<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
COMMISSION FILE NUMBER: 001-14165
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RIBOGENE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-3095154
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
26118 RESEARCH ROAD
HAYWARD, CA 94545
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 732-5551
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter prior that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At July 31, 1998 there were 5,432,814 shares of the Registrant's common
stock, $0.001 value, outstanding.
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RIBOGENE, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1 Financial Statements (Unaudited)............................ 2
Condensed Balance Sheets -- as of June 30, 1998 and December
31, 1997.................................................... 2
Condensed Statements of Operations -- for the three and six
months ended June 30, 1998 and 1997......................... 3
Condensed Statements of Cash Flows for the six months ended
June 30, 1998 and 1997...................................... 4
Notes to Condensed Financial Statements..................... 5
Management's Discussion and Analysis of Financial Condition
Item 2 and Results of Operations................................... 8
PART II. OTHER INFORMATION
Item 1 Legal Proceedings........................................... 12
Item 2 Changes in Securities and Use of Proceeds................... 12
Item 3 Defaults upon Senior Securities............................. 12
Item 4 Submission of Matters to Vote of Security Holders........... 12
Item 5 Other Information........................................... 12
Item 6 Exhibits and Reports -- Form 8-K............................ 13
Signatures.......................................................... 14
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 8,136 $ 2,045
Short-term investments.................................... 10,560 -
Prepaid expenses and other current assets................. 326 207
-------- --------
Total current assets.............................. 19,022 2,252
Property and equipment, net................................. 637 471
Deferred offering costs..................................... - 1,142
Deferred lease expense...................................... 266 290
Other assets................................................ 185 157
-------- --------
$ 20,110 $ 4,312
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 930 $ 1,402
Accrued compensation...................................... 372 254
Accrued interest payable.................................. 15 224
Deferred revenue -- related parties....................... 1,167 556
Other current liabilities................................. 521 469
Current portion of capital lease obligations.............. 153 174
Current portion of notes payable.......................... - 918
-------- --------
Total current liabilities......................... 3,158 3,997
Long-term portion of capital lease obligations.............. 283 289
Other noncurrent liabilities................................ 96 188
Commitments
Stockholders' equity (deficit):
Preferred Stock, 5,000,000 shares, $0.001 par value, and
18,932,344 shares, no par value, authorized at June 30,
1998 and December 31, 1997, respectively; issuable in
series, none at June 30, 1998 and 14,377,595 at
December 31, 1997 (aggregate liquidation preference at
December 31, 1997, $40,478,381)........................ - 33,533
Common Stock, 30,000,000 shares, $0.001 par value, and
50,000,000 shares, no par value, authorized at June 30,
1998 and December 31, 1997, respectively; 5,432,814 and
103,845 shares issued and outstanding at June 30, 1998
and December 31, 1997, respectively.................... 5 1,839
Additional paid-in capital.................................. 56,096 1,672
Notes receivable from stockholders.......................... (147) (147)
Deferred compensation....................................... (1,799) (1,362)
Deficit accumulated during the development stage............ (37,556) (35,697)
Net unrealized loss on available-for-sale securities........ (26) -
-------- --------
Total stockholders' equity (deficit).............. 16,573 (162)
-------- --------
$ 20,110 $ 4,312
======== ========
</TABLE>
See Accompanying Notes.
2
<PAGE> 4
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED PERIOD FROM
JUNE 30, JUNE 30, INCEPTION
------------------ ----------------- (MAY 5, 1989) TO
1998 1997 1998 1997 JUNE 30, 1998
-------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Revenue:
Contract research revenue from related
parties............................. $ 639 $ 417 $ 1,388 $ 834 $ 4,168
Grant revenue.......................... 146 434 403 747 3,326
------- ------ ------- ------- --------
Total revenue.................. 785 851 1,791 1,581 7,494
------- ------ ------- ------- --------
Operating expenses:
Research and development............... 1,428 1,053 2,604 2,052 25,303
General and administrative............. 550 403 1,011 763 12,867
Financial advisory costs............... - - - - 1,396
Acquired in-process research and
development......................... - - - - 5,000
------- ------ ------- ------- --------
Total operating expenses....... 1,978 1,456 3,615 2,815 44,566
------- ------ ------- ------- --------
Loss from operations..................... (1,193) (605) (1,824) (1,234) (37,072)
Interest income (expense), net........... 34 (15) (35) (24) (484)
------- ------ ------- ------- --------
Net loss................................. (1,159) (620) (1,859) (1,258) (37,556)
------- ------ ------- ------- --------
Deemed dividend upon conversion of
preferred stock........................ (7,989) - (7,989) - (7,989)
------- ------ ------- ------- --------
Net loss attributable to common
stockholders........................... $(9,148) $ (620) $(9,848) $(1,258) $(45,545)
======= ====== ======= ======= ========
Basic net loss per common share.......... $ (5.24) $(6.20) $(10.59) $(12.58)
======= ====== ======= =======
Weighted average shares of common stock
outstanding............................ 1,746 100 930 100
======= ====== ======= =======
</TABLE>
See Accompanying Notes.
3
<PAGE> 5
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, PERIOD FROM INCEPTION
------------------ (MAY 5, 1989)
1998 1997 TO JUNE 30, 1998
-------- ------- ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $ (1,859) $(1,258) $(37,556)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 111 66 1,077
Amortization of warrants and deferred compensation........ 304 - 422
Accrued interest on bridge notes converted to preferred
stock................................................... - - 122
Losses on advances to related parties..................... - - 465
Non-cash financial advisory costs......................... - - 1,300
Acquisition of in-process research and development for
notes payable........................................... - - 4,200
Other..................................................... 10 - 48
Changes in assets and liabilities:
Prepaid expenses and other current assets............... (119) - (326)
Other assets............................................ (28) (71) (185)
Accounts payable........................................ (472) (224) 930
Deferred revenue - related parties...................... 611 - 1,167
Accrued expenses and other liabilities.................. (131) (254) 1,004
-------- ------- --------
Net cash used in operating activities....................... (1,573) (1,741) (27,332)
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment......................... (206) (20) (603)
Organization costs.......................................... - - (68)
Advances to related parties................................. - - (715)
Repayment of notes receivables -- officer................... - - 250
Purchases of short-term investments......................... (10,586) (881) (17,067)
Maturities of short-term investments........................ - - 4,500
Sales of short-term investments............................. - - 2,000
-------- ------- --------
Net cash used in investing activities....................... (10,792) (901) (11,703)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bridge financing.............................. - - 3,630
Proceeds from short-term debt............................... - - 4,908
Repayment of short-term debt................................ - - (3,015)
Repayment of notes payable.................................. (1,000) (1,000) (4,200)
Principal payments on capital lease obligations............. (108) (56) (836)
Proceeds from sale-leaseback of equipment................... - - 207
Deferred offering costs..................................... 1,142 - -
Proceeds from issuances of common stock and warrants, net of
issuance costs, repurchases and repayment of stockholder
notes..................................................... 16,444 7 16,624
Net proceeds from issuance of convertible preferred stock
and warrants.............................................. 1,978 4,111 29,853
-------- ------- --------
Net cash provided by financing activities................... 18,456 3,062 47,171
-------- ------- --------
Net increase in cash and cash equivalents................... 6,091 420 8,136
Cash and cash equivalents at beginning period............... 2,045 1,981 -
-------- ------- --------
Cash and cash equivalents at end of period.................. $ 8,136 $ 2,401 $ 8,136
======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 285 $ 132 $ 1,129
======== ======= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Equipment purchased under capital leases.................... $ 81 $ 24 $ 1,014
======== ======= ========
Conversion of debt obligations and accrued interest to
preferred stock........................................... - - $ 5,645
======== ======= ========
Deferred compensation related to stock option grants........ $ 635 - $ 2,115
======== ======= ========
Warrants issued in connection with lease and borrowing
transactions.............................................. - - $ 372
======== ======= ========
</TABLE>
See Accompanying Notes.
4
<PAGE> 6
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of RiboGene, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles and applicable Securities and Exchange Commission
regulations for interim financial information. These financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The unaudited financial
statements are intended to be read in conjunction with the audited financial
statements and footnotes thereto for the year ended December 31, 1997 contained
in the Company's Registration Statement filed on form S-1 with the Securities
and Exchange Commission on May 28, 1998, as amended. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation of interim financial information have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
2. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments with a maturity from
the date of purchase of three months or less to be cash equivalents.
The Company classifies its investments as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, if any, reported in a separate component of stockholders'
equity. For the three months ended June 30, 1998 the Company recognized an
unrealized loss of $26,000. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are included
in income. The Company has not experienced any realized gains or losses on its
cash equivalents. The cost of securities sold is based on the specific
identification method. Cash and cash equivalents and short-term investments at
June 30, 1998 and December 31, 1997 consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Demand deposits with banks and investment in money
market funds.......................................... $ 7,086 $2,045
Corporate debt securities, including accrued interest... 11,610 --
------- ------
$18,696 $2,045
======= ======
</TABLE>
3. NET LOSS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), basic net loss per share has been computed
using the weighted-average number of shares of Common Stock outstanding during
the period. Pro forma net loss per share gives effect to the conversion of the
convertible preferred stock that automatically converted on completion of the
Company's initial public offering (using the as-if converted method) from the
original date of issuance.
5
<PAGE> 7
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following is a reconciliation of shares used in the calculation of
basic net loss per share and pro forma net loss per share (in thousands except
per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1998 1997 1998 1997
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss attributable to common
stockholders............................... $(9,148) $ (620) $(9,848) $(1,258)
======= ====== ======= =======
Weighted average shares of common stock
outstanding................................ 1,746 100 930 100
======= ====== ======= =======
Basic net loss per common share.............. $ (5.24) $(6.20) $(10.59) $(12.58)
======= ====== ======= =======
Calculation of shares outstanding for
computing pro forma net loss per share:
Shares used in computing basic net loss per
common share............................... 1,746 100 930 100
Adjusted to reflect the effect of the assumed
conversion of Preferred Stock from the date
of issuance or as of the beginning of the
period..................................... 1,651 2,054 2,006 1,681
------- ------ ------- -------
Shares used in computing pro forma net loss
per common share........................... 3,397 2,154 2,936 1,781
======= ====== ======= =======
Pro forma net loss per common share.......... $ (2.69) $(0.29) $ (3.35) $ (0.71)
======= ====== ======= =======
Pro forma net loss excluding impact of deemed
dividend (see note 5)...................... $ (0.34) $(0.29) $ (0.63) $ (0.71)
======= ====== ======= =======
</TABLE>
Diluted net loss per share has not been presented separately as, due to the
Company's net loss position, it is anti-dilutive.
4. STOCK OPTIONS AND WARRANTS
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected
to account for stock options and purchase rights granted to employees using the
intrinsic value method and, accordingly, does not recognize compensation expense
for options and purchase rights granted to employees with exercise prices which
are not less than fair value of the underlying common stock.
For equity awards to non-employees, including lenders and lessors, the
Company applies the Black-Scholes method to determine the fair value of such
instruments. The value is recognized as expense over the period of services
received or the term of the related financing.
During the three months ended June 30, 1998, the Company granted employees,
directors and consultants options to purchase 586,400 shares of common stock
with an exercise price of $5.63 per share. The fair market value of the
Company's common stock at the date of grant was $6.63 per share and as a result,
the Company has recognized deferred compensation of approximately $635,000 which
will be amortized to expense over the vesting period of the options, subject to
adjustment in the case of non-employee grants.
5. INITIAL PUBLIC OFFERING AND RELATED MATTERS
In June 1998, the Company consummated an initial public offering (the
"Offering") with the issuance of 2,300,000 shares of common stock at a price of
$7.00 per share. Concurrently with the closing of the Offering, the Company sold
571,429 additional shares of common stock at $7.00 per share to Abbott
6
<PAGE> 8
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Laboratories in a private placement. Proceeds from the Offering and private
placement net of issuance costs were $16,430,000.
The Company filed a Certificate of Amendment in the State of Delaware to
effect a one-for-14 reverse stock split of all outstanding shares of common
stock, and common stock options and warrants in June 1998. As a result of the
reverse stock split, each share of Series A through E and G preferred stock
converted into 0.0714 of a share of common stock. Each share of Series F
preferred stock converted into 0.6429 of a share of common stock. The Series F
preferred stock contained certain antidilution provisions that resulted in the
Series F preferred stock holders receiving an additional 1,141,317 shares of
common stock upon conversion. The value of this additional common stock,
$7,989,000, has been deemed to be equivalent of a preferred stock dividend. The
Company recorded the deemed dividend at the time of conversion by offsetting
charges and credits to additional paid in capital, without any effect on total
stockholders' equity. There was no effect on cash or net loss for the three and
six months ended June 30, 1998, from the conversion. However, the amount
increased the loss allocable to common stock, in the calculation of basic net
loss per share for the three and six month periods ended June 30, 1998.
Following the Offering, the Company filed a Restated Certificate of
Incorporation to reduce the authorized stock of the Company such that the
Company will be 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.
6. SUBSEQUENT EVENT
On July 7, 1998, the Company entered into an option and license agreement
with Roberts Pharmaceutical Corporation ("Roberts") for the development of
Emitasol, an intranasally administered drug being developed for treatment of
delayed onset nausea and vomiting in cancer chemotherapy patients. In addition,
Roberts has made a $10 million equity investment in RiboGene by purchasing
1,428,572 shares of Series A non-voting convertible preferred stock at $7.00 per
share.
Under the terms of the option and license agreement, Roberts will conduct
clinical trials and, if those are successful, submit a New Drug Application
("NDA"). If FDA regulatory approval, is obtained Roberts will have 60 days to
exercise an exclusive option for a license to market Emitasol in North America.
Roberts has agreed to make a payment to RiboGene of up to $10,000,000 upon the
exercise of the option and to pay a royalty on product sales. RiboGene will
provide up to $7,000,000 in funding for the development of Emitasol through
completion of Phase III trials and the submission of an NDA, with the balance,
if any, provided by Roberts.
7
<PAGE> 9
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this quarterly report on Form 10-Q that are not historical
fact constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements regarding future
pharmaceutical development, regulatory approvals, revenues, expenses, and
profits or losses. These forward-looking statements are subject to known and
unknown risks, uncertainties or other factors which may cause the actual results
of the Company to be materially different from historical results or any results
expressed or implied by the forward-looking statements. Factors that could cause
actual results to differ materially include, but are not limited to, the risks
and uncertainties described or discussed in the section "Risk Factors" in the
Company's Registration Statement filed on May 28, 1998. The forward-looking
statements contained herein represent the Company's judgement as of the date of
this quarterly report on Form 10-Q and the Company cautions readers not to place
undue reliance on such statements. Furthermore, the Company disclaims any
obligation or intent to update any such forward-looking statements to reflect
future events or developments.
OVERVIEW
RiboGene is a drug discovery company focused on the identification of novel
leads and the development of potential drug candidates for the treatment of
infectious diseases. The Company was founded in May 1989 to develop laboratory
equipment for cell-free protein synthesis. In January 1993, the Company
discontinued development of the lab equipment and began to focus its research
and development efforts on the identification of novel leads and the development
of potential drug candidates for the treatment of infectious diseases. The
Company's research efforts initially focused on infections caused by fungi and
viruses. In 1996, the Company expanded its research efforts to include
infections caused by bacteria. Simultaneously with the shift in focus to
infectious disease drug discovery, in 1993 and later in 1994, the Company
in-licensed or acquired the rights to certain in-process research and
development (the "Intranasal Product Acquisition"), including certain patents
and other intellectual property related to intranasal formulations and the
corresponding administration of metoclopramide, propranolol and certain
benzodiazepines. One of the potential products acquired by the Company was
Emitasol, an intranasal formulation of metoclopramide for the treatment of
emesis (nausea and vomiting) following chemotherapy.
On January 27, 1998, the Company entered into a collaboration with
Dainippon Pharmaceuticals Company, Ltd. ("Dainippon") encompassing two targets
in the Company's antibacterial program (the "Dainippon Collaboration"). As part
of the Dainippon Collaboration, Dainippon agreed to provide the Company with up
to $6.0 million in research support payments ($2.0 million of which has been
received), and to provide additional research and development at Dainippon, over
the three-year term of the research program. The Company may also be entitled to
receive milestone payments upon the achievement of mostly late-stage clinical
and regulatory milestones in an amount of up to $10.0 million for each product
developed through the collaboration, consisting of up to $5.0 million through
approval in Japan and up to $5.0 million through approval in one additional
major market territory. In connection with the Dainippon Collaboration,
Dainippon purchased $2.0 million of the Company's Series G preferred stock,
which automatically converted into 53,988 shares of common stock concurrently
with the closing of the initial public offering. From April 1996 to April 1998,
the Company had a collaboration with Abbott Laboratories for the Company's
antifungal program (the "Abbott Collaboration"). In connection with the Abbott
Collaboration, Abbott made a $3.5 million equity investment in the Company and,
concurrently with the Company's initial public offering, purchased an additional
$4.0 million of common stock directly from the Company in a private placement at
$7.00 per share.
In June 1998, the Company consummated an initial public offering (the
"Offering") with the issuance of 2,300,00 shares of common stock at a price of
$7.00 per share. Concurrently with the closing of the Offering the Company sold
571,429 additional shares of common stock to Abbott Laboratories in a private
placement. Proceeds from the Offering and private placement, net of issuance
costs, were $16 million. In connection with the Offering all outstanding
preferred stock automatically converted into common stock and the Company
recognized a deemed dividend to preferred stockholders in the amount of $8
million.
8
<PAGE> 10
On July 7, 1998, the Company entered into an option and license agreement
with Roberts Pharmaceutical Corporation for the development of Emitasol, an
internally administered drug for treatment of delayed onset nausea and vomiting
in cancer chemotherapy patients. In addition, Roberts has made a $10 million
equity investment in the Company by purchasing 1,428,572 shares of Series A
non-voting preferred stock at $7.00 per share. Under the terms of the option and
license agreement, Roberts will conduct clinical trials and, if those are
successful, submit a New Drug Application (NDA). If FDA regulatory approval is
obtained, Roberts will have 60 days to exercise an exclusive option for a
license to market Emitasol in North America. Roberts has agreed to make a
payment to the Company of up to $10 million upon the exercise at the option and
to pay a royalty on product sales. The Company will provide up to $7 million in
funding for the development of Emitasol through the completion of Phase III
trials and the submission of an NDA, with the balance, if any, provided by
Roberts.
The Company is a development stage company, has generated no revenue from
the sales of products and, through June 30, 1998, has incurred cumulative net
losses of approximately $37.6 million and, at June 30, 1998, had a net
stockholders' equity of $16.6 million. The Company expects to incur significant
operating losses over the next several years due primarily to expanded research
and development efforts, preclinical and clinical testing of its product
candidates and commercialization activities. The Company does not anticipate
revenues from product sales for a significant number of years, if ever. The
Company's sources of revenues for the next several years will be payments from
strategic collaborations if any, and interest income. Certain payments under
collaborations are or will be contingent upon the Company or its collaborators
achieving certain milestones as to which there can be no assurance. Results of
operations may vary significantly from quarter to quarter depending on, among
other factors, the progress of the Company's research and development efforts,
results of clinical testing, the timing of certain expenses, the establishment
of collaborative research agreements and the receipt of grants or milestone
payments, if any.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
For the three month period ended June 30, 1998, the Company's revenues
consisted of revenues from the collaboration agreements and Small Business
Innovation Research ("SBIR") grants from the National Institutes of Health.
Revenue earned under the Abbott collaboration, which ended on April 13, 1998,
was $139,000 for the three month period ended June 30, 1998 and $417,000 for the
three months ended June 30, 1997. Revenue earned as part of the Dainippon
collaboration, which began in February 1998, amounted to $500,000 for the three
month period ended June 30, 1998. Revenues from SBIR grants for the three month
period ended June 30, 1998 were $146,000 as compared to $434,000 in the three
month period ended June 30, 1997. The decrease in grant revenues results from
the completion of one grant in June 1998 and two grants during the third quarter
of 1997. Revenues earned under research grants are determined by the timing of
the award from the issuing agency. As a result, research grant revenue earned in
one period is not predictive of research grant revenue to be earned in future
periods.
Research and development expenses increased $375,000, or 36%, to $1.4
million for the three month period ended June 30, 1998, from $1.1 million in the
three month period ended June 30, 1997. This increase resulted from personnel
and supply costs relating to the establishment of the Company's medicinal
chemistry capabilities, operating costs associated with the Company's new
laboratories, and a $78,000 non-cash charge for deferred compensation relating
to certain stock options granted to employees and consultants during 1997 and
1998. Research and development expenses represented approximately 72% of total
operating expenses of $2.0 million in the three month period ended June 30,
1998, and 72% of total operating expenses of $1.5 million in the three month
period ended June 30, 1997.
General and administration expenses increased $147,000 or 36% to $550,000
for the three month period ended June 30, 1998, from $403,000 in the three month
period ended June 30, 1997. This increase is due to additional operating costs
associated with the Company's new facility and a $26,000 non-cash charge for
deferred compensation relating to certain stock options granted employees and
consultants during 1997 and 1998.
9
<PAGE> 11
For the three months ended June 30, 1998, the Company reported net interest
income of $34,000, as compared to net interest expense for the three months
ended June 30, 1997. This increase in interest income results from interest
earned on the investment of proceeds from the Company's initial public offering
and concurrent private placement.
The net loss for the three month period ended June 30, 1998 was $1,159,000,
an increase of $539,000, or 87%, from the net loss of $620,000 for the three
month period ended June 30, 1997. The increase resulted from the changes in
revenue and operating expenses discussed above.
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
For the six month period ended June 30, 1998, the Company's revenues
consisted of revenues from the collaboration agreements and SBIR grants from the
National Institutes of Health. Revenue earned as part of the Abbott
collaboration, which ended on April 13, 1998, was $556,000 for the six month
period ended June 30, 1998, as compared to $834,000 for the six months period
ended June 30, 1997. Revenue earned under the Dainippon collaboration, which
began in February 1998, amounted to $832,000 for the six month period ended June
30, 1998. Revenues from SBIR grants for the six month period ended June 30, 1998
were $403,000 as compared to $747,000 in the six month period ended June 30,
1997. The decrease in grant revenues results from the completion of one grant in
June 1998 and two grants during the third quarter of 1997. Revenues earned under
research grants are determined by the timing of the award from the issuing
agency. As a result, research grant revenue earned in one period is not
predictive of research grant revenue to be earned in future periods.
Research and development expenses increased $552,000 or 27%, to
approximately $2.6 million for the six month period ended June 30, 1998, from
$2.1 million in the six month period ended June 30, 1997. This increase resulted
from personnel and supply costs relating to the establishment of the Company's
medicinal chemistry capabilities, facility operating costs associated with the
Company's new laboratories, a $150,000 non-cash charge for deferred compensation
relating to certain stock options granted to employees and consultants during
1997 and 1998, and initial costs associated with the Dainippon Collaboration.
Research and development expenses represented approximately 72% of total
operating expenses of $3.6 million in the six month period ended June 30, 1998,
as compared to 73% of total operating expenses of $2.8 million in the six month
period ended June 30, 1997.
General and administration expenses increased $248,000, or 33%, to $1.0
million for the six month period ended June 30, 1998, from $763,000 in the six
month period ended June 30, 1997. This increase is due to additional operating
costs associated with the Company's new facility and a $48,000 non-cash charge
for deferred compensation relating to certain stock options granted to employees
and consultants during 1997.
Net interest expense increased $11,000 to $35,000 for the six month period
ended June 30, 1998, from $24,000 in the six month period ended June 30, 1997.
This increase results from a non-cash charge for the amortization of the value
of a warrant issued in connection with the extension of a note payable, which
was partially offset by interest earned on the investment of proceeds from the
Company's initial public offering and concurrent private placement.
The net loss for the six month period ended June 30, 1998 was $1.9 million,
an increase of $601,000, or 48%, from the net loss of $1.3 million for the six
month period ended June 30, 1997. The increase resulted from the changes in
revenue and operating expenses discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since incorporation primarily
through private sales of Common Stock and preferred stock, warrants, SBIR
grants, the Abbott and Dainippon Collaborations, the issuance of short-term
convertible notes and equipment financing arrangements. Through June 30, 1998,
the Company has raised approximately $57.4 million from the sale of Common Stock
and preferred stock, warrants and short-term convertible notes, $3.3 million
from SBIR grants and $4.2 million from the Abbott and Dainippon Collaborations
(excluding the initial Abbott and Dainippon equity investments). The Company's
capital
10
<PAGE> 12
expenditures and payments under capital lease obligations aggregate
approximately $1.6 million through June 30, 1998, and cash used to fund
operating activities since incorporation totaled $27.3 million.
At June 30, 1998, the Company had cash and cash equivalents and short-term
investments of approximately $18.7 million and working capital of $15.9 million.
The Company has a policy of investing excess funds in government securities and
investment grade, interest-bearing securities primarily with an expected
maturity of one-and-one-half years or less.
In July 1998 the Company received $10 million from the sale of Series A
non-voting convertible preferred stock to Roberts Pharmaceutical Corporation.
Under the terms of a development agreement with Roberts, the Company will
provide up to $7 million in funding for the development of Emitasol.
The Company will require substantial additional funds to continue and
expand its research and development activities, conduct preclinical studies and
expand administrative capabilities. The Company estimates that at its planned
rate of spending, existing cash and cash equivalents, and the interest income
earned on such proceeds, will be sufficient for the purposes specified herein
and to allow the Company to maintain its current and planned operations through
the first quarter of 2000. There can be no assurance, however, that the
Company's assumptions regarding its future level of expenditures and operating
losses will prove to be accurate. The Company's future funding requirements will
depend on many factors, including any expansion or acceleration and the breadth
of the Company's research and development programs; the results of research and
development, preclinical studies and clinical trials conducted by the Company or
its collaborative partners or licensees, if any; the acquisition and licensing
of technologies or compounds, if any; the Company's ability to maintain existing
and establish new corporate relationships and research collaborations; the
Company's ability to manage growth; competing technological and market
developments; the time and costs involved in filing, prosecuting, defending and
enforcing patent and intellectual property claims; the receipt of licensing or
milestone fees from its current or future collaborative and license
arrangements, if established; the continued funding of governmental research
grants; the timing of regulatory approvals; and other factors.
IMPACT OF YEAR 2000
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's suppliers
or service providers, working either alone or in conjunction with other software
or systems, will not accept input of, store, manipulate and output dates for the
years 1999, 2000 or thereafter without error or interruption (commonly known as
the "Year 2000" problem). The Company does not have a comprehensive or formal
Year 2000 plan for its operations. However, the Company has assessed its
computer systems and at this time, believes that such systems will function
properly with respect to dates in the years 1999, 2000 and thereafter. Some
risks associated with the Year 2000 problem are beyond the ability of the
Company to control, including the extent to which the Company's suppliers and
service providers, including providers of telephone services, can address the
Year 2000 problem. The failure by a third party to adequately address the Year
2000 issue could have a material adverse impact on such third party, and could
have an adverse impact on the Company. The Company is assessing the possible
effects on the Company's operations of the possible failure of the Company's key
suppliers and providers, contractors and collaborators to identify and remedy
potential Year 2000 problems.
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Recent Sales of Unregistered Securities
1. In June 1998, the Company sold and issued an aggregate of
571,429 shares of common stock to Abbott Laboratories for cash
in the aggregate amount of $4,000,000.
2. In July 1998, the Company sold and issued an aggregate of
1,428,572 shares of Series A preferred stock to Roberts
Pharmaceutical Corporation in connection with a collaboration
arrangement for an aggregate of $10,000,000.
(b) Use of Proceeds
1. The effective date of the Company's registration statement,
filed on Form S-1 under the Securities and Exchange Act of
1933, as amended (File No. 333-38781), was May 28, 1998 (the
"Registration Statement"). The class of securities registered
was Common Stock and all securities sold were sold in the
offering. The underwriter for the offering was Gruntal & Co.,
L.C. Pursuant to the Registration Statement, the Company sold
2,300,000 shares of its Common Stock for an aggregate
offering price of $16,100,000.
In connection with the public offering, the Company incurred
expenses of $3,670,000, of which $1,787,000 represented
underwriting discounts and commissions and expense
reimbursements and $1,883,000 represented other expenses
related to the offering. No proceeds were paid directly or
indirectly to directors, officers, general partners of the
Company or to persons holding ten percent or more of any
class of equity security issued by the Company, or to any
other affiliate of the Company. The net offering proceeds to
the Company after total expenses was $12,430,000.
The Company has used $422,000 of the net proceeds from the
offering for operations. The Company has invested the
remainder of the net proceeds in short-term,
investment-grade, interest bearing financial instruments. The
use of the proceeds from the offering does not represent a
material change in the use of the proceeds described in the
Registration Statement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In April 1998, the Company solicited and received the written consent
of stockholders, approving (i) the adoption of the 1997 Equity
Incentive Plan, (ii) the adoption of the 1997 Non-Employee Directors'
Stock Option Plan, (iii) the adoption of the 1997 Employee Stock
Purchase Plan, (iv) the adoption of the Certificate of Incorporation
and Bylaws to be effective upon consummation of the Company's initial
public offering, and (v) a 1-for-14 reverse split of the outstanding
shares of the Company's Common Stock.
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring
matters or propose nominees for director at the Company's 1999 Annual
Meeting of stockholders must provide specified information to the
Company not later than 60 days nor earlier than 90 days prior to the
Company's 1999 annual meeting of the stockholders (unless such matters
are included in the Company's proxy statement pursuant to rule 14a-8
under the Securities and Exchange Act of 1934, as amended).
12
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- ---------------------------------------------------------
<C> <S>
10.39 Stock Purchase Agreement, dated May 29, 1998 between the
Company and Abbott Laboratories.
27.0 Financial Data Schedules
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K during the quarter ended June
30, 1998.
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RIBOGENE, INC.
By: /s/ TIMOTHY E. MORRIS
------------------------------------
Timothy E. Morris
Vice President, Finance and
Administration
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: August 13, 1998
14
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
<C> <S>
10.39 Stock Purchase Agreement, dated May 29, 1998 between the
Company and Abbott Laboratories
27.0 Financial Data Schedules
</TABLE>
15
<PAGE> 1
EXHIBIT 10.39
STOCK PURCHASE AGREEMENT
RIBOGENE, INC.
MAY 29, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. PURCHASE AND SALE..................................................... 1
1.1 Sale of Shares................................................. 1
1.2 Closing Date................................................... 1
1.3 Delivery....................................................... 2
1.4 "Market Stand-Off" Agreements.................................. 2
2. REPRESENTATIONS AND WARRANTIES OF RIBOGENE............................ 2
2.1 Organization and Standing; Certificate and Bylaws.............. 2
2.2 Authorization.................................................. 2
2.3 Validity of Shares............................................. 2
2.4 Offering....................................................... 2
2.5 No Conflict; No Violation...................................... 3
2.6 Consents and Approvals......................................... 3
3. REPRESENTATIONS AND WARRANTIES OF ABBOTT.............................. 3
3.1 Legal Power.................................................... 3
3.2 Due Execution.................................................. 3
3.3 Investment Representations..................................... 3
4. REGISTRATION OF SHARES AND INITIAL SHARES............................. 4
4.1 Registration................................................... 4
4.2 Expenses of Registration....................................... 5
4.3 Obligations of RiboGene........................................ 5
4.4 Delay of Registration; Furnishing Information.................. 6
5. CONDITIONS TO CLOSING................................................. 6
5.1 Conditions to Obligations of Abbott............................ 6
(a) Representations and Warranties True;
Performance of Obligations................................ 6
(b) Completion of Initial Public Offering..................... 6
(c) Qualifications, Legal Investment.......................... 6
(d) Certificate............................................... 7
(e) Opinion of Counsel........................................ 7
5.2 Conditions to Obligations of RiboGene.......................... 7
(a) Representations and Warranties True....................... 7
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(b) Performance of Obligations................................ 8
(c) Qualifications, Legal Investment.......................... 8
6. MISCELLANEOUS......................................................... 8
6.1 Governing Law.................................................. 8
6.2 Successors and Assigns......................................... 8
6.3 Entire Agreement............................................... 8
6.4 Severability................................................... 8
6.5 Amendment and Waiver........................................... 8
6.6 Delays or Omissions............................................ 8
6.7 Notices, Etc................................................... 9
6.8 Titles and Subtitles.......................................... 10
6.9 Counterparts.................................................. 10
</TABLE>
ii
<PAGE> 4
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of May 29, 1998 (the "Effective Date"), by and between RIBOGENE, INC., a
Delaware corporation ("RIBOGENE"), and ABBOTT LABORATORIES, an Illinois
corporation ("ABBOTT").
RECITALS
A. RIBOGENE and ABBOTT are parties to that certain Series E Preferred Stock
Purchase Agreement, as amended, dated as of April 26, 1996 (the "Series E
Purchase Agreement"), whereby ABBOTT covenants to purchase shares of RIBOGENE
capital stock upon the occurrence of an Initial Public Offering (as such term is
defined in the Series E Purchase Agreement) if the aggregate Price to Public of
the Initial Public Offering is not less than $16,000,000 (exclusive of the
Shares, which Shares are defined below).
B. ABBOTT purchased and currently owns 1,555,556 shares of RIBOGENE's
Series E Preferred Stock pursuant to the Series E Purchase Agreement, which
shares will be converted to shares of common stock of RIBOGENE upon the closing
of the Initial Public Offering and which shares are hereinafter referred to as
the "Initial Shares."
C. Pursuant to Section 9 of the Series E Purchase Agreement, RIBOGENE
desires to sell and issue to ABBOTT, and ABBOTT desires to buy, shares of
RIBOGENE's common stock, as provided herein.
NOW, THEREFORE, the Parties hereto agree as follows:
1. PURCHASE AND SALE.
Subject to the terms and conditions hereof, and in reliance upon the
representations, warranties and agreements contained herein, RIBOGENE hereby
agrees to issue and sell to ABBOTT, and ABBOTT hereby agrees to purchase from
RIBOGENE, the aggregate number of shares of RIBOGENE's Common Stock (the
"Shares") determined in accordance with Subsection 1.1 hereof.
1.1 SALE OF SHARES. On the Closing Date (as defined in Subsection
1.2), RIBOGENE shall issue and sell to ABBOTT, and ABBOTT shall purchase from
RIBOGENE for $4,000,000, the number of shares of RIBOGENE's Common Stock (the
"Shares") equal to the quotient of $4,000,000 (the "Purchase Price") divided by
the Per Share Price (as hereinafter defined). In the event the number of Shares
includes a fraction of a share, the number of Shares shall be rounded to the
nearest whole number of shares and the Purchase Price shall be adjusted to equal
the Per Share Price times such whole number of Shares. The Per Share Price shall
be the Price to Public stated on the front cover of the final prospectus
distributed in connection with the Initial Public Offering.
1.2 CLOSING DATE. The closing of the sale and purchase of the Shares
(the "Closing") shall take place on the date of the closing of the Initial
Public Offering (the "Closing Date").
1.
<PAGE> 6
1.3 DELIVERY. At the Closing, RIBOGENE will deliver to ABBOTT a
certificate registered in the name of Abbott, representing the Shares to be
purchased by ABBOTT from RIBOGENE, dated the Closing Date, against payment of
the Purchase Price by wire transfer, a check made payable to the order of
RIBOGENE, or any combination thereof.
1.4 "MARKET STAND-OFF" AGREEMENTS. ABBOTT hereby agrees that prior to
the first anniversary of the Closing Date, it shall not sell or otherwise
transfer or dispose of any of the Shares held by it. RIBOGENE may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of the applicable periods.
2. REPRESENTATIONS AND WARRANTIES OF RIBOGENE.
RIBOGENE hereby represents and warrants to ABBOTT as follows:
2.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. RIBOGENE is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has full power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and as proposed to be conducted. RIBOGENE is qualified as a foreign corporation
to do business in each jurisdiction in the United States in which the ownership
of its property or the conduct of its business requires such qualification,
except where any statutory fines or penalties or any corporate disability
imposed for the failure to qualify would not materially adversely affect
RIBOGENE, its assets, financial condition or operations. True and correct copies
of RIBOGENE's Amended and Restated Certificate of Incorporation and Bylaws
currently in effect have been delivered to ABBOTT.
2.2 AUTHORIZATION. All corporate action on the part of RIBOGENE, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the performance of all of RIBOGENE's obligations
hereunder, and for the authorization, issuance, sale and delivery of the Shares
has been taken or will be taken prior to Closing. This Agreement, when executed
and delivered, shall constitute a valid and legally binding obligation of
RIBOGENE in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and subject to
general equity principles.
2.3 VALIDITY OF SHARES. The sale of the Shares is not subject to any
preemptive rights or rights of first refusal that have not been waived and, when
issued, sold and delivered in compliance with the provisions of this Agreement,
the Shares will be validly issued, fully paid and non-assessable, and will be
free of any liens or encumbrances created by RIBOGENE; provided, however, that
the Shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.
2.4 OFFERING. Assuming the accuracy of the representations and
warranties of ABBOTT contained in Section 3 hereof, the offer, issue, and sale
of Shares are exempt from the registration and prospectus delivery requirements
of the 1933 Act, and the Shares have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit, or
qualification requirements of all applicable state securities laws.
2.
<PAGE> 7
2.5 NO CONFLICT; NO VIOLATION. The execution, delivery and
performance of this Agreement and consummation of the transactions contemplated
hereby will not (a) conflict with any provisions of the Amended and Restated
Certificate of Incorporation or Bylaws of RIBOGENE; (b) result in any material
violation or default of, or permit the acceleration of any obligation under (in
each case, upon the giving of notice, the passage of time, or both), any
material mortgage, indenture, lease, agreement or other instrument, permit,
franchise, license, judgment, order, decree, law, ordinance, rule or regulation
applicable to RIBOGENE or its properties.
2.6 CONSENTS AND APPROVALS. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of RIBOGENE in
connection with the valid execution and delivery of this Agreement, the offer,
sale or issuance of the Shares, or the consummation of any other transaction
contemplated hereby have been obtained, or will be effective at the Closing,
except for notices required or permitted to be filed with certain state and
federal securities commissions after the Closing, which notices will be filed on
a timely basis.
3. REPRESENTATIONS AND WARRANTIES OF ABBOTT.
ABBOTT hereby represents and warrants to RIBOGENE as follows:
3.1 LEGAL POWER. It has the requisite legal power to enter into this
Agreement, to purchase the Shares hereunder, and to carry out and perform its
obligations under the terms of this Agreement.
3.2 DUE EXECUTION. This Agreement has been duly authorized, executed
and delivered by it, and, upon due execution and delivery by RIBOGENE, this
Agreement will be a valid and binding agreement of it.
3.3 INVESTMENT REPRESENTATIONS
(A) It is acquiring the Shares for its own account, not as
nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the 1933 Act.
(B) It understands that (i) the Shares have not been registered
under the 1933 Act by reason of a specific exemption therefrom, that they must
be held by it indefinitely, and that it must, therefore, bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the 1933 Act or is exempt from such registration; (ii) each
certificate representing the Shares will be endorsed with the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) PURSUANT
TO SEC RULE 144 OR (B) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT COVERING SUCH SECURITIES OR (C) RIBOGENE, INC.
3.
<PAGE> 8
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO RIBOGENE, INC., STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT."
and (iii) RIBOGENE will instruct any transfer agent not to register the transfer
of any of the Shares unless the conditions specified in the foregoing legend are
satisfied.
ABBOTT shall have the right to demand removal of the foregoing legend
with respect to any or all of the Shares if, in the opinion of counsel to
RIBOGENE, removal of such legend is permitted by the rules and regulations of
the SEC.
(C) It has been furnished with such materials and has been given
access to such information relating to RIBOGENE as it or its qualified
representative has requested and it has been afforded the opportunity to ask
questions regarding RIBOGENE and the Shares, all as it has found necessary to
make an informed investment decision.
(D) It is an "accredited investor" within the meaning of
Regulation D under the 1933 Act.
(E) It was not formed for the specific purpose of acquiring the
Shares offered hereunder.
4. REGISTRATION OF SHARES AND INITIAL SHARES.
4.1 REGISTRATION. The registration rights provided herein are without
prejudice to the registration rights contained in the Series E Purchase
Agreement and pertinent exhibits thereto, as amended. The term "Registrable
Shares" means the Shares and the Initial Shares. If RIBOGENE shall receive at
any time after the one year anniversary of the Closing Date a written request
from ABBOTt covering the Registrable Shares then outstanding that RIBOGENE file
a registration statement under the 1933 Act, then RIBOGENE shall file as soon as
practicable, and in any event within thirty (30) days of the receipt of such
request, a registration statement with the SEC (the "Registration") under the
1933 Act covering all Registrable Shares which Abbott requests to be registered.
In connection with such Registration RIBOGENE will:
(A) promptly give written notice of the proposed Registration,
and any related qualification or compliance, to ABBOTT; and
(B) as soon as practicable, effect such Registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all of ABBOTT's Shares; provided,
however, that RIBOGENE shall not be obligated to effect any such Registration,
qualification or compliance pursuant to this Section 4:
(i) if RIBOGENE shall furnish to ABBOTT a certificate signed
by the Chairman of the Board of Directors of RIBOGENE stating that in the good
faith judgment of the Board of Directors of RIBOGENE, it would be seriously
detrimental to RIBOGENE and its stockholders for such Registration to be
effected at such time, in which event RIBOGENE shall
4.
<PAGE> 9
have the right to defer the filing of the registration statement for a period of
not more than ninety (90) days; provided, that such right to delay shall be
exercised by RIBOGENE not more than once in any twelve (12) month period, or
(ii) in any particular jurisdiction in which RIBOGENE would
be required to qualify to do business or to execute a general consent to service
of process in effecting such Registration, qualification or compliance.
(C) ABBOTT hereby covenants that prior to the first anniversary
of the Closing, it shall not exercise its registration rights under Section 3 of
that certain Tenth Amended and Restated Rights Agreement, dated March 23, 1998.
4.2 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all expenses incurred in connection with a Registration, qualification or
compliance pursuant to this Section 4 ("Registration Expenses") shall be borne
by RIBOGENE. All underwriting discounts and selling commissions applicable to
such Registration shall be borne by ABBOTT. RIBOGENE shall not, however, be
required to pay for expenses of any Registration proceeding begun pursuant to
this Section 4 which has been subsequently withdrawn at the request of ABBOTT
unless the withdrawal is based upon material adverse information concerning
RIBOGENE of which ABBOTT was not aware at the time such Registration was
initiated.
4.3 OBLIGATIONS OF RIBOGENE. When required to effect the Registration
of the Shares, RIBOGENE shall, as expeditiously as reasonably possible:
(A) Prepare and file with the SEC a registration statement with
respect to such Registrable Shares and use all reasonable efforts to cause such
registration statement to become effective, and keep such registration statement
effective until ABBOTT has completed the distribution related thereto.
(B) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of the Registrable
Shares covered by such registration statement for the period set forth in
paragraph (a) above.
(C) Furnish to ABBOTT such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of the Registrable Shares then owned by them.
(D) Use its reasonable best efforts to register and qualify the
Registrable Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by ABBOTT; provided that RIBOGENE shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(E) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the
5.
<PAGE> 10
managing underwriter(s) of such offering. Should ABBOTT participate in such
underwriting, ABBOTT shall also enter into and perform its obligations under
such an agreement.
(F) Notify ABBOTT of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
(G) Use its best efforts to furnish, on the date that such
Registrable Shares are delivered to the underwriters for sale, if such
Registrable Shares are being sold through underwriters, (i) an opinion, dated as
of such date, of the counsel representing RIBOGENE for the purposes of such
Registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of RIBOGENE, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
4.4 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(A) ABBOTT shall not have any right to obtain or seek an
injunction restraining or otherwise delaying any such Registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 4.
(B) It shall be a condition precedent to the obligations of
RIBOGENE to take any action pursuant to this Section 4 that ABBOTT shall furnish
to RIBOGENE such information regarding themselves, the Shares held by them and
the intended method of disposition of such Shares as shall be required to effect
the registration of the Shares.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO OBLIGATIONS OF ABBOTT. ABBOTT's obligation to
purchase the Shares at the Closing is subject to the fulfillment, at or prior to
the Closing, of all of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by RIBOGENE in Section 2
hereof shall be true and correct in all material respects on the date of the
Closing with the same force and effect as if they had been made on and as of
said date; and RIBOGENE shall have performed all obligations and conditions
herein required to be performed by it on or prior to the Closing.
(B) COMPLETION OF INITIAL PUBLIC OFFERING. The Company shall
have completed its Initial Public Offering.
(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 pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing.
6.
<PAGE> 11
No stop order or other order enjoining the sale of the Shares shall have been
issued and no proceedings for such purpose shall be pending or, to the knowledge
of RIBOGENE, threatened by the SEC or any commissioner of corporations or
similar officer of any other state having jurisdiction over this transaction. At
the time of the Closing, the sale and issuance of the Shares shall be legally
permitted by all laws and regulations to which ABBOTT and RIBOGENE are subject.
(D) CERTIFICATE. The Chief Executive Officer of RIBOGENE shall
have delivered to ABBOTT a certificate certifying that the aggregate Price to
Public is not less than $20,000,000 (inclusive of the Shares) as specified in
Section 9 of the Series E Purchase Agreement and that the representations and
warranties set forth in Section 2 hereof are true and correct, with the same
force and effect as if they had been made on the Closing Date.
(E) OPINION OF COUNSEL. Counsel for RIBOGENE shall have
delivered to ABBOTT an opinion, dated the Closing Date, substantially to the
effect that, on the basis of facts and representation set forth in such opinion
or set forth in writing elsewhere and referred to therein:
(i) RIBOGENE has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in Section 2.1 hereof.
(ii) RIBOGENE has corporate power to enter into and perform
its obligations under this Agreement.
(iii) The Shares have been duly authorized and validly
issued and are fully paid and non-assessable and, to the best of their knowledge
and information, have not been issued in violation of or are not otherwise
subject to any preemptive rights or other similar rights.
(iv) Assuming the accuracy of the representations and
warranties of ABBOTT contained in Section 3, hereof, the offer, issue and sale
of the Shares will be exempt from the registration and prospectus delivery
requirements of the 1933 Act, and the Shares have been registered or qualified
(or are exempt from registration and qualification) under the registration,
permit, or qualification requirements of all applicable state securities laws.
(v) The form of certificate used to evidence the Shares is
in due and proper form and complies with all applicable statutory requirements.
5.2 CONDITIONS TO OBLIGATIONS OF RIBOGENE. RIBOGENE's obligation to
issue and sell the Shares at the Closing is subject to the fulfillment to
RIBOGENE's satisfaction, on or prior to the Closing, of the following
conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by ABBOTT in Section 3 hereof shall be true and correct at the
date of the Closing, with the same force and effect as if they had been made on
and as of said date.
7.
<PAGE> 12
(B) PERFORMANCE OF OBLIGATIONS. ABBOTT shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by it on or before the 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 pursuant to this Agreement shall have
been duly obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Shares shall have been issued and
no proceedings for such purpose shall be pending or, to the knowledge of
RIBOGENE, threatened by the SEC or any commissioner of corporations or similar
officer of any state having jurisdiction over this transaction. At the time of
the Closing, the sale and issuance of the Shares shall be legally permitted by
all laws and regulations to which ABBOTT and RIBOGENE are subject.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents, made and to be performed entirely within the State of Delaware.
6.2 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.
6.3 ENTIRE AGREEMENT. This Agreement and any other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof, and no party
shall be liable or bound to any other party in any manner by any
representations, warranties, covenants, or agreements except as specifically set
forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
6.4 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.5 AMENDMENT AND WAIVER. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively, and either
for a specified period of time or indefinitely), with the written consent of
RIBOGENE and ABBOTT. Any amendment or waiver effected in accordance with this
Section shall be binding upon ABBOTT, each future holder of the Shares, and
RIBOGENE.
6.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to ABBOTT or any subsequent holder of any Shares upon
any breach, default
8.
<PAGE> 13
or noncompliance of RIBOGENE under this Agreement, shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on ABBOTT's part
of any breach, default or noncompliance under this Agreement or any waiver on
ABBOTT's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing, and that all remedies, either under this Agreement, by law, or
otherwise afforded to ABBOTT, shall be cumulative and not alternative.
6.7 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(a) upon personal delivery, (b) on report of successful transmission by
facsimile machine that automatically generates a printed report indicating
whether transmission was completed successfully, at the conclusion of each
transmission, (c) on the first business day after receipted delivery to a
courier service which guarantees next business-day delivery, under circumstances
in which such guaranty is applicable, or (d) on the earlier of delivery or five
(5) business days after mailing by United States certified by mail, postage and
fees prepaid, to the appropriate party at the address set forth below or to such
other address as the part so notifies the other in writing:
9.
<PAGE> 14
(A) if to RIBOGENE, to:
RIBOGENE, INC.
26118 Research Road
Hayward, CA 94545
Attention: President and Chief Executive Officer
with a copy to:
COOLEY GODWARD LLP
5 Palo Alto Square, 4th Floor
3000 El Camino Real
Palo Alto, CA 94306-2155
Facsimile: (650) 857-0663
Attention: Robert J. Brigham, Esq.
(B) if to ABBOTT, to:
ABBOTT LABORATORIES
100 Abbott Park Road
Abbott Park, IL 60064-3500
Facsimile: (847) 938-5383
Attention: President, Pharmaceutical Products Division
with a copy to:
ABBOTT LABORATORIES
100 Abbott Park Road
Abbott Park, IL 60064-3500
Facsimile: (847) 939-6277
Attention: General Counsel
Notwithstanding the foregoing, all notices and other communications to an
address outside of the United States shall be sent by telecopy and confirmed in
writing to be sent by first class mail.
6.8 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.
6.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
10.
<PAGE> 15
The foregoing Agreement is hereby executed as of the date first above
written.
RIBOGENE, INC. ABBOTT LABORATORIES
By: By:
--------------------------------- ---------------------------------
Printed Name: Printed Name:
----------------------- -----------------------
Title: Title:
------------------------------ ------------------------------
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0
0
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