT Territory for angina pectoris and, at CVT's
discretion, certain other Cardiovascular Indications; and
(b) an exclusive right and license to make, have made, use,
offer for sale, sell and import the Licensed Product(s) in the CVT Territory for
angina pectoris and, at CVT's discretion, certain other Cardiovascular
Indications.
No rights are granted pursuant to the foregoing license under the Syntex
Patent Rights and Know-how to any compounds other than the Licensed Compounds.
2.2 The exclusiveness as per Section 2.1 above shall be valid against
Syntex in the CVT Territory, unless specifically provided for to the contrary
under this Agreement.
6.
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2.3 CVT shall be permitted to extend its right and license obtained
under this Agreement to its Affiliates and to grant sublicenses to third parties
in the CVT Territory. Unless expressly stated to the contrary, all references
in this Agreement to sublicensees of CVT shall include the CVT Partner. CVT
shall inform Syntex in writing of the identity of its sublicensees, including
the CVT Partner, and any Affiliates to which it has extended rights, promptly
after such parties have obtained such rights.
2.4 If at any time CVT or the CVT Partner for reasons of seeking a
marketing partner decides that it desires to sublicense its rights granted in
Section 2.1 to a third party in a given country of the CVT Territory, CVT or the
CVT Partner, as the case may be, shall give Syntex written notice to such effect
identifying the country or countries. Syntex shall have forty-five (45) days
from receipt of such notice to inform CVT, or the CVT Partner, as the case may
be, by written notice that Syntex elects to exercise a right of first
negotiation to obtain such sublicense with respect to the country or
countries in question and provide at the time of such election a proposal of
terms relating to the Licensed Product and country or countries in question.
If the election is in the affirmative, Syntex or any Affiliate of Syntex
shall have a right of first negotiation, such right giving Syntex or its
Affiliate, during the one hundred and twenty (120) day period following
delivery of the notice (the "Negotiation Period"), the exclusive right to
negotiate with CVT or the CVT Partner, before CVT or the CVT Partner
negotiates with any third party, to participate in marketing a Licensed
Product in any portion of the CVT Territory in which CVT or the CVT Partner
plans to seek assistance in marketing the Licensed Product; provided,
however, that the foregoing shall not apply to CVT's selection of a CVT
Partner, or if CVT or the CVT Partner at the time of launch of Licensed
Product has in the relevant portion of the CVT Territory an established and
systematic commercial relationship with a third party for the marketing by
such third party of other products developed by CVT or the CVT Partner, as
the case may be, and CVT or the CVT Partner plans to use such third party to
market the Licensed Product. At Syntex's request, during the Negotiation
Period the parties will negotiate in good faith to enter into an agreement
providing for Syntex or an Affiliate of Syntex being granted rights as a
marketing partner of CVT or the CVT Partner. Such agreement shall be on
commercially reasonable terms, which may include, without limitation,
co-promotion product exchange and other consideration, consistent with
customary business practices in armslength transactions with third parties in
the pharmaceutical industry, it being understood that CVT or the CVT Partner
shall be entitled to reject Syntex's offer at the end of the Negotiation
Period and seek more favorable terms from a third party. If no agreement is
entered into with Syntex or a Syntex Affiliate by the end of the Negotiation
Period, then CVT or the CVT Partner shall be free to enter into an agreement
to sublicense a third party at its sole discretion on terms materially more
favorable to CVT than those last offered by Syntex or its respective
Affiliate. "Terms" shall include, but not be limited to, royalty,
copromotion, product exchange and level of development or marketing support
for the Licensed Product in question. If CVT or the CVT Partner intends to
enter into such an agreement with a third party on terms materially equal or
less favorable to CVT than those last offered by Syntex or its Affiliate, it
shall first offer such terms to Syntex or its Affiliate, as the case may be,
in writing, and Syntex or its Affiliate shall have thirty (30) days from
receipt of such offer to accept or reject the terms of the offer in its
entirety. If Syntex or its Affiliate rejects the offer, CVT or the CVT
Partner, as the case may be, shall then be free to enter into the agreement
with such third party or another party upon the offered terms.
7.
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2.5 Any registrations, and any other validations, notifications, or
like procedures, and compliance therewith, required by any authority in the CVT
Territory with respect to the right and license granted to CVT pursuant to this
Agreement shall be the sole responsibility of CVT and shall be at the sole
expense of CVT. CVT shall indemnify and hold Syntex harmless from any claim
against Syntex arising from or relating to CVT's failure to comply with the
foregoing.
3. DISCLOSURE.
3.1 (a) Following execution of this Agreement, Syntex shall provide
CVT all written Syntex Know-How in its possession relevant to the Compound to
the extent available. Syntex shall use reasonable efforts to arrange for a
complete disclosure and demonstration of all technology and know-how in its
possession worldwide relating to the Compound that is necessary or useful for
the manufacture of Licensed Products (in bulk and finished form under Good
Laboratory Practice ("GLP) and Good Manufacturing Practice "(GMP") conditions
for clinical or commercial use) by CVT or a CVT sublicensee or subcontractor, by
personnel of Syntex or other knowledgeable ex-Syntex personnel accessible to
Syntex, to the extent such personnel will be available.
(b) Upon reasonable notice to Syntex, Syntex shall use
reasonable efforts to make available up to three Syntex employees to
facilitate the transfer of Syntex Know-How relating to bulk manufacture of the
Compound, including a walk-through of a process batch, and demonstrate the
manufacturing process at a
8.
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single site, either in North America or Europe, and up to two Syntex employees
to facilitate the transfer of formulation know-how, including the walk-through
of a pilot batch, at a single manufacturing site designated by CVT as its prime
manufacturing site in the United States or Europe; provided, however, that
Syntex shall not be obligated to make available more than a total of four
employees. In either case, Syntex shall not be obligated to maintain such
employees on site after successful walk-through and batch preparation, and in no
event longer than [ ]. Travel and related out-of-pocket expenses
of Syntex employees in rendering the foregoing services at sites remote from the
Syntex facilities shall be paid for by CVT. All Syntex obligations under this
Section 3.1b) shall cease [ ].
(c) Syntex shall grant permission, upon written request and
reasonable notice by CVT, for ex-Syntex personnel and ex-Syntex consultants,
as the case may be, to disclose and discuss Syntex's proprietary information
on the Compound to CVT or the CVT Partner solely in furtherance of the
purposes of this Agreement. Syntex will pay up to a maximum total of
[ ] for the reasonable costs (including consulting fees
and reasonable travel expenses), in the aggregate, of all ex-Syntex personnel
and of the two, [ ]consultants Dr. Gary Lopaschuk and Dr. D.M.
Turnball when providing the foregoing services to CVT and the CVT Partner,
and CVT shall be solely responsible for payment of any such costs in excess
of that amount and the costs of any other consultants of CVT.
(d) Syntex's obligations in accordance with this Article III,
including making employees available for telephone consultations, with respect
to transfer of written information and associated documentation relating to pre-
clinical and
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clinical activities and IND matters shall cease [ ] from the
effective date of this Agreement.
3.2 CVT shall provide periodic progress reports of the significant
results of the development of the Licensed Products and CVT's progress in
meeting the milestone timetable set out in Appendix B, in such form and detail
as Syntex may reasonably require.
3.3 If Syntex has been granted rights under an agreement pursuant to
Section 2.4 above, it is understood that CVT shall then make available to Syntex
any know-how, information, data, etc. (including the registration file prepared
by CVT or the CVT Partner for registration approval) in CVT's or the CVT
Partner's possession for Syntex's marketing of the Licensed Product in that
portion of the CVT Territory where Syntex has been granted rights to sell
Licensed Product(s). In such case, the provisions of Section 2.5 shall not
apply to that portion of the CVT Territory where Syntex has been granted rights
to sell Licensed Product(s).
4. DEVELOPMENT, REGISTRATION AND MARKETING
4.1 All development and clinical trials required for regulatory
approval in CVT Territory will be conducted by CVT or the CVT Partner, at the
sole expense of CVT or the CVT Partner. CVT and the CVT Partner will have the
right to subcontract any part of its development and clinical trial obligations
in the CVT Territory.
10.
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4.2 Syntex shall, upon execution of this Agreement, exercise reasonable
efforts to introduce CVT to the Third Party Licensee.
4.3 Syntex shall endeavor to provide access by CVT to all consultants
who have been involved in the development of the Compound by Syntex and whom CVT
desires to retain for the purposes of this Agreement, to the extent such
consultants are available and willing to work with CVT. Subject to
Section 3.1c), all costs and expenses associated with retaining such consultants
shall be borne by CVT.
4.4 All processes, inventions, formulations, proprietary information,
know-how, and patents resulting from CVT's development program, including
formulation and manufacturing information (the "Results") developed pursuant to
the licenses granted to CVT hereunder shall be owned by CVT.
4.5 Subject to Section 11.4, CVT shall use commercially reasonable
efforts to develop the Compound for the treatment of angina pectoris within
milestone/time guidelines set out in Appendix B hereto, or as later mutually
agreed to in writing by duly authorized officers of the parties hereto. CVT
shall notify Syntex before the lapse of a time limit contained in the
milestone/time guidelines that the completion of a particular trial or the
filing of a certain document has been delayed, and if CVT can competently
demonstrate that such delay was due to valid reasons beyond CVT's control and
that CVT has undertaken reasonable efforts to overcome such adverse
circumstances, then in such a case Syntex shall, upon consultation with CVT,
extend the respective time limit for a reasonable period. Notwithstanding the
foregoing, Syntex shall not be obligated to extend any time limit for reaching a
particular milestone set
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forth under the Milestone Payments more than once, and failure to meet the
milestone in question by such an extended time limit, unless the amount set
forth for payment upon reaching the milestone is paid on or before expiration of
the extended time limit, shall be deemed a material breach of the Agreement by
CVT.
4.6 Subject to Section 11.4, CVT shall use commercially reasonable
efforts consistent with accepted pharmaceutical business practices and legal
requirements to promote, market, distribute and sell the Licensed Products with
the same standard of effort used by CVT in the marketing of its own products of
similar market potential. CVT and any sublicensee of CVT shall launch Licensed
Product(s) in each country of the CVT Territory within [ ] of
receiving marketing approval, or pricing approval if required, whichever is
later, for the Licensed Product in question.
4.7 With regard to any countries in the CVT Territory for which CVT is
acting through an Affiliate or sublicensee, CVT's Affiliated Company or
sublicensee of CVT, as the case may be, shall observe commercially reasonable
efforts comparable to the ones set forth above.
4.8 Upon [ ] prior written notice, but in any event not
earlier than [ ] after launch of a Licensed Product in a country in
question, Syntex may convert the right and license granted pursuant to
Article II into a non-exclusive right and license in a given country of the
CVT Territory in the event CVT, or the responsible CVT Affiliate or
sublicensee fails to comply with its obligations in each such country as set
forth above, unless, within such [ ] period, CVT or the
responsible CVT Affiliate or sublicensee shall have
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cured such default or shall have put a reasonable plan in place and allocated
sufficient resources to meet its efforts - obligation in the country in
question, all to the reasonable satisfaction of Syntex.
4.9 CVT undertakes to inform Syntex of:
(a) the date of filing the application for the registration of
each Licensed Product in a given country of the CVT Territory;
(b) the date of obtaining product approval (or equivalent
authorization) from the relevant authority in each country of the CVT Territory;
(c) the date of the first sale of the Licensed Product in each
country of the CVT Territory; and
(d) any events which might be material to Syntex in connection
with a possible extension of the patent protection term. In this regard, CVT
shall cooperate with Syntex in filing for and obtaining patent extensions and
supplementary or complementary protection certificates in any country of the
Territory, if and when available, including supplementary protection
certificates in European Union (EU) countries and European Free Trade Area
(EFTA) countries, patent extensions in the United States of America, and
administrative protection, such as so-called pipeline protection in certain
countries of the CVT Territory. Such cooperation shall include, without
limitation, providing to Syntex, within one (1) month of receipt by CVT, CVT's
Affiliated Companies, recognized distributors and sublicensees, a copy of every
marketing authorization for
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a Licensed Product issued by either an EU or an EFTA country, and in addition,
within one (1) month of availability of the document, a copy of the official
journal page from each EU or EFTA country giving the marketing approval number
and date of authorization for each approved Licensed Product, and a summary of
the characteristics of the Licensed Product for that country, for the purpose of
applying for supplementary protection certificates under EEC (European Economic
Community) Directive 1768/2, which Syntex shall have the right to do in its sole
discretion, and providing information and signing of documents as required.
4.10 As soon as practicable after execution of this Agreement, but in
any event within [ ] days of the effective date, Syntex shall
initiate transfer of ownership of and responsibility for all the pending
Investigational New Drug applications, IND 30,205 (oral tablets and caps) and
IND 43,735 (sustained-release tablets) ("INDs"), relating to the Compound that
have been filed with the United States Food and Drug Administration ("FDA") by
sending the appropriate communication to the FDA. Syntex shall render
reasonable assistance with respect to matters dealing with the transfer of the
IND consistent with its obligations in Article III. After transfer of ownership
of the INDs to CVT, CVT shall be solely responsible for all matters relating to
the INDs.
5. PAYMENTS, REPORTS, TIME OF PAYMENTS
5.1 In consideration of the rights and license granted under this
Agreement, CVT shall make the following payments to Syntex:
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LICENSE FEE
(a) Subject to Section 5.1 c) below, CVT shall pay Seven
Hundred and Fifty Thousand Dollars ($750,000) upon execution of this Agreement.
MILESTONE PAYMENTS
(b) CVT will pay Syntex following additional amounts in
milestone payments upon the first occurrence of each of following six milestones
in the CVT Territory as follows:
(1) Subject to Section 5.1 c) below, [
]
upon [ ], but in no event later
than [
];
(2) [ ] upon commencement of
[ ];
(3) [ ] upon commencement of
[ ] or the date of [ ];
(4) [ ] upon the date of [ ];
(5) [ ] upon [ ];
and
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(6) [ ] upon the first [
]. For the purposes hereof, [ ] shall
mean any of the following
[
] and [
] shall
mean [
].
"Commencement" of a clinical trial shall mean the first date on which a Licensed
Product is shipped to an investigator for the clinical trial.
(c) In lieu of payment in cash of the Seven Hundred and Fifty
Thousand Dollars ($750,000) License Fee [
] CVT may issue Syntex
[ ]
that number of shares of its Series E Preferred Stock equally: Seven Hundred
Fifty Thousand Dollars ($750,000) divided by the Conversion Price (as that
term is defined in CVT's Restated Certificate of Incorporation) of the Series
E Preferred Stock then in effect.
Any such payment made in Series E Preferred Stock pursuant to
this subsection shall be made on the same terms as, and pursuant to, that
certain Series E Purchase Agreement dated September 8, 1995 among CVT and the
purchases of Series E Preferred Stock and shall also entitle Syntex to
receive warrants of Series E Preferred Stock, based on the formula described
in the Purchase Agreement, attached hereto as Exhibit A. The Series E
Preferred Stock issued to Syntex shall be entitled to the rights, preferences
and privileges set forth in CVT's current Restated Certificate of
Incorporation as described to Syntex as of the effective date hereof. The
Series E Preferred Stock issuable [ ](excluding the Warrants) shall be
deemed issued and outstanding for the purpose of obtaining stockholder
approval of any amendment to the Restated Certificate of Incorporation and
CVT shall receive an appropriate number of Series E shares and warrants for
issuance to Syntex.
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as set forth above.
5.2 CVT shall pay the following royalties to Syntex on Net Sales of the
Licensed Products. Such royalties shall be paid on a product-by-product and
country-by-country basis according to the following rates:
(a) For Net Sales of a Licensed Product as to which Syntex
Patents and Know-How cover the manufacture, use, sale, offer for sale, or import
of the Licensed Product a rate of [ ].
(b) For sales of a Licensed Product in a country of the CVT
Territory in which competition by products having the same active compound as
the Licensed Product exceeds [ ] in terms of unit sales,
based on IMS data or equivalent independent survey, a royalty reduced to [
] of the rate shown in Section 5.2 (a) above for as long as such
competition continues to exceed [ ].
5.3 The obligation to pay royalties to Syntex hereunder shall be
imposed only once with respect to the same unit of the Licensed Product.
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5.4 No royalties shall accrue on the sales of CVT to CVT's Affiliated
Companies or sublicensees of CVT on any transactions between such entities.
Royalties shall accrue only on sales of the Licensed Product from CVT,
Affiliated Companies of CVT or sublicensees of CVT to third parties that are not
Affiliates of those entities.
5.5 In the event that CVT shall grant a sublicense to a third party,
including, without limitation, the CVT Partner, all of the terms and conditions
of this Agreement shall apply to such sublicensee to the same extent as they
apply to CVT. CVT guarantees the performance of all obligations so imposed on
its sublicensees under this Agreement and will itself pay and account to Syntex
for all royalties due under this Agreement which may accrue by reason of the
action or operations of any of CVT's sublicensees.
5.6 CVT shall pay to Syntex the royalties due hereunder, including any
royalties due from the sales of Licensed Product by CVT's Affiliates or
sublicensees on a quarterly basis, within [ ] of such royalty
computation period, that is to say up to the last working day of the months of [
] respectively of each year. The royalty shall
be paid to Syntex in U.S. Dollars and computed in accordance with Section 5.7
and Section 5.8, and CVT shall submit to Syntex, together with each royalty
payment, a written royalty statement containing at least the following
information:
(a) the quantity of each Licensed Product subject to royalty
sold (by country) by CVT, its Affiliates and sublicensees;
(b) total adjusted gross sales for each Product subject to
royalty (by country);
(c) total royalties payable to Syntex (by country); and
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(d) any relevant information related to matters stated in
Section 5.9.
Any compensation payment that is not paid on or before the date such
payment is due under this Agreement shall bear interest, to the extent permitted
by applicable law, at the average one month London Interbank Offered Rate
(LIBOR) for the currency and time such a payment is overdue. The payment of
such interest shall not affect the rights defined in Section 11.3.
5.7 With respect to each quarter, monthly adjusted gross sales in the
currency of the country of sale will be converted to U.S. Dollars at an exchange
rate that is the average of the daily exchange rate for the U.S. Dollar and the
currency of the country of sale as quoted by The Wall Street Journal, or a
comparable publication acceptable to the parties if it ceases to exist, for the
corresponding month in which the adjusted gross sales are made and then
aggregated in U.S. Dollars for the quarter in question. From that quarterly
aggregate amount in U.S. Dollars, a lump sum of [ ] shall be
deducted to obtain the Net Sales aggregate amount of the quarter in question.
5.8 CVT shall keep accurate books and records setting forth the gross
sales, adjusted gross sales, Net Sales, the amount of royalties payable to
Syntex as provided for herein, for each country with regard to the Licensed
Product sold by CVT, CVT's Affiliated Companies or sublicensees of CVT. Such
books and records shall be retained by CVT at its principal place of business
for at least the three (3) years immediately following the calendar year to
which each shall pertain. Abstracts thereof shall be made independently from
CVT by CVT's public accountants and shall be made available for audit, all at
the request and expense of Syntex by an independent certified public accountant
or accounting firm appointed by Syntex and acceptable to CVT; provided, however,
that if the
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audit on behalf Syntex is conducted at the same time as the regular, annual
audit of CVT, the expense of such audit shall be borne by CVT. CVT shall not
unreasonably withhold acceptance of an independent certified public accountant
or accounting firm appointed by Syntex. In the event that such audit shall
indicate that in any calendar year the royalties which should have been paid by
CVT are at least [ ] greater than those which were actually paid
by CVT, then CVT shall pay the cost of such audit.
5.9 Any tax required to be withheld by CVT under the laws of any
country for the account of Syntex shall be promptly paid by CVT for and on
behalf of Syntex to the appropriate governmental authority, and CVT shall
furnish Syntex with proof of payment of such tax. Any such tax actually paid on
Syntex's behalf shall be deducted from royalty payments due Syntex.
6. SUPPLY OF COMPOUND.
6.1 Subject to (i) existing quantities of bulk Compound, granulated,
formulated Compound and tableted, formulated Compound in Syntex's possession and
(ii) Syntex's commitment to provide certain quantities of such materials to
Syntex's Third Party Licensee, Syntex shall provide to CVT (x) at no charge, any
combination of free goods consisting of bulk Compound, granulated, formulated
Compound and tableted, formulated Compound having a total value of [
] as calculated based on the
prices listed on Appendix C hereto, and (y) at CVT's expense, such other agreed
to quantities of bulk Compound, granulated, formulated Compound and tableted,
formulated Compound in Syntex's possession at the prices set forth in Appendix
C. CVT shall order and complete
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the purchase of the foregoing materials that it desires to purchase and specify
those materials that it wishes to receive as free goods as soon as practicable,
but in no event later that [ ] after the effective date, and Syntex
shall not be obligated to supply any material ordered or specified thereafter.
The materials to be provided hereunder are provided "as is", and Syntex hereby
disclaims any representation or warranty that the materials provided hereunder
will be suitable for use in any manner whatsoever or have adequate dating for
use, including, without limitation, for use in clinical trials, or that such
materials will meet the requirements of any analysis required to establish
extended dating for the materials provided. In the event that the materials
provided need to be reanalyzed to establish extended dating or for any other
reason, or such materials have to reworked or otherwise manipulated, CVT shall
be solely responsible for all of the costs and expenses associated therewith and
relating thereto. Title and risk of loss shall pass to CVT upon delivery by
Syntex to a common carrier, F.C.A. (Incoterms, 1990), Syntex's storage facility.
Thereafter, subject to Syntex's obligations under Article III, CVT and the CVT
Partner will be solely responsible to procure the necessary quantities of
Compound for the development and manufacture of the Licensed Product.
6.2 CVT acknowledges that it has been informed of the existence,
circumstances and details of a "temporary import bond(s)" put up by Syntex
with respect to the import of existing Counpound into the United States,
including, without limitation, the fact that Syntex has closed out such
bond(s) by shipping the Compound out of the United States, and the potential
consequences of importing any quantity of such Compound into the United
States. CVT shall be responsible for and pay any transportation costs, duties,
fines, taxes, penalties, forfeitures or other charges of any kind ("Costs")
associated with the
21.
<PAGE>
supply by Syntex of any Compound pursuant to Section 6.1 and shall indemnify and
hold harmless Syntex and any Syntex Affiliates from any such Costs. Any costs,
expenses or penalties of any kind associated with the import of any quantity of
the Compound into the United States, whether or not relating to such bond(s),
after the effective date of this Agreement shall be totally included with the
Costs for which the foregoing indemnity and hold harmless apply.
6.3 Subject to Syntex's obligations under Article III, CVT and the CVT
Partner shall be solely responsible for manufacturing the Compound and Licensed
Products. CVT shall be entitled to procure from any appropriate source the
Compound necessary to develop and manufacture the Licensed Product for marketing
purposes.
7. LICENSED PRODUCT LIABILITY/DISCLAIMER OF WARRANTIES.
7.1 CVT shall indemnify, and holds harmless, Syntex, its Affiliates,
directors, employees and agents from all costs and expenses of any kind,
including reasonable attorneys fees, arising from any claim relating to the use
of the Syntex Know-How and the Syntex Patent Rights, or the use, manufacture,
promotion, marketing and sale of the Compound or any Licensed Products by CVT,
its Affiliates, its sublicensees, distributors and customers.
7.2 Syntex hereby disclaims any warranties, whether express or implied,
of any kind, including, without limitation, any warranty of merchantability or
fitness for any particular purpose, with respect to any Compound or other
materials in whatever form provided to CVT hereunder, or that the Compound or a
Licensed
22.
<PAGE>
Product can be successfully developed by use of the Syntex Know-How, or that
clinical or commercial quantities of the Compound or Licensed Product can be
produced by use of the Syntex Know-How, or that the Syntex Patent Rights are or
will be valid or can be or will be enforceable, or that the use of the Syntex
Know-How or practice of the invention of the Syntex Patent Rights will not
infringe the intellectual property rights of a third party; provided, however,
that as of the effective date of this Agreement to the best of the knowledge of
Syntex there are no facts that on their face would render the Syntex Patent
Rights invalid or unenforceable and Syntex has received no claims with respect
thereto.
8. MAINTENANCE AND ENFORCEMENT OF SYNTEX PATENT RIGHTS.
8.1 Syntex agrees to prosecute and maintain, [
] all of the patents and patent applications included within Syntex Patent
Rights. At Syntex's request, CVT shall cooperate, in all reasonable ways in
connection with the prosecution of all patent applications included within
Syntex Patent Rights. Syntex shall advise CVT promptly of any significant
developments in the prosecution of Syntex Patent Rights in the CVT Territory, in
particular of the issuance of or rejection of or of opposition to or of protest
of any patent or application within Syntex Patent Rights. Should Syntex decide
that it is no longer interested in maintaining or prosecuting Syntex Patent
Rights or part thereof, it shall promptly advise CVT thereof and, at the request
of CVT, Syntex shall assign free of charge such Syntex Patent Rights or part
thereof to CVT. Upon assignment of such Syntex Patent Rights or part thereof,
CVT will thereafter prosecute and maintain such Syntex Patent Rights [
] to the extent that CVT desires to do so.
23.
<PAGE>
8.2 Each party will advise the other promptly upon its becoming aware
of any third party infringement of Syntex Patent Rights. In the event of an
infringement of Syntex Patent Rights by a product that would be or is
competitive with a Licensed Product under active development or being sold by
CVT, the parties agree with the following:
(a) to consult with each other to attempt to agree on whether
legal action should be taken against the infringer, and also to establish the
proportion in which they will participate in the costs and expenses of the
action, if taken, and in any recoveries or awards resulting therefrom; and
(b) in the event Syntex does not agree to bring suit or to
participate in a suit against any such infringer, CVT shall have the right to
take such action at its own expense and deduct up to [ ] of its
reasonable litigation expenses from future royalties or milestone payments due
to Syntex, provided that such deduction does not reduce the royalties or
milestone payments payable in any quarter below [ ] of the
royalties or milestone payments otherwise due in such quarter, and, upon
receiving a recovery or award from such suit, such recovery and award shall be
used first to reimburse CVT for its reasonable litigation expenses actually
incurred, then to reimburse Syntex for the amounts of any unpaid royalties or
milestone payments, and any remainder of the recovery and award shall be
retained by CVT for its own benefit and use; and
(c) in any such infringement suit Syntex shall, at the request
of CVT render all reasonable assistance in the prosecution of such suit.
24.
<PAGE>
9. RETAINED RIGHTS.
Syntex retains all rights to make, have made, use, import, offer to sell,
and sell the Licensed Compounds and to use the know-how encompassed in the
Syntex Patents and Know-How in the CVT Territory for non-Cardiovascular
Indications. CVT herewith grants to Syntex a non-exclusive, royalty-bearing
right and license in the CVT Territory under any CVT Patents and Know-How to
exercise such rights. For so long as Syntex is selling any product covered by a
claim of the CVT Patent Rights, Syntex shall pay CVT a royalty equal to [
] of Net Sales, as defined in Section 1.10, with respect to sales by Syntex,
its Affiliates or sublicensees; provided, however, that if CVT jointly owns CVT
Patent Rights with a third party and payments would be due such third party upon
Syntex's use of the CVT Patent Rights, the parties shall negotiate in good faith
a commercially reasonable royalty rate that reflects payments due such third
party.
10. CONFIDENTIAL INFORMATION.
10.1 CVT shall keep the Syntex Know-How in strict confidence and shall
not use Syntex Know-How except for the purposes of this Agreement. Any
information disclosed pursuant to the Confidentiality Agreement between the
parties dated November 7, 1994 shall be considered Syntex Know-How and governed
by the terms of this Agreement.
10.2 Both CVT and Syntex agree to keep in strict confidence all other
know-how as well as other information and data of confidential nature received
from the
25.
<PAGE>
other party under this Agreement and not to make any use thereof other than
provided under this Agreement.
10.3 The confidentiality obligations as per this Article 10 shall not
apply to the extent that the Syntex Know-How or other know-how or information
and data are required by appropriate authorities to be submitted for purposes of
registration of the Licensed Product; provided, however, that to the extent
possible such submissions shall be made on a confidential basis. The
confidentiality and non-use obligations under this Article 10 shall extend for
the term of this Agreement and five (5) years thereafter.
10.4 The obligation of confidentiality and non-use as set forth in this
Article 10 shall not apply:
(a) to information and data which, at the time of disclosure,
was known by the recipient party or an Affiliated Company, or which after
disclosure was independently developed by the recipient party or an Affiliated
Company without use of such information and data, and which can be so
demonstrated by the records of the recipient party or an Affiliated Company, as
the case may be; and/or
(b) are public knowledge at the date of disclosure to the
recipient party; and/or
(c) become public knowledge at a later date without any fault of
the recipient party or an Affiliated Company; and/or
26.
<PAGE>
(d) are disclosed to the recipient party or an Affiliated
Company by a third-party having the right to do so.
10.5 Nothing in this Article 10 or this Agreement shall be construed to
prevent either party from disclosing to its Affiliated Companies information and
data obtained from the other party during this Agreement, provided that such
information is used in a manner consistent with this Agreement, and further
provided that said Affiliated Companies are bound by a like confidentiality
obligation with respect to such information.
11. TERM AND TERMINATION.
11.1 This Agreement shall be effective as of the date first written
above.
11.2 This Agreement shall have a duration on a country-by-country and
product-by-product basis of the later of (i) ten (10) years from the date of
first commercial sale of the Licensed Product in a given country of the CVT
Territory or (ii) a duration corresponding to the duration of the Syntex Patent
Rights having one or more claims covering a Licensed Product, or its use or
manufacture, in a given country, whichever is longer. Following expiration of
the term as set forth above, CVT shall retain a non-exclusive, fully-paid
license under the Syntex Know-How to manufacture, use, sell and offer for sale
Licensed Products for Cardiovascular Indications within the CVT Territory.
11.3 Failures by one party to comply with any of its respective
obligations contained in this Agreement shall entitle the other party to give
the party in default written notice of such default. If such default is not
remedied within [ ]
27.
<PAGE>
after receipt of such notice (or thirty (30) days in the event of
non-payment), the notifying party shall be entitled to terminate this Agreement
by giving notice with immediate effect. The right of either party to terminate
this Agreement as provided hereinabove shall not be affected in any way by its
waiver of or failure to take actions with respect to any previous default. In
such cases of breach by CVT, all licenses from CVT to Syntex as set forth below
in Section 11.4 for the case of an early termination shall be royalty free, and
CVT shall provide to Syntex all of the information required by Section 11.4 in
the event of early termination or breach of this Agreement by CVT. If there is
any BONA FIDE dispute between the parties regarding the right of termination
based on failure by CVT to make a milestone or royalty payment when due, the
disputed milestone or royalty payment, as the case may be, shall be paid into an
interest bearing account by CVT where it shall remain during the pendency of the
dispute, and upon resolution of the dispute, paid, with accumulated interest, to
the prevailing party.
11.4 CVT shall have the right to terminate the Agreement at any time
provided that CVT gives notice to Syntex at least one hundred and twenty
(120) days prior to such termination and under the condition that CVT further
informs Syntex together with the notice of termination that, in its
reasonable business judgment based on scientific, medical, economic or other
valid business reasons, CVT has determined not to carry out further
development or marketing of the Licensed Products. In the event of such an
early termination, the licenses granted hereunder by Syntex shall revert to
Syntex. In addition, CVT shall grant Syntex an exclusive license, with the
right to sublicense, to the CVT Patents and Know-How directly related to and
solely usable in connection with the Compound and the Licensed Products to
make, have made, use,
28.
<PAGE>
import, offer to sell and sell the Compound and the Licensed Products. All other
CVT Patents and Know-How shall be licensed non-exclusively to Syntex solely for
use in connection with the Licensed Products as set forth above. Licenses under
the CVT Patents shall be royalty bearing on commercially reasonable terms not to
exceed, in the aggregate, [ ] of Net Sales, as defined in Section 1.10,
with respect to sales by Syntex, its Affiliates or sublicensees, of Licensed
Products. All CVT Know-How in CVT's possession or under its control relating to
the Licensed Products including without limitation the documents necessary to
obtain or maintain the registration authorization of the relevant authorities in
the CVT Territory, shall be made available to Syntex free of charge.
11.5 This Agreement shall survive the acquisition or change of control
of either company, provided that in the case of CVT the acquiring entity will
expressly assume all rights and obligations contained in this Agreement and such
entity further undertakes to use its commercially reasonable efforts consistent
with accepted pharmaceutical business practices and legal requirements to
promote, market, distribute and sell the Licensed Products with the same
standard of effort as used in the marketing of its own products of similar
market potential.
11.6 In the event of a conversion of the exclusive right and license of
CVT into a non-exclusive right and license because of a failure of CVT to comply
with its efforts obligation pursuant to Section 4.3, the provisions of Section
11.4 for early termination by CVT shall apply MUTATIS MUTANDIS, with the
exception that Syntex shall receive a royalty-free, non-exclusive license.
29.
<PAGE>
11.7 Neither of the undersigned parties shall be liable for failure to
perform its obligations under this Agreement, where such failure was
occasioned by contingencies beyond its control, including without limitation,
strikes or work stoppages, lock-outs, riots, wars, delay of carriers, Acts of
God, including without limitation, fire, floods, storms, and earthquakes,
acts or failures to act by government or governmental agencies or
instrumentalities (Force Majeure). Each party will notify the other
immediately, should any such contingencies occur. Such notice shall set
forth the obligations that the notifying party is unable to perform and shall
also specify the contingencies which it contends provide a basis under this
Section 11.7 for such non-performance. Nothing herein shall relieve a party
from the obligation to pay promptly, in U.S. dollars, all payments that may
be due under this Agreement.
11.8 In the event of termination of the licenses to CVT, any licenses
granted to a CVT Partner shall survive and this Agreement may be assumed by the
CVT Partner for the CVT Partner's portion of the CVT Territory, subject to
adequate assurances to Syntex of such CVT Partner's ability to perform CVT's
obligations hereunder. The agreement between CVT and the CVT Partner shall
provide that if this Agreement is not assumed by the CVT Partner, then the
agreement between CVT and the CVT Partner shall be terminated and the CVT
Partner's patent rights and know-how relating to the Licensed Products will be
licensed to Syntex, with the right to sublicense, with delivery of the necessary
information to enable Syntex to exercise the license and continue the
development, marketing and sale of Licensed Products in the CVT Partner's
portion of the CVT Territory under the same terms as Syntex's license to the CVT
Patents and Know-How pursuant to Section 11.4 as in the case of CVT's
termination; provided, however, that if the CVT Partner has acquired
30.
<PAGE>
technology from a third party that the CVT Partner is not permitted to transfer
to Syntex, then there would not be an obligation on CVT to obtain agreement to
license such technology. In such event, CVT and the CVT Partner will render
reasonable assistance to Syntex in its attempts to obtain access to that third
party technology. Furthermore, should CVT have acquired licenses from third
parties under technology relating to Licensed Products for which CVT has the
right to sublicense, CVT shall grant sublicenses to Syntex upon the same
financial terms as CVT's licenses, unless the licenses are available from the
third party directly to Syntex on the same or more favorable financial terms.
11.9 Either party shall have the right to terminate this Agreement if
the other party becomes insolvent or unable to pay its debts or perform its
obligations as they mature, or makes an assignment for the benefit of creditors,
or is the subject of a petition or other document seeking relief under any
bankruptcy law, filed by or against a party, that is not discharged with
prejudice within sixty (60) days thereafter, such termination to be effective
upon the delivery of written notice to the insolvent or bankruptcy party.
12. MISCELLANEOUS.
12.1 CVT shall not assign or transfer, in whole or in part, this
Agreement or any rights thereunder without the prior written consent of Syntex.
12.2 In the event of the permitted assignment or transfer by CVT of this
Agreement or any part thereof, or in the event of any sublicense granted by CVT,
the assignee, transferee or sublicensee shall agree to be bound by the terms of
this Agreement and CVT shall guarantee the performance and obligations thereof.
31.
<PAGE>
12.3 Syntex shall have the right to assign or transfer, in whole or in
part, this Agreement or any rights thereunder, or delegate any of its
obligations, to any Affiliate of Syntex and such Affiliate shall agree to be
bound by the terms and conditions of this Agreement, and Syntex shall guarantee
the performance and obligations thereof. Promptly after any such assignment or
transfer, Syntex shall provide CVT with written notice of the assignment or
transfer and the identity of the assignee or transferee.
12.4 This Agreement contains the entire understanding between the
parties relating to the subject matter hereof and supersedes any and all prior
agreements, understandings and arrangements, whether written or oral, between
the parties, including the Confidentiality Agreement dated November 7, 1994 and
the Heads of Agreement dated December 21, 1995. No amendments, changes,
modifications or alterations of the terms and conditions of this Agreement shall
be binding upon either party hereto unless in writing and signed by both
parties.
12.5 All titles and captions in this Agreement are for convenience only
and shall not be interpreted as having any substantive meaning.
12.6 Both parties hereby expressly state that it is the intention of
neither party to violate any rule, law and regulations. If any of the
provisions of this Agreement are held to be void or unenforceable, then such
void or unenforceable provisions shall be replaced by valid and enforceable
provisions which will achieve as far as possible the economic business
intentions of the parties.
12.7 Unless required by law or regulation, each party shall refrain from
making any public announcement or disclosure of the terms and conditions of this
32.
<PAGE>
Agreement without the prior written consent of the other party, which consent
shall not unreasonably be withheld; provided, however, CVT may publicize certain
aspects of the Agreement at time of signing, subject to prior written approval
by Syntex.
12.8 No failure or delay on the part of a party in exercising any right
hereunder shall operate as a waiver of, or impair, any such right. No single or
partial exercise of any such right shall preclude any other or further exercise
thereof or the exercise of any other right. Any waiver on the part of either
party hereto of any right hereunder shall be effective only if made in writing
and shall not constitute or imply a waiver of any other right or a subsequent
waiver.
12.9 The indemnities of Section 2.5, Section 6.2 and Section 7.1 and the
provisions of Section 5.6, Section 5.7 (for one year), Article X (for the term
set forth in Section 10.3), Section 11.4 and Article XIV shall survive
termination or expiration of this Agreement.
13. NOTICES.
Any notice required to be given hereunder shall be considered properly
given if sent in English by registered air-mail, telecopier, telex or by
personal courier delivery to the respective address of each party as follows:
for Syntex: Syntex (U.S.A.) Inc.
P.O.Box 10850
3401 Hillview Avenue
Palo Alto, California U.S.A.
Attention: President
33.
<PAGE>
Facsimile: (415) 354-2595
with a copy to: F. Hoffmann-La Roche Ltd
P.O.Box, CH-4070 Basel
Switzerland
Attention: Corporate Law
Facsimile: 41-61-68-81396
and in the case
of notice regarding
CVT's stock, Attention: Corporate Finance
34.
<PAGE>
for CVT: CV Therapeutics, Inc.
3172 Porter Drive
Palo Alto, California 94304
Attention: Thomas L. Gutshall
President & COO
Facsimile: (415) 858-0388
or to such other address as a party may designate in a notice given in
accordance with this Article 13.
14. GOVERNING LAW AND ARBITRATION.
14.1 This Agreement shall be governed by the laws of California (without
regard for the choice of law provisions of California or any other
jurisdiction).
14.2 In the event of any controversy or claim arising out of or relating
to any provision of this Agreement or the breach thereof, the parties shall try
to settle those conflicts amicably between themselves. Should they fail to
agree, any controversy, dispute or claim which may arise out of or in connection
with this Agreement, or the breach, termination or validity thereof, shall be
settled by final and binding arbitration pursuant to the Rules of the American
Arbitration Association as hereinafter provided:
(a) The arbitration tribunal shall consist of three arbitrators.
Each party shall nominate in the request for arbitration and the answer thereto
one arbitrator and the two arbitrators so named will then jointly appoint the
third arbitrator as chairman of the arbitration tribunal. If one party fails to
nominate its arbitrator or if the parties' arbitrators cannot agree on the
35.
<PAGE>
person to be named to be chairman within sixty (60) days, the American
Arbitration Association shall make the necessary appointments for arbitrator or
chairman.
(b) The place of arbitration shall be in Palo Alto, California
and the arbitration proceedings shall be held in English. The arbitrators shall
apply the law of California as set out in Section 14.1. The arbitrators shall
have no power to award punitive damages or any multiple of damages assessed.
CV THERAPEUTICS, INC. SYNTEX (U.S.A.) INC.
By: /s/ Thomas L. Gutshall By: /s/ David R. Austin
------------------------ ---------------------------
Thomas L. Gutshall David R. Austin
President and COO Vice President
Date: 3/27/96 Date: 3/27/96
------------------------ -------------------------
36.
<PAGE>
APPENDIX A
Case [
]
Case [
]
Case [ ]
<PAGE>
<TABLE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 1 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
23530 AUSTRIA E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: E31533 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 AUSTRALIA GNT RS43285
APPLICATION NO: 28346/84 APPLICATION DATE: 17MY1984
PATENT NO: 566489 GRANT DATE: 220C1987 EXPIRATION DATE: 17MY2004
23550 BELGIUM E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 BAHAMAS GNT RS43285
APPLICATION NO: 753 APPLICATION DATE: 17MY1984
PATENT NO: 753 GRANT DATE: 08DE1986 EXPIRATION DATE: 17MY2000
23550 CANADA GNT RS43285
APPLICATION NO: 454628 APPLICATION DATE: 17MY1984
PATENT NO: 1256874 GRANT DATE: 04JL1989 EXPIRATION DATE: 04JL2006
23550 SWITZERLAND E GNT RS43285
APPLICATION NO: 84105643.5A APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 CZECH REPUBLIC GNT RS43285
APPLICATION NO: PV3680 APPLICATION DATE: 17MY1984
PATENT NO: 246080 GRANT DATE: 01SE1986 EXPIRATION DATE: 17MY1999
23550 CZECH REPUBLIC D 01 GNT RS43285
APPLICATION NO: PV3492 APPLICATION DATE: 15MY1985
PATENT NO: 246099 GRANT DATE: 01SE1986 EXPIRATION DATE: 17MY1999
23550 GERMANY E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: P-3468215.5-08 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 2 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
23550 DENMARK GNT RS43285
APPLICATION NO: 2483/84 APPLICATION DATE: 17MY1984
PATENT NO: 168535 GRANT DATE: 18AP1994 EXPIRATION DATE: 17MY2004
23550 EUROPEAN PATENT E INA RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 SPAIN GNT RS43285
APPLICATION NO: 532565 APLICATION DATE: 17MY1984
PATENT NO: 532565 GRANT DATE: 09SE1985 EXPIRATION DATE: 09SE2005
23550 FINLAND GNT RS43285
APPLICATION NO: 841989 APPLICATION DATE: 17MY1984
PATENT NO: 78479 GRANT DATE: 10AU1989 EXPIRATION DATE: 17MY2004
23550 FRANCE E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 GREAT BRITAIN E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 GREECE GNT RS43285
APPLICATION NO: 74733 APPLICATION DATE: 16MY1984
PATENT NO: 82400 GRANT DATE: 13DE1984 EXPIRATION DATE: 16MY2004
23550 HUNGARY GNT RS43285
APPLICATION NO: 1902 APPLICATION DATE: 17MY1984
PATENT NO: 192404 GRANT DATE: 16DE1986 EXPIRATION DATE: 17MY2004
23550 IRELAND GNT RS43285
APPLICATION NO: 1224 APPLICATION DATE: 17MY1984
PATENT NO: 57487 GRANT DATE: 02FE1993 EXPIRATION DATE: 17MY2004
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 3 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
23550 ISRAEL GNT RS43285
APPLICATION NO: 71863 APPLICATION DATE: 17MY1984
PATENT NO: 71863 GRANT DATE: 31JA1988 EXPIRATION DATE: 17MY2004
23550 ITALY E GNT RS43285
APPLICATION NO: 126449 APPLICATION DATE: 17MY1984
PATENT NO: 67299BE88 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 LIECHTENSTEIN E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 LUXEMBOURG E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
[
]
23550 NETHERLANDS E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 126449 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 NORWAY GNT RS43285
APPLICATION NO: 841968 APPLICATION DATE: 16MY1984
PATENT NO: 163618 GRANT DATE: 27JE1990 EXPIRATION DATE: 16MY2004
23550 NEW ZEALAND GNT RS43285
APPLICATION NO: 208188 APPLICATION DATE: 17MY1984
PATENT NO: 208188 GRANT DATE: 13AP1988 EXPIRATION DATE: 17MY2004
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 4 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
23550 POLAND GNT RS43285
APPLICATION NO: P247722 APPLICATION DATE: 17MY1984
PATENT NO: 142760 GRANT DATE: 09FE1987 EXPIRATION DATE: 17MY1999
23550 POLAND D 01 GNT RS43285
APPLICATION NO: P252856 APPLICATION DATE: 10AP1985
PATENT NO: 143558 GRANT DATE: 20MR1989 EXPIRATION DATE: 17MY1999
23550 PORTUGAL GNT RS43285
APPLICATION NO: 78604 APPLICATION DATE: 17MY1984
PATENT NO: 78604 GRANT DATE: 15JL1986 EXPIRATION DATE: 15JL2001
23550 SWEDEN E GNT RS43285
APPLICATION NO: 84105643.5 APPLICATION DATE: 17MY1984
PATENT NO: 84105643.5 GRANT DATE: 23DE1987 EXPIRATION DATE: 17MY2004
23550 SLOVAK REPUBLIC GNT RS43285
APPLICATION NO: PV3680 APPLICATION DATE: 17MY1984
PATENT NO: 246080 GRANT DATE: 26NO1986 EXPIRATION DATE: 17MY1999
23550 SLOVAK REPUBLIC D 01 GNT RS43285
APPLICATION NO: PV3492 APPLICATION DATE: 15MY1985
PATENT NO: 246099 GRANT DATE: 26NO1986 EXPIRATION DATE: 17MY1999
[
]
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 5 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
23550 U.S.A. GNT RS43285
APPLICATION NO: 06/495,904 APPLICATION DATE: 18MY1983
PATENT NO: 4,567,264 GRANT DATE: 28JA/1986 EXPIRATION DATE: 18MY2003
23550 SOUTH AFRICA GNT RS43285
APPLICATION NO: 843746 APPLICATION DATE: 17MY1984
PATENT NO: 843746 GRANT DATE: 29JA1986 EXPIRATION DATE: 17MY2004
26720 AUSTRALIA GNT RS43285
APPLICATION NO: 57618/90 APPLICATION DATE: 21JE1990
PATENT NO: 633589 GRANT DATE: 04FE1993 EXPIRATION DATE: 21JE2010
[
]
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 6 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
[
]
26720 SOUTH AFRICA GNT RS43285
APPLICATION NO: 904842 APPLICATION DATE: 21JE1990
PATENT NO: 904842 GRANT DATE: 26 FE1992 EXPIRATION DATE: 21JE2010
[
]
27850 BAHAMAS GNT RS61443
APPLICATION NO: 1085 APPLICATION DATE: 12MY1994
PATENT NO: 1085 GRANT DATE: 18MR1995 EXPIRATION DATE: 12MY2010
[
]
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 7 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
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<S> <C> <C> <C> <C>
[
]
27850 HUNGARY C GNT RS61443
APPLICATION NO: P/P00110 APPLICATION DATE: 24AP1995
PATENT NO: 211270 GRANT DATE: 24JL1995 EXPIRATION DATE: 11MY2014
[
]
<PAGE>
<CAPTION>
STATUS OF CASE 23550 APPENDIX A
RUN DATE: 19 MAR 1996 PAGE 8 OF 8
DKT COUNTRY CS TP RL TP FL TP FL MO STATUS CLASSIFY
- --- ------- -- -- -- -- -- -- -- -- ------ --------
<S> <C> <C> <C> <C>
27850 U.S.A. P 01 GNT RS61443
APPLICATION NO: 08/239,621 APPLICATION DATE: 09MY1994
PATENT NO: 5,472,707 GRANT DATE: 05DE1995 EXPIRATION DATE: 13MY2013
[
]
27850 SOUTH AFRICA GNT RS61443
APPLICATION NO: 943267 APPLICATION DATE: 11MY1994
PATENT NO: 943267 GRANT DATE: 25JA1995 EXPIRATION DATE: 11MY2014
</TABLE>
<PAGE>
APPENDIX B
MILESTONE DATE OF MILESTONE DATE OF MILESTONE
[ ] [ ]
- --------- ----------------- -----------------
Satisfied by [ [ [
] ] ]
Satisfied by [ [ [
] ] ]
Satisfied by [ [ [
] ] ]
Satisfied by [ [ [
] ] ]
Satisfied by [ [ [
] ] ]
<PAGE>
APPENDIX C
Description Unit Price to CVT/Unit
- ----------- ---- -----------------
Ranolazine [ ] Kg $[ ]/Kg
Ranolazine [ ] Kg $[ ]/Kg
Ranolazine [ ]placebo tablet Tablet $[ ]/Tablet
Ranolazine [ ]blue tablet Tablet $[ ]/Tablet
Ranolazine [ ]tablet Tablet $[ ]/Tablet
Ranolazine [ ]tablet Tablet $[ ]/Tablet
Ranolazine [ ]placebo tablet Tablet $[ ]/Tablet
<PAGE>
Exhibit A
CV THERAPEUTICS, INC.
SERIES E PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
SEPTEMBER 8, 1995
<PAGE>
CV THERAPEUTICS, INC.
SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of September 8, 1995 (the "Agreement"),
by and among CV THERAPEUTICS, INC., a Delaware corporation (the "Company"), with
its principal office at 3172 Porter Drive, Palo Alto, California 94304, each of
the purchasers who are signatories hereto and any other purchasers who are made
a party to this Agreement pursuant to paragraph 2.1 hereof (individually, a
"Purchaser" and collectively, the "Purchasers"), as set forth in the Schedule of
Purchasers, attached hereto as EXHIBIT A.
AGREEMENT
In consideration of the mutual promises, representations, warranties and
conditions set forth in the Agreement, the Company and each Purchaser, severally
and not jointly, agrees as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF THE SHARES AND WARRANTS. The Company has authorized,
or before the Closing, as defined in paragraph 2.1 hereof, will have authorized,
the issuance and sale of: (a) up to 5,000,000 shares of its Series E Preferred
Stock (the "Shares") and (b) warrants (the "Warrants") to purchase up to
2,500,000 shares of the Company's Series E Preferred Stock with an exercise
price of $2.00 per share (the "Warrant Shares"), at a purchase price of $2.00
per Share and Warrant Share (a "Unit"). As used herein, a Unit is comprised of
one share of Series E Preferred Stock and one Warrant, in substantially the form
set forth in EXHIBIT B hereto, to purchase one-half of a share of Series E
Preferred Stock.
1.2 SALE OF SHARES AND WARRANTS. In reliance upon the Purchasers'
representations and warranties contained in Section 4 hereof and subject to the
terms and conditions set forth herein, the Company hereby agrees to sell to each
Purchaser, at a price per Unit of $2.00, the aggregate number of Shares and
Warrants set forth below such Purchaser's signature on such Purchaser's
signature page hereto. The total amount of common stock of the Company (the
"Common Stock") and other securities issuable upon conversion of the Shares and
the Warrant Shares is hereinafter referred to as the "Conversion Stock." The
Shares, Warrants, Warrant Shares and the Conversion Stock are hereinafter
collectively referred to as the "Securities."
1.3 PURCHASE OF SHARES AND WARRANTS. In reliance upon the representations
and warranties of the Company contained herein, and subject to the terms and
conditions set forth herein, each Purchaser hereby agrees to purchase, at a
price per Unit of $2.00, the number of Shares and Warrants set forth below such
Purchaser's signature on such Purchaser's signature page hereto. Each
<PAGE>
Purchaser shall, severally and not jointly, be liable for only the purchase of
the Shares and the Warrants indicated on such Purchaser's signature page hereto.
1.4 FURTHER ISSUANCE. The Purchasers agree that the Company shall be
entitled to issue and sell any shares of Series E Preferred Stock (or securities
convertible into Series E Preferred Stock) not previously issued and sold at the
Closings (as hereinafter defined), in connection with any corporate partnering,
collaboration, lease financing or similar transaction.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The first closing for the purchase and sale of the
Units hereunder will be on September 8, 1995 (the "First Closing") at the
offices of Cooley Godward Castro Huddleson & Tatum, Five Palo Alto Square, Palo
Alto, California 94306, or at such other time and place as the Company and the
Purchasers shall agree upon (the "First Closing Date"). Additional closings
("Additional Closings") may be held from time to time following the First
Closing and on or before October 31, 1995 at such time (a "Closing Date") and
place as the Company may elect. At or prior to any such Additional Closing, the
Purchaser or Purchasers at such Additional Closing shall execute counterpart
copies of this Agreement and any related agreements or other documents required
to be executed hereunder, dated as of the date of such Additional Closing, and
shall thereupon become parties hereto and thereto for all purposes and be added
to the Schedule of Purchasers. The First Closing and any Additional Closing
shall be referred to collectively as the "Closings" and singularly as a
"Closing."
2.2 DELIVERY. At each Closing, the Company will deliver to each Purchaser
a stock certificate and a Warrant registered in such Purchaser's name
representing the number of Shares and Warrants, respectively, purchased by such
Purchaser as set forth on such Purchaser's signature page hereto. At each
Closing, each Purchaser will pay the purchase price, in an amount equal to $2.00
times the number of Units being purchased by such Purchaser, by check, wire
transfer, cancellation of indebtedness, or a combination thereof, at the option
of the Purchaser. No Warrants will be issued for fractional shares.
2.3 SUBSEQUENT CHANGE IN TERMS. If, after the First Closing, the Company
shall sell any of the Units at any Additional Closing upon terms more beneficial
to the Purchasers than those at any previous Closing, then the Company shall
offer such terms to the Purchasers from any previous Closing and shall take
appropriate actions to amend any document or agreement to carry out this
covenant.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached hereto as
EXHIBIT C, the Company hereby represents and warrants to the Purchasers as
follows:
3.1 ORGANIZATION; GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of Delaware and is in good standing
2
<PAGE>
under such laws. The Company has the requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is qualified to do
business as a foreign corporation in any jurisdiction where the failure to be so
qualified would have a material adverse impact on the business or financial
condition of the Company.
3.2 CORPORATE POWER. The Company will have at each Closing Date all
requisite legal and corporate power to execute and deliver this Agreement and
the Amended and Restated Investor Rights Agreement of even date herewith, in
substantially the form attached hereto as EXHIBIT D (the "Investor Rights
Agreement"), to sell and issue the Shares, the Warrants and the Warrant Shares
and Conversion Stock and to carry out and perform its obligations under the
terms of this Agreement and the Investor Rights Agreement, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity and except as the indemnification agreements of the Company
in Section 3 of the Investor Rights Agreement may be legally unenforceable.
3.3 SUBSIDIARIES. Other than CV Therapeutics International, a corporation
organized under the laws of the Cayman Islands (the "Subsidiary"), the Company
has no subsidiaries or affiliated companies and does not otherwise own or
control, directly or indirectly, any other corporation, association or business
entity. The Company owns all of the outstanding capital stock of the
Subsidiary.
3.4 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the First Closing, will consist of 60,000,000 shares of
Common Stock, of which 3,940,497 are issued and outstanding, and 35,000,000
shares of preferred stock (the "Preferred Stock") of which (a) 8,000,000 are
designated Series A Preferred Stock (the "Series A Preferred"), 7,746,973 of
which are issued and outstanding, (b) 1,000,000 are designated Series B
Preferred Stock (the "Series B Preferred"), none of which are issued and
outstanding, (c) 6,000,000 are designated Series C Preferred Stock (the "Series
C Preferred"), 5,505,865 of which are issued and outstanding, (d) 12,500,000 are
designated Series D Preferred Stock (the "Series D Preferred"), 8,296,607 of
which are issued and outstanding, and (e) 7,500,000 are designated Series E
Preferred Stock, none of which are issued and outstanding. The conversion
prices of the Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred are $0.80, $1.25, $1.25 and $2.00 per share, respectively.
The Company has reserved (a) 28,125 shares of Common Stock, (b) 250,000 shares
of Series A Preferred, (c) 1,000,000 shares of Series B Preferred, (d) 30,000
shares of Series C Preferred, and (e) 719,266 shares of Series D Preferred for
issuance upon exercise of outstanding stock purchase warrants. In addition, the
Company has reserved 6,621,327 shares of Common Stock for issuance upon exercise
of outstanding stock options. All of the issued and outstanding shares of
Common Stock and Preferred Stock have been duly authorized and validly issued,
are fully paid and nonassessable and have been issued in compliance with
applicable federal and state securities laws. Except as described herein and in
the Investor Rights Agreement, there are no other options, warrants, conversion
privileges or other rights (including preemptive rights) or agreements presently
outstanding to purchase or otherwise acquire any
3
<PAGE>
authorized but unissued shares of capital stock or other securities of the
Company. The Company is not aware of any voting agreements among its
stockholders. In addition, the total number of shares reserved under the
Company's Non-Employee Director Stock Option Plan, 1992 Stock Option Plan and
1994 Equity Incentive Plan is 200,000, 3,450,000 and 5,000,000, respectively.
3.5 AUTHORIZATION. All corporate action on the part the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Investor Rights Agreement by the
Company, the authorization, sale, issuance and delivery of the Securities, and
the performance of the Company's obligations hereunder and thereunder has been
taken. The Securities, when issued in compliance with the provisions of this
Agreement, the Warrants and the Certificate (as defined below), will be validly
issued, fully paid and nonassessable, and free of any liens or encumbrances
created by the Company, except for restrictions created by this Agreement, the
Investor Rights Agreement and the Warrants, and will be issued in compliance
with all applicable federal and state securities laws. The issuance of the
Securities, when issued pursuant to this Agreement, the Warrants and the
Certificate, are not subject to any preemptive rights or rights of first refusal
that have not been satisfied or waived, other than rights created by this
Agreement and the Investor Rights Agreement.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation of
any term of its Restated Certificate of Incorporation in the form attached
hereto as EXHIBIT E (the "Certificate") or Bylaws or in any material respect of
any term or provision of any material mortgage, indenture, contract, agreement,
instrument, judgment or decree, and is not in violation of any order, statute,
rule or regulation applicable to the Company, the violation of which would have
a material adverse effect on the Company's business or properties. The
execution, delivery and performance of and compliance with this Agreement and
the Investor Rights Agreement and the issuance of the Securities, will not
result in any such violation, or be in conflict with, or constitute a default
under, or result in the creation of, any mortgage, pledge, lien, encumbrance or
charge upon any of the existing properties or assets of the Company.
3.7 NO CONFLICT WITH LAW OR DOCUMENTS. The execution, delivery and
consummation of this Agreement and the Investor Rights Agreement and the
transactions contemplated hereby and thereby will not: (a) conflict with any
provisions of the Certificate or Bylaws, as amended, of the Company or of the
Subsidiary; (b) result in any violation of or default or loss of a benefit
under, or permit the acceleration of any obligation under (in each case, upon
the giving of notice, the passage of time, or both), any mortgage, indenture,
lease, agreement or other instrument, permit, franchise license, judgement,
order, decree, law, ordinance, rule or regulation applicable to the Company, the
Subsidiary or their respective properties.
3.8 GOVERNMENTAL CONSENT. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement and the Investor Rights Agreement or the offer, sale or
issuance of the Securities, or the consummation of any other transaction
contemplated hereby or thereby, except filings as have been made prior to the
Closings, except that any notices of sale required to be filed with the
Securities and Exchange Commission under Regulation
4
<PAGE>
D of the Securities Act of 1933, as amended (the "Securities Act"), or such
post-closing filings as may be required under other applicable state or federal
securities laws, which filings, if required, will be accomplished in a timely
manner, as required by such laws.
3.9 FINANCIAL STATEMENTS. The Company has provided to each Purchaser (a)
audited financial statements (consisting of a consolidated balance sheet as at
December 31, 1994, and consolidated statement of operations, consolidated
statement of stockholders' equity and consolidated statement of cash flows for
the year then ended, and (b) unaudited financial statements (consisting of a
consolidated balance sheet as at June 30, 1995, and statement of operations and
consolidated statement of cash flows for the six months then ended)
(collectively, the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated.
3.10 CERTAIN TRANSACTIONS. Since June 30, 1995, neither the Company nor
its Subsidiary has (a) mortgaged, pledged or subjected to lien, charge or any
other encumbrance any of its assets, tangible or intangible, (b) sold, assigned
or transferred any of its assets or canceled any debts or obligations except in
the ordinary course of business, consistent with past practices, (c) suffered
any extraordinary losses, or waived any rights of substantial value, (d) entered
into any material transaction other than in the ordinary course of business,
consistent with past practices, or (e) otherwise had any change in its
condition, financial or otherwise, except for changes in the ordinary course of
business, consistent with past practices, none of which individually or in the
aggregate has been materially adverse, and excepted further that the Company
continues to incur losses consistent with its past practices.
3.11 MATERIAL CONTRACTS AND COMMITMENTS.
(a) Except for agreements explicitly contemplated by this Agreement
and the Investor Rights Agreement, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors or
holders of ten percent (10%) or more of the outstanding voting securities of the
Company.
(b) Except as set forth in the Financial Statements, there are no
agreements, understandings, instruments, contracts or proposed transactions to
which the Company is a party or by which it is bound, other than contracts with
vendors, suppliers and customers entered into in the ordinary course of
business, that involve (i) obligations (contingent or otherwise) of, or payments
to the Company in excess of $100,000, or (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company, or
(iii) provisions restricting the development, manufacture or distribution of the
Company's products or services.
(c) Except as set forth in the Financial Statements, the Company (i)
is not obligated to repay any indebtedness for money borrowed or incurred any
other liabilities outside the ordinary course of business individually in excess
of $25,000 or, in the case of indebtedness and/or liabilities individually less
than $25,000 in excess of $50,000 in the aggregate, (ii) is not a creditor with
respect to any loans or advances to any person, other than ordinary advances for
travel expenses, or (ii) since
5
<PAGE>
June 30, 1995, has not sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business. For the purposes of this subsection, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of determining the individual minimum dollar amounts.
(d) The Company is not engaged in any current active discussions (i)
with any representative of any corporation or corporations regarding the merger
of the Company with or into any such corporation or corporations, (ii) with any
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company or a transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company is
disposed of, or (iii) regarding any other form of liquidation, dissolution or
winding up of the Company.
3.12 CHANGES. Since June 30, 1995, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not had,
in the aggregate, a materially adverse effect on the Company and other than that
the Company continues to incur losses.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business presently is conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a material
debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business
presently is conducted and as it is proposed to be conducted);
(e) any material change or amendment to any material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any material change in any compensation arrangement or agreement
with any employee;
(g) any declaration or setting aside for payment or other
distribution in respect of any of the Company's capital stock, or any agreement
or obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire shares of its capital stock; or
6
<PAGE>
(h) to the Company's knowledge, any change in the Company's prospects
or any other event or condition of any character that might materially and
adversely affect the assets, properties, financial condition, operating results
or business of the Company (as such business presently is conducted and as it is
proposed to be conducted).
3.13 TITLE. The Company has good and marketable title to its properties
and assets, and has good title to all its leasehold interests, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than
(a) those resulting from taxes not delinquent, (b) minor liens and encumbrances,
which do not in any case, or in the aggregate, materially detract from the value
of the property subject thereto or materially impair the operations of the
Company, when taken as a whole, and (c) those that otherwise have arisen in the
ordinary course of business.
3.14 LITIGATION. There are no material actions, suits, proceedings or
investigations pending or overtly threatened against the Company that question
the validity of this Agreement or the Investor Rights Agreement or the right of
the Company to enter into either of them, or to consummate the transactions
contemplated hereby or thereby, or which could reasonably be expected to result,
either individually or in the aggregate, in any material adverse change in the
assets, condition or prospects of the Company, nor is the Company aware that
there is a basis for any of the foregoing. The Company is not a party to any
order, writ, injunction, judgment, or decree of any court or governmental agency
or instrumentality. There is no action, suit, proceeding, or investigation by
the Company currently pending or that the Company presently intends to initiate.
3.15 REGISTRATION RIGHTS. Except as set forth in the Investor Rights
Agreement, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
3.16 TAX RETURNS. The Company has filed all federal, state and other tax
returns that are required to be filed. All taxes shown to be due and payable on
such returns, any assessments imposed, and all other taxes due and payable by
the Company on or before the First Closing have been or will be paid prior to
the time they would become delinquent.
3.17 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or subject
to any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and is it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company and
no employee has been granted the right to any material compensation following
the termination of employment with the Company.
7
<PAGE>
3.18 INSURANCE. The Company has in full force and effect fire, casualty
and liability insurance policies, which to the best of the Company's knowledge
are in such amounts and with such coverage as are carried by companies similar
to the Company.
3.19 PATENTS AND TRADEMARKS. To the best of its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information, and
proprietary rights (collectively, "Intellectual Property") necessary for its
business as now conducted and as proposed to be conducted without any conflict
with, or infringement of the rights of, others. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any material options, licenses, or agreements
of any kind with respect to the Intellectual Property rights of any other person
or entity, other than such licenses or agreements arising from the purchase of
"off the shelf" or standard products. The Company has not received any
communications alleging that the Company has violated or, by conducting is
business as proposed, would violate any of the Intellectual Property rights of
any other person or entity; provided, however, there can be no assurance that
the Company's manufacture and sale of any of its products will not infringe
third-party patents or that patents owned or licensed by the Company will cover
products sold by the Company.
3.20 DISCLOSURE. No statement by the Company contained in this Agreement
and the attached exhibits, and any written statement or certificate furnished or
to be furnished to the Purchasers pursuant to this Agreement or in connection
with the transactions contemplated hereby (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. To its knowledge the
Company has provided the Purchasers with all the information they have
reasonably requested in connection with their decision to purchase the Shares
and Warrants hereunder.
3.21 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each employee of
the Company has executed a Proprietary Information and Inventions Agreement
substantially in the form or forms which have been delivered to special counsel
for the Purchasers.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS; RESTRICTIONS ON TRANSFER.
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser,
severally and not jointly, represents and warrants to the Company with respect
to the purchase of the Shares and the Warrants as follows:
(a) DUE AUTHORIZATION, EXECUTION, DELIVERY AND PERFORMANCE. All
action on the part of Purchaser for the authorization, execution, delivery and
performance by Purchaser of this Agreement and the Investor Rights Agreement has
been taken.
(b) INVESTMENT INTENT. Purchaser is acquiring the Shares and the
Warrants for investment for such Purchaser's own account and not with a view to,
or for resale in connection with, any distribution. The Purchaser understands
that the Shares and the Warrants to be purchased have not
8
<PAGE>
been registered under the Act by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein.
(c) RESTRICTED SECURITIES. Purchaser acknowledges that the
Securities must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, in case
the Purchaser has held the Securities for less than three years or is an
affiliate of the Company, among other things: the availability of certain
current public information about the Company, the resale occurring not less than
two years after the Securities were purchased from the Company or an affiliate
of the Company, the sale being through a "broker's transaction" or in
transactions directly with a "market maker," and the number of shares being sold
during any three-month period not exceeding specified limitations.
(d) NO PUBLIC MARKET. Purchaser understands that no public market
now exists for any of the securities issued by the Company and there can be no
assurance that a public market will ever exist for the Securities.
(e) RECEIPT OF AND ACCESS TO INFORMATION. Purchaser has been
furnished with such materials and has been given access to such information
relating to the Company as it or its qualified representative has requested and
has been afforded the opportunity to ask questions regarding the Company and the
Shares and Warrants, all as Purchaser has found necessary to make an informed
investment decision.
4.2 LEGENDS. Each certificate representing the Securities shall be
endorsed with the following legend (in addition to any legend required by
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE SECURITIES
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
The Company will not register a transfer of the Securities unless the conditions
specified in the foregoing legend are satisfied, and the Company may instruct
its transfer agent not to register the transfer of any of the Securities unless
the conditions specified in the foregoing legend are satisfied. Notwithstanding
the foregoing, the Company shall not require a Purchaser to furnish an opinion
of its counsel in connection with a proposed transfer of Securities to a partner
of the Purchaser unless, in the
9
<PAGE>
view of the Company's counsel, such an opinion is needed to confirm compliance
with applicable securities laws.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT EACH CLOSING. The
Purchasers' obligations to purchase the Shares and the Warrants at each Closing
are subject to the fulfillment on or prior to each Closing of the following
conditions, any of which may be waived in writing in whole or in part by the
Purchasers:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company herein shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of the same date; and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it on
or prior to such Closing Date.
(b) NECESSARY CONSENTS AND WAIVERS OBTAINED. The Company shall have
obtained all consents and waivers necessary for consummation of the transactions
contemplated by this Agreement which need to be obtained prior to such Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations, approvals,
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required prior to the Closing in
connection with the lawful sale and issuance of the Shares and the Warrants
pursuant to this Agreement shall have been duly obtained and shall be effective
on and as of such Closing Date.
(d) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate or certificates, executed by an officer of the Company,
dated the Closing Date, certifying to the fulfillment of the conditions
specified in subparagraphs (a), (b) and (c) of this Section 5.1.
(e) RESTATED CERTIFICATE OF INCORPORATION. The Restated Certificate
of Incorporation, substantially in the form attached hereto as Exhibit E shall
have been filed with the Secretary of State of the State of Delaware.
(f) INVESTOR RIGHTS AGREEMENT. The Company and the Purchasers shall
have entered into the Investor Rights Agreement, substantially in the form
attached hereto as Exhibit D.
(g) LEGAL OPINION. Purchasers shall have received from Cooley
Godward Castro Huddleson & Tatum, counsel to the Company, an opinion letter
addressed to the Purchasers, dated the Closing Date, substantially in form
attached hereto as EXHIBIT F.
5.2 CONDITION TO COMPANY'S OBLIGATIONS AT EACH CLOSING. The Company's
obligation to sell and issue the Shares and the Warrants at each Closing is
subject to the fulfillment to the
10
<PAGE>
Company's satisfaction on or prior to each Closing Date of the following
conditions, any of which may be waived in writing in whole or in part by the
Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by the Purchasers on the First Closing Date shall be true and
correct when made and shall be true and correct on such Closing Date with the
same force and effect as if they had been made on and as of the same date, and
the Purchasers shall have performed all obligations and conditions herein
required to be performed or observed by them on or prior to such Closing Date.
(b) NECESSARY CONSENTS AND WAIVERS OBTAINED. The Company shall have
obtained all consents and waivers necessary for consummation of the transactions
contemplated by this Agreement which need to be obtained prior to such Closing.
(c) QUALIFICATIONS, LEGAL INVESTMENT. All authorizations, approvals,
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
sale and issuance of the Shares and the Warrants pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of such Closing
Date.
(d) PERFORMANCE OF OBLIGATIONS. Each Purchaser shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by such Purchaser on or before such Closing Date, and each
Purchaser shall have delivered payment to the Company in respect of its purchase
of Shares and Warrants.
(e) INVESTOR RIGHTS AGREEMENT. The Company and the Purchasers shall
have entered into the Investor Rights Agreement, substantially in the form
attached hereto as Exhibit D.
6. MISCELLANEOUS.
6.1 WAIVERS AND AMENDMENTS. With the written consent of the record
holders of a majority of the Securities then outstanding, the obligations of the
Company and the rights of the holders of the Securities under this Agreement may
be waived (either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely), and
with the same consent of the record holders of a majority of the Securities then
outstanding, the Company, when authorized by resolution of its Board of
Directors, may enter into a supplementary agreement for the purpose of adding
any provision to or changing in any manner or eliminating any provision of this
Agreement. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by a signed statement in
writing. Any such waiver or supplementary agreement shall be binding on all
holders of Securities.
6.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
11
<PAGE>
6.3 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchasers and the
Closings of the transactions contemplated hereby.
6.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
6.5 ENTIRE AGREEMENT. This Agreement and the other documents delivered
pursuant hereto, including the exhibits, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
6.6 SEVERABILITY OF THIS AGREEMENT. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.8 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to the Purchasers, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by the Purchasers of any breach or default under this
Agreement, or any waiver by the Purchasers of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to the Purchasers, shall be
cumulative and not alternative.
6.9 PAYMENT OF FEES AND EXPENSES. The Company and each Purchaser shall
bear its own expenses incurred on its behalf with respect to this Agreement and
the transactions contemplated hereby; PROVIDED, HOWEVER, that the Company shall
pay the reasonable fees and expenses of one special counsel to the Purchasers at
the Closing, up to a maximum of $5,000. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or the
Certificate, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.10 NOTICES. Any notice or report required in this Agreement or permitted
to be given shall be given in writing and shall be deemed effective upon
personal delivery, confirmed facsimile or upon deposit in the United States
mail, first-class, postage prepaid and addressed (a) if to a Purchaser, at such
Purchaser's address set forth on such Purchaser's signature page hereto, or at
such other address as such Purchaser shall have furnished to the Company in
writing, or (b) if to any other holder of any
12
<PAGE>
Securities, at such address as such holder shall have furnished the Company in
writing, or, until any such holder furnishes an address to the Company, then to
and at the address of the last holder of such Securities who has so furnished an
address to the Company, (c) if to the Company, one copy should be sent to its
address set forth on the cover page of this Agreement and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Purchasers.
6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Series E
Preferred Stock Purchase Agreement as of the date first set forth above.
CV THERAPEUTICS, INC.
By:
--------------------------------
Louis G. Lange, M.D.
Chief Executive Officer
PURCHASERS:
13
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
[OMITTED]
<PAGE>
EXHIBIT B
FORM OF WARRANT
SEE EXHIBIT 10.18
<PAGE>
EXHIBIT C
SCHEDULE OF EXCEPTIONS
[OMITTED]
<PAGE>
EXHIBIT D
FORM OF AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SEE EXHIBIT 10.11
<PAGE>
EXHIBIT E
FORM OF RESTATED CERTIFICATE OF INCORPORATION
SEE EXHIBIT 3.1
<PAGE>
EXHIBIT F
FORM OF OPINION OF COOLEY GODWARD CASTRO HUDDLESON & TATUM
[OMITTED]
<PAGE>
Confidential treatment has been requested for portions of this document.
Brackets indicate portions of text that have been omitted. A separate filing
of such omitted text has been made with the Commission as part of the
Company's application for confidential treatment.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is dated May 07, 1996 by and
between CV THERAPEUTICS, INC., a California corporation, having its principal
place of business at 3172 Porter Drive, Palo Alto, California ("CVT"), and BAYER
AG, a German corporation having its principal place of business at D 51368
Leverkusen, Germany ("BAYER").
Each of BAYER and CVT are sometimes referred to herein as the "PARTY" or,
collectively, as the "PARTIES".
RECITALS
WHEREAS, CVT has discovered [ ]
([ ] CTX), as the available representative), has performed certain
research, and owns certain proprietary rights thereon.
WHEREAS, BAYER is a leader in the research, development, marketing,
manufacture and distribution of therapeutic pharmaceutic products; and
1.
<PAGE>
WHEREAS, CVT and BAYER desire to establish a contractual relationship to
grant an exclusive license to BAYER to research, develop, manufacture and market
CTX, its derivatives and/or modulators of the principle.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, the PARTIES agree as follows:
DEFINITIONS
Capitalized words used in this Agreement shall have the meanings ascribed
in the following definitions, unless otherwise stated or defined in the
Agreement.
1. DEFINITIONS
1.1 "AFFILIATE" means any entity controlled by, controlling, or under
common control with a PARTY and shall include without limitation any company
fifty percent (50%) or more of whose voting stock or participating profit
interest is owned or controlled, directly or indirectly, by a PARTY, and any
entity which owns or controls, directly or indirectly, fifty percent (50%) or
more of the voting stock of a PARTY. Where the laws of jurisdiction in which
such entity operates prohibits the ownership by a PARTY of 50%, an AFFILIATE
shall mean an entity that is controlled by, controlling, or under common control
with a PARTY at a maximum level of ownership allowed by such jurisdiction.
1.2 "BAYER PATENT" means all PATENTS that claim or cover COMPOUNDS or
PRODUCTS, the manufacture, use, sale,offer for sale or import of COMPOUNDS, or
methods or materials useful for discovering, identifying, or
2.
<PAGE>
assaying for COMPOUNDS, the manufacture, use, sale, offer for sale or import of
PRODUCTS, where such PATENTS cover inventions made solely by employees or agents
of BAYER or an AFFILIATE of BAYER.
1.3 "COMPOUND" means
(a) [ ] (CTX), and/or
(b) modulators [
] of CTX
and/or
(c) any composition of matter that is discovered, identified or
synthesized by or on behalf of BAYER or an AFFILIATE regarding the FIELD and
which is covered by valid claims of the CVT PATENT and/or identified only by
using and applying the CVT KNOW HOW within the FIELD.
1.4 "CONFIDENTIAL INFORMATION" means each PARTY's confidential
information, inventions, additional Know-How or data relating to COMPOUNDS, CTX,
KNOW HOW, including but not limited to identifying, developing, manufacturing
COMPOUNDS and/or PRODUCTS, BAYER's reporting and other business information and
plans, whether in oral, written graphic or electronic form. CONFIDENTIAL
INFORMATION disclosed orally shall be reduced to writing by the disclosing PARTY
and delivered to the other PARTY within thirty (30) days after disclosure.
3.
<PAGE>
1.5 "CONTROL" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement,
other arrangement with or any rights of any THIRD PARTY.
1.6 "CTX" means [
] covered by the FIELD and CVT PATENT.
1.7 "CVT KNOW HOW" means all KNOW HOW information, results, procedures
including but not limited to the identification and development of COMPOUNDS and
to the isolation and purification of CTX, [
] and corresponding
information for the use and handling thereof and/or useful for the
identification and development of COMPOUNDS that CVT owns or CONTROLS on the
EFFECTIVE DATE and that will be owned and will be CONTROLLED by CVT. CVT KNOW
HOW shall exclude CVT PATENTS.
1.8 "CVT PATENTS" means all PATENTS owned or CONTROLLED by CVT or an
affiliate of CVT that claim or cover COMPOUNDS, the manufacture or use of
COMPOUNDS and PRODUCTS and/or methods or materials useful for discovering,
identifying, purifying, evaluating or assaying of COMPOUNDS, where such PATENTS
cover inventions made by employees or agents of CVT or made by CVT's cooperation
partners in the FIELD, as identified in Annex 2.
1.9 "EFFECTIVE DATE" means May 07, 1996.
4.
<PAGE>
1.10 "FIELD" means the use of the PRINCIPLE for any therapeutic and/or
prophylactic and/or diagnostic use in human or animals.
1.11 "KNOW HOW" means all intangible Know-How, inventions (whether or not
patentable), data, preclinical results, information, and any physical, chemical
or biological material or any replication of any part of such material.
1.12 "NET SALES" shall mean gross sales of PRODUCT sold by BAYER, its
AFFILIATES and sublicensees to THIRD PARTIES (including any unaffiliated THIRD
PARTY's distributors), less, to the extent included in gross sales, the total of
(a) ordinary and customary trade discounts actually allowed,
(b) credits, rebates, returns (including, but not limited to,
wholesaler and retailer returns) actually allowed,
(c) excise taxes, other consumption taxes, customs duties and
compulsory payments to governmental authorities paid, and
(d) amounts equivalent to 5 % of said gross sales as an
allowance for expenses such as transportation, insurance and the like.
1.13 "PATENT" means
(a) valid and enforceable Letters Patent in any and all
countries including without limitation any extension - Supplemental Protection
Certificates
5.
<PAGE>
(SPC), registration, confirmation, reissue, continuation-in-part, division, or
renewal thereof, and
(b) pending applications for any of the foregoing.
1.14 "PRINCIPLE" means the [ ]
exemplified as the activities of CTX, and modulators [
].
1.15 "PRODUCT" means any pharmaceutical product identified and developed
under this Agreement covered by the FIELD containing CTX or any other COMPOUND
as active ingredient, representing the PRINCIPLE.
1.16 "PRODUCT DEVELOPMENT" means the performance of the non-clinical and
clinical investigations necessary to and directly in support of obtaining
REGULATORY APPROVAL for marketing a PRODUCT.
1.17 "REGULATORY APPROVAL" means any approvals (including price and
reimbursement approvals), licenses, registrations or authorizations of any
federal, state or local regulatory agency, department, bureau or other
government entity, necessary for the manufacture, use, storage, import,
transport or sale, of PRODUCTS in a country.
1.18 "SUBLICENSE REVENUES" means all revenues from THIRD PARTIES as
consideration for the sale of PRODUCTS.
1.19 "TERRITORY" means the entire world.
6.
<PAGE>
1.20 "THIRD PARTY" means any entity other than CVT or BAYER and their
respective AFFILIATES.
1.21 "THIRD PARTY ROYALTIES" means royalties payable to a THIRD PARTY in
respect of the PRINCIPLE, COMPOUND and the manufacture or sale of PRODUCTS.
2. LICENSE GRANT
2.1 CVT hereby grants BAYER a license under CVT PATENTS and CVT KNOW HOW
to identify, have identified and develop, have developed COMPOUNDS and to
develop, have developed, make, have made use, have used, sell, have sold, offer,
have offered for sale, import and have imported COMPOUNDS and/or PRODUCTS
subject to the terms and conditions of this Agreement. Such license shall be
exclusive, unlimited and worldwide. BAYER shall have the right to sublicense
its rights hereunder to its AFFILIATES and to THIRD PARTIES.
2.2 EXCLUSIVITY.
2.2.1 RIGHTS IN USE
Subject to and conditioned upon the provisions of this Agreement, the
rights, licenses and privileges granted pursuant to Article 2.1 shall be
exclusive to
7.
<PAGE>
BAYER. Without limiting the generality of the foregoing, CVT covenants that
during the term of this Agreement, neither CVT nor its AFFILIATES shall grant to
any THIRD PARTY any right, license or privilege to identify, develop, make, have
made COMPOUNDS and/or to develop, use or sell PRODUCTS, or to otherwise use or
exploit CVT PATENTS and CVT KNOW HOW.
2.2.2 CONTROL
Regarding CVT PATENTS, CVT KNOW HOW and CTX, CVT herewith expressly
confirms to own and CONTROL exclusively all rights, which will be exclusively
licensed to BAYER. CVT further expressly confirms that CVT. owns and CONTROLS
exclusively all rights, know how experiences, cell lines as defined under CVT
KNOW HOW which was developed at CVT's cooperation partners including but not
limited to the University of Kansas and the Washington University. CVT further
confirms that- to the best of their knowledge - there are not any rights with
any THIRD PARTY regarding the PRINCIPLE.
8.
<PAGE>
2.2.3 THIRD PARTY ROYALTIES
If under this Agreement BAYER becomes aware of technology and/or know how
of a THIRD PARTY that at BAYER's discretion would be valuable or necessary to
the discovery, development or commercialization of PRODUCTS, BAYER is free to
acquire such rights at its sole discretion. In the event of an acquisition of
any such THIRD PARTY right or know how which would result in payment of
royalties or other license fee to a THIRD PARTY, the PARTIES will share such
compensation to the offering THIRD PARTY:
Of any such license fee, CVT will pay [ ] out of the milestone payment
foreseen in section 4.3.5., but only up to a maximum of [ ]
of that milestone. The contribution of CVT to this license fee shall be
deducted by BAYER from the milestone foreseen in section 4.3.5. In case of an
obligation by BAYER to pay running royalties to such licensor, CVT will
contribute [ ] out of CVT royalties received from BAYER under
this Agreement, but limited to a maximum of [ ] of CVT's
royalties received from BAYER.
2.3 RIGHTS TO SUBLICENSE
(i) BAYER shall have the sole right to sublicense to THIRD
PARTIES all or any portion of the rights to CVT PATENTS and CVT KNOW HOW and/or
CTX granted to BAYER pursuant to this Agreement;
9.
<PAGE>
(ii) BAYER shall have the sole right to sublicense all or any
portion of the rights to the CVT PATENTS, the CVT KNOW HOW and CTX, granted to
BAYER pursuant to this Agreement to any or all of its AFFILIATES.
(iii) BAYER agrees that all sublicenses granted by BAYER hereunder
shall expressly bind sublicensees to the terms of sections 3.2, 4.4, 5.4, 9, and
all other relevant obligations of this Agreement. In the event BAYER grants
sublicenses, BAYER shall pay all royalties to CVT through and under the sole
responsibility of BAYER as if SUBLICENSE REVENUES were NET SALES of BAYER;
(iv) Any sublicenses granted by BAYER shall provide for the
termination of the sublicenses upon termination of this Agreement.
(v) During the term of this Agreement, BAYER shall inform CVT on
all sublicenses granted by BAYER hereunder.
2.4 SUBCONTRACTING
Notwithstanding anything herein provided for to the contrary, BAYER shall
be allowed to (i) sub-contract in whole or in part COMPOUND and PRODUCT
development to THIRD PARTIES, (ii) appoint sales agents and distributors to
market PRODUCT, and (iii) sub-contract the manufacturing of COMPOUND and/or
PRODUCT with THIRD PARTIES on BAYER's discretion or with BAYER's AFFILIATES.
BAYER shall provide for the corresponding confidentiality and restriction-of-use
obligations to apply to those subcontracting THIRD PARTIES according to Article
9.
10.
<PAGE>
3. DISCLOSURE OF INFORMATION
3.1 As soon as possible after the EFFECTIVE DATE, CVT shall disclose or
cause its AFFILIATES to disclose and/or deliver to BAYER all CVT PATENTS,
COMPOUND, COMPOUND specifications, CTX, CTX specifications, CVT KNOW HOW, to
enable and support BAYER to identify, develop COMPOUNDS and to manufacture, have
manufactured, and commercialize PRODUCTS in the FIELD on the terms and subject
to the conditions of this Agreement.
3.2 During the term of this AGREEMENT, BAYER shall inform CVT on the
progress of the project under this Agreement, at 6 (six) months intervals
(Summaries, only).
4. PAYMENTS
For the rights granted to BAYER according to Article 2, BAYER will
compensate CVT by the following payments at the following events under the
following conditions:
4.1 DOWN PAYMENT
BAYER shall transfer to CVT a downpayment of U.S. $0.25MM (two hundred
and fifty thousand U.S. Dollars) due on the EFFECTIVE DATE.
4.2 DOWN PAYMENT
11.
<PAGE>
If and when the [ ] (CTX) producing cell line is successfully
established at BAYER's labs, [
] and [ ]
efficacy is confirmed by Bayer as being sufficient and qualified for [
] Bayer shall transfer to CVT [
].
4.3 Milestone Payments according to the progress of the first COMPOUND
or PRODUCT to be developed, as follows:
4.3.1 As soon as [
] BAYER shall transfer
to CVT [ ].
4.3.2 At the [
] BAYER shall transfer
to CVT [ ].
4.3.3 At the [
Bayer shall furnish to CVT [
].
12.
<PAGE>
4.3.4 At the [
] BAYER will furnish to CVT
[ ].
4.3.5 At the [
BAYER shall furnish to CVT
[ ].
It is understood that all payments identified in Article 4.3 will only
become due [
].
4.4 ROYALTIES
4.4.1 On the NET SALES of each of BAYER's PRODUCTS [
] in the TERRITORY of up to [
]
-accrued during [ ] BAYER shall [
] of [
] for the period according to Art. 10.1.
4.4.2 On the NET SALES of each of BAYER's PRODUCTS [
] in the TERRITORY of more than [
]
- accrued during [ ] BAYER shall [
]
of [ ] for the period according to Art. 10.1.
13.
<PAGE>
4.4.3 On the NET SALES of each of BAYER's PRODUCT [
] or [ ] - accrued during [ ] BAYER shall [
]
of [ ] of that identified in Art. 4.4.1 and 4.4.2, respectively, for the
period according to Art. 10.1.
4.5 MARKET EXCLUSIVITY
On a country by country basis, BAYER will pay the royalty rates according
to Art. 4.4 only and as long as the [
] Under all other
circumstances, BAYER will [
] according to Art. 4.4.1
through 4.4.3.
4.6 OFFSET FOR THIRD PARTY ROYALTIES
BAYER may offset, against any amounts owed to CVT as royalties hereunder
the following expenses to the extent incurred in the year for which such royalty
amounts accrued:
(a) [ ] of THIRD PARTY ROYALTIES with respect
to technology acquired and due under Section 2.2.3 to the extent provided
hereunder and as defined and limited according to Section 2.2.3 and,
(b) any amounts paid and/or allocated to be paid by BAYER
pursuant to Art. 8.3 and 8.4.
14.
<PAGE>
5. MANNER OF PAYMENTS
5.1 BAYER shall effect each milestone payment under Section 4.3 within
60 (sixty) days after they become due. BAYER shall effect all royalty payments
under Section 4.4 within 90 (ninety) days after each calendar quarter Payment
shall be made to an account designated in writing by CVT.
5.2 BLOCKED CURRENCY
In each country where the local currency is blocked and cannot be removed
from the country, at the election of BAYER, royalties accrued in that country
shall be paid to CVT in the country in local currency by deposit in a local bank
designated in writing by the CVT.
5.3 FOREIGN EXCHANGE
Royalties on U.S. sales shall be calculated and paid in U.S. Dollars.
Royalties on all other sales shall be calculated in local currency and converted
to the US Dollar at the end of each calendar quarter. The exchange rate used
shall be the exchange rate for the US dollar and the currency of the country of
sale as quoted by the Wall Street Journal, or a comparable publication
acceptable to both parties, if the Wall Street Journal ceases to exist, on the
last day of the quarter for which royalties on net sales have been calculated.
15.
<PAGE>
5.4 RECORDS
BAYER shall keep or cause to be kept such records as are required to
determine in a manner consistent with generally accepted accounting principles
the sum of royalties due under this Agreement and the sales figures of each
first PRODUCT according to Art. 4.4. At the request (and expense) of CVT, BAYER
and its sublicensees shall permit an independent certified public accountant
appointed by CVT and reasonably acceptable to BAYER, at reasonable times and
upon reasonable notice, to examine those records as may be necessary to:
(a) determine, with respect to any calendar year ending not more than
three years prior to CVT's request, the correctness of any report or payment
made under this Agreement; or
(b) obtain information as to the royalty payable for any calendar year.
Any such examination shall be subject to Article 9. Results of any such
examination shall be made available to both PARTIES. If CVT requests an audit,
CVT shall bear the full cost of the performance of any such audit, unless such
audit discloses a variance of more than [
] from the amount of the original report, royalty or payment calculation. In
such case, BAYER shall bear the full cost of the performance of such audit.
16.
<PAGE>
6. DILIGENCE
6.1 DEVELOPMENT
BAYER shall use reasonable diligence in developing and marketing PRODUCTS
and shall endeavor to maximize the economic value of the PRODUCTS.
6.2 COMMERCIAL SUPPLY
BAYER shall be responsible for optimization, scale-up and commercial supply
of PRODUCTS for worldwide sale, directly or through AFFILIATES of BAYER or
through THIRD PARTIES, at BAYER's discretion. BAYER shall manufacture, or have
manufactured, all PRODUCTS for worldwide commercial sales in conformance with
the specifications set forth in the respective applications for REGULATORY
APPROVAL and any amendments or supplements thereto, and any substitutes.
7. TAXES
7.1 CVT shall pay any and all taxes levied on account of the royalties
it receives under this Agreement. If laws or regulations require that taxes be
withheld, BAYER will
(a) deduct those taxes from the remittable royalty,
(b) timely pay the taxes to the proper taxing authorities, and
17.
<PAGE>
(c) send proof of payment to CVT within 90 (ninety) days
following that payment.
The PARTIES agree to cooperate to obtain the benefit of any tax treaty with
respect to such royalty payments.
8. OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
8.1 PATENT PROSECUTION
The PARTIES intend to establish broad patent protection for CTX arid other
patentable inventions developed by or achieved at CVT and CVT's collaboration
partners according to Art. 2.2.2 and other patentable inventions. CVT shall
supervise and direct patenting of all CVT PATENTS. CVT shall file and prosecute
all patent applications covering such CVT PATENTS and collaboration partners'
inventions. For such prosecution, CVT will engage counsel reasonably acceptable
to BAYER, at CVT's expense. CVT shall give BAYER copies of all such
applications and related correspondence, in sufficient time to allow BAYER
reasonably to comment thereon. CVT will seriously consider BAYER's comments.
CVT shall maintain all CVT PATENTS that issue on such applications.
8.2 CONFIDENTIAL TREATMENT
All information disclosed under Sections 8.1 shall be treated as
confidential pursuant to Article 9.
18.
<PAGE>
8.3 INFRINGEMENT BY THIRD PARTIES OF CVT PATENT.
If any CVT PATENT is infringed by a THIRD PARTY in any country of the
TERRITORY, regarding the development, manufacture, use, sale, offer for sale or
import of COMPOUND or any PRODUCT in such country, the PARTY first having
knowledge of such infringement shall promptly notify the other in writing. The
notice shall set forth the facts of that infringement in reasonable detail. CVT
shall have the obligation to institute, prosecute, and control any action or
proceeding with respect to such infringement, by counsel of its own choice, and
BAYER shall have the right, at its own expense, to be represented in any action
by counsel of its own choice. If CVT fails to bring an action or proceeding
within a period of ninety (90) days after having knowledge of infringement of a
CVT PATENT, BAYER shall have the right to bring and control any such action by
counsel of its own choice, and CVT shall have the right to be represented in any
such action by counsel of its own choice at its own expense. If one PARTY
brings any such action or proceeding, the other PARTY agrees to be joined as a
party plaintiff if necessary to prosecute the action and to give the first PARTY
reasonable assistance and authority to file and prosecute the suit. No
settlement or consent judgment or other voluntary disposition of a suit brought
by a PARTY under this section may be entered into without the written consent of
the other PARTY if such settlement would adversely affect the other PARTY's
interests, which consent shall not be unreasonably withheld.
[ ]
19.
<PAGE>
[ ].
8.4 THIRD PARTY CLAIMS AGAINST CVT PATENTS
If a THIRD PARTY asserts that a patent or other right owned by it is
infringed by the use of CVT KNOW HOW or by the manufacture, use, sale, offer for
sale or import of COMPOUND and/or PRODUCT, the PARTY first obtaining knowledge
of such a claim shall immediately provide the other PARTY notice of such claim
and the related facts in reasonable detail. CVT shall have the primary right
and obligation to control the defense of such claims. BAYER will cooperate in
defending all such actions and shall have the right to be represented separately
by counsel of its own choice. If CVT fails to bring an action or proceeding
within a period of ninety (90) days after having knowledge of infringement of a
CVT PATENT, BAYER shall have the right to bring and control any such action by
counsel of its own choice, and CVT shall have the right to be represented in any
such action by counsel of its own choice at its own expense. If one PARTY
brings any such action or proceeding, the other PARTY agrees to be joined as a
party plaintiff if necessary to prosecute the action and to give the first PARTY
reasonable assistance and authority to file and prosecute the suit. No
settlement or consent judgment or other voluntary disposition of a suit under
this section may be entered into without the written consent of the other PARTY
if such settlement would adversely affect the other PARTY's interests, which
consent shall not be unreasonably withheld.
20.
<PAGE>
[
]
9. CONFIDENTIALITY
9.1 CONFIDENTIALITY; EXCEPTIONS.
(a) Except to the extent expressly authorized by this Agreement
or otherwise agreed in writing, the PARTIES agree that, during the term of this
Agreement and five (5) years, thereafter, the receiving PARTY shall keep
confidential and shall not publish or otherwise disclose or use for any purpose,
other than as provided for in this Agreement, any CONFIDENTIAL INFORMATION
furnished to it by the other PARTY.
(b) The restrictions shall not apply to the extent that it can
be established by the receiving PARTY that such CONFIDENTIAL INFORMATION:
(i) was already known to the receiving PARTY, other than under
an obligation of confidentiality, at the time of disclosure by the other PARTY;
(ii) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving PARTY;
21.
<PAGE>
(iii) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving PARTY in breach of this Agreement; or
(iv) was disclosed to the receiving PARTY, other than under
an obligation of confidentiality, by a THIRD PARTY who had no obligation to the
disclosing PARTY not to disclose such information to others.
9.2 AUTHORIZED DISCLOSURE
Each PARTY may disclose CONFIDENTIAL INFORMATION hereunder to the extent
such disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, complying with applicable
governmental regulations or conducting preclinical or clinical trials, provided
that if a PARTY is required by law or regulation to make any such disclosure of
the other PARTY's CONFIDENTIAL INFORMATION it will, except where impracticable
for necessary disclosures, (for example, in the event of medical emergency),
give reasonable advance notice to the other PARTY of such disclosure requirement
and, except to the extent inappropriate in the case of PATENT applications, will
use its reasonable efforts to secure confidential treatment of such CONFIDENTIAL
INFORMATION required to be disclosed and to minimize the extent of such
disclosure. Each PARTY also may disclose to its collaborators according to Art.
2.4, under confidentiality obligations, CONFIDENTIAL INFORMATION developed by
such PARTY during the course of this collaboration.
22.
<PAGE>
9.3 PUBLICATIONS BY CVT
Contrary to Art. 9.1 and 9.2, CVT may publish the results developed earlier
than the enforcement of this Agreement so long as such publication will not
disclose confidential information regarding this Agreement. CVT will provide
BAYER with a draft of any intended publication 90 days in advance of such
publication to allow BAYER to identify any such confidential information and
will delete from any proposed publication such relevant confidential:
information as may be identified by BAYER.
If BAYER identifies a strategic interest, not to publish certain results or
the intended publication in total, BAYER will have the right to refuse such
publication, which BAYER confirms not to request unreasonably.
BAYER will be free to publish all results and information it deems
necessary to support the project and to provide COMPOUNDS and PRODUCT.
10. TERM AND TERMINATION
10.1 TERM OF AGREEMENT
This Agreement shall commence as of the EFFECTIVE DATE and, unless sooner
terminated as provided herein, shall continue in effect until the expiration of
the last to expire CVT PATENT licensed under this Agreement or after ten (10)
year's marketing of the first PRODUCT [ ] according to Art. 4.4,
whichever is later.
23.
<PAGE>
10.2 TERMINATION AT BAYER'S DISCRETION
Giving 30 (thirty) days written notice to CVT, BAYER may terminate this
Agreement for any reason in its sole discretion, at any time, especially if
there is no exclusivity according to Article 4.5 and/or according to Article
2.2.2.
BAYER may invite CVT to discuss BAYER's reasons for its intent to
terminate the Agreement and to allow CVT to give scientific and/or technical
input to avoid such termination.
Upon termination of the activities by BAYER, CVT would like to have a
royalty-bearing grant-back option. Terms for this would be negotiable in
good faith, at due time, taking into account the relative contribution of
BAYER and CVT. Any such grant-back should also allow BAYER the first right
to negotiate for products based on BAYER's activities under this Agreement
which may subsequently be developed by CVT or a partner of CVT.
24.
<PAGE>
10.3 TERMINATION OF BREACH
10.3.1 BREACH BY CVT
If CVT materially breaches this Agreement at any time, and has not cured
such breach within ninety (90) days after written notice thereof from BAYER, or,
if such breach is not curable within such ninety day period, CVT fails to use
diligent and continuing efforts to cure such breach, then [
].
10.3.2 BREACH BY BAYER
If BAYER materially breaches this Agreement at any time, and has not cured
such breach within ninety (90) days after written notice thereof from CVT, or,
if such breach is not curable within such ninety day period, BAYER fails to use
diligent and continuing efforts to cure such breach, then (a) [
] and (b) [
].
25.
<PAGE>
10.3.3 The breaching PARTY hereby authorizes, transfers and assigns
to the non-breaching PARTY the right to prosecute, maintain and defend all
PATENTS licensed hereunder in the event of such uncured breach. The breaching
PARTY shall be liable for any damages resulting from its breach, costs and
attorney's fees, and the non-breaching PARTY shall be relieved from its
obligations under this Agreement except as provided in Art. 10.5.
10.4 TERMINATION FOR OTHER REASONS
In the event either PARTY shall:
(a) become insolvent or bankrupt;
(b) make an assignment for the benefit of its creditors;
(c) appoint a trustee or receiver for itself for all or a
substantial part of its property;
(d) have any case of proceeding commenced or other action taken
by or against itself in bankruptcy;
(e) seek liquidation, dissolution, a winding-up arrangement,
composition or readjustment of its debts;
(f) seek any other relief under any bankruptcy, insolvency,
reorganization or other similar or law of any jurisdiction, now or hereafter in
effect; or
26.
<PAGE>
(g) have issued against itself a warrant of attachment,
execution, distraint or similar process against any substantial part of its
property of the other PARTY;
then within sixty (60) days of the event, the other PARTY may, at its sole
option, either
(i) terminate this Agreement upon thirty (30) days written
notice to the other PARTY; or
(ii) continue the performance of this Agreement thereafter.
10.5 SURVIVING RIGHTS
The following provisions of this Agreement shall survive termination of
this Agreement, in addition to any provisions which survive by their terms:
Articles 1, 8, 9, 13, 14.
10.6 ACCRUED RIGHTS: SURVIVING OBLIGATIONS
Termination, relinquishment or expiration of the Agreement for any reason
shall be without prejudice to any rights which shall have accrued to the benefit
of either PARTY prior to such termination, relinquishment or expiration,
including damages arising from any breach hereunder. Such termination,
relinquishment or expiration shall not relieve either PARTY from obligations
27.
<PAGE>
which are expressly indicated to survive termination or expiration of the
Agreement.
11. DISPUTE RESOLUTION
11.1 DISPUTES
The PARTIES recognize that disputes as to certain matters may from time to
time arise during the term of this Agreement which relate to either PARTY's
rights and/or obligations hereunder. The PARTIES shall follow the procedures
set forth in this Article 11.1 to facilitate the resolution of disputes arising
under this Agreement in an expedient manner by mutual cooperation and to attempt
to avoid litigation between the PARTIES.
In the event the PARTIES are not able to resolve such dispute within such
60-day period, either PARTY may then invoke any other remedies available to it
in law or equity. Any dispute or controversy arising out of or related to this
Agreement which is not resolved between the PARTIES shall be submitted to a
United States federal court located in the County of Santa Clara, California.
The PARTIES hereby consent to the jurisdiction of the State of California.
28.
<PAGE>
12. REPRESENTATIONS AND WARRANTIES; EXCLUSIVITY
12.1 REPRESENTATIONS AND WARRANTIES
Each PARTY hereby represents and warrants to the other that this Agreement
is a legal and valid obligation binding upon such PARTY and enforceable in
accordance with its terms. The execution, delivery and performance of and the
rights granted under this Agreement by such PARTY does not conflict with any
agreement, instrument or understanding, written or oral, to which it is a PARTY
or by which it is bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
12.2 PERFORMANCE BY AFFILIATES
The PARTIES recognize that each may perform some or all of its obligations
under this Agreement through AFFILIATES, provided, however, that each PARTY
shall remain responsible and be guarantor of the performance by such AFFILIATES
and shall cause such AFFILIATES to comply with the provisions of this Agreement
in connection with such performance. Each PARTY waives any obligation on the
other PARTY to seek performance by such PARTY's AFFILIATE before the other PARTY
may enforce the foregoing guaranty.
29.
<PAGE>
13. PRODUCTS LIABILITY AND INDEMNIFICATION
13.1 INDEMNIFICATION FOR SALES OF PRODUCTS
With respect to PRODUCTS, BAYER hereby agrees to defend, indemnify, and
hold harmless CVT and its directors, officers, employees, and agents from and
against any and all suits, claims, actions, demands, liabilities, damages,
costs, expenses and/or loss, including reasonable legal expenses and attorney's
fees ("Losses"), resulting directly or indirectly from the manufacture, use,
handling, storage, sale or other disposition of such PRODUCTS by BAYER, or its
agents or sublicensees. In the event that CVT seeks indemnification under this
Section 13.1, it shall inform BAYER of such claim as soon as practicable after
it receives notice of the claim, shall permit BAYER to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested in the
defense of the claim.
13.2 INDEMNIFICATION FOR NEGLIGENCE
Each PARTY hereby agrees to defend, indemnify, and hold harmless the other
PARTY and its directors, officers, employees, and agents from and against any
and all losses resulting directly or indirectly from the indemnifying PARTY's
negligence.
30.
<PAGE>
14. MISCELLANEOUS
14.1 ASSIGNMENT.
(a) Either PARTY may assign any of its rights or obligations
under this Agreement to any AFFILIATES; provided, however, that such assignment
shall not relieve the assigning PARTY of its responsibilities for performance of
its obligations under this Agreement.
(b) CVT may not assign its rights or obligations under this
Agreement or its ownership interest in CVT PATENTS to a non-AFFILIATE without
the prior written consent of BAYER, which consent shall not be unreasonably
withheld, except that CVT may assign this Agreement and its interests in CVT
PATENTS in connection with any merger, consolidation, or sale of all or
substantially all of its assets.
(c) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the PARTIES. Any assignment
not in accordance with this Agreement shall be void.
14.2 CHANGE IN CONTROL OF CVT.
(a) In the event that (i) CVT is acquired by another entity by
reason of merger, consolidation or sale of all or substantially all of its
assets (except for a reorganization transaction in which the persons who held
majority ownership of CVT prior to the transaction continue to hold
31.
<PAGE>
majority ownership of CVT, directly or through a parent company, after the
transaction) or (ii) a single entity other than BAYER or an AFFILIATE of BAYER
acquires ownership of a majority of the outstanding voting stock of CVT, this
Agreement shall survive. A change in control shall not be deemed to be an
assignment under Section 14.1.
14.3 CONSENTS NOT UNREASONABLY WITHHELD
Whenever provision is made in this Agreement for either PARTY to secure the
consent or approval of the other, that consent or approval shall not
unreasonably be withheld or delayed, and whenever in this Agreement provision is
made for one PARTY to object to or disapprove a matter, such objection or
disapproval shall not unreasonably be exercised.
14.4 TERMINATION OF PRIOR AGREEMENT
This Agreement supersedes all previous confidentiality agreements between
the PARTIES and their respective AFFILIATES. All confidential information
exchanged between the PARTIES and their respective AFFILIATES under such
agreements shall be deemed CONFIDENTIAL INFORMATION and shall be subject to the
terms of Article 9.
32.
<PAGE>
14.5 FORCE MAJEURE
Neither PARTY shall use any rights hereunder or be liable to the other
PARTY for damages or losses on account of failure of performance by the
defaulting PARTY if the failure is occasioned by government action, war, fire,
explosion, flood, strike, lockout, embargo, act of God, or any other similar
cause beyond the control of the defaulting PARTY, provided that the PARTY
claiming force majeure has exerted all reasonable efforts to avoid or remedy
such force majeure; provided, however, that in no event shall a PARTY be
required to settle any labor dispute or disturbance.
14.6 FURTHER ACTIONS
Each PARTY agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts, as may be necessary or appropriate
in order to carry out the purposes and intent of this Agreement.
14.7 NOTICES
All notices hereunder shall be in writing and shall be deemed given if
delivered personally or by facsimile transmission (receipt verified), telexed,
mailed by registered or certified mail (return receipt requested), postage
prepaid, or sent by express courier service, to the PARTIES at the following
addresses (or at such other address for a PARTY as shall be specified by like
notice; provided, that notices of a change of address shall be effective only
upon receipt thereof):
33.
<PAGE>
If to CVT, addressed to:
CV Therapeutics, Inc.
3172 Porter Drive
Palo Alto, CA 94304
Attention: Chief Executive Officer
Telephone: (415) 812-9540
Telecopy: (415) 858-0388
With copy to:
COOLEY GODWARD CASTRO HUDDLESON & TATUM
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Deborah A. Marshall, Esq.
Telephone: (415) 843-5000
Telecopy: (415) 857-0663
If to BAYER, addressed to:
regarding research aspects
34.
<PAGE>
Bayer AG
PH-R, Cardiovascular
D-42096 Wuppertal
Federal Republic of Germany
[
]
regarding contractual aspects
Bayer AG
Licensing and Technical Cooperation
D-51368 Leverkusen
Federal Republic of Germany
[
]
and
Bayer AG
Pharma-Business Planning
and Administration
International Cooperation and Licensing
D-51368 Leverkusen
Federal Republic of Germany
[
]
35.
<PAGE>
14.8 WAIVER
Except as specifically provided for herein, the waiver from time to time by
either of the PARTIES of any of their rights or their failure to exercise any
remedy shall not operate or be construed as a continuing waiver of same or of
any other of such PARTY's fights or remedies provided in this Agreement.
14.9 SEVERABILITY
If any term, covenant or condition of this Agreement or the application
thereof to any PARTY or circumstance shall, to any extent, be held to be invalid
or unenforceable, then
(i) the remainder of this Agreement, or the application of such term,
covenant or condition to PARTIES or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced to
the fullest extent permitted by law; and
(ii) the PARTIES hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the PARTIES that the basic purposes of this Agreement are to be effectuated.
36.
<PAGE>
14.10 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
14.11 PRESS RELEASES
The PARTIES agree that the specific material economic and specific material
terms of the transaction and the principle shall be kept confidential and shall
not be disclosed without the prior written consent of both PARTIES, subject to
standard exceptions for disclosure of CONFIDENTIAL INFORMATION set forth in the
Agreement and except: (i) as required in financial statements to comply with
generally accepted accounting principles (as determined by the disclosing
PARTY's independent auditors), (ii) by CVT to potential investors in connection
with public and private financing of CVT, and (iii) as mutually agreed.
37.
<PAGE>
14.12 ENTIRE AGREEMENT
This Agreement sets forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the PARTIES
hereto and supersedes and terminates all prior agreements and understanding
between the PARTIES. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the PARTIES other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the PARTIES hereto unless reduced to writing and signed by the respective
authorized officers of the PARTIES.
14.13 GOVERNING LAW
Resolution of all disputes arising out of or related to this Agreement or
the performance, enforcement, breach or termination of this Agreement and any
remedies relating thereto, shall be governed by and construed under the
substantive laws of the State of California, as applied to Agreements executed
and performed entirely in the State of California by residents of the State of
California, without regard to conflicts of law rules and excluding the United
Nations Convention on Sale of Goods.
38.
<PAGE>
IN WITNESS WHEREOF, the PARTIES have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
Palo Alto Leverkusen
Date: 5/2/96 Date: 14.05.1996
CVT Therapeutics, Inc. BAYER AG
/s/ Louis G. Lange /s/
[
]
39.
<PAGE>
Annex 1
Preparation and Culture of [ ] Cells Producing [ ]
This protocol reviews the methodology for generating a novel cell line
capable of synthesizing [ ].
The starting cell structure was [ ] cells isolated from [
] the basal media used throughout consists of
Dulbecco's Modified Eagle's Medium (DME/low) mixed [ ] with [
] penicillin, [ ] streptomycin, [ ]
insulin [ ] transferring. [ ] the medium is
supplemented with [ ].
[ ] cell cultures are cultured in [ ] tissue culture
dishes. [ ] is dissolved in [
] to give a final concentration of [ .
] in the laminar flow hood and then [
]. The dishes can be used immediately or stored under sterile
conditions.
The methodology for generating [ ] was derived from the
technique of [
.]
40.
<PAGE>
Primary cultures of [ ] were grown to [ ] confluency in
10 cm dishes, detached via [ ] and passed to
[
]. The cells were [
].
[ ]Used:
Classification:[ ]
Agent:[ ]
Strain:[ ]
Original source:[
]
Commercial source: [ ]
The cultures were fed and observed for [ ] at which time colonies of
cells appeared, these were detached and replated after Dilution. Colonies
were then isolated with cloning rings and passaged separately. Cell line
[ ] was found to grow in a monolayer with [ ]. It
is confluent in [ ] at a [ ] subculture. It displays biochemical and
histochemical characteristics of [ ] including positive assays for
[ ] and [ ]. It demonstrates [
].
[ ] is unique for its capacity to specifically produce [
].
41.
<PAGE>
[
]:
[
]
As little as [ ] of conditioned medium yields a [ ] fraction
whose [ ] activity for [ ] is equivalent to the maxiumum [
] response to [ ] activity is detected in
the medium by [ ] provides the
best yields. Cells grown in [ ] produce [ ]
constitutively because they [ ] results in
continued, but slower, growth, with no production of [
].
42.
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Annex 2
CVT PATENTS means:
patent status + full text of the patent applications.
43.
