<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1998
REGISTRATION NO. 333-38781
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 7
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RIBOGENE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 8731 94-3095154
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
26118 RESEARCH ROAD
HAYWARD, CA 94545
(510) 732-5551
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHARLES J. CASAMENTO
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
26118 RESEARCH ROAD
HAYWARD, CA 94545
(510) 732-5551
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ROBERT J. BRIGHAM, ESQ.
LANA K. HAWKINS, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(650) 843-5000
RODD M. SCHREIBER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
SUITE 2100
CHICAGO, IL 60606
(312) 407-0700
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(b) 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,
check the following box. [ ]
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> 2
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.
SUBJECT TO COMPLETION, DATED MAY 20, 1998
PROSPECTUS
2,700,000 SHARES
RIBOGENE LOGO
COMMON STOCK
All of the 2,700,000 shares of Common Stock offered hereby are being issued
and sold by RiboGene, Inc., a Delaware corporation ("RiboGene" or the
"Company"). Prior to this offering (the "Offering"), there has been no public
market for the Common Stock of the Company. It is currently anticipated that the
initial public offering price will be $7.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company's Common Stock has been approved for quotation on
the Nasdaq National Market under the symbol "RIBO," subject to the Company
meeting the tangible net worth listing requirement. The Company will meet the
tangible net worth listing requirement if the gross proceeds from the Offering
are at least $18,900,000. If the Company's Common Stock is not quoted on the
Nasdaq National Market, the Company will apply for listing of the Common Stock
on the Nasdaq SmallCap Market. See "Risk Factors -- No Assurance of Nasdaq
National Market Listing."
---------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS 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.
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=============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
Per Share...................... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(3)....................... $ $ $
=============================================================================================================
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(1) Does not include additional consideration payable to Gruntal & Co., L.L.C.,
the representative of the several Underwriters (the "Representative"),
consisting of (i) a non-accountable expense allowance of 3% of the gross
proceeds of the Offering and (ii) warrants to purchase an aggregate of
270,000 shares of Common Stock, exercisable at any time following the first
anniversary of the date of this Prospectus, each warrant having an exercise
price equal to 165% of the initial public offering price of the Common Stock
and expiring five years from the date of this Prospectus. Holders of such
warrants have been granted certain registration rights under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the
securities issuable upon exercise of such warrants. The Company has agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $ , including the non-accountable expense allowance.
(3) The Company has granted to the Underwriters a 45-day option to purchase up
to an additional 405,000 shares of Common Stock, on the same terms and
conditions set forth above, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will total $ ,
$ and $ , respectively. See "Underwriting."
---------------------------------
The shares of Common Stock are being offered by the Underwriters named
herein, subject to prior sale, when, as and if delivered to, and accepted by
them, and subject to the right of the Underwriters to reject any order in whole
or in part, and to certain other matters. It is expected that delivery of the
certificates representing shares of Common Stock will be made against payment
therefor at the offices of Gruntal & Co., L.L.C. on or about ,
1998.
---------------------------------
GRUNTAL & CO., L.L.C.
---------------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE
COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus, including information under "Risk Factors." This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results could differ materially from those described in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" and elsewhere in this Prospectus.
Except as otherwise noted, all information in this Prospectus, including
financial information, share and per share data: (i) assumes no exercise of the
Underwriters' over-allotment option; (ii) reflects a 1-for-14 reverse split of
the Company's Common Stock to be effected prior to or concurrently with the
closing of the Offering; (iii) reflects reincorporation of the Company in
Delaware prior to the closing of the Offering; and (iv) assumes the automatic
conversion of all outstanding shares of the Company's Series A through Series G
Preferred Stock into an aggregate of 2,385,039 shares of Common Stock, assuming
an initial public offering price of $7.00 per share, which will occur
concurrently with the closing of the Offering. The number of shares of Common
Stock to be issued upon conversion of the Series F Preferred Stock and upon the
exercise of the Placement Agent Unit Options will depend upon the initial public
offering price. See "Certain Transactions" and "Description of Capital Stock."
THE COMPANY
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's drug discovery efforts target bacterial,
fungal and viral infections, for which the efficacy of existing therapies is
being threatened by the emergence of drug resistance or for which existing
therapies have had limited effectiveness. The Company's drug discovery
technology is based on the translational control of gene expression. Translation
is the process used by cells to make proteins and is an essential cellular
process for all living organisms, including infectious pathogens. The Company is
using its platform technology to discover compounds that inhibit or interfere
with pathogen specific translation mechanisms ("PSTMs"). RiboGene's extensive
knowledge of translation allows the Company to identify components of the
translation process unique to a particular pathogen and essential to its
existence. The Company believes that targeting PSTMs may lead to the discovery
of drugs that are effective against either drug-resistant pathogens or pathogens
for which current therapies are not effective.
Infectious diseases have increased significantly during the past 20 years
and are now the third most common cause of death in the United States. Worldwide
sales of antiinfective drugs were approximately $33.0 billion in 1996 and
constituted the second largest pharmaceutical sales category. The antibacterial,
antifungal and antiviral markets are estimated to be approximately $26.0
billion, $4.0 billion and $3.0 billion, respectively, based on 1996 sales. There
are currently three antibacterial drugs that have each generated in excess of
$1.0 billion in worldwide sales annually and one antifungal drug that generated
nearly $1.0 billion. Of the 100 best selling brand name drugs worldwide, 20 are
antiinfectives addressing bacterial, fungal and viral infections. The clinical
efficacy of many bacterial and fungal antiinfectives is being threatened by
emerging strains of drug-resistant pathogens. In the antiviral area, there are
only a limited number of effective therapeutics currently marketed.
The Company believes that its target-based approach is different from, and
provides advantages over, traditional drug discovery techniques. Antiinfective
drug discovery has historically used a limited number of biological targets
which has restricted the ability to discover new drugs effective against drug
resistant pathogens. RiboGene's PSTMs represent a new class of targets for drug
discovery. By focusing discovery efforts on drugs which are effective inhibitors
of PSTMs, the Company believes that it may be possible to discover drug
candidates for which pathogens have not already developed resistance. In
addition, because the Company selects only PSTM targets which are essential for
the life of the pathogen and appear to bear little or no resemblance to their
human counterpart, such compounds may in certain applications have better safety
and efficacy profiles than existing therapies, or may provide a therapy where no
other therapy currently exists. The Company's scientists and Scientific Advisory
Board use their knowledge and expertise in the field of
3
<PAGE> 5
translation to identify unique targets specific to pathogens and to design and
implement assays in order to identify selective compounds which demonstrate
activity at the pathogen specific translation targets. By developing assays to
discover compounds with identified mechanisms of action against desired targets,
the Company believes that the compounds which demonstrate activity at these
targets will be better characterized and more likely to result in lead
candidates for optimization and further development.
RiboGene has established antibacterial, antifungal and antiviral drug
discovery programs. Within each program, the Company's drug discovery process
consists of four phases: (i) target identification -- the selection and
characterization of PSTM targets; (ii) assay development -- the design and
implementation of screening systems to identify small-molecule compounds active
against the PSTM targets; (iii) lead discovery -- the screening of compound
libraries to identify small-molecule lead compounds; and (iv) lead
optimization -- the refinement of lead compounds in order to develop drug
candidates. In its antibacterial program, the Company has two principal targets
in the lead discovery phase, deformylase and ppGpp degradase, for which it
conducts research in collaboration with Dainippon Pharmaceutical Co., Ltd.
("Dainippon"), a major Japanese pharmaceutical company located in Osaka, Japan.
The Company has several additional antibacterial targets, to which it has
retained its rights, that are in the assay development phase. In its antifungal
program, compounds directed toward two targets, EF3 and GCN4, are in the lead
optimization phase and several others are in various phases of early research
and development. In its antiviral program, which is currently focused
exclusively on the hepatitis C virus ("HCV"), the Company has one target, HCV
IRES, in the lead discovery phase and one target, HCV NS5A/PKR, in the assay
development phase.
In order to accelerate the discovery, development and commercialization of
antiinfective drugs, the Company seeks to enter into collaborations with major
pharmaceutical companies and, additionally, into research and licensing
agreements with biotechnology companies, combinatorial chemistry companies and
universities. These relationships are intended to provide the Company with
funding, research and development support, access to additional compound
libraries and targets, as well as to provide the Company with preclinical and
clinical trial, manufacturing and marketing capabilities.
In April 1996, the Company entered into a collaboration with Abbott
Laboratories ("Abbott") for the Company's antifungal program (the "Abbott
Collaboration"). On February 6, 1998, Abbott notified the Company of its
termination of the Abbott Collaboration effective April 8, 1998. As of March 31,
1998, the Company had realized $3.2 million in research support revenues from
Abbott and expects to realize $139,000 of revenue deferred at March 31, 1998. In
connection with the Abbott Collaboration, Abbott made a $3.5 million equity
investment in the Company and agreed to purchase an additional $4.0 million of
Common Stock at a price per share equal to the initial public offering price
concurrently with the closing of the Offering, assuming the Offering results in
gross proceeds to the Company of $16.0 million.
In January 1998, the Company entered into a collaboration with Dainippon
(the "Dainippon Collaboration") for the two principal targets in the Company's
antibacterial program. 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 support 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 the
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.
RiboGene also has retained certain co-promotion rights for any products
resulting from the collaboration. In connection with the Dainippon
Collaboration, Dainippon made a $2.0 million equity investment in the Company by
purchasing 756,144 shares of the Company's Series G Preferred Stock (the
"Dainippon Shares"), which will automatically convert into 53,988 shares of
Common Stock upon the closing of the Offering. The Company has also entered into
agreements with ArQule, Inc., Pharmacopeia, Inc. and Trega Biosciences, Inc. to
provide the Company with access to additional compound libraries for its drug
discovery programs and with the University of Washington to acquire the rights
to the HCV NS5A/PKR target for its antiviral program.
4
<PAGE> 6
RiboGene is a development stage company that has experienced operating
losses every year since its inception. At March 31, 1998, the Company had an
accumulated deficit of approximately $36.4 million. To date, the Company has not
selected any compounds for further development, has not initiated any
preclinical or clinical studies with any compounds and has not developed or
commercialized any products that have generated revenues. Relatively few
products based on genetic discoveries, and no drugs discovered using a
translation-based discovery approach, have been developed and commercialized by
others to date. The Company's PSTM technology is still in early stages and will
require significant further research, development and preclinical and clinical
testing in order to validate translation generally, and PSTM targets
specifically, as an effective method to discover new antiinfectives. An
investment in the shares of Common Stock offered hereby involves a high degree
of risk. In addition to the other information contained in this Prospectus, the
discussion of risk factors on pages 8 to 20 of this Prospectus should be
considered carefully in evaluating an investment in the Common Stock. See "Risk
Factors -- History of Losses; Uncertainty of Future Profitability; Going Concern
Explanatory Paragraph in Auditors Report," "-- Early Stage of Development;
Uncertainty of Product Development" and "-- Dependence on a Single Technological
Approach."
STATUS OF RIBOGENE DRUG DISCOVERY PROGRAMS
LOGO
The Company was incorporated in California in May 1989 as TransGene, Inc.
and changed its name to RiboGene, Inc. in May 1990. The Company intends to
reincorporate in Delaware prior to or concurrently with the closing of the
Offering. The principal executive offices of the Company are located at 26118
Research Road, Hayward, California 94545 and its telephone number is (510)
732-5551.
5
<PAGE> 7
THE OFFERING
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Common Stock offered...................... 2,700,000 shares
Common Stock to be outstanding after the
Offering................................ 5,764,055 shares(1)(2)
Use of proceeds........................... Expansion of internal chemistry capabilities, expansion and
advancement of antibacterial, antifungal and HCV programs,
establishment of new drug discovery programs, repayment of
certain indebtedness and working capital and general
corporate purposes. See "Use of Proceeds."
Nasdaq National Market symbol............. RIBO
</TABLE>
- ---------------
(1) Based upon shares outstanding at March 31, 1998. Includes: (i) an aggregate
of 2,385,039 shares of Common Stock issuable upon the automatic conversion
of all outstanding shares of the Company's Series A through Series G
Preferred Stock concurrently with the closing of the Offering and (ii)
571,429 shares of Common Stock (assuming an initial public offering price of
$7.00 and gross proceeds to the Company of at least $16.0 million) to be
sold by the Company to Abbott for $4.0 million pursuant to a stock purchase
agreement, dated as of April 26, 1996, as amended (the "Abbott Purchase
Agreement"), concurrently with the closing of the Offering. The number of
shares of Common Stock to be issued upon conversion of the Company's Series
F Preferred Stock and to Abbott will depend upon the initial public offering
price. See "Business -- Collaborative and Research Agreements," "Certain
Transactions" and "Description of Capital Stock."
(2) Excludes as of March 31, 1998: (i) an aggregate of 182,433 shares of Common
Stock reserved for issuance under the Company's stock plans upon exercise of
options outstanding at a weighted average exercise price of $3.57 per share;
(ii) an aggregate of 1,506,486 shares of Common Stock reserved for future
grants or purchases under the Company's equity incentive plans; (iii)
162,967 shares of Common Stock reserved for issuance upon exercise of the
warrants (the "Class A Warrants") issued in connection with the private
placement of the Series F Preferred Stock (the "Series F Private
Placement"), with an exercise price equal to the initial public offering
price; (iv) 166,319 shares of Common Stock reserved for issuance upon the
exercise of warrants (other than Class A Warrants) outstanding at a weighted
average exercise price of $16.75 per share; (v) 733,755 shares of Common
Stock reserved for issuance upon exercise of options (the "Placement Agent
Unit Options") to purchase 570,665 units (the "Placement Agent Units"), at
an exercise price of $1.24 per unit, issued to the placement agent in
connection with the Series F Private Placement and a financial advisory
agreement, each Placement Agent Unit consisting of two shares of Series F
Preferred Stock and one Class A Warrant (the "Placement Agent Class A
Warrants"); (vi) 40,739 shares of Common Stock reserved for issuance upon
the exercise of the Placement Agent Class A Warrants; and (vii) an aggregate
of 270,000 shares of Common Stock reserved for issuance upon the exercise of
warrants issued to the Representative at an exercise price equal to 165% of
the initial public offering price of the Common Stock (the "Representative's
Warrants"). The number of shares of Common Stock to be issued upon
conversion of the Series F Preferred Stock and exercise of the Placement
Agent Unit Options will depend upon the initial public offering price. See
"Management -- Stock and Related Employee Benefit Plans," "Certain
Transactions," "Description of Capital Stock" and "Underwriting."
6
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS (MAY 5,
ENDED 1989)
YEAR ENDED DECEMBER 31, MARCH 31, TO
---------------------------- --------------- MARCH 31,
1995 1996 1997 1997 1998 1998
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STATEMENT OF OPERATIONS DATA:
Total revenues.......................... $ 407 $ 2,087 $ 2,971 $ 730 $1,006 $ 6,709
Operating expenses:
Research and development.............. 4,663 4,077 4,130 999 1,177 23,875
General and administrative............ 2,758 1,372 1,551 360 459 12,098
Financial advisory costs.............. -- -- 1,396 -- -- 1,396
Restructuring costs................... -- 219 -- -- -- 219
Acquired in-process research and
development........................ -- -- -- -- -- 5,000
-------- ------- ------- ------ ------ --------
Total operating expenses........... 7,421 5,668 7,077 1,359 1,636 42,588
-------- ------- ------- ------ ------ --------
Loss from operations.................... (7,014) (3,581) (4,106) (629) (630) (35,879)
Interest expense, net................... (240) (282) (7) (9) (70) (518)
-------- ------- ------- ------ ------ --------
Net loss................................ $ (7,254) $(3,863) $(4,113) $ (638) $ (700) $(36,397)
======== ======= ======= ====== ====== ========
Basic net loss per share(1)............. $(164.86) $(52.92) $(41.13) $(6.44) $(6.73)
======== ======= ======= ====== ======
Shares used in computing basic net loss
per share(1).......................... 44 73 100 99 104
======== ======= ======= ====== ======
Pro forma net loss per share(1)......... $ (1.95) $(0.28)
======= ======
Shares used in computing pro forma net
loss per share(1)..................... 2,109 2,469
======= ======
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<CAPTION>
MARCH 31, 1998
---------------------
DECEMBER 31, AS
1997 ACTUAL ADJUSTED(2)
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BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 2,045 $ 3,272 $ 22,576
Working capital (deficit)................................... (1,745) (622) 19,993
Total assets................................................ 4,312 5,765 23,700
Deficit accumulated during development stage................ (35,697) (36,397) (36,430)
Total stockholders' equity (deficit)........................ (162) 1,226 20,581
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- ---------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
(2) As adjusted to reflect: (i) the issuance and sale of the 2,700,000 shares of
Common Stock offered hereby (assuming an initial public offering price of
$7.00 per share), and the receipt and application of the estimated net
proceeds therefrom; and (ii) the issuance and sale of 571,429 shares of
Common Stock (assuming an initial public offering price of $7.00 per share)
to Abbott for $4.0 million, concurrently with the closing of the Offering.
See "Use of Proceeds," "Capitalization" and "Business -- Collaboration and
Research Agreements."
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RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS
SHOULD BE CONSIDERED CAREFULLY BY POTENTIAL INVESTORS IN EVALUATING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN
THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES
INCLUDE THOSE DISCUSSED BELOW.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY; GOING CONCERN
EXPLANATORY PARAGRAPH IN AUDITORS REPORT. The Company is a development stage
company that has experienced operating losses every year since its inception. At
March 31, 1998, the Company had an accumulated deficit of approximately $36.4
million. The Company expects to continue to incur substantial and increasing
operating losses for at least the next several years as it expands its research
and development activities. The report of the Company's independent auditors for
the year-ended December 31, 1997 includes an explanatory paragraph that
describes the conditions that raise substantial doubt as to the Company's
ability to continue as a going concern.
Neither the Company nor its collaborative partner has developed products
that have generated any revenues to the Company or entered clinical trials with
any potential products developed with the Company that may lead to revenues to
the Company, if successful. To date, substantially all of the Company's revenues
have resulted from payments under the research agreement and license agreements
(the "Abbott Agreements") with Abbott Laboratories ("Abbott"), which were
terminated by Abbott effective April 8, 1998, and grants from a governmental
agency. Payments from collaborators, payments under governmental grants and
investment income are expected to be the only sources of revenue for the
foreseeable future. Royalties or other revenues from commercial sales of
products, if any, are not expected for a significant number of years, if ever.
To achieve profitable operations, the Company, alone or with others, must
successfully discover and identify drug candidates suitable for testing in
humans and use these discoveries to develop products, conduct preclinical
studies and clinical trials, obtain required regulatory approvals and
successfully manufacture, introduce and market such products. There can be no
assurance that any of these requirements to achieve profitability will be met.
The aggregate amount of future net losses and the time required by the
Company to reach or sustain profitability are highly uncertain. There can be no
assurance that the Company will ever be able to generate product revenue or
achieve profitability on a sustained basis or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EARLY STAGE OF DEVELOPMENT; UNCERTAINTY OF PRODUCT DEVELOPMENT. RiboGene is
at an early stage of development and does not expect that any drugs resulting
from its research and development efforts will be commercially available for a
significant number of years, if at all. Although the Company was organized in
1989, the Company only began in January 1993 to focus its research and
development efforts on the identification of novel leads for antiinfective
drugs, initially focusing on the identification of antifungal and antiviral
drugs. The Company's research efforts were expanded in 1996 to include the
identification of novel leads for antibacterial drugs. To date, the Company has
conducted only limited research and development activities and has not completed
the selection of any lead compounds for drug development. None of the Company's
potential lead compounds has advanced to the stage of preclinical or clinical
trials. The Company's leads for potential drug candidates will be subject to the
risks and failures inherent in the development of pharmaceutical products based
on new technologies. These risks include, but are not limited to, unanticipated
problems relating to product development, testing, regulatory compliance,
manufacturing, marketing and competition, and additional costs and expenses that
may exceed current estimates. Products, if any, resulting from the Company's
research and development programs will require significant additional research
and development efforts, and extensive preclinical studies and clinical trials
will be required prior to submission of any regulatory application for
commercial use. There can be no assurance that the Company, or its current or
any future collaborative partners, will be permitted to undertake clinical
trials of any potential products, if developed, that sufficient numbers of
patients can be enrolled for such trials or that such clinical trials will
demonstrate that the products tested are safe and efficacious. Any or all of the
Company's proposed products may prove to have undesirable and unintended side
effects or other characteristics that may limit or prevent their commercial use.
8
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Even if clinical trials are successful, there can be no assurance that the
Company or any collaborative partner will obtain regulatory approval for any
product, that any approved product can be produced and distributed in commercial
quantities at reasonable costs or gain acceptance for use by physicians and
other health care providers, or that any potential products will be marketed
successfully at prices that would permit the Company to operate profitably. The
failure of any of these events to occur would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- The RiboGene Approach," "-- The RiboGene Programs" and
"-- Government Regulation."
NEED FOR ADDITIONAL CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING. The Company
expects negative cash flow from operations to continue for the foreseeable
future. 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, together with the net
proceeds from the Offering and the proceeds from the sale of the Abbott Shares
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 or 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.
The Company will need to raise substantial additional capital to fund its
operations. Initially, the Company intends to seek such additional funding
through collaborative arrangements and through public or private financings,
including equity or debt financings. Any additional equity financing will be
dilutive to existing stockholders, and any debt financing, if available, may
involve restrictions on, among other things, the Company's ability to pay
dividends on its capital stock or the manner in which the Company conducts its
business. In addition, in the event that additional funds are obtained through
arrangements with collaborative partners, such arrangements may require the
Company to relinquish rights to technologies, product candidates or potential
products that the Company would not otherwise relinquish. The Company has no
commitments for any additional collaborations or financings, and there can be no
assurance that any such collaborations or financings will be available to the
Company when needed or, if available, on terms acceptable to the Company. The
inability to obtain sufficient funds when needed may require the Company to
delay, scale back or eliminate some or all of its research and development
programs or cease operations. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS; FUNDING OF PROGRAMS. The
Company's strategy for the development, preclinical and clinical testing,
manufacturing and commercialization of new drugs based on its research and
development activities depends upon corporate partners, licensors, licensees and
others. The Company expects to rely upon the performance of these outside
parties to provide funding for its research programs, further develop lead
compounds or potential product candidates, provide access to additional compound
libraries, conduct preclinical studies and clinical trials, obtain regulatory
approvals and manufacture and market any resulting products.
In April 1996, RiboGene established a collaboration with Abbott (the
"Abbott Collaboration") to discover and develop antifungal drugs. On February 6,
1998, Abbott notified the Company of its termination of the Abbott
Collaboration, effective April 8, 1998. Pursuant to the Abbott Agreements,
Abbott was granted exclusive worldwide rights to develop and market any and all
antifungal products discovered through the Abbott-sponsored collaborative
research program. Since May 1996, Abbott has funded a significant portion of the
costs associated with the Company's antifungal program. As of March 31, 1998,
the Company had
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realized $3.2 million in research support revenues from Abbott and expects to
realize $139,000 of revenue deferred at March 31, 1998. As a result of Abbott's
termination of the Abbott Collaboration, Abbott is obligated to reimburse the
Company for all irrevocably committed research costs for the project prior to
termination that were not covered by previous research support payments. In
addition, each party to the Abbott Agreements is obligated to return to the
other proprietary and confidential information and know-how of such other party
in its possession, and each party is entitled to retain copies of any technical
or other information which was solely or jointly generated as a direct result of
the Abbott Collaboration. The Company is seeking to establish a corporate
collaboration for its antifungal program to replace the Abbott Collaboration,
however, there can be no assurance that the Company will be successful in such
efforts. If the Company is not able to establish a corporate collaboration for
its antifungal program, it currently intends to fund the antifungal program from
its own resources.
On January 27, 1998, RiboGene entered into a collaboration (the "Dainippon
Collaboration") with Dainippon Pharmaceutical Co., Ltd. ("Dainippon") to
discover and develop antibacterial drugs based on the two principal targets in
the Company's anti-bacterial program. Pursuant to a license agreement and
research agreement by and between the Company and Dainippon, dated January 27,
1998 (the "Dainippon Agreements"), Dainippon was granted exclusive, worldwide
rights to develop and market any and all antibacterial products which have
activity against either of these two specific bacterial targets, discovered
during the Dainippon-sponsored collaborative research program. Pursuant to the
Dainippon Agreements, Dainippon has agreed to provide the Company with up to
$6.0 million in research support payments over the three-year term of the
research program ($2.0 million of which has been received), and to provide
related antibacterial research support at Dainippon. Dainippon has the right to
terminate the research agreement at any time after January 27, 1999 upon 180
days written notice to the Company. There can be no assurance that Dainippon
will not terminate the research agreement prior to the expiration of its full
three-year term.
The Company's revenues will be dependent on the success of the lead
compounds and potential drug candidates developed through the Dainippon
Collaboration and on the Company's ability to establish additional
collaborations for its other programs. The failure of the Company to maintain
the Dainippon Collaboration or to enter into agreements with additional
collaborators to provide research support, both financial and technical, and to
develop, obtain regulatory approval for, and market products incorporating, the
Company's discoveries would have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that any such collaborators will commit sufficient development
resources, technology, regulatory expertise, manufacturing, marketing and other
resources towards developing, promoting and commercializing products
incorporating the Company's discoveries. Further, competitive conflicts may
arise among these third parties that could prevent them from working
cooperatively with the Company. The amount and timing of resources devoted to
these activities by such parties could depend on the achievement of milestones
by the Company and otherwise generally will be controlled by such parties. In
addition, the Company expects that its agreements with future collaborators will
provide such collaborators with the right to terminate their agreements with the
Company upon written notice to the Company. Any such termination would
substantially reduce the likelihood that the applicable research program or any
lead candidate or candidates would be developed into a drug candidate, would
obtain regulatory approvals and would be manufactured and successfully
commercialized. Therefore, any such termination could have a material adverse
effect on the Company's business, financial condition and results of operations.
There can be no assurance that the Dainippon Collaboration or any future
collaborations will be successful in developing and commercializing products or
that the Company will receive milestone payments or generate revenues from
royalties sufficient to offset the Company's significant investment in research
and development and other costs. There also can be no assurance that disputes
will not arise in the future with the Company's collaborators, including with
respect to the ownership of rights to any technology developed pursuant to the
collaboration. These and other possible disagreements between collaborators and
the Company could lead to delays or interruptions in, or termination of,
collaborative research, development and commercialization of certain potential
products or could require or result in litigation or arbitration, which could be
time-consuming and expensive and could have a material adverse effect on the
Company's business, financial condition and results of operations. See "-- Need
for Additional Capital; Uncertainty of Additional Funding" and
"Business -- Collaborative and Research Agreements."
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DEPENDENCE ON A SINGLE TECHNOLOGICAL APPROACH. The Company's research and
development efforts are based solely on its pathogen specific translation
mechanism ("PSTM") targeted approach. The Company began to focus its research
and development efforts on its PSTM approach to drug discovery in 1993. In March
1996, the Company restructured its operations to focus all efforts on the PSTM
approach. To date, the Company has not developed or commercialized any product
or product candidates. While the Company has demonstrated that certain compounds
have the ability to inhibit the activity of certain of the Company's PSTM
targets, the Company has not proven that this activity can be utilized
clinically as a therapeutic. There can be no assurance that the inhibitory
activity demonstrated in existing screening will continue to be shown in further
screening or drug discovery studies. There can be no assurance that the
Company's technology platform will enable it to discover compounds that will
lead to the development of drugs relevant to the treatment of infectious
diseases. There is limited scientific understanding relating to the role of
genes or translation in diseases. Relatively few products based on genetic
discoveries and no drugs discovered using a translation-based discovery approach
have been developed and commercialized to date. The Company's PSTM technology is
still in early stages and will require significant further research, development
and testing in order to validate translation generally, or PSTM targets
specifically, as an effective method to discover new antiinfectives. In the
event that the Company's PSTM approach is unsuccessful, the Company will be
required to identify and license or acquire alternative technologies or
compounds in order to develop leads or product candidates. To date, the Company
has not identified, licensed or acquired alternative technologies or compounds
that would allow it to develop leads or product candidates, and there can be no
assurance that the Company would be able to do so in the future. Even if the
Company is successful in identifying and developing lead compounds associated
with specific diseases, there can be no assurance that the Company will be
successful in marketing its discoveries to biopharmaceutical companies for use
in the development of therapeutic products or that any such resulting products
will receive regulatory approval or be manufactured or marketed successfully or
that the Company will not be precluded from commercialization of drug
discoveries by proprietary rights of third parties. See "-- Dependence on
Patents and Proprietary Rights," "-- Need for Chemistry Capabilities" and
"Business -- Collaborative and Research Agreements."
DEPENDENCE ON SCIENTIFIC ADVISORS. The Company is highly dependent on the
members of its Scientific Advisory Board ("SAB") who conduct research in
cooperation with the Company and provide the Company with access to technology
developed by them. The potential success of the Company's drug discovery
programs depends in part on continued collaborations with these advisors. The
Company and various members of its management and research staff rely heavily on
members of the SAB for new translation-based targets for its drug discovery
programs and for continued consulting and expertise in translation research. The
Company's scientific advisors are employed by employers other than the Company
and may have commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to the Company. As a result, the
Company has limited control over their activities and, except as otherwise
required by its consulting agreements, can expect only limited amounts of their
time to be dedicated to the Company's activities. Most members of the SAB have
entered into scientific advisor agreements with the Company. These agreements
provide for indefinite terms of service on the SAB and are terminable at any
time by written notice of either the Company or the advisor. Certain members of
the SAB also have entered into separate consulting agreements with the Company.
These agreements have an initial one-year term, typically have been renewed by
the parties for successive one-year periods and provide for earlier termination
by either party upon 30 days' written notice. There can be no assurance that the
Company will be able to maintain such consulting agreements or that such
scientific advisors will not enter into consulting arrangements, exclusive or
otherwise, with competing pharmaceutical or biotechnology companies, any of
which would have a detrimental impact on the Company's research objectives and
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The scientific advisor agreements and the consulting agreements provide for
confidentiality of the Company's proprietary information. These agreements also
provide that any confidential information that results from work performed for
the Company by such advisors is the sole and exclusive property of the Company.
In certain instances, such provisions are subject to the patent and other
policies now in effect or adopted in the future by the advisor's employer or
primary affiliation. To the extent any confidential information is also the
product of work performed for the advisor's affiliates, such affiliates'
policies may
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provide such affiliate with proprietary rights to such information. Accordingly,
the Company may not have rights to developments, publications or the results of
any research conducted by these advisors, which may adversely affect the
Company. There can be no assurance that the Company will be able to maintain the
confidentiality of its technology and other confidential information, and any
unauthorized dissemination of the Company's confidential information could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Scientific Advisors."
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS. The Company's commercial
success will depend, in part, on its ability, and the ability of any
licensor(s), to obtain patent protection for its products and technologies, both
in the United States and in other countries. The patent positions of
pharmaceutical and biotechnology firms can be highly uncertain and often involve
complex legal and technical questions for which important legal principles are
largely unresolved, thus making it difficult to predict the breadth of claims
which would be allowable in any particular case. This uncertain situation is
also affected by revisions to the United States patent law adopted in recent
years to give effect to international accords to which the United States has
become a party. The extent to which such changes in law will affect the
obligations of the Company cannot be ascertained. The Company owns a provisional
application, a pending patent application and certain corresponding foreign
applications relating to its antibacterial drug discovery program; an issued
United States patent, a pending United States patent application and certain
corresponding foreign applications relating to its antifungal drug discovery
program; and an issued United States patent, a pending United States patent
application and certain corresponding foreign applications relating to its
antiviral drug discovery program. One of the coinventors of the Company-owned
patent applications relating to the antivirual drug discovery program is Michael
Katze, Ph.D. Dr. Katze presently is a member of the Company's SAB and, at the
time these applications were filed, was a consultant to the Company and a
faculty member at the University of Washington. The Company has received
inquiries from, and has been in discussions with, the University of Washington
regarding a potential, partial ownership interest in these patent applications
that Dr. Katze and the coinventors assigned to the Company. Such discussions are
ongoing and may result in a determination that the University of Washington is a
joint owner of the patent applications, though the Company believes, after a
review of the information available to date, that Dr. Katze, in his capacity as
a consultant to the Company, properly assigned his rights in these applications
to the Company. Nevertheless, in connection with these ongoing discussions, the
Company has obtained an option for an exclusive, worldwide license under the
University of Washington's potential ownership interest. The option is
exercisable upon payment of a $25,000 fee, at which time the Company will have
an exclusive license under terms that will include payments of $250,000 for each
new drug application approval, royalty payments on future sales of products
developed under the licensed patent rights and a percentage payment of
sublicensing fees received by the Company, and certain other terms to be
negotiated in good faith. The Company is an assignee, along with McGill
University, of an allowed United States patent application generally relating to
the PSTM program. The Company is an exclusive licensee under a University of
Washington pending United States application and certain corresponding foreign
applications directed to HCV NS5A/PKR. In addition, the Company has an option,
from the University of Washington and McGill University, to license a
recently-issued United States patent and a pending United States patent
application relating to translational technology. There can be no assurance that
any of these patent applications, or any patent applications which the Company
may acquire in the future, will be issued as patents, that any such issued
patents will afford adequate protection to the Company and will not be
challenged, invalidated, circumvented or infringed, or that any rights granted
under such patents will afford competitive advantages to the Company. To protect
its rights to its patent applications and/or patents, the Company may be
required to participate in interference proceedings before the United States
Patent and Trademark Office to determine priority of invention and the rights to
a patent. In addition, if patents that cover the Company's activities are issued
to other companies, there can be no assurance that the Company would be able to
obtain a license to such patents on terms acceptable to the Company, if at all.
The Company also could incur substantial costs in any litigation against third
parties, in which the Company asserts patents to which the Company has rights.
There can be no assurance that the Company's patents or those of its licensors,
if issued would not be held invalid by a court or that a competitor's technology
or product would be found to infringe such patents.
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The Company's success will further depend, in part, on its ability to
operate without infringing the proprietary rights of others. There can be no
assurance that the Company's activities will not infringe patents owned by
others. The Company could incur substantial costs in defending itself in suits
brought against it or any licensor. Should the Company's products or
technologies be found to infringe patents issued to third parties, the
manufacture, use and sale of the Company's products could be enjoined, and the
Company could be required to pay substantial damages. In addition, the Company,
in connection with the development and use of its products and technologies, may
be required to obtain licenses to patents or other proprietary rights of third
parties. No assurance can be given that any licenses required under any such
patents or proprietary rights would be made available on terms acceptable to the
Company, if at all. Failure to obtain such licenses could have a material
adverse effect on the Company.
In addition to patent protection, the Company also relies to a significant
extent upon trade secret protection for its confidential and proprietary
information, including many of the Company's key discovery technologies. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets or disclose such technology. To protect its trade
secrets, RiboGene has required its employees, consultants, SAB members and
parties to collaboration and licensing agreements to execute confidentiality
agreements upon the commencement of employment, the consulting relationship or
the collaboration or licensing arrangement, as the case may be, with RiboGene.
In the case of employees, the agreements also provide that all inventions
resulting from work performed by them while employed by RiboGene will be the
exclusive property of RiboGene. In the case of SAB members, the agreements also
provide that any confidential information that results from work performed for
RiboGene will be the exclusive property of RiboGene. The Company will continue
to require its employees, consultants, SAB members and collaborators and
licensees to execute confidentiality agreements and inventions assignment
agreements (in the case of its employees) upon the commencement of employment,
the consulting relationship or the collaboration or license with the Company.
There can be no assurance, however, that these agreements will provide
meaningful protection of the Company's trade secrets or adequate remedies in the
event of unauthorized use or disclosure of such information, or that the
Company's trade secrets will not otherwise become known or be independently
discovered by its competitors, that the Company can meaningfully protect its
rights in such unpatented proprietary technology through other means, that any
obligation to maintain the confidentiality of such proprietary technology will
not be breached by employees, consultants, advisors, collaborators, licensees or
others or that others will not independently develop the same or substantially
equivalent technology. The loss of trade secret protection of any of the
Company's key discovery technologies would materially and adversely affect the
Company's competitive position and could have a material adverse effect on the
Company's business, financial condition and results of operations. Finally,
disputes may arise as to the ownership of proprietary rights to the extent that
outside consultants, collaborators or licensees apply technological information
developed independently by them or others to Company projects or apply Company
technology to other projects and, if adversely determined, such disputes could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "-- Dependence on Scientific Advisors,"
"-- Dependence on and Need for Additional Key Personnel" and
"Business -- Patents and Proprietary Rights."
In 1994, the Company acquired intellectual property that falls outside the
field of infectious diseases and translational control. The Company does not
intend to develop any products associated with such intellectual property
itself. Such potential products include Emitasol, for emesis associated with
chemotherapy, Migrastat, for migraine, and intranasal benzodiazepines for
various conditions such as anxiety, seizures, panic attacks and sleep disorders.
The Company has received notice that Peptech (Europe A/S) is opposing the grant
of a European patent with claims directed to the nasal administration of
benzodiazepines. As one of the grounds for the opposition, Peptech has submitted
a published abstract describing the nasal administration, to children, of the
benzodiazepine midazolam. This abstract has an apparent publication date of
February 1988, several months prior to the earliest filing date in the United
States from which the Company's European patent application could have claimed
priority. While the Company intends to respond vigorously to the opposition, no
assurance can be given as to the scope of the claims, if any, which the European
Patent Office ultimately will find patentable. Failure of the Company to prevail
in the opposition before the European Patent Office could impede the Company's
ability to outlicense the technology portfolio.
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The issued United States patent relating to the nasal administration of
benzodiazepines is the subject of a reissue proceeding before the United States
Patent and Trademark Office. In the course of negotiations with a potential
licensee of the technology portfolio containing this patent, the Company became
aware that the issued United States patent for which reissue is being sought had
expired for failure to pay the required maintenance fees. The Company's petition
to revive this patent recently was granted by the Patent and Trademark Office,
effectively resulting in the reinstatement of the patent, as if it had not
expired. However, should the Company choose to enforce this patent by
instituting an infringement action, the patent statute would provide certain
protection to those infringers who first began practicing, or first made
substantial preparation to practice, the patented invention during the
approximately three-year and four month period that the patent had lapsed. The
Company presently is not aware of any potential infringers who may be entitled
to such so-called "intervening rights."
NEED FOR CHEMISTRY CAPABILITIES. One of the Company's strategies is to
acquire substantial additional capabilities in chemistry in order to enhance the
Company's lead discovery and optimization capabilities. The Company currently
has three employees with degrees, experience and training in chemistry who
conduct the Company's chemistry activities on a limited basis. The Company has
joint responsibility with Dainippon to provide chemistry support for the
discovery and optimization of potential antibacterials resulting from the
Dainippon Collaboration. The Company plans to add medicinal, combinatorial,
analytical and computational chemistry capabilities internally and through
external collaborations to support its other programs. The Company intends to
use a significant portion of the net proceeds of the Offering to build its
chemistry capabilities by recruiting additional chemistry expertise in-house,
acquiring and implementing the capital equipment necessary to support these
activities, acquiring additional compounds and supplies and entering into
additional collaborative agreements. There can be no assurance that the Company
will be successful in developing these capabilities. Qualified medicinal,
combinatorial, analytical and computational chemists and the corresponding
support personnel are in high demand. The Company may experience difficulty in
attracting, recruiting or hiring the personnel necessary to implement its
strategy. Failure by the Company to successfully complete or implement any part
of the strategy described above could prevent the Company from implementing its
overall business strategy, require the Company to rely to a greater extent on
collaborative agreements for the optimization of leads for drug candidates and
enter into such arrangements at an earlier stage of development, and could have
a material adverse impact on the Company's business, financial condition and
results of operations.
COMPETITION. The biotechnology and pharmaceutical industries are intensely
competitive and subject to rapid and significant technological change. Many of
the drugs which the Company is attempting to discover will be competing with
existing therapies. In addition, a number of companies are pursuing the
development of pharmaceuticals which target the same diseases and conditions the
Company is targeting, using technology similar to the RiboGene technology, as
well as alternative discovery technologies, including antisense, gene therapy
and genomics. The Company faces competition from pharmaceutical and
biotechnology companies both in the United States and abroad. Many of the
Company's competitors, particularly large pharmaceutical companies, have
substantially greater financial, technical and human resources than the Company.
In addition, unlike the Company, many of these competitors have experience in
undertaking preclinical studies and clinical trials of new pharmaceutical
products and obtaining the necessary regulatory approvals and manufacturing and
marketing products. In addition, academic institutions, government agencies, and
other public and private organizations conducting research may seek patent
protection with respect to potentially competing products or technologies and
may establish exclusive collaborative or licensing relationships with
competitors of the Company.
The Company believes that its ability to compete is dependent, in part,
upon its abilities to create and maintain scientifically advanced technology and
to develop and commercialize pharmaceutical products based on this technology,
as well as its ability to attract and retain qualified personnel, obtain patent
protection or otherwise develop proprietary technology or processes and secure
sufficient capital resources for the expected substantial time period between
technological conception and commercial sales of products based upon the
Company's technology.
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There can be no assurance that the Company's competitors will not succeed
in developing technologies and drugs that are more effective or less costly than
any which are being developed by the Company or which would render the Company's
technology and future drugs obsolete and noncompetitive. In addition, the
Company's competitors may succeed in obtaining the approval of the United States
Food and Drug Administration (the "FDA") or other regulatory approvals for drug
candidates more rapidly than the Company. Companies that complete clinical
trials, obtain required regulatory agency approvals and commence commercial sale
of their drugs before their competitors may achieve a significant competitive
advantage, including certain patent and FDA marketing exclusivity rights that
would delay the Company's ability to market certain products. There can be no
assurance that drugs resulting from the Company's research and development
efforts, or from the joint efforts of the Company and its existing or future
collaborative partners, will be able to compete successfully with competitors'
existing products or products under development or that they will obtain
regulatory approval in the United States or elsewhere.
DEPENDENCE ON AND NEED FOR ADDITIONAL KEY PERSONNEL. The Company is highly
dependent on the principal members of its management and scientific staff,
including the services of Charles J. Casamento, President, Chief Executive
Officer and Chairman of the Board, and Drs. Lehman, Gluchowski, and Moehle, the
Company's Vice President of Research, Director of Drug Discovery and Associate
Director of Translational Control Research, respectively, as well as the project
leaders for each of its core projects and the leader of its screening group.
There can be no assurance that these persons will continue to be employed by the
Company in the future. The loss of any of these persons could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's potential growth and expansion into areas and
activities requiring additional expertise, such as chemistry, are expected to
place increased demands on the Company's management skills and resources. These
demands are expected to require a substantial increase in management and
scientific personnel and the development of additional expertise by existing
management personnel. Accordingly, recruiting and retaining management and
operational personnel and qualified scientific personnel to perform research and
development work in the future will also be critical to the Company's success.
There can be no assurance that the Company will be able to attract and retain
skilled and experienced management, operational and scientific personnel on
acceptable terms given the competition among numerous pharmaceutical and
biotechnology companies, universities and other research institutions for such
personnel. The failure to attract and retain such personnel or to develop such
expertise could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Employees" and
"Management."
UNCERTAINTIES RELATED TO CLINICAL TRIALS. The Company believes it will be
several years, if ever, before any potential product candidates discovered using
its technology would be ready to begin the regulatory approval process. Before
seeking such approval, the Company or its collaborative partners must
demonstrate in extensive preclinical studies and clinical trials that any such
product candidate is safe and effective for use in each target indication. The
results of preclinical studies and early clinical trials may not be predictive
of results that will be obtained in large-scale testing or use, and there can be
no assurance that any such preclinical studies and clinical trials will
demonstrate the safety and efficacy of any product candidate, if successfully
developed, or that, regardless of preclinical and clinical trial results, FDA
approval will be obtained or that marketable products will result. A number of
companies in the pharmaceutical industry have suffered significant setbacks in
advanced clinical trials or have not received FDA approval, even after promising
results in earlier trials. Clinical trials for any product candidates developed
by the Company and its collaborators may be delayed by many factors.
Furthermore, the FDA may suspend clinical trials at any time if it decides that
patients are being exposed to an unreasonable and significant health risk. In
addition, clinical trials are often conducted with patients having the most
advanced stages of disease. During the course of treatment, these patients can
die or suffer other adverse medical effects for reasons that may not be related
to the pharmaceutical agent being tested, but which can nevertheless affect
clinical trial results. Any delays in, or termination of, the clinical trials of
any of the Company's product candidates, if successfully developed, or the
failure of any clinical trials to meet applicable regulatory standards, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
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GOVERNMENT REGULATION AND NEED FOR PRODUCT APPROVALS. The manufacture and
marketing of any products developed by the Company and its ongoing research and
development activities are subject to regulation by numerous governmental
authorities in the United States and other countries. Prior to marketing, any
drug developed by the Company must undergo rigorous preclinical and clinical
testing and an extensive regulatory approval process mandated by the FDA and
equivalent authorities in other countries. These processes can take a number of
years and require the expenditure of substantial resources. The time required
for completing such testing and obtaining such approvals is uncertain, and there
can be no assurance that such approvals will be obtained or that marketable
products will result. The safety and efficacy of a therapeutic product under
development by the Company must be supported by extensive data from clinical
trials. The results from preclinical studies and early clinical trials may not
be indicative of results that will be obtained in large-scale testing. In
addition, delays or rejections may be encountered in the regulatory review
process or in the event there are changes in FDA policy or the Company decides
to replace the compounds in testing with modified or optimized compounds. There
can be no assurance that even after such time and expenditures, regulatory
approval will be obtained for any products developed by the Company. Failure by
the Company to obtain regulatory approval of any products resulting from its
discovery programs could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that if clinical trials are completed, the Company will submit a new
drug application (an "NDA") with respect to any potential products or that such
applications will be reviewed and approved by the FDA in a timely manner, if at
all.
If regulatory approval of a product is granted, such approval will entail
limitations on the indicated uses for which the product may be marketed.
Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer, and its manufacturing facilities are subject to continual review
and periodic inspections, and later discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on such
product, manufacturer or facility, including withdrawal of the product from the
market. Failure to comply with ongoing relevant regulatory requirements may
result in, among other things, warning letters, fines, product recalls or
seizures, suspension or termination of production, injunctions, delays in
obtaining marketing authorization or refusal of the government to grant such
approvals, withdrawals of previously granted approvals, civil penalties and
criminal prosecution, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company and its collaborative partners may also be subject to
regulation under state and federal laws, including requirements regarding
occupational safety and laboratory practices, and may be subject to other
present and possible future local, state, federal and foreign regulation. The
impact of such regulation upon the Company cannot be predicted and could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Government Regulation."
CONVERSION OF SERIES F PREFERRED STOCK INTO COMMON STOCK. The terms of the
Series F Preferred Stock provide for the automatic conversion of such stock into
Common Stock upon the closing of the first underwritten public offering of
Common Stock resulting in aggregate gross proceeds to the Company in excess of
$7.5 million. The number of shares of Common Stock issuable upon the automatic
conversion of the Series F Preferred Stock will depend upon the initial public
offering price. Assuming an initial public offering price of $7.00 per share,
each share of the outstanding 2,282,663 shares of Series F Preferred Stock will
convert into 0.6429 of a share of Common Stock, for a total of 1,467,510 shares
of Common Stock. If the initial public offering price is less than $7.00 per
share, the conversion ratio of the Series F Preferred Stock will be adjusted,
resulting in additional shares of Common Stock being issued to the holders of
Series F Preferred Stock. As a result, if the initial public offering price is
less than $7.00 per share, investors purchasing in the Offering will own a
lesser percentage of the total shares of Common Stock outstanding following the
Offering. For example, assuming an initial public offering price of $6.00 per
share, an additional 244,487 shares of Common Stock would be issued upon the
conversion of the outstanding shares of Series F Preferred Stock. If the
conversion ratio of the Series F Preferred Stock is adjusted, additional shares
of Common Stock will also be issued upon the exercise of the Placement Agent
Unit Options. For instance assuming an initial public offering price of $6.00,
an additional 122,242 shares of Common Stock would be issued upon the exercise
of the Placement Agent Unit Options. See "Dilution," "Certain Transactions" and
"Description of Capital Stock -- Preferred Stock."
16
<PAGE> 18
DILUTION. Purchasers of the Common Stock offered hereby will incur
immediate and substantial dilution equal to $3.43 per share, based upon an
assumed initial public offering price of $7.00 per share. The dilution will be
increased to the extent that the holders of outstanding options or warrants to
purchase Common Stock with exercise prices below the initial public offering
price exercise such options or warrants. If the initial public offering price is
less than $7.00 per share, the per share amount of dilution will be lower;
however, investors purchasing in the Offering will own a lesser percentage of
the total shares of Common Stock outstanding as a result of the issuance of
additional shares of Common Stock to holders of the Series F Preferred Stock
upon conversion into Common Stock of such preferred stock upon the closing of
the Offering and to the holders of the Placement Agent Unit Options upon the
exercise thereof. See "Dilution," "Certain Transactions" and "Description of
Capital Stock -- Preferred Stock."
LACK OF MANUFACTURING, MARKETING AND SALES CAPABILITY AND
EXPERIENCE. RiboGene does not expect to invest in the development of
manufacturing, marketing or sales capabilities in the foreseeable future. If the
Company is unable to contract for manufacturing capabilities on acceptable
terms, the Company's ability to conduct preclinical and clinical trials with any
potential drug candidates would be adversely affected, resulting in delays in
the submission of any drug candidate for regulatory approval and in the
initiation of new development programs, which in turn could materially impair
RiboGene's competitive position and the possibility of achieving profitability.
The Company has no experience in marketing drugs. The Company has granted
marketing rights to Dainippon and under certain circumstances has retained
copromotion rights with respect to antibacterial drugs developed through the
Dainippon Collaboration. The Company intends to collaborate with additional
third parties to market any drugs that may result from its other areas of focus.
There can be no assurance that any such collaborative agreement can be reached
on acceptable terms, if at all. There can be no assurance that the Company will
be able to establish or maintain third party relationships to provide any or all
of these capabilities.
PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE. The Company's business
will expose it to potential liability risks that are inherent in the testing,
manufacturing and marketing of pharmaceutical products. The use of any drug
candidates ultimately developed by the Company or its collaborators in clinical
trials may expose the Company to product liability claims and possible adverse
publicity. These risks will expand with respect to the Company's drug
candidates, if any, that receive regulatory approval for commercial sale.
Product liability insurance for the biotechnology industry is generally
expensive, if available at all. The Company does not have product liability
insurance but intends to obtain such coverage if and when any drug candidates
are tested in clinical trials. However, such coverage is becoming increasingly
expensive and there can be no assurance that the Company will be able to obtain
insurance coverage at acceptable costs or in a sufficient amount, if at all, or
that a product liability claim would not adversely affect the Company's
business, operating results or financial condition.
UNCERTAINTY RELATED TO HEALTH CARE INDUSTRY. The successful
commercialization of any drug candidates developed by the Company and its
current and future collaborators will depend substantially on reimbursement of
the costs of the resulting drugs from government authorities, private health
insurers and other organizations at levels acceptable to the Company. There can
be no assurance that adequate reimbursement will be available or, if available,
will not be decreased in the future, or that reimbursement amounts will not
reduce the demand for, or the price of, any such drugs. Any of the foregoing
could have a material adverse effect on the Company's business, financial
condition and results of operations. If such reimbursement is not available or
is available on a limited basis, the Company may not be able to retain any
collaborative partners to manufacture and commercialize any drugs and may not be
able to obtain a financial return on the manufacture and commercialization of
any future drugs.
Third-party payors are increasingly focusing on the cost-effectiveness
profile of prescription drugs and challenging the prices charged for such
products and services. Also, the trend towards managed health care in the United
States and the concurrent growth of organizations such as health maintenance
organizations, which could control or significantly influence the purchase of
health care services and products, as well as legislative proposals to reform
health care or government medical assistance programs, may all result in lower
prices or
17
<PAGE> 19
reduced markets for any products developed by the Company or its current and
future collaborators. The cost containment measures that health care providers
and payors are instituting could adversely affect the Company's or its current
and future collaborators' ability to sell future products and may have a
material adverse effect on the Company. To date, the Company has not conducted
any marketing studies on any of its potential product candidates and has not
undertaken any pharmacoeconomic analysis with respect to any potential products.
The cost containment measures and reforms that government institutions and
third-party payors are considering could result in significant and unpredictable
changes to the marketing and pricing and reimbursement practices of
biopharmaceutical and pharmaceutical companies such as the Company and its
current and future collaborators. The adoption of any such measures or reforms
could have a material adverse effect on the business, financial condition and
results of operations of the Company.
HAZARDOUS MATERIALS. The Company is subject to federal, state and local
laws and regulations governing the use, generation, manufacture, storage,
discharge, handling and disposal of certain materials and wastes used in its
operations. There can be no assurance that the Company will not be required to
incur significant costs to comply with environmental laws and regulations as its
research activities are increased, or that the operations, business and future
profitability of the Company will not be adversely affected by current or future
environmental laws and regulations. See "Business -- Government Regulation."
MANAGEMENT DISCRETION AS TO USE OF PROCEEDS. The Company intends to use the
net proceeds from the Offering for expansion of internal chemistry capabilities,
expansion and advancement of drug discovery programs and for working capital and
other general corporate purposes. Accordingly, the Company's management will
retain broad discretion as to the allocation of the balance of the net proceeds
from the Offering and the proceeds from the sale of the Abbott Shares. As a
result of such discretion, the Company's management could allocate such proceeds
to uses which the stockholders may not deem desirable. There can be no assurance
as to the timing or application of such proceeds, or that the application
thereof will not have a material adverse effect on the Company's future
business, financial condition or results of operations. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CONTROL BY EXISTING STOCKHOLDERS. Immediately following the Offering,
officers, directors and existing stockholders of the Company will beneficially
own approximately 61% of the outstanding shares of Common Stock of the Company
(based on shares, warrants and options outstanding as of March 31, 1998). These
stockholders, if acting in concert, will continue to be able to control the
election of all members of the Company's Board of Directors and to determine all
corporate actions after the sale of the shares offered hereby. See "Principal
Stockholders."
ABSENCE OF DIVIDENDS. The Company has never declared or paid cash dividends
on its capital stock and does not anticipate paying cash dividends in the
foreseeable future, but intends instead to retain future earnings, if any, for
reinvestment in its business. Any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent upon
the Company's financial condition, results of operations, capital requirements
and such other factors as the Board of Directors deems relevant. See "Dividend
Policy."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Common Stock. Accordingly,
there can be no assurance that an active trading market for the Common Stock
will develop or be sustained upon completion of the Offering or that the market
price of the Common Stock will not decline below the initial public offering
price. The initial public offering price of the shares of Common Stock offered
hereby will be determined by negotiations between the Company and the
Representatives. The market prices for securities of biopharmaceutical companies
have been highly volatile. Announcements regarding the results of regulatory
approval filings, preclinical or clinical studies or other testing,
technological innovations or new commercial products by the Company or its
competitors, government regulations, developments concerning proprietary rights
or public concern as to safety of technology have historically had, and are
expected to continue to have, a significant impact on the market prices of the
stocks of biopharmaceutical companies. The trading price of the Common Stock
could also be subject to significant fluctuations in response to variations in
operating results.
18
<PAGE> 20
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS. Under
the Company's Certificate of Incorporation, the Company's Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the powers, rights, preferences and privileges of those shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. While the Company has no present intention to issue shares of Preferred
Stock, such issuance could dilute the voting power of holders of Common Stock
and, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, 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. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibits the Company 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. The application of
Section 203 could have the effect of delaying or preventing a change of control
of the Company. See "Description of Capital Stock -- Delaware Anti-Takeover Law
and Certain Charter and By-law Provisions."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares of
Common Stock (including shares issued upon the exercise of outstanding options
and warrants) in the public market after the Offering could materially adversely
affect the market price of the Common Stock. Such sales also might make it more
difficult for the Company to sell equity securities or equity-related securities
in the future at a time and price that the Company deems appropriate. Upon
completion of the Offering, the Company will have outstanding an aggregate of
5,764,055 shares of Common Stock (6,169,055 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 2,700,000
shares offered hereby will be freely tradeable without restriction or further
registration under the Securities Act, except for any shares held by an
"affiliate" of the Company, as that term is defined in Rule 144 under the
Securities Act ("Rule 144"). The remaining 3,064,055 shares of Common Stock held
by existing stockholders of the Company (including the Abbott Shares) are
"restricted securities" as that term is defined in Rule 144 (the "Restricted
Shares"). The Restricted Shares were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the Securities
Act. Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under the Securities Act,
including an exemption under Rule 144 or 701 under the Securities Act. For a
summary description of the requirements of Rules 144 and 701, see "Shares
Eligible for Future Sale." Pursuant to "lock-up" agreements, all of the
Company's executive officers and directors and certain stockholders, holding in
the aggregate 2,304,997 Restricted Shares, have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any such
shares for a period of 180 days from the date of this Prospectus without the
prior written consent of the Representative.
As of March 31, 1998, options to purchase an aggregate of 182,433 shares of
Common Stock were outstanding under the Company's stock plans and an aggregate
of 1,506,486 shares of Common Stock were reserved for future grants or purchases
under the Company's equity incentive plans. The holders of all such outstanding
options have agreed not to offer, sell, contract to sell, grant any options to
purchase or otherwise dispose of any shares of Common Stock issuable upon
exercise of such options for a period 180 days from the date of this Prospectus
without the prior written consent of the Company, and the Company has agreed in
the Underwriting Agreement that it will not grant any such consent without the
prior written consent of the Representative. The Company intends to file after
the closing of the Offering a registration statement on Form S-8 to register an
aggregate of 1,506,486 shares of Common Stock reserved for issuance under the
Company's equity incentive plans.
In addition, as of March 31, 1998, 166,319 shares of Common Stock were
reserved for issuance upon the exercise of warrants (other than Class A
Warrants); 162,967 shares of Common Stock were reserved for issuance upon
exercise of the Class A Warrants; 733,755 shares of Common Stock were reserved
for issuance upon exercise of the Placement Agent Unit Options in respect of
shares of Series F Preferred Stock issuable thereunder; 40,739 shares of Common
Stock were reserved for issuance upon the exercise of the Placement Agent Class
A Warrants; and 270,000 shares of Common Stock were reserved for issuance upon
exercise of
19
<PAGE> 21
warrants issued to the Representatives, at an exercise price equal to 165% of
the initial public offering price of the Common Stock (the "Representative's
Warrants").
Holders of the Placement Agent Unit Options and warrants to purchase an
aggregate of 1,102,017 shares of Common Stock have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any of
their shares of Common Stock issuable upon exercise of such options or warrants,
for a period of 180 days from the date of this Prospectus without the prior
written consent of the Representative.
The Company also has agreed that it will not offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of Common Stock for a period
of 180 days from the date of this Prospectus, other than pursuant to existing
stock option plans or upon exercise of outstanding options and warrants, without
the prior written consent of the Representative.
Following completion of the Offering, holders of 2,385,039 Restricted
Shares and 370,025 shares issuable upon exercise of outstanding warrants will be
entitled to certain rights with respect to the registration of such shares under
the Securities Act for resale, at the expense of the Company. See "Description
of Capital Stock -- Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."
NO ASSURANCE OF NASDAQ NATIONAL MARKET LISTING. Although the Company's
Common Stock has been approved for listing on the Nasdaq National Market, such
approval is subject to the Company meeting all of the listing requirements. In
order to meet the tangible net worth listing requirement, the gross proceeds
from the Offering must be at least $18,900,000. Assuming an initial public
offering price of $7.00, the sale of the 2,700,000 shares of Common Stock
offered hereby would result in gross proceeds of $18,900,000. If the gross
proceeds from the Offering are less than $18,900,000, the Company's Common Stock
will not be listed on the Nasdaq National Market. There can be no assurance that
the Company will meet the listing requirements of the Nasdaq National Market or,
if met, that it will be able to meet any applicable maintenance requirements.
If the Company's Common Stock is not listed on the Nasdaq National Market,
the Company will apply for listing of the Common Stock on the Nasdaq SmallCap
Market. There can be no assurance that the Company will meet the listing
requirements of the Nasdaq SmallCap Market. Any failure to obtain or maintain
listing of the Common Stock on the Nasdaq SmallCap Market could result in any
trading of the Common Stock being conducted on the OTC Bulletin Board or in the
over-the-counter market in what is commonly referred to as the "pink sheets." If
this occurs, a stockholder will find it more difficult to dispose of the
securities or to obtain accurate quotations regarding the price of the
securities. In addition, the Company's common stock could become subject to the
"penny stock" regulations of the Securities and Exchange Commission, which
impose additional restrictions on broker-dealers who trade in such stock, and
could severely limit the liquidity of the Company's securities.
FORWARD-LOOKING STATEMENTS. Certain statements under the captions
"Prospectus Summary," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" and elsewhere
in this Prospectus constitute "forward-looking statements." Such forward-looking
statements may be identified by the use of terminology such as "may," "will,"
"expect," "anticipate," "intend," "designed," "estimate," "should" or "continue"
or the negatives thereof or other variations thereon or comparable terminology.
Such forward-looking statements involve known or unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include those described above and
in the sections entitled "Prospectus Summary," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
20
<PAGE> 22
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
offered hereby (assuming an initial public offering price of $7.00 per share)
are estimated to be approximately $15.4 million ($17.9 million if the
Underwriters' over-allotment option is exercised in full), after deducting the
estimated underwriting discounts and commissions and estimated Offering
expenses. The Company also will receive approximately $4.0 million from the sale
of the Abbott Shares directly from the Company, assuming the Offering results in
gross proceeds to the Company of $16.0 million.
The Company anticipates that it will use the net proceeds of the Offering,
together with the proceeds from the sale of the Abbott Shares, over the next two
years as follows:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE
APPLICATION OF NET PROCEEDS AMOUNT OF NET PROCEEDS
--------------------------- ------------------ ----------------------
(IN MILLIONS)
<S> <C> <C>
Expand internal chemistry capabilities(1)............. $ 4.2 21.6%
Expand and advance antibacterial, antifungal and HVC
programs............................................ 1.7 8.8%
Establish new drug discovery programs................. 1.4 7.2%
Repay certain outstanding indebtedness(2)............. 0.4 2.1%
Working capital and general corporate purposes(3)..... 11.7 60.3%
----- ------
Total....................................... $19.4 100.0%
===== ======
</TABLE>
- ---------------
(1) Includes acquiring necessary equipment and recruiting qualified personnel.
(2) The Company will use approximately $350,000 of such net proceeds to repay
certain guaranteed consulting payments of $50,000 per quarter through
December 1999. See "Certain Transactions."
(3) The Company's management, subject to approval by the Board of Directors,
will have broad discretion with respect to the proceeds designated for
working capital and general corporate purposes. The Company feels that such
discretion is necessary to allow management to determine the best
allocation, as particular needs arise, of such proceeds. The Company may
also use a portion of such proceeds to acquire or license technology rights
or compounds. No such transactions involving a material amount of
consideration are being negotiated as of the date of this prospectus.
Pending application of such proceeds, the net proceeds to the Company of
the Offering will be invested in short-term, interest bearing, investment
grade securities. See "Risk Factors -- Management's Discretion as to Use of
Proceeds."
21
<PAGE> 23
The Company anticipates that the net proceeds of the Offering, together
with the proceeds from the sale of the Abbott Shares, and the interest income
earned on such proceeds, together with existing cash, cash equivalents and
short-term investments, 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. However, there can be no assurance that the Company's
assumptions regarding future operating losses and operating expenses will be
accurate. The Company's future funding requirements and use of proceeds 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 or 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. The Company will
need to raise substantial additional capital to fund its operations. Initially,
the Company intends to seek such additional funding through collaborative
arrangements and through public or private financings, including equity or debt
financings. See "Risk Factors -- Need for Additional Capital; Uncertainty of
Additional Funding" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company intends to retain future earnings, if any, for reinvestment in its
business. Any future determination to pay cash dividends would be at the
discretion of the Board of Directors and would be dependent upon the Company's
financial condition, results of operations, capital requirements and such other
factors as the Board of Directors deems relevant.
22
<PAGE> 24
CAPITALIZATION
The following table sets forth as of March 31, 1998: (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the Company,
giving effect to (a) the automatic conversion of all outstanding shares of
Series A through Series G Preferred Stock of the Company into an aggregate of
2,385,039 shares of Common Stock (assuming an initial public offering price of
$7.00 per share), concurrently with the closing of the Offering, and (b) the
reincorporation of the Company in Delaware and the amendment of its charter
prior to the effective date of the Offering; and (iii) the pro forma as adjusted
capitalization of the Company adjusted to reflect the issuance and sale of the
2,700,000 shares of Common Stock offered hereby (assuming an initial public
offering price of $7.00 per share), the receipt and application of the estimated
net proceeds therefrom, and the sale of 571,429 shares of Common Stock (assuming
an initial public offering price of $7.00 per share) to Abbott for $4.0 million,
concurrently with the closing of the Offering. The number of shares of Common
Stock to be issued upon conversion of RiboGene's Series F Preferred Stock and to
Abbott will depend upon the initial public offering price. See "Use of
Proceeds," "Business -- Collaborative and Research Agreements," "Certain
Transactions" and "Description of Capital Stock."
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
LONG-TERM OBLIGATIONS:
Capital lease obligations less current portion and
other noncurrent liabilities..................... $ 464 $ 464 $ 464
-------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value: 19,688,488 shares
authorized (actual); 5,000,000 shares authorized,
$0.001 par value (pro forma and pro forma as
adjusted); 15,133,739 shares issued and
outstanding (actual); none issued and outstanding
(pro forma and pro forma as adjusted)............ 35,514 -- --
Common Stock, no par value: 50,000,000 shares
authorized (actual); 30,000,000 shares
authorized, $0.001 par value (pro forma and pro
forma as adjusted); 107,587 shares issued and
outstanding (actual); 2,492,626 shares issued and
outstanding (pro forma); 5,764,055 shares issued
and outstanding (pro forma as adjusted)(1)....... 1,853 2 5
Additional paid in capital............................ 1,672 39,037 58,422
Notes receivable from stockholders.................... (147) (147) (147)
Deferred compensation................................. (1,269) (1,269) (1,269)
Deficit accumulated during development stage.......... (36,397) (36,397) (36,430)
-------- -------- --------
Total stockholders' equity (deficit)................ 1,226 1,226 20,581
-------- -------- --------
Total capitalization........................ $ 1,690 $ 1,690 $ 21,045
======== ======== ========
</TABLE>
- ---------------
(1) Excludes: (i) an aggregate of 182,433 shares of Common Stock reserved for
issuance under the Company's stock plans upon exercise of options
outstanding at a weighted average exercise price of $3.57 per share; (ii) an
aggregate of 1,506,486 shares of Common Stock reserved for future grants or
purchases under the Company's equity incentive plans; (iii) 162,967 shares
of Common Stock reserved for issuance upon exercise of the Class A Warrants;
(iv) 166,319 shares of Common Stock reserved for issuance upon the exercise
of warrants (other than Class A Warrants) outstanding at a weighted average
exercise price of $16.75 per share; (v) 733,755 shares of Common Stock
reserved for issuance upon exercise of the Placement Agent Unit Options;
(vi) 40,739 shares of Common Stock reserved for issuance upon the exercise
of the Placement Agent Class A Warrants; and (vii) an aggregate of 270,000
shares of Common Stock reserved for issuance upon the exercise of the
Representative's Warrants. The number of shares of Common Stock to be issued
upon conversion of the Series F Preferred Stock and exercise of the
Placement Agent Unit Options will depend upon the initial public offering
price. See "Management -- Stock and Related Employee Benefit Plans,"
"Certain Transactions," "Description of Capital Stock" and "Underwriting."
23
<PAGE> 25
DILUTION
The pro forma net tangible book value (deficit) of the Company as of March
31, 1998, was approximately $(143,000) or $(0.06) per share of Common Stock. Pro
forma net tangible book value (deficit) per share is equal to the Company's pro
forma net tangible assets (pro forma tangible assets less pro forma total
liabilities and deferred offering costs) divided by the pro forma number of
shares of Common Stock outstanding at that date, giving effect to the automatic
conversion of all outstanding shares of Series A through Series G Preferred
Stock of the Company into an aggregate of 2,385,039 shares of Common Stock
(assuming an initial public offering price of $7.00 per share) concurrently with
the closing of the Offering. Without taking into account any other changes in
pro forma net tangible book value other than to give effect to the receipt and
application of the estimated net proceeds from the sale of the 2,700,000 shares
of Common Stock offered hereby (assuming an initial public offering price of
$7.00 per share), at an assumed initial public offering price of $7.00 per
share, and the sale of 571,429 shares of Common Stock (assuming an initial
public offering price of $7.00 per share) to Abbott for $4.0 million, the pro
forma net tangible book value of the Company as of March 31, 1998 would have
been $20,581,000 or $3.57 per share. This represents an immediate increase in
such pro forma net tangible book value of $3.63 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$3.43 per share to new investors. The number of shares of Common Stock to be
issued upon conversion of RiboGene's Series F Preferred Stock and to Abbott will
depend upon the initial public offering price. See "Certain Transactions" and
"Description of Capital Stock." The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $7.00
Pro forma net tangible book value per share as of March
31, 1998............................................... $(0.06)
Increase in net tangible book value per share attributable
to new investors....................................... 3.63
------
Pro forma net tangible book value per share after the
Offering and the sale of the Abbott Shares................ 3.57
-----
Dilution per share to new investors......................... $3.43
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders (excluding Abbott), by Abbott and by new investors (at an
assumed offering price of $7.00 per share and before deducting estimated
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 2,381,560 41% $33,770,000 56% $14.18
Abbott.................................... 682,495 12 7,500,000 13 10.99
New investors............................. 2,700,000 47 18,900,000 31 7.00
--------- --- ----------- ---
Total........................... 5,764,055 100% $60,170,000 100%
========= === =========== ===
</TABLE>
The foregoing discussion and table assumes no exercise of outstanding
options or warrants subsequent to March 31, 1998, and excludes: (i) an aggregate
of 182,433 shares of Common Stock reserved for issuance under the Company's
stock plans upon exercise of options outstanding at a weighted average exercise
price of $3.57 per share; (ii) an aggregate of 1,506,486 shares of Common Stock
reserved for future grants or purchases under the Company's equity incentive
plans; (iii) 162,967 shares of Common Stock reserved for issuance upon exercise
of the Class A Warrants; (iv) 166,319 shares of Common Stock reserved for
issuance upon the exercise of warrants (other than Class A Warrants) outstanding
at a weighted average exercise price of $16.75 per share; (v) 733,755 shares of
Common Stock reserved for issuance upon the exercise of the Placement Agent Unit
Options; (vi) 40,739 shares of Common Stock reserved for issuance upon exercise
of the Placement Agent Class A Warrants; and (vii) 270,000 shares of Common
Stock reserved for issuance upon the exercise of the Representative's Warrants.
The number of shares of Common Stock to be issued upon conversion of the Series
F Preferred Stock and exercise of the Placement Agent Unit Options will depend
upon the initial public offering price. See "Business -- Collaborative and
Research Agreements," "Management -- Stock Plans and Related Employee Benefits
Plans," "Certain Transactions," "Description of Capital Stock" and
"Underwriting."
24
<PAGE> 26
SELECTED FINANCIAL DATA
The selected financial data set forth below at December 31, 1993, 1994,
1995, 1996, 1997 and for each of the years then ended have been derived from the
audited financial statements of the Company. The audited financial statements of
the Company as of December 31, 1996 and 1997 and for each of the three years in
the period ended December 31, 1997, together with the notes thereto and the
related report of Ernst & Young LLP, independent auditors, are included
elsewhere herein. The report of Ernst & Young LLP contains an explanatory
paragraph that describes the uncertainty as to the ability of the Company to
continue as a going concern as described in Note 1 of Notes to Financial
Statements. The balance sheet data as of March 31, 1998 and the statement of
operations data for the three month periods ended March 31, 1997 and 1998 and
for the period from inception (May 5, 1989) to March 31, 1998 have been derived
from unaudited financial statements of the Company and, in the opinion of the
Company's management, include all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the information set forth therein. The
results for the three months ended March 31, 1998 are not necessarily indicative
of the results to be expected for the full year. The selected financial data set
forth below should be read in conjunction with the Financial Statements of the
Company and related Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company has not declared or
paid cash dividends on its Common Stock since inception and does not intend to
pay any cash dividends in the foreseeable future.
<TABLE>
<CAPTION>
THREE MONTHS PERIOD FROM
ENDED INCEPTION
YEAR ENDED DECEMBER 31, MARCH 31, (MAY 5, 1989)
--------------------------------------------------- --------------- TO MARCH 31,
1993 1994 1995 1996 1997 1997 1998 1998
-------- -------- -------- -------- ------- ------ ------ --------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Contract research........... $ -- $ -- $ -- $ 1,112 $ 1,668 $ 417 $ 749 $ 3,529
Grants...................... -- 238 407 975 1,303 313 257 3,180
-------- -------- -------- -------- ------- ------ ------ --------
-- 238 407 2,087 2,971 730 1,006 6,709
Operating expenses:
Research and development.... 1,970 4,209 4,663 4,077 4,130 999 1,177 23,875
General and
administrative............ 1,924 2,424 2,758 1,372 1,551 360 459 12,098
Financial advisory costs.... -- -- -- -- 1,396 -- -- 1,396
Restructuring costs......... -- -- -- 219 -- -- -- 219
Acquired in-process research
and development........... -- 5,000 -- -- -- -- -- 5,000
-------- -------- -------- -------- ------- ------ ------ --------
Total operating expenses...... 3,894 11,633 7,421 5,668 7,077 1,359 1,636 42,588
-------- -------- -------- -------- ------- ------ ------ --------
Loss from operations.......... (3,894) (11,395) (7,014) (3,581) (4,106) (629) (630) (35,879)
Interest income (expense),
net......................... 55 (42) (240) (282) (7) (9) (70) (518)
-------- -------- -------- -------- ------- ------ ------ --------
Net loss...................... $ (3,839) $(11,437) $ (7,254) $ (3,863) $(4,113) $ (638) $ (700) $(36,397)
======== ======== ======== ======== ======= ====== ====== ========
Basic net loss per share(1)... $(239.94) $(300.97) $(164.86) $ (52.92) $(41.13) $(6.44) $(6.73)
======== ======== ======== ======== ======= ====== ======
Shares used in computing basic
net loss per share(1)....... 16 38 44 73 100 99 104
======== ======== ======== ======== ======= ====== ======
Pro forma net loss per
share(1).................... $ (1.95) $(0.28)
======= ======
Shares used in computing pro
forma net loss per
share(1).................... 2,109 2,469
======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------- MARCH 31,
1993 1994 1995 1996 1997 1998
------- ------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $ 2,105 $ 4,416 $ 1,897 $ 1,981 $ 2,045 $ 3,272
Working capital (deficit)............................... 1,708 2,133 (1,762) (954) (1,745) (622)
Total assets............................................ 2,892 5,105 2,404 2,657 4,312 5,765
Long-term obligations................................... 249 3,192 2,656 1,494 477 464
Deficit accumulated during the development stage........ (9,030) (20,467) (27,721) (31,584) (35,697) (36,397)
Total stockholders' equity (deficit).................... 1,980 (504) (4,029) (1,956) (162) 1,226
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include the factors discussed below as well as the factors discussed
in "Risk Factors" and elsewhere in this Prospectus.
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 certain technology not directly related to its drug discovery
efforts. In September 1993, the Company acquired the rights to a compound known
as RG-201. In January 1994, the Company acquired from Hyline Laboratories, Inc.
("Hyline") certain in-process research and development (the "Intranasal Product
Acquisition"), including certain patents and other intellectual property, for an
aggregate purchase price of $5.0 million, of which $800,000 was paid in cash and
$4.2 million was paid in the form of promissory notes ($909,000 of which
remained outstanding as of December 31, 1997), and warrants to purchase 92,820
shares of Common Stock, with an exercise price of $15.87. The promissory note
outstanding was amended and a principal payment of $500,000 was made on January
5, 1998, and the remaining principal balance of $409,000, plus accrued interest
was paid in May 1998. As consideration for the amendment, the Company issued a
warrant to purchase 13,923 shares of Common Stock at $15.87 per share. The
warrant expires in January 1999. The patents and other intellectual property
acquired in connection with the Intranasal Product Acquisition relate to
intranasal formulations and the corresponding administration of metoclopramide,
propranolol and certain benzodiazepines. Potential products incorporating this
technology were under development by Hyline at the time of acquisition. In
connection with the Intranasal Product Acquisition, the Company also entered
into an agreement with the sole stockholder of Hyline pursuant to which the
Company is obligated to pay such stockholder $50,000 per quarter through
December 1999. Such obligation was fully recognized in the Company's Statement
of Operations in 1994 and 1995. One of the potential products acquired by the
Company was Emitasol, an intranasal formulation of metoclopramide for the
treatment of emesis following chemotherapy. In 1996, the Company discontinued
development of RG-201 and all the potential intranasal products, including
Emitasol. See "Business -- Patents and Proprietary Rights" and "Certain
Transactions."
On January 27, 1998, the Company entered into a collaboration with
Dainippon encompassing the two principal targets in the Company's antibacterial
program. 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 will automatically convert into 53,988 shares of
Common Stock concurrently with the closing of the Offering. In April 1996, the
Company entered into a collaboration with Abbott for the Company's antifungal
program. On February 6, 1998, Abbott notified the Company of its termination of
the Abbott Collaboration effective April 8, 1998. As of March 31, 1998, the
Company had realized $3.2 million in research support revenues from Abbott and
expects to realize $139,000 of revenue deferred at March 31, 1998. In connection
with the Abbott Collaboration, Abbott made a $3.5 million equity investment in
the Company and agreed to purchase an additional $4.0 million of Common Stock
directly from the Company in a private placement at a
26
<PAGE> 28
price per share equal to the initial public offering price concurrently with the
closing of the Offering, assuming the Offering results in gross proceeds to the
Company of $16.0 million. See "Business -- Collaborative and Research
Agreements."
The Company is a development stage company, has generated no revenue from
the sales of products and, through March 31, 1998, has incurred cumulative net
losses of approximately $36.4 million and, at March 31, 1998, had a net
stockholders' equity of $1.2 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. See "Risk Factors -- Need for Additional Capital; Uncertainty
of Additional Funding."
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
For the three month period ended March 31, 1998, the Company's revenues
consisted of revenues from the collaboration agreements and SBIR grants from the
National Institutes of Health. Revenue earned under the Abbott agreement was
$417,000 for the three month periods ended March 31, 1998 and 1997. Revenue
earned under the Dainippon agreement, which began in February 1998, amounted to
$332,000 for the three month period ended March 31, 1998. Revenues from SBIR
grants for the three month period ended March 31, 1998 were $257,000 as compared
to $313,000 in the three month period ended March 31, 1997. The decrease in
grant revenues results from the completion of 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 $178,000, or 18%, to
approximately $1.2 million for the three month period ended March 31, 1998, from
$1.0 million in the three month period ended March 31, 1997. This increase
resulted from equipment costs associated with the Company's new laboratories, a
$73,000 non-cash charge for deferred compensation relating to certain options
granted during 1997, and initial costs associated with the Dainippon
Collaboration. Research and development expenses represented approximately 72%
of total operating expenses of $1.6 million in the three month period ended
March 31, 1998, as compared to 74% of total operating expenses of $1.4 million
in the three month period ended March 31, 1997.
General and administration expenses increased $99,000, or 28%, to $459,000
for the three month period ended March 31, 1998, from $360,000 in the three
month period ended March 31, 1997. This increase is due to a charge for the
amortization of additional operating costs associated with the Company's new
facility and a $20,000 non-cash charge for deferred compensation relating to
certain options granted during 1997.
Net interest expense increased $61,000 to $70,000 for the three month
period ended March 31, 1998, from $9,000 in the three month period ended March
31, 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.
The net loss for the three month period ended March 31, 1998 was $700,000,
an increase of $62,000, or 10%, from the net loss of $638,000 for the three
month period ended March 31, 1997. The increase resulted from the changes in
revenue and operating expenses discussed above.
YEARS ENDED DECEMBER 31, 1997 AND 1996
For the year ended December 31, 1997, the Company's revenues consisted of
revenues from the Abbott Agreements and SBIR grants from the National Institutes
of Health. Revenues earned under the Abbott
27
<PAGE> 29
Agreements were $1.7 million for the year ended December 31, 1997, as compared
to $1.1 million for the year ended December 31, 1996. The increase is
attributable to the Company's research support payments beginning in May 1996
and, as a result, the 1996 period includes only eight months of support revenue
as compared to 12 months of support revenue during 1997. Revenues from the SBIR
grants for the year ended December 31, 1997 were $1.3 million as compared to
$975,000 for the year ended December 31, 1996. The increase in grant revenue
results from the funding of two grants that were awarded in the fourth quarter
of 1996. 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 were $4.1 million in 1997. Although the
Company discontinued the external activities involving Emitasol and RG-201 in
1996, research and development expenses in 1997 remained the same as compared to
1996 due to an increase in the Company's scientific staff to support its PSTM
drug discovery programs. Research and development expenses represented
approximately 58% of total operating expenses of $7.1 million in 1997 as
compared to 72% of total operating expenses of $5.7 million in 1996.
General and administrative expenses increased $179,000, or 13%, to $1.6
million in 1997, from $1.4 million in 1996. This increase was the result of
additional administrative costs associated with a 1997 increase in the Company's
scientific staff.
Financial advisory costs consist of a one-time, non-cash charge of $1.3
million, and $96,000 of accrued expenses, which were recognized as an expense
upon the signing of a financial advisory agreement in June 1997 with a placement
agent who assisted the Company with the issuance of the Series F Preferred Stock
("the Placement Agent"). The $1.3 million one-time, non-cash charge for
financial advisory costs represents the fair value of options issued to the
Placement Agent pursuant to the financial advisory agreement.
In March 1996, the Company restructured its operations to focus on its PSTM
technology and the search for novel leads for antiinfective drugs. As a result,
certain employees associated with discontinued programs (Emitasol, RG-201) were
terminated. Severance compensation and other associated costs were recognized as
a charge to operations of $219,000 in 1996.
Net interest expense decreased $275,000, or 98%, to $7,000 in 1997, from
$282,000 in 1996. This decrease resulted from the repayment of debt and
conversion of promissory notes issued to certain of the Company's investors in
1996.
The net loss for the year ended December 31, 1997 was $4.1 million, an
increase of $250,000, or 6%, from the net loss of $3.9 million for 1996, due to
the changes in revenue and operating expenses discussed above. The net loss of
$4.1 million included the $1.4 million one-time charge ($1.3 million of which is
non-cash) described above for expense associated with the signing of the
financial advisory agreement. Exclusive of the $1.4 million charge, the net loss
would have decreased by $1.1 million or 30% from $3.9 million to $2.7 million.
As of December 31, 1997, the Company had a federal net operating loss
carryforward of approximately $28.4 million available to offset future taxable
income, if any. The Company also had federal and state research and development
tax credit carryforwards of approximately $575,000 and $375,000, respectively.
The net operating loss carryforward will begin to expire incrementally at
various dates beginning from 2004 through 2012, if not utilized. Utilization of
the net operating losses and credits may be subject to substantial annual
limitation due to the "change in ownership" provisions of the Internal Revenue
Code of 1986, as amended, and similar state provisions. The annual limitation
may result in the expiration of net operating losses and credits before
utilization. See Note 8 of Notes to Financial Statements.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues for the year ended December 31, 1996 were $2.1 million compared to
$407,000 in the prior year. The Company's 1995 revenues consisted solely of SBIR
grants. Revenues in 1996 included $1.1 million in research payments from Abbott.
The increase in grant revenue in 1996 was attributed to the funding of SBIR
grants in the second quarter of 1995 and the fourth quarter of 1996. Revenues
earned under research
28
<PAGE> 30
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 decreased $586,000, or 13%, to $4.1
million in 1996, from $4.7 million in 1995 due primarily to the discontinuance
of outside consulting and contract research services related to preclinical
studies of RG-201 and various activities associated with Emitasol. Research and
development expenses represented approximately 72% of total operating expenses
of $5.7 million in 1996 and 63% of total operating expenses of $7.4 million in
1995.
General and administrative expenses decreased $1.4 million, or 50%, to $1.4
million in 1996, from $2.8 million in 1995. The decrease was due to a one-time
charge in 1995, of $646,000, related to a consulting services agreement with an
executive of the selling party in the Intranasal Product Acquisition in 1994.
The remainder of the decrease was attributable to personnel and administrative
costs savings associated with the reorganization of the business development
function in the first quarter of 1996 and a reduction in the use of external
consulting during 1996.
Net interest expense increased from $240,000 in 1995 to $282,000 in 1996.
The increase of $42,000, or 18%, was due primarily to interest on notes payable
to a bank and convertible promissory notes issued to certain of the Company's
investors.
The net loss decreased from $7.3 million in 1995 to $3.9 million in 1996.
The decrease of $3.4 million, or 47%, was due primarily to revenue and operating
expense differences 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 Collaboration, the issuance of short-term convertible notes
and equipment financing arrangements. Through March 31, 1998, the Company has
raised approximately $37.3 million from the sale of Common Stock and preferred
stock, warrants and short-term convertible notes, $3.2 million from SBIR grants
and $3.5 million from the Abbott and Dainippon Collaborations (excluding the
initial Abbott and Dainippon equity investments). The Company's capital
expenditures and payments under capital lease obligations aggregate
approximately $1.4 million through March 31, 1998, and cash used to fund
operating activities since incorporation $25.8 million.
At March 31, 1998, the Company had cash and cash equivalents of
approximately $3.3 million and a working capital deficit of $622,000.
On March 7, 1997, the Company entered into a 15-year lease (with the right
of sublease) for a new facility located in Hayward, California. The lease
provides for an initial annual rent of $531,000, with scheduled increases.
Pursuant to the lease, the Company issued to the landlord a six-year warrant to
purchase 17,850 shares of Common Stock at $31.51 per share. The Company
relocated to the new facility in November 1997. In September 1997, the Company
amended the lease to include additional square footage in the new facility. The
Company has sublet the additional space through February 28, 2001. See
"Business -- Facilities."
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, together with the net
proceeds from the Offering and the proceeds from the sale of the Abbott Shares
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 collabora-
29
<PAGE> 31
tions; 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. See "Risk
Factors -- Need for Additional Capital; Uncertainty of Additional Funding."
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.
30
<PAGE> 32
BUSINESS
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's drug discovery efforts target bacterial,
fungal and viral infections for which the efficacy of existing therapies is
being threatened by the emergence of drug resistance or for which existing
therapies have had limited effectiveness. The Company's drug discovery
technology is based on the translational control of gene expression. Translation
is the process used by cells to make proteins and is an essential cellular
process for all living organisms, including infectious pathogens. The Company is
using its platform technology to discover compounds that inhibit or interfere
with PSTMs. RiboGene's extensive knowledge of translation allows the Company to
identify components of the translation process unique to a particular pathogen
and essential to its existence. The Company believes that targeting PSTMs may
lead to the discovery of drugs that are effective against either drug-resistant
pathogens or pathogens for which current therapies are not effective.
Infectious diseases have increased significantly during the past 20 years
and are now the third most common cause of death in the United States. Worldwide
sales of antiinfective drugs were approximately $33.0 billion in 1996 and
constituted the second largest pharmaceutical sales category. The antibacterial,
antifungal and antiviral markets are estimated to be approximately $26.0
billion, $4.0 billion and $3.0 billion, respectively, based on 1996 sales. There
are currently three antibacterial drugs that each generate in excess of $1.0
billion in worldwide sales annually and one antifungal drug that generates
nearly $1.0 billion. Of the 100 best selling brand name drugs worldwide, 20 are
antiinfectives addressing bacterial, fungal and viral infections. The clinical
efficacy of many bacterial and fungal antiinfectives is being threatened by
emerging strains of drug-resistant pathogens. In the antiviral area, there are
only a limited number of effective therapeutics currently marketed.
The Company believes that its target-based approach is different from, and
provides advantages over, traditional drug discovery techniques. Antiinfective
drug discovery has historically used a limited number of biological targets
which has restricted the ability to discover new drugs effective against drug
resistant pathogens. RiboGene's PSTMs represent a new class of targets for drug
discovery. By focusing discovery efforts on drugs which are effective inhibitors
of PSTMs, the Company believes that it may be possible to discover drug
candidates for which pathogens have not already developed resistance. In
addition, because the Company selects only PSTM targets which are essential for
the life of the pathogen and appear to bear little or no resemblance to their
human counterpart, such compounds may in certain applications have better safety
and efficacy profiles than existing therapies, or may provide a therapy where no
other therapy currently exists. The Company's scientists and SAB use their
knowledge and expertise in the field of translation to identify unique targets
specific to pathogens and to design and implement assays in order to identify
selective compounds which demonstrate activity at the pathogen specific
translation targets. By developing assays to discover compounds with identified
mechanisms of action against desired targets, the Company believes that the
compounds which demonstrate activity at these targets will be better
characterized and more likely to result in lead candidates for optimization and
further development.
RiboGene has established antibacterial, antifungal and antiviral drug
discovery programs. Within each program, the Company's drug discovery process
consists of four phases: (i) target identification -- the selection and
characterization of PSTM targets; (ii) assay development -- the design and
implementation of screening systems to identify compounds active against the
PSTM targets; (iii) lead discovery -- the screening of compound libraries to
identify small-molecule lead compounds; and (iv) lead optimization -- the
refinement of lead compounds in order to develop drug candidates. In its
antibacterial program, the Company has two principal targets in the lead
discovery phase, deformylase and ppGpp degradase, for which it conducts research
in collaboration with Dainippon. The Company has several additional
antibacterial targets, to which it has retained its rights, that are in the
assay development phase. In its antifungal program, two targets, EF3 and GCN4,
are in the lead optimization phase and several others that are in various phases
of early research and development. In its antiviral program, which is currently
focused exclusively on the hepatitis C virus
31
<PAGE> 33
("HCV"), the Company has one target, HCV IRES, in the lead discovery phase and
one target, HCV NS5A/PKR, in the assay development phase.
In order to accelerate the discovery, development and commercialization of
antiinfective drugs, the Company seeks to enter into collaborations with major
pharmaceutical companies and, additionally, into research and licensing
agreements with biotechnology companies, combinatorial chemistry companies and
universities. These relationships are intended to provide the Company with
funding, research and development support, access to additional compound
libraries and targets, as well as to provide the Company with preclinical and
clinical trial, manufacturing and marketing capabilities. On January 27, 1998,
the Company entered into a collaboration with Dainippon encompassing the two
principal targets in the Company's antibacterial program. 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 support at Dainippon, over
the three-year term of the research program. The Company may be entitled to
receive milestone payments upon the achievement of mostly late-stage clinical
and regulatory milestones in the amount of up to $10.0 million consisting of up
to $5.0 million in milestones through approval in Japan and an additional $5.0
million in milestones through approval in one other major market territory for
each product developed through the collaboration. RiboGene also has the right to
co-promote, on a country-by-country basis, any products resulting from the
collaboration. In connection with the Dainippon Collaboration, Dainippon made a
$2.0 million equity investment in the Company on February 23, 1998, by
purchasing the Dainippon Shares, which will automatically convert into 53,988
shares of Common Stock upon the closing of the Offering. In April 1996, the
Company entered into a collaboration with Abbott for its anti-fungal program. In
connection with the Abbott Collaboration, Abbott made a $3.5 million equity
investment in the Company. Abbott also agreed to purchase an additional $4.0
million of Common Stock in a private placement at a purchase price equal to the
initial public offering price assuming the offering results in gross proceeds to
the Company of $20.0 million including the $4.0 million investment from Abbott.
As of March 31, 1998, the Company had realized $3.2 million in research support
revenues from Abbott and expects to realize $139,000 of revenue deferred at
March 31, 1998. On February 6, 1998, Abbott notified the Company of the
termination of the Research Agreement entered into as part of the Abbott
Collaboration effective April 8, 1998. The Company has also entered into
agreements with ArQule, Inc. ("ArQule"), Pharmacopeia, Inc. ("Pharmacopeia") and
Trega Biosciences, Inc. ("Trega") to provide the Company with access to
additional compound libraries for its drug discovery programs and with the
University of Washington to acquire the rights to the HCV NS5A/PKR target for
its antiviral program.
STRATEGY
The Company's objective is to discover and develop novel antiinfective
drugs. To achieve this objective, the key elements of the Company's strategy are
to:
Exploit expertise in pathogen specific translation mechanisms. The Company
intends to use its accumulated expertise and know-how in pathogen specific
translation mechanisms to identify novel targets critical for the survival of
bacteria, fungi or viruses. With these targets, the Company develops assays
which are used to identify compounds with desired mechanisms of action. By using
targets which are specific to pathogens, the Company believes it may be able to
identify small-molecule lead compounds which inhibit pathogen function and
thereby kill or attenuate pathogen growth with minimal effects on humans. The
Company believes that in certain applications these small-molecule lead
compounds may have better safety and efficacy profiles than those of existing
drugs.
Develop novel antiinfectives which target drug resistant pathogens. The
Company directs its drug discovery programs toward the development of drugs that
target pathogens which have developed resistance to currently marketed
antiinfectives. Because new drugs which inhibit PSTMs will have different
molecular targets than those of existing classes of antiinfectives, the Company
believes that potential drug candidates resulting from its drug discovery
programs may be effective against existing drug resistant pathogens.
Leverage platform technology over multiple indications and multiple
targets. The Company will continue to leverage its platform technology over
multiple targets and across multiple disease states, including
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its current focus on antibacterials, antifungals and antivirals, which the
Company believes may increase the likelihood of successful development of leads
for potential drug candidates.
Establish collaborative relationships. The Company employs a two-pronged
collaborative strategy to accelerate the discovery, development and
commercialization of novel antiinfective drugs. The Company seeks to enter into
collaborations with (i) major pharmaceutical companies, on entire programs or on
specific targets, to provide the Company with funds, research and development
resources, including chemistry capabilities, access to compound libraries and
preclinical and clinical trial, regulatory, manufacturing and commercialization
capabilities and (ii) biotechnology and combinatorial chemistry companies and
universities to provide the Company with access to drug discovery and
development technologies, compound libraries and targets. The Company has
entered into the Dainippon Collaboration in order to enhance its antibacterial
program. The Company has also entered into agreements with ArQule, Pharmacopeia
and Trega to provide RiboGene with access to additional compound libraries for
certain of RiboGene's drug discovery programs.
Maintain and enhance proprietary position. RiboGene will continue to seek
protection for its discoveries and proprietary technology through the
maintenance of trade secrets, the filing of patent applications and the
in-licensing of issued patents and pending patent applications. The Company has
an issued patent and a pending United States application relating to its
antifungal program, an issued United States patent and pending application
relating to its antiviral program and a provisional application, a pending
application and certain corresponding foreign applications relating to its
antibacterial program.
BACKGROUND
Infectious Disease Resistance
The increase in prevalence of infectious diseases caused by bacteria, fungi
and viruses that have developed resistance to existing antiinfective drugs is
well documented in the medical literature. This current situation results in
part from the overuse or incorrect use of antiinfective drugs. Administering
antiinfectives in the presence of resistant pathogens creates a growth advantage
for such pathogens and allows them to multiply preferentially over those that
have not developed resistance. These resistant pathogens can then spread quickly
from infected patients to healthy individuals.
Resistant pathogens have developed multiple mechanisms against certain
approved antiinfective drugs. Mechanisms of resistance include altering the
pathogen target, altering the drug itself or preventing the drug from
interacting with the target. Because traditional antiinfective drug discovery
approaches have used a limited number of biological targets, they have not
adequately addressed this resistance problem. As a result, new generations of
antiinfectives resulting from traditional approaches have been susceptible to
the same resistance mechanisms.
Traditional Approaches to Antiinfective Drug Discovery
There are two traditional approaches to antiinfective drug discovery.
Biological approaches rely on the use of whole organism based assays to screen
for compounds which kill pathogens. Although antiinfectives have been discovered
using this approach, information on the molecular target or the mechanism of
action of the drug resulting from this approach is minimal. The lack of
information on the target or mechanism of action makes it difficult to
understand the cause of subsequent drug resistance. Chemistry driven approaches
focus on chemical modifications of known antiinfective compounds. This approach
has led to the identification of new drugs which have chemical structures that
are closely related to existing drugs. As a result, these newer drugs are active
at the same molecular targets and eventually encounter the same resistance
problems that were observed for earlier drugs.
RiboGene's target-based approach involves the identification and
characterization of translation mechanisms that are specific to pathogens and
essential to their survival. This approach stands in contrast to traditional
methods for antiinfective drug discovery (particularly for antibacterial agents)
which have produced the drugs that are in clinical use today. Although a number
of existing antibacterials kill pathogens by inhibiting bacteria translation,
these drugs were discovered through traditional approaches. The Company's
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approach is one of several modern drug discovery methods, including antisense,
gene therapy and genomics, that have emerged as alternatives to traditional
methods. The Company believes that its targeted approach, which is based on
PSTMs, and assays incorporating those PSTM-based targets combined with
contemporary medicinal and combinatorial chemistry techniques, could increase
the possibility of identifying unique drug candidates.
THE RIBOGENE APPROACH
The Company's scientists, in combination with its collaborative partner and
SAB, use their extensive knowledge and expertise in the field of translation to
identify targets specific to pathogens and to design and implement assays to
identify selective compounds which demonstrate activity at the specific
translation targets. By developing assays which identify compounds with
mechanisms of action against the desired target, the Company believes that the
compounds which demonstrate activity at the target will be better characterized
and more likely to result in lead candidates for optimization and further
development. Because RiboGene's PSTMs represent new drug targets, the Company
believes that antiinfective drugs which result from its drug discovery programs
may also be effective against current drug resistant pathogens.
Translation and protein synthesis are synonymous terms for the process used
by cells to make proteins from a template known as messenger RNA ("mRNA").
Proteins participate in virtually all cellular functions. All proteins are
assembled from a defined set of building blocks known as amino acids, and it is
the sequence in which the amino acids are assembled which distinguishes one
protein from another. The instructions that determine this sequence are encoded
within the genes of the organism. Typically, each gene contains coded
information for the synthesis of one particular protein. For this protein to be
synthesized, the information in the gene must be decoded. The decoding process
has two primary stages known as transcription and translation. (See Figure 1).
During the first stage, which is known as transcription, the genetic information
is "transcribed," or copied, and the copies produced are known as mRNA
molecules. During the second stage of gene expression, which is known as
translation, the information is "translated," or utilized, to assemble amino
acids into proteins. During this stage, these mRNA molecules direct the
synthesis of the protein by intracellular structures known as ribosomes. Each
ribosome moves along the mRNA and reads it like a tape, which tells the ribosome
which amino acid to add next as it synthesizes the protein.
FIGURE 1 -- THE NATURAL GENE EXPRESSION PROCESS
LOGO
Genetic information is stored archivally as DNA, transcribed into a working copy
as mRNA, and translated into functional units as proteins.
RIBOGENE'S DRUG DISCOVERY PROCESS
RiboGene's drug discovery process consists of four phases: (i) target
identification; (ii) assay development; (iii) lead discovery; and (iv) lead
optimization. The Company currently has the capability internally for
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the first three phases and intends to use a portion of the proceeds of the
Offering to enhance its internal lead optimization capabilities.
The following diagram illustrates RiboGene's four-phase integrated drug
discovery process.
FIGURE 2 -- RIBOGENE'S DRUG DISCOVERY PROCESS
LOGO
Target Identification
In the first phase of the process, the Company uses its accumulated
translation specific expertise and know-how in combination with functional
genetics and microbial genomics to identify and select the PSTM targets for use
in its drug discovery programs. Only PSTM targets which are essential for the
life of the pathogen and appear to bear little or no resemblance to their human
counterpart are selected for RiboGene's programs. The Company validates PSTM
targets by demonstrating their essential nature through the examination of the
effects on pathogens upon disruption or deletion of the gene which encodes the
PSTM target. The Company believes that the expertise of its staff and SAB
provides it with an important advantage in identifying PSTM targets. To date,
the Company has identified several PSTM targets utilizing its assembled
knowledge of pathogen and human translation.
Assay Development
When PSTM targets have been identified and validated, RiboGene scientists
use a variety of techniques to design and implement translation-based assays.
RiboGene has considerable expertise in the design and implementation of
translation-based assays incorporating conventional, automated and
high-throughput screening technology. The Company believes that its internal
translation-based assay development and implementation capabilities represent a
core competence of RiboGene and an advantage over more traditional drug
discovery screens. To date, the Company has applied its assay development
capabilities to create 40 unique PSTM assays, including those currently utilized
in its antibacterial collaboration with Dainippon.
Several types of assays have been developed internally for use in the
Company's drug discovery programs, including primary and secondary in vitro
biochemical assays and secondary whole cell assays. Primary assays incorporate
PSTM targets in a high-throughput format and are used to indicate the biological
activity of a compound against the specific PSTM target. This biological
activity is then reconfirmed in separate assays to eliminate compounds that are
not selectively acting against the specific PSTM target. Secondary assays are
used to characterize further the activity of screened compounds.
The basic constructs in many of the Company's assays are similar throughout
all of its drug discovery programs. It is this similarity and the Company's
internal expertise in assay development that allow for advances made in the
design and development of screens for one particular program to be applied to
all of its other programs as well. This advantage can be demonstrated by a
review of the total assay development time for certain of its antifungal and
antibacterial assays. Advances made in the Company's antifungal program allowed
certain antibacterial screens to be developed in half the time required to
develop their fungal counterparts.
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Lead Discovery
Once a PSTM target has been incorporated into a high-throughput assay,
RiboGene scientists use these assays to screen compound libraries to identify
potential lead compounds suitable for lead optimization. Compounds with
demonstrated activity in the primary screen are considered "hits." Secondary
assays designed to characterize further the activity of hits consist of separate
analyses of the compound against (i) the specific PSTM target in an environment
that more closely resembles its natural state, (ii) the specific pathogens in
cell culture and (iii) an appropriate human cell line. The data generated from
screening compounds in these assays is used to identify compounds that have
activity against a given PSTM target. This information is then used to select
compounds that serve as the starting point for lead optimization.
Currently, the Company has the capacity to screen approximately 1.25
million samples per year. The Company believes that with currently planned
improvements, this capacity can be increased to over 2.4 million samples per
year. The Company intends to use a portion of the proceeds from the Offering to
increase its screening capacity.
In order to increase the probability of identifying compounds that are
active against selected PSTMs, the Company has acquired and will continue to
acquire access to diverse and biased compound libraries. Diverse libraries
contain compounds with a wide variety of chemical structures and structural
features or motifs. Biased libraries contain a narrower selection of chemical
structures and structural motifs that are selected based on their propensity to
bind selected targets. Currently, RiboGene's compound library consists of over
100,000 diverse small-molecule compounds and natural product extracts. The
Company's library has been assembled through acquisitions from commercial and
academic sources as well as through custom syntheses. The RiboGene library also
contains a small number of compounds that are biased toward certain PSTM
targets. Through the Dainippon Collaboration, the Company will gain access to
the Dainippon compound library for use in connection with development activities
under the collaboration. In addition, the Company has obtained access to certain
compound libraries of Trega, ArQule and Pharmacopeia through research agreements
for use in its antiinfective PSTM assays. See "-- Collaborative and Research
Agreements."
Lead Optimization
Lead optimization involves the use of contemporary medicinal and
combinatorial chemistry techniques to enhance the potency, selectivity,
pharmacokinetic and other properties of potential leads identified using the
Company's assays. Lead optimization begins with the generation of compounds
which are structurally related to the potential lead compounds ("analogs"). The
analogs are generated by methodically altering specific components of a
potential lead compound. The effects of these alterations on the activity of the
analogs are studied in order to determine the function of the altered
components. Once the key components of a given core structure are known,
undesirable or unimportant components may be eliminated, leading to improved
potential lead compounds. Lead optimization is an iterative process involving
the systematic refinement and retesting of potential lead compounds. The Company
currently has limited internal lead optimization capabilities. RiboGene intends
to use a significant portion of the net proceeds from the Offering to further
develop the chemistry capabilities necessary to support its drug discovery
programs. The Company believes that developing these capabilities internally may
allow it to retain control over its discovery programs until a later stage and,
therefore, increase the value of its discovery programs. See "Risk
Factors -- Need for Chemistry Capabilities."
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THE RIBOGENE PROGRAMS
The status of RiboGene's primary drug discovery programs is shown below.
FIGURE 3 -- STATUS OF RIBOGENE DRUG DISCOVERY PROGRAMS
LOGO
ANTIBACTERIAL PROGRAM
Bacterial Infections
Bacterial infections are a significant and growing medical problem. These
infections may either be confined to a single organ or tissue, or disseminated
throughout the body by bloodstream infections, and can cause many serious
diseases, including pneumonia, meningitis and complicated urinary-tract
infections. Antibiotics are administered both to prevent bacterial infections
and to treat established bacterial disease. When administered to prevent an
infection, antibiotics are given before any clinical signs or symptoms of an
infection are present. When administered to treat an established infection,
antibiotics are often chosen and administered empirically before diagnostic
testing has established the causative bacterium and its susceptibility to
specific antibiotics.
Antibacterial Resistance and Market Opportunity
Annual worldwide sales of all antibacterial drugs in 1996 were
approximately $26.0 billion. At least three drugs have individually reached
worldwide sales of over $1.0 billion annually: Augmentin
(amoxicillin/clavulanate potassium), Biaxin (clarithromycin) and Cipro
(ciprofloxacin). Each of these drugs replaced previously prescribed drugs (such
as penicillin, tetracycline and erythromycin) whose effectiveness has diminished
as a consequence of bacterial drug resistance which developed after years of
administration. The clinical efficacy of these new drugs, however, is similarly
being threatened by emerging strains of drug-resistant pathogens.
The increasing prevalence of drug-resistant pathogens has contributed to
higher mortality rates from infectious diseases, particularly those caused by
Staphylococcus aureus, Streptococcus pneumoniae and Enterococcus
faecium/faecalis. S. aureus is the most common pathogen to cause
life-threatening infections. This organism is an aggressive pathogen that has
developed resistance to most antibiotics, except vancomycin (frequently called
"the drug of last resort"). Recent reports of vancomycin-resistant S. aureus
infections in the
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United States and Japan suggest that S. aureus has begun to show, and the
Company believes will continue to show, resistance to "the drug of last resort."
S. pneumoniae is a frequent cause of death among the elderly and is the most
frequently isolated pathogen in children with otitis media (middle ear
infections) and adults with sinusitis (sinus infection). Studies have shown that
patients with pneumonia caused by drug-resistant strains of S. pneumoniae have a
higher mortality rate than those with drug-sensitive strains. Enterococci are
commonly found living within the human intestinal tract, but can cause serious
bloodstream infections in weakened individuals. Vancomycin-resistant
enterococci, or "VRE" in the medical literature, are extremely difficult to
treat and are increasingly common in clinical settings. It is also feared that
these organisms will be able to pass their vancomycin resistance trait onto the
more serious pathogen S. aureus.
The Company believes that these examples demonstrate the importance of
identifying new molecular targets which will lead to antibacterial agents with
new mechanisms of action. RiboGene's PSTM technology is designed to identify
novel classes of antibiotics that act against new molecular targets.
RiboGene's Antibacterial Projects
RiboGene is focusing its antibacterial drug discovery programs on those
pathogens that have a high annual incidence rate worldwide and that have become
resistant to all but a few available antibacterial drugs. The Center for Disease
Control ("CDC") has reported that 47% of the two million hospital-acquired
infections in the United States are caused by four bacteria: staphylococci,
enterococci, pneumococci and pseudomoni. The Company's antibacterial projects
target infections caused by these and other bacteria.
Translation in bacterial cells differs from translation in human cells. In
particular, the translation initiation factors used by bacterial cells are fewer
in number and have little homology with functional counterparts in human cell
types. In addition, bacteria use translational control processes not found in
human cells. RiboGene is exploiting its knowledge of these bacterial PSTMs and
is designing and implementing antibacterial drug discovery systems incorporating
these PSTM targets. The Company's bacterial PSTM targets are in various stages
of research and development. The Company has developed assays incorporating
certain of these targets and intends to continue assay development incorporating
previously identified and future bacterial PSTM targets. Several of the assays
utilize proprietary strains of bacteria that may allow identification of
inhibitors of the target. Other assays utilize in vitro enzymatic reactions
designed to identify enzyme inhibitors of the target.
The Company has identified several bacterial PSTM targets that are in
various stages of research and development. Two of these targets, deformylase
and ppGpp degradase, are the focus of the Company's most advanced antibacterial
projects. The Company believes that bacterial PSTMs such as deformylase and
ppGpp degradase may be excellent selective targets for drug intervention and has
therefore established drug discovery projects based on these targets. The
Company entered into a collaboration with Dainippon in January 1998 to continue
the research and development of antibacterials that have activity against
deformylase or ppGpp. As part of the Dainippon Collaboration, RiboGene is
screening both the RiboGene and Dainippon compound libraries. RiboGene has
responsibility for assay development and lead discovery. Both parties have joint
responsibility for in vitro testing and lead optimization. Dainippon generally
has responsibility for any preclinical and clinical development, regulatory
submission, manufacturing or marketing. See " -- Collaborative and Research
Agreements."
Deformylase Inhibitor Project. Bacteria initiate translation using an amino
acid building block called formyl-methionine. The enzyme deformylase, common to
all bacteria, removes the formyl group from methionine releasing the protein for
use by the bacteria. This formylation-deformylation process is essential for
growth of all pathogenic bacteria. Because there is no mammalian counterpart,
the Company believes that deformylase enzyme inhibition is a useful target to
identify selective inhibitors of bacterial translation. In addition, the Company
believes that all pathogenic bacteria utilize this translation process, and
therefore deformylase inhibitors have the potential to be broad spectrum
antibacterial agents. RiboGene scientists have designed and implemented assays
that target the identification of inhibitors of the deformylase enzyme.
The deformylase inhibitor project is currently in the lead discovery phase.
Through its assay system, the Company has discovered small-molecule deformylase
inhibitors that have activity against bacterial pathogens.
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The Company, in collaboration with Dainippon, will continue to screen compounds
in the deformylase assays to identify additional novel lead compounds suitable
for lead optimization.
ppGpp Degradase Inhibitor Project. ppGpp (guanosine tetraphosphate) is an
unusual nucleotide, synthesized during the translation process and regulated by
the essential enzyme, ppGpp degradase. Bacteria carefully regulate ppGpp levels
because accumulation of this nucleotide is toxic to the organism. Therefore, the
Company believes that inhibitors of the ppGpp degradase enzyme should kill
bacteria. Since this process is not part of the human translation process, yet
all bacteria appear to utilize this process, RiboGene scientists believe that
ppGpp degradase inhibitors have the potential to be antibacterial agents with
selective broad spectrum activity against pathogens and potentially low toxicity
to humans. The Company has developed a high-throughput primary assay around the
ppGpp degradase enzyme. Secondary assays developed by the Company include an
assay which comprises the isolated ppGpp enzyme and an assay which
quantitatively measures the accumulation of ppGpp. These assays are used to
confirm the mechanism of action of the inhibitors identified in the primary
assay.
The ppGpp degradase inhibitor project is in the lead discovery phase. The
ppGpp assays have identified several potential small-molecule lead compounds
with antibacterial activity in vitro against pathogenic bacteria. The Company,
in collaboration with Dainippon, will continue to screen compounds in the ppGpp
assays to identify novel lead compounds suitable for lead optimization. In the
fall of 1997, the Company received a Phase I SBIR grant in the amount of
$100,000 to support this project.
ANTIFUNGAL PROGRAM
Fungal Infections
Systemic fungal infections are a serious and growing problem. Infections by
fungi or yeasts are frequently caused by Candida albicans, a yeast which is
commonly found in the intestinal tract and on mucosal linings of healthy
individuals. This yeast also causes thrush (sore throat), vaginitis, and
life-threatening infections, particularly in individuals with weakened immune
systems. Another frequent source of serious fungal infections is the Aspergillus
genus, which the average person is exposed to on a regular basis. Healthy
individuals resist Aspergillus infections, but after a severe illness or injury,
this fungus can cause lung infections which can then spread throughout the body
resulting in death. Many diseases and disease states (e.g., organ transplants,
diabetes, cancer) of an aging and increasingly affluent population correlate
with an increased susceptibility to systemic fungal infections, as do
increasingly common medical practices such as use of broad-spectrum antibiotics,
cancer chemotherapy and intensive-care unit support. C. albicans, the most
common fungal pathogen, now accounts for 8-15% of all hospital-acquired
infections, which represents a 480% increase over the last decade. Infections
caused by C. albicans are a significant cause of morbidity and mortality, with
median increased hospital stays of 30 days and estimates of death rates ranging
from 30 to 80%. Aspergillus, a less common cause of fungal infection, results in
a mortality rate estimated at greater than 50%.
Fungal Resistance and Market Opportunity
Worldwide sales of all antifungal drugs in 1996 were approximately $4.0
billion. The largest selling antifungal, Diflucan (fluconazole) had sales in
1996 of approximately $910 million. Diflucan is fungistatic in that it only
stops the growth of the fungus but does not kill it. The Company believes that a
fungicidal drug (i.e., a drug that kills fungi) would be a more effective
antifungal. Relatively few therapeutics have been approved for fungal infections
and almost all inhibit a common biochemical pathway. Because the differences
between fungal and mammalian cells are less than those between bacterial and
mammalian cells, agents that damage or kill fungal cells are more likely to have
toxic effects on mammalian cells. As a result, progress in antifungal therapy
has been slow. By attacking only one pathway, current antifungals are vulnerable
to increased resistance. Although resistance to antifungal therapeutics is not
yet as serious as for antibacterials, it is increasing and is expected to become
worse if present trends continue.
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RiboGene's Antifungal Projects
Certain fungal translational mechanisms differ from those found in human
cells and therefore provide opportunities for RiboGene scientists to identify
translation targets specific to fungal pathogens. RiboGene believes that it may
be possible to identify substances that interfere in fungal translation without
significantly affecting human translation. The Company has identified several
fungal PSTM targets and developed fungal-specific in vitro and whole cell
assays. The hits identified in the primary high-throughput assays are then
analyzed using secondary in vitro translational assays to confirm that the
compounds interfere specifically with fungal translation without significantly
affecting mammalian translation. Compounds with the desired potency and
selectivity are then assayed for their effects against pathogenic fungi in cell
culture.
The Company has identified several fungal PSTM targets that are in various
stages of development. Two examples of antifungal PSTMs are the third soluble
elongation factor ("EF3") and another system focused more broadly on fungal
translation ("GCN4"). The Company believes that antifungal PSTMs, such as EF3
and GCN4, are excellent selective targets for drug intervention and has
therefore established drug discovery projects based on these targets.
Elongation Factor 3 (EF3) Project. EF3 is a translation factor unique to
fungi and essential for fungal translation and growth. Although EF3 is common to
all known fungi, the Company believes that no known human counterpart exists,
which increases the probability of identifying selective drugs. At the
elongation stage of translation, fungi utilize three soluble elongation factors
whereas human cells utilize only two. Based upon such differing factors,
RiboGene believes that it may be possible to identify substances that interfere
in fungal translation without significantly affecting human translation.
From April 1996 to April 8, 1998, RiboGene worked with Abbott to discover
novel lead compounds that inhibit this factor. The Company, in conjunction with
Abbott, developed multiple approaches to identify substances that interfere
selectively with EF3 function. Certain potential lead compounds have been
identified. Several compounds identified using the primary assay appear to be
fungicidal. In addition, the Company has recently received a Phase I SBIR grant
in the amount of $100,000 to fund the development of one EF3 assay system.
GCN4 Project. GCN4 is used as a biological signal which can provide
information on fungal translation by responding to inhibition of several steps
within the translation pathway. The Company uses whole living fungal cells with
genetic mutations to screen for inhibitors of these translational components.
RiboGene has developed and patented this drug screening system.
From April 1996 to April 8, 1998, through the Abbott Collaboration, the
Company worked towards the development of novel antifungal drugs identified with
this assay. Potential lead compounds identified using the primary screen at
RiboGene have progressed to the lead optimization stage. The Company received
one Phase I and one Phase II SBIR grant in the aggregate amount of $830,000 to
fund early work on the GCN4 project.
On February 6, 1998, Abbott notified the Company of its termination of the
Abbott Collaboration effective April 8, 1998. The Company is seeking to
establish a corporate collaboration for its antifungal program to replace the
Abbott Collaboration. If the Company is not successful in such efforts, it
currently intends to fund the antifungal program from its own resources. See
"-- Collaborative and Research Agreements -- The Abbott Agreements."
ANTIVIRAL PROGRAM
Viral Infections and Hepatitis C
Viruses are intracellular parasites that can only reproduce and proliferate
within a living host cell. Viruses are composed of RNA or DNA genetic material
enclosed in a protective viral coat. A virus reproduces by entering a host cell
and releasing the genetic material which utilizes the host cell machinery to
recreate itself. Unlike bacteria and fungi, viruses do not have their own
cellular machinery to reproduce. The Company currently is focusing all of its
antiviral efforts on HCV.
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HCV is recognized as a major cause of chronic hepatitis worldwide.
According to the CDC, there are approximately four million HCV infected
individuals in the United States, with up to 180,000 new cases occurring each
year. The World Health Organization estimates that an additional 10 million
individuals are infected with HCV in Europe and a total of 100 million people
are infected worldwide. Hepatitis C accounts for 20% of all cases of acute
hepatitis. Approximately 85% of HCV infected persons will develop chronic
hepatitis, of which 20% will progress to liver cirrhosis. Chronic HCV infection
can also lead to the development of hepatocellular carcinoma and liver failure.
Currently, hepatitis C is responsible for an estimated 8,000 deaths annually,
and without effective intervention that number is estimated to triple in the
next 10 to 20 years. Hepatitis C is also a leading cause for liver
transplantation in the United States.
HCV and Market Opportunity
Interferon alpha and its derivatives are the only approved therapeutics for
HCV infections. Interferon alpha is estimated to be only 20% effective while
resistance to interferon occurs in the other 80% of HCV patients. Based on
published studies conducted by a team of researchers led by a member of the
Company's SAB, the Company believes that hepatitis C virus may be intrinsically
resistant to interferon and that the clinical efficacy observed is due to the
occurrence of virus strains which are partially defective. As interferon alpha
is also administered for other indications, including cancer, it is difficult to
determine the precise amount used specifically for HCV treatment. However, total
worldwide sales of all brands of interferon in 1996 were approximately $1.2
billion.
RiboGene's HCV Projects
RiboGene's antiviral drug discovery program focuses on interfering with
viral translation mechanisms important for viral replication. The Company is
currently focusing its HCV efforts on two HCV PSTM targets, the HCV Internal
Ribosome Entry Site ("HCV IRES"), and the interaction between a viral protein
NS5A and a human protein kinase, RNA-activated enzyme ("PKR"), together known as
HCV NS5A/PKR. The Company has considerable expertise in the area of HCV
translation. Two members of the Company's SAB, Dr. Nahum Sonenberg and Dr.
Michael Katze, are responsible for certain important discoveries that have
significantly aided the Company's HCV efforts. Dr. Sonenberg was a co-discoverer
of the IRES mechanisms, and Dr. Katze recently published his findings on the
interaction of interferon-induced PKR and NS5A. Based in part on discoveries
made by Dr. Sonenberg, Company scientists have developed translation-based
assays incorporating certain viral IRES elements, including the HCV IRES. The
Company has screened and will continue to screen compounds in these assays. In
April 1997, the Company licensed the rights to the HCV discovery made by Dr.
Katze from the University of Washington. The Company is currently incorporating
the findings of Dr. Katze and is developing an assay designed to identify
inhibitors of the interaction between NS5A and interferon-induced PKR. See "Risk
Factors -- Dependence on Patents and Proprietary Rights."
HCV Internal Ribosome Entry Site (HCV IRES) Project. An IRES is a special
structure within HCV that enables the virus to manipulate a human cell's
translation process. Viruses with defective IRES elements replicate poorly
which, the Company believes, demonstrates that a loss of IRES function is
damaging to virus replication. RiboGene believes that drugs which affect IRES
function may have similarly damaging effects on viruses with minimal side
effects on human protein synthesis because humans do not utilize IRESs to
initiate translation.
The HCV-IRES project is in the lead discovery phase. The Company has
identified potential small-molecule lead compounds that have demonstrated
activity against HCV surrogates in cell culture. The Company has been awarded
Phase I and Phase II SBIR grants in an aggregate amount of $850,000 to fund the
HCV-IRES project.
HCV NS5A/PKR Project. PKR plays an important role in defending cells
against many kinds of viral infections. PKR regulates protein synthesis in
infected cells, thereby preventing the production of new viruses. Many viruses,
including HCV, have evolved certain defense mechanisms against PKR. RiboGene
believes that if a drug protects PKR against the HCV defense mechanisms it may
be an effective HCV therapeutic
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because it will enable the human enzyme to exert its natural anti-HCV effect.
The recent work published by Dr. Katze suggests that the HCV protein NS5A
confers interferon resistance by blocking the action of PKR.
The Company is working to discover novel therapeutics that protect PKR from
this viral protein in the belief that such therapeutics could increase the
efficacy of interferon treatment. The Company also believes that it may be
possible that a compound with this activity might even allow the efficacious use
of lower doses of interferon, thereby reducing the side effects of high-dose
interferon therapy or increase patient compliance to interferon therapy. The
target has undergone validation and is in the assay development stage. RiboGene
scientists are determining the optimal translational assay system to identify
inhibitors of the HCV NS5A/PKR interaction.
COLLABORATIVE AND RESEARCH AGREEMENTS
The Dainippon Agreements
On January 27, 1998, the Company entered into a research agreement with
Dainippon in connection with the Company's two principal antibacterial targets,
deformylase and ppGpp degradase. Pursuant to the research agreement, Dainippon
and the Company agreed to collaborate in a research program directed at
accelerating the discovery of antibacterial drugs that have activity against
either of these two bacterial specific targets. Dainippon has agreed to provide
certain antibacterial research and development support internally at Dainippon
and up to $6.0 million ($2.0 million of which has been received) to support
related research at RiboGene over a three-year period, subject to extension upon
mutual agreement by both parties. Pursuant to the terms of the research
agreement, the duties and responsibilities of Dainippon and RiboGene are
determined by a research committee comprised of representatives from both
companies. RiboGene's initial responsibilities include assay development and
lead discovery. Both parties are responsible for in vitro testing against
pathogens and lead optimization. Dainippon is responsible for in vivo evaluation
and preclinical development. Dainippon may terminate the research agreement at
any time after January 27, 1999 upon 180 days' written notice to the Company.
Also in January 1998, the Company entered into a license agreement with
Dainippon. Pursuant to the license agreement, the Company granted Dainippon
exclusive, worldwide rights to develop and market any and all antibacterial
products discovered by the parties during the joint research collaboration to
have activity against deformylase or ppGpp degradase. Under the terms of the
license agreement, Dainippon has responsibility for all development activities
necessary to commercialize potential lead compounds resulting from the Dainippon
Collaboration, including preclinical testing, clinical development, submission
for regulatory approval, manufacturing and marketing. The Company is entitled to
receive milestone payments of up to $10.0 million for each product developed
upon the achievement of mostly late-stage clinical and regulatory milestones,
consisting of up to $5.0 million through approval in Japan and up to $5.0
million through approval in a major market other than Japan, and royalties on
worldwide sales of any products that may result from such collaboration. The
Company also has an option on a country-by-country basis to co-promote any
products resulting from the Dainippon Collaboration. If the Company elects to
co-promote, it will receive a co-promotion fee, in addition to royalties on
product sales, equal to at least the fully-burdened cost of each of the
Company's sales representatives that promote the products, plus an additional
co-promotion fee.
In connection with the Dainippon Collaboration, the Company and Dainippon
entered into the Series G Preferred Stock Purchase Agreement, pursuant to which
Dainippon made an initial equity investment in the Company of $2.0 million by
purchasing 756,144 shares of the Company's Series G Preferred Stock, which will
automatically convert into 53,988 shares of Common Stock upon the closing of the
Offering. Dainippon also will receive certain registration rights with respect
to the Dainippon Shares. See "Description of Capital Stock -- Registration
Rights."
There can be no assurance that the Company or Dainippon will be successful
in developing or commercializing any drugs or products under the Dainippon
Agreements. As such, there can be no assurance that any milestones will be
achieved or that any royalties contemplated by the Dainippon Agreements will
ever be made. There can be no assurance that the Dainippon Agreements will not
be terminated by Dainippon prior to their expiration. See "Risk
Factors -- Dependence on Collaborative Relationships; Funding of Programs."
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Research Agreements
Trega Biosciences, Inc. In April 1995, RiboGene entered into an agreement
with Trega (formerly Houghten Pharmaceuticals, Inc.), which was amended in April
1997 and again in March 1998, pursuant to which the two companies agreed to
collaborate to screen combinatorial chemistry libraries developed by Trega using
assays developed by RiboGene. Core antifungals and certain antiviral assays were
the initial therapeutic targets. The Company has completed screening the Trega
compounds in the antifungal assays, but continues to screen compounds in its HCV
assays. Pursuant to this agreement, once a compound is selected for further
development the parties will jointly agree on a development plan which will
further specify each party's obligations. Each party has the right but not the
obligation to participate in the development of the compound. In no case is the
Company obligated to expend additional funds for development. The agreement
provides for proportionate ownership of compounds resulting from the
collaboration, based on each party's contribution to development of the
compound. Each party's contribution will be calculated based on actual internal
and external expenditures.
Pharmacopeia, Inc. In September 1997, the Company entered into a Library
Sample Evaluation Agreement with Pharmacopeia, a combinatorial chemistry company
(the "Pharmacopeia Agreement"). The Pharmacopeia Agreement grants the Company
sequential access to up to three of Pharmacopeia's proprietary compound
libraries (the "Pharmacopeia Compounds"). The Company intends to screen the
Pharmacopeia Compounds in certain of its assays. Upon receipt of the
Pharmacopeia Compounds, the Company will have four months (subject to extension)
during which it will have the exclusive right to screen the compounds against
specified targets. If the Company determines that a Pharmacopeia Compound has
demonstrated biological activity, the Company has the right, within 180 days, to
negotiate a subsequent development agreement with respect to the use and
development of such compound. At this point, the Company is not obligated to
expend additional funds for development of compounds under this agreement. The
agreement can be terminated by the Company upon 60 days notice, without any
further obligation.
ArQule, Inc. In September 1997, the Company entered into a Material
Transfer and Screening Agreement with ArQule, a combinatorial chemistry company
(the "ArQule Agreement"), which grants the Company access to ArQule's
proprietary combinatorial chemistry libraries (the "ArQule Compounds"). The
Company intends to screen the ArQule Compounds in certain of its assays. If the
Company detects activity in one or more of the ArQule Compounds and such
compounds have not already been licensed to a third-party, the Company will have
the opportunity to negotiate a collaboration agreement for such compounds. The
ArQule Agreement has an initial six-month term with automatic six-month renewal
periods, unless earlier terminated by either party. At this point, the Company
is not obligated to expend additional funds for development of compounds under
this agreement. The agreement can be terminated by the Company upon 30 days
notice, without any further obligation.
Georgia State University. In March 1995, the Company entered into an
assignment agreement with Georgia State University Research Foundation ("GSU")
for the transfer of rights to certain compounds synthesized at GSU that have
shown activity in certain of the Company's antiviral assays. The agreement
transfers to RiboGene all right, title and ownership to such compounds. In
consideration for these rights, the Company paid to GSU a one-time fee of
$10,000 and agreed to the payment of royalties to GSU from any sales of products
which incorporate the assigned compounds.
License Agreements
University of Washington. In April 1997, the Company entered into an
agreement with the University of Washington, which was amended in October 1997,
pursuant to which RiboGene received an exclusive worldwide license to certain
patent rights and technology relating to the interaction of the hepatitis C
virus NS5A protein and PKR. Under the agreement, the Company paid an upfront
license fee and has agreed to pay a quarterly license maintenance fee and a
milestone payment of $250,000 due upon the approval of an NDA for a compound
developed using the licensed patent rights. See "Risk Factors -- Dependence on
Patents and Proprietary Rights."
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University of Washington and McGill University. In April 1993, RiboGene
entered into an agreement with the University of Washington and McGill
University, under which RiboGene received an option to acquire an exclusive,
worldwide license to certain patent rights and technology relating to the
tumor-suppressing properties of the enzyme PKR. This agreement was amended in
April 1996 to extend the term of the option through April 1998, in exchange for
a minimal payment and a commitment by the Company to screen specified compounds
in assays incorporating this technology, which has been completed, and to
conduct preclinical studies on future lead compounds selected. The Company is
currently in negotiations with the parties with respect to obtaining a worldwide
license to such patent rights and technology. There can be no assurance,
however, that the Company will be able to obtain such rights, or that any
license agreement negotiated by the Company would be as favorable to the Company
as are the terms contained in the option. No lead compounds have been selected
for development to date. The funding for this research is being provided by an
SBIR grant that awarded the Company up to $640,000 over a two-year period ending
in August 1998.
The Abbott Agreements
In April 1996, RiboGene established a collaboration with Abbott (the
"Abbott Collaboration") to discover and develop antifungal drugs. On February 6,
1998, Abbott notified the Company of its termination of the Abbott Collaboration
effective April 8, 1998. Pursuant to the Abbott Agreements, Abbott was granted
exclusive worldwide rights to develop and market any and all antifungal products
discovered through the Abbott-sponsored collaborative research program. Since
May 1996, Abbott has funded a significant portion of the costs associated with
the Company's antifungal program. Pursuant to the Abbott Agreements, Abbott was
committed, subject to rights of early termination, to pay up to $5.0 million in
research support payments over the three-year term of the research program. As
of March 31, 1998, the Company had realized $3.2 million in research support
revenues from Abbott and expects to realize $139,000 of revenue deferred at
March 31, 1998. As a result of Abbott's termination of the Abbott Collaboration,
the Company will be reimbursed for all irrevocably committed research costs for
the project prior to termination that were not covered by previous research
support payments. In addition, each party to the Abbott Agreements will return
to the other proprietary and any confidential information and know-how of such
other party in its possession, and retain copies of any technical or other
information which was solely or jointly generated as a direct result of the
Abbott Collaboration. The Company is seeking to establish a corporate
collaboration for its antifungal program to replace the Abbott Collaboration.
However, there can be no assurance that the Company will be successful in such
efforts. If the Company is not able to establish a corporate collaboration for
its antifungal program it currently intends to fund the antifungal program from
its own resources. See "Risk Factors -- Dependence on Collaborative
Relationships; Funding of Programs."
In connection with the Abbott Agreements, the Company and Abbott entered
into a stock purchase agreement, dated April 26, 1996, as amended (the "Abbott
Purchase Agreement"), pursuant to which Abbott made an initial equity investment
in the Company of $3.5 million in 1996 and agreed to purchase the Abbott Shares
directly from the Company concurrently with the closing of the Company's initial
public offering, assuming such initial public offering resulted in gross
proceeds to the Company of $16.0 million. Pursuant to the Abbott Purchase
Agreement, Abbott also will receive certain registration rights with respect to
the Abbott Shares. See "Description of Capital Stock -- Registration Rights."
PATENTS AND PROPRIETARY RIGHTS
The Company believes that patents and other proprietary rights are
important to its business. The Company's policy is to file patent applications
to protect technology, inventions and improvements to its inventions that are
considered important to the development of its business. The Company's
commercial success will depend, in part, on its ability, and the ability of any
licensors, to obtain patent protection for its products and technologies, both
in the United States and in other countries. The patent positions of
pharmaceutical and biotechnology firms can be highly uncertain and involve
complex legal and technical questions for which important legal principles are
largely unresolved issues; thus making it difficult to predict the breadth of
claims which would be found allowable in any particular case. This uncertain
situation is also affected by revisions to the United States patent law adopted
in recent years to give effect to international
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accords to which the United States has become a party. The extent to which such
changes in laws will affect the obligations of the Company cannot be
ascertained.
The Company owns a provisional application, a pending patent application
and certain corresponding foreign applications relating to its antibacterial
drug discovery program; an issued U.S. patent, a pending U.S. patent application
and certain corresponding foreign applications, relating to its antifungal drug
discovery program; and an issued United States patent, a pending United States
patent application and certain corresponding foreign applications relating to
its antiviral drug discovery program. One of the coinventors of the
Company-owned patent applications relating to the antiviral drug discovery
program is Michael Katze, Ph.D. Dr. Katze presently is a member of the SAB and,
at the time these applications were filed, was a consultant to the Company and a
faculty member at the University of Washington. The Company has received
inquiries from, and has been in discussions with, University of Washington
regarding a potential, partial ownership interest in these patent applications
that Dr. Katze and the coinventors assigned to the Company. Such discussions are
ongoing and may result in a determination that University of Washington is a
joint owner of the patent applications, though the Company believes, after a
review of the information available to date, that Dr. Katze, in his capacity as
a consultant to the Company, properly assigned his rights in these applications
to the Company. Nevertheless, in connection with these ongoing discussions, the
Company decided to obtain an option for an exclusive, worldwide license under
the University's potential ownership interest. The option is exercisable upon
payment of a $25,000 fee, at which time the Company will have an exclusive
license under terms that will include payments of $250,000 for each new drug
application approval, royalty payments on future sales of products developed
under the licensed patent rights and a percentage payment of sublicensing fees
received by the Company, and certain other terms to be negotiated in good faith.
The Company is an assignee, along with McGill University, of an allowed
U.S. patent application generally relating to the PSTM program. The Company is
an exclusive licensee under a University of Washington pending United States
application and certain corresponding foreign applications directed to HCV
NS5A/PKR. In addition, the Company has an option, from the University of
Washington and McGill University, to license a recently-issued U.S. patent and a
pending U.S. patent application relating to translational technology. There can
be no assurance that any of these patent applications, or any patent
applications which the Company may acquire in the future, will issue as patents,
that any such issued patents will afford adequate protection to the Company or
not be challenged, invalidated, circumvented or infringed, or that any rights
granted under such patents will afford competitive advantages to the Company. To
protect its rights to its patent applications and/or patents, the Company may be
required to participate in interference proceedings before the United States
Patent and Trademark Office to determine priority of invention. In addition, if
patents that cover the Company's activities are issued to other companies, there
can be no assurance that the Company would be able to obtain licenses to such
patents at a reasonable cost if at all or be able to develop alternative
technology. The Company also could incur substantial costs should suits be
brought against third parties, in which the Company asserts patents to which the
Company has rights. There can be no assurance that the Company's patents or
those of its licensors if issued, would not be held invalid by a court or that a
competitor's technology or product would be found to infringe such patents.
The Company's success further will depend, in part, on its ability to
operate without infringing the proprietary rights of others without breaching
agreements that cover technology used in the Company's products. There can be no
assurance that the Company's activities will not infringe patents owned by
others. The Company could incur substantial costs in defending itself in suits
brought against it or any licensor. Should the Company's products or
technologies be found to infringe patents issued to third parties, the
manufacture, use, and sale of any of the Company's products could be enjoined
and the Company could be required to pay substantial damages. In addition, the
Company, in connection with the development and use of its products and
technologies, may be required to obtain licenses to patents or other proprietary
rights of third parties. No assurance can be given that any licenses required
under any such patents or proprietary rights would be made available on terms
acceptable to the Company, if at all. Failure to obtain such licenses may have a
material adverse effect on the Company.
In addition to patent protection, the Company also relies to a significant
extent upon trade secret protection for its confidential and proprietary
information, including many of the Company's key discovery technologies. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets or disclose
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such technology. To protect its trade secrets, it is RiboGene's policy to
require its employees, consultants, SAB members and parties to collaboration and
licensing agreements to execute confidentiality agreements upon the commencement
of employment, the consulting relationship or the collaboration or licensing
arrangement, as the case may be, with RiboGene. In the case of employees, the
agreements also provide that all inventions resulting from work performed by
them while employed by RiboGene will be the exclusive property of RiboGene. In
the case of SAB members, the agreements also provide that any confidential
information that results from work performed for RiboGene will be the exclusive
property of RiboGene. The Company will continue to require its employees,
consultants, SAB members, collaborators and licensees to execute confidentiality
agreements and inventions assignment agreements (in the case of its employees)
upon the commencement of employment, the consulting relationship or the
collaboration or license with the Company. There can be no assurance, however,
that these agreements will not be breached or that they will provide meaningful
protection of the Company's trade secrets or adequate remedies in the event of
unauthorized use or disclosure of such information, that the Company can
meaningfully protect its rights in such unpatented proprietary technology
through other means, that any obligation to maintain the confidentiality of such
proprietary technology will not be breached by employees, consultants, advisors,
collaborators, licensees or others, or that others will not independently
develop the same or substantially equivalent technology. The loss of trade
secret protection of any of the Company's key discovery technologies would
materially and adversely affect the Company's competitive position and could
have a material adverse effect on the Company's business, financial condition
and results of operations. Finally, disputes may arise as to the ownership of
proprietary rights to the extent that outside collaborators, licensees or
consultants apply technology information developed independently by them or
others to Company projects or apply Company technology to other projects and, if
adversely determined, such disputes would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company had acquired intellectual property that falls outside the field
of infectious diseases and translational control. The Company does not intend to
develop these products itself. These acquired products include Emitasol, for
emesis associated with chemotherapy, Migrastat, for migraine, and intranasal
benzodiazepines for various conditions such as anxiety, seizures, panic attacks
and sleep disorders. The Company has ongoing debt obligations relating to the
purchase of these products. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The Company discontinued the development of Emitasol, Migrastat and the
intranasal benzodiazepines in 1996. The Company has decided to discontinue the
patent prosecution for Migrastat. The Company has licensed rights to Emitasol in
Italy, Spain, Austria and certain former Soviet block countries. The Italian
licensee for Emitasol applied to the Italian regulatory authorities in 1993 for
registration of the product. There can be no assurance that the foreign
licensees will obtain the necessary regulatory approvals to market Emitasol, or
that, in the event such approvals are obtained, that Emitasol will achieve
market acceptance in such countries, or that the Company will ever realize
royalties on sales of Emitasol in such countries.
The Company has received notice that Peptech (Europe A/S) is opposing the
grant of a European patent with claims directed to the nasal administration of
benzodiazepines. As one of the grounds for the opposition, Peptech has submitted
a published abstract describing the nasal administration, to children, of the
benzodiazepine midazolam. This abstract has an apparent publication date of
February 1988, several months prior to the earliest filing date in the United
States from which the Company's European patent application could have claimed
priority. While the Company intends to respond vigorously to the opposition, no
assurance can be given as to the scope of the claims, if any, which the European
Patent Office ultimately will find patentable. Failure of the Company to prevail
in the opposition before the European Patent Office could impede the Company's
ability to outlicense the technology portfolio containing this patent.
The issued United States patent relating to the nasal administration of
benzodiazepines is the subject of a reissue proceeding before the United States
Patent and Trademark Office. In the course of negotiations with a potential
licensee of the technology portfolio containing this patent, the Company became
aware that the issued United States patent for which reissue is being sought had
expired for failure to pay the required maintenance fees. The Company's petition
to revive this patent recently was granted by the Patent and Trademark Office,
effectively resulting in the reinstatement of the patent, as if it had not
expired. However,
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should the Company choose to enforce this patent by instituting an infringement
action, the patent statute would provide certain protection to those infringers
who first began practicing, or first made substantial preparation to practice,
the patented invention during the approximately three-year and four month period
that the patent had lapsed. The Company presently is not aware of any potential
infringers who may be entitled to such so-called "intervening rights."
In April 1997, the Company entered into an agreement with CSC
Pharmaceuticals Ltd. ("CSC") of Vienna, Austria for the sale and distribution of
Emitasol in Austria, Eastern Europe and the Russian Federation. Under the terms
of the agreement, CSC is obligated to file for regulatory approval in Austria on
its behalf and three other European Union countries (as directed by and for the
benefit of the Company) for the purpose of obtaining European Union approval to
market the product via the Mutual Recognition process. CSC is obligated to file
for approval in Austria by April 1998. In the event the Company licenses a third
party in a European Union country other than Austria, and the third party
obtains marketing approval through substantial reliance on the marketing
approval obtained by CSC, on behalf of the Company, in any of the three
designated countries, the Company will pay CSC 10% of all up-front consideration
received from the third party, other than payment for equity, up to a maximum of
200% of CSC's expenses for obtaining such marketing approval. In a separate
agreement, the Company's Italian Licensee, Crinos, has agreed to manufacture
Emitasol for CSC and any other licensees. There can be no assurance that CSC
will obtain approval in Austria or that if approval is obtained, CSC will file
for and obtain approval in the other EU countries.
COMPETITION
The biotechnology and pharmaceutical industries are intensely competitive
and subject to rapid and significant technological change. Many of the drugs
which the Company is developing will be competing with existing therapies. In
addition, a number of companies are pursuing the development of pharmaceuticals
which target the same diseases and conditions the Company is targeting, using
technology similar to the RiboGene technology, as well as alternative discovery
technologies, including antisense, gene therapy and genomics. The Company faces
competition from pharmaceutical and biotechnology companies both in the United
States and abroad. Many of the Company's competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than the Company. In addition, unlike the Company, many of these
competitors have experience in undertaking preclinical studies and clinical
trials of new pharmaceutical products, obtaining the necessary regulatory
approvals and manufacturing and marketing products. In addition, academic
institutions, government agencies, and other public and private organizations
conducting research may seek patent protection with respect to potentially
competing products or technologies and may establish exclusive collaborative or
licensing relationships with competitors of the Company.
The Company believes that its ability to compete is dependent, in part,
upon its abilities to create and maintain scientifically advanced technology and
to develop and commercialize pharmaceutical products based on this technology,
as well as its ability to attract and retain qualified personnel, obtain patent
protection or otherwise develop proprietary technology or processes and secure
sufficient capital resources for the expected substantial time period between
technological conception and commercial sales of products based upon the
Company's technology.
There can be no assurance that the Company's competitors will not succeed
in developing technologies and drugs that are more effective or less costly than
any which are being developed by the Company or which would render the Company's
technology and future drugs obsolete and noncompetitive. In addition, the
Company's competitors may succeed in obtaining FDA or other regulatory approvals
for drug candidates more rapidly than the Company. Companies that complete
clinical trials, obtain required regulatory agency approvals and commence
commercial sale of their drugs before their competitors may achieve a
significant competitive advantage, including certain patent and FDA marketing
exclusivity rights that would delay the Company's ability to market certain
products. There can be no assurance that drugs resulting from the Company's
research and development efforts, or from the joint efforts of the Company and
its existing or future collaborative partners, will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
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GOVERNMENT REGULATION
Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
pharmaceutical products that ultimately may be developed by the Company. All of
the Company's products will require regulatory approval by governmental agencies
prior to commercialization. Therapeutic drug products intended for human use are
subject to rigorous preclinical and clinical testing requirements and extensive
review and approval procedures by the FDA in the United States and similar
health authorities in other countries. Various statutes and regulations also
govern or affect, among other things, the clinical testing, safety, efficacy,
manufacturing, labeling, storage, record keeping, advertising and marketing and
distribution of such products. Failure to comply with such regulations could
result in, among other things, delays in obtaining required marketing
authorizations, warning letters, recalls, suspension or termination of
production, product seizures, injunctions, civil penalties and criminal
prosecution.
The Company currently is engaged in the preliminary stages of drug
development and does not expect to submit an application for FDA marketing
approval of any therapeutic product drug for a number of years, if ever. Once
the Company identifies a pharmaceutical candidate for potential commercial
development, it will be subject to a lengthy and uncertain regulatory review
process. The steps ordinarily required before a new biopharmaceutical product
may be marketed in the United States include: (i) drug discovery and screening
activities; (ii) preclinical testing; (iii) the submission to the FDA of an
investigational new drug application (an "IND") which must become effective
before clinical trials may commence; (iv) adequate and well-controlled clinical
trials to establish the safety and effectiveness of the drug for its intended
use; (v) the submission of an NDA to the FDA; and (vi) FDA review and approval
of the NDA prior to any commercial sale or distribution.
Preclinical testing includes laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the safety and efficacy of the
product. Preclinical tests must be conducted in compliance with good laboratory
practice regulations. The results of preclinical tests are submitted to the FDA
as part of an IND. Unless the FDA objects to an IND, the IND will become
effective 30 days following its receipt by the FDA. In addition, the FDA may, at
any time, impose a clinical hold on an ongoing trial, requiring the suspension
of the trial until the agency authorizes its re-commencement. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials or that such authorization will lead to ultimate FDA approval of
a marketing application for the product.
Clinical trials involve the administration of the investigational product
to human subjects under the supervision of qualified principal investigators.
Clinical trials must be conducted in accordance with good clinical practices
under protocols submitted to the FDA as part of the IND. In addition, each
clinical trial must be approved and conducted under the auspices of an
Institutional Review Board ("IRB"), which will consider, among other things,
ethical factors, the safety of the human subjects and the potential liability of
the institution conducting the investigation.
Clinical trials ordinarily are conducted in three sequential phases and
generally take an average of five years, but may take longer. In certain cases
the phases may overlap. Phase I represents the initial introduction of the drug
to a small group of healthy subjects to test for safety, dosage tolerance, and
the essential characteristics of the drug. Phase II involves studies in a
limited number of patients to test the safety and efficacy of the drug at
different dosages. Phase III trials involve large-scale evaluation of safety and
effectiveness, usually (though not necessarily) in comparison with a placebo or
an existing treatment. The results of the preclinical and clinical testing are
submitted to the FDA in the NDA. In some cases, the FDA may require additional
trials to be conducted following marketing approval to confirm safety and/or
effectiveness. 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 potential products that may be developed by the
Company. Furthermore, the FDA may suspend clinical trials at any time if it
decides that patients are being exposed to a significant health risk.
All data obtained from a comprehensive development program are submitted as
an NDA to the FDA. Although the FDA is required by law to review applications
within 180 days of their filing, in practice longer times are typically
required. Review generally takes an average of at least 15 months but may take
longer. The FDA frequently requests that additional information be submitted
requiring significant additional review time.
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Any potential products of the Company will be subject to demanding and
time-consuming NDA or similar approval procedures in countries where the Company
intends to market its products. Such regulations vary country by country.
The process of obtaining required FDA marketing approvals, including a
review of manufacturing process and facilities used to produce such products,
can be costly, time consuming and subject to unanticipated delays. The FDA may
refuse to approve an application if it believes that applicable regulatory
criteria are not satisfied. The FDA may also require additional testing of a
drug product as a condition of marketing approval. There can be no assurance
that approvals of any potential products that may be developed by the Company
and its collaborative partners will be granted on a timely basis, if at all.
Even if granted, marketing approval will be limited to specific therapeutic
indications, and the Company and its collaborative partners will be subject to
periodic inspection for compliance with good manufacturing practices and other
applicable regulatory requirements relating to labeling, advertising, record
keeping, and reporting to FDA of adverse experiences and other information.
For marketing outside of the United States before FDA approval to market,
the Company must submit an export permit application to the FDA. Whether or not
FDA approval is obtained, approval of a potential product by comparable
regulatory authorities may be necessary in other countries prior to marketing
such product in such countries. The review and approval procedures vary from
country to country, can involve additional testing and the time required may
differ from that required for FDA approval. In addition, product licensing,
pricing and reimbursement requirements vary widely from country to country.
There can be no assurance that the Company will meet and sustain any such
requirements.
The Company's research and development activities involve the controlled
use of hazardous materials, chemicals and various radioactive materials. The
Company is subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal laws and regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
liability could exceed the resources of the Company. See "Risk
Factors -- Uncertainties Related to Clinical Trials" and "-- Government
Regulation and Need for Product Approvals."
SCIENTIFIC ADVISORS
The Company has established an SAB consisting of individuals with expertise
in translational biochemistry, particularly as it relates to bacteria, fungi,
and viruses. The Company is highly dependent on its SAB members, who conduct
research in cooperation with the Company and provide the Company with access to
technology developed by them. The potential success of the Company's drug
discovery programs depends in part on continued collaborations with these
advisors. The Company and various members of its management and research staff
rely heavily on the SAB for new translation-based targets and for expertise in
translation research. The Company has entered into agreements with its SAB
members which provide for confidentiality of the Company's proprietary
information. The agreements also provide that any confidential information that
results from work performed for the Company is the exclusive property of the
Company. However, the Company may not have rights to developments, publications
or the results of any research conducted by these advisors, which may adversely
affect the Company. See "Risk Factors -- Dependence on Scientific Advisors."
The SAB holds meetings at least twice a year, and SAB members consult with
and meet informally with the Company and with each other on a more frequent
basis. The Company also has entered into independent consulting agreements with
certain of its SAB members pursuant to which such SAB members provide additional
services in the discovery and development of PSTM-targeted therapeutics on a per
project basis. In consideration for services provided to the Company, each
independent consultant is paid a retainer and may receive stock options pursuant
to the consulting agreements. The members of the SAB are as follows:
JOE B. HARFORD, PH.D., Chairman of the SAB, has served on the SAB since
July 1997. Dr. Harford serves as Associate Director of the National Cancer
Institute ("NCI"). In his current position Dr. Harford plays a role in shaping
the course of the NIH in several areas. He is an editor of several books related
to Molecular Biology and has over 100 scientific publications. Prior to joining
the NCI, Dr. Harford was the Director of New Drug Discovery at RiboGene from
1993 to 1996. Prior to that, Dr. Harford held various research and
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<PAGE> 51
managerial positions at the NIH from 1979 to 1993. Dr. Harford holds a B.S.
degree in Chemistry from Ohio University, and a Ph.D. degree in Biochemistry
from the University of Maryland School of Medicine. Dr. Harford has been active
in the translation field for over 10 years.
JOHN HERSHEY, PH.D., has served on the SAB since November 1992. Dr.
Hershey, Professor and Chairman, Department of Biological Chemistry, University
of California, Davis. Dr. Hershey has conducted extensive research relating to
translation factors and mechanisms in many species, including humans, bacteria,
fungi, plants and sea urchins. He has 168 scientific publications (30 in the
last five years) and has served on the editorial board of several journals, with
current positions at BioChemie and Gene Expression. Dr. Hershey also is a
co-editor of the book Translational Control (1996), which is a definitive text
in the field. He received his B.S. degree from Haverford College and his Ph.D.
degree from Harvard University. Dr. Hershey has been active in the translation
field for over 35 years.
ALAN HINNEBUSCH, PH.D., has served on the SAB since January 1993. Dr.
Hinnebusch is Chief, Laboratory of Eukaryotic Gene Regulation, National
Institute of Child Health and Human Development. Dr. Hinnebusch's research
interests include translational control mechanisms in fungi and mammals. He has
devised methods for cloning many translation factor genes from fungi and mammals
and this work has led to a much greater understanding of how the translation
initiation process works. Dr. Hinnebusch has 76 scientific publications (28 in
the last five years) and has served on the editorial board of several journals,
with current positions at Molecular & Cellular Biology, Microbiological Reviews
and Genetics. He received his B.S. degree from the University of Dayton and his
Ph.D. degree from Harvard University. Dr. Hinnebusch has been active in the
translation field for over 10 years.
ADAM GEBALLE, M.D., has served on the SAB since December 1992. Dr. Geballe
is an Associate Member in Molecular Medicine and Clinical Research, Fred
Hutchinson Cancer Research Center and Associate Professor of Medicine. Dr.
Geballe's research interests include translational control of viral gene
expression and translation termination in eukaryotes. He has 26 scientific
publications (nine in the last five years) and serves as Associate Editor on the
Journal of Infectious Diseases. Dr. Geballe is certified by the American Board
of Internal Medicine with a Subspecialty of Infectious Disease. He received his
B.A. degree from Stanford University and his M.D. degree from Duke University.
Dr. Geballe has been active in the translation field for over 10 years.
MICHAEL KATZE, PH.D., has served on the SAB since October 1992. Dr. Katze,
Professor, Department of Microbiology, University of Washington and Associate
Director for Scientific Affairs at the Regional Primate Research Center, has
conducted extensive research relating to translational control by several
viruses, including HCV, influenza, and HIV, and regulation of cellular
translation and growth by PKR. Dr. Katze devised the Company's current model of
interferon resistance in HCV. He also was involved in the development of an
alternative animal model for HIV infection. He has 83 scientific publications
(38 in the last five years) and serves on the editorial boards of Interferon and
Cytokine Research. He received his B.A. in Biology from Boston University and
his M.S. degree and Ph.D. degree from Hahnemann Medical College and Hospital.
Dr. Katze has been active in the translation field for over 15 years.
DAVID MORRIS, PH.D., has served on the SAB since October 1992. Dr. Morris,
Professor, Department of Biochemistry, University of Washington, has conducted
extensive research relating to polyamine biochemistry, translational control
mechanisms and growth control regulation of translation in mammalian cells. He
has 113 scientific publications (14 in the last five years). He received his
B.A. degree from the University of California at Los Angeles and his Ph.D.
degree from the University of Illinois. Dr. Morris has been active in the
translation field for over 25 years.
MICHAEL MATHEWS, PH.D., has served on the SAB since April 1993. Dr.
Mathews, Professor and Chairman of the Department of Biochemistry and Molecular
Biology at the New Jersey Medical School, has conducted extensive research
relating to translational control mechanisms by viruses, including HIV,
adenovirus and hepatitis D virus, and regulation of cellular translation and
growth by PKR. He has 152 scientific publications (47 in the last five years),
and has served on the editorial board of several journals, with current
positions at Genes & Development and Journal of Virology. He also is a co-editor
of the book Translational Control (1996), which is a definitive text in the
field. He received his B.A. degree and Ph.D. degree from Cambridge University.
Dr. Mathews has been active in the translation field for 30 years.
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<PAGE> 52
NAHUM SONENBERG, PH.D., has served on the SAB since October 1992. Dr.
Sonenberg, Professor, Department of Biochemistry and McGill Cancer Center,
McGill University, has conducted extensive research relating to translation
factors and mechanisms in many species, including humans, fungi and viruses.
Most of his work has been focused on translational control of mammalian cell
growth, translational control by viruses, including HCV, HIV and rhinovirus and
the initiation phase of translation. Dr. Sonenberg was one of the co-discoverers
of viral IRES elements. He has 193 scientific publications (68 in the last five
years) and has served on the editorial board of several journals, with current
positions at Molecular & Cellular Biology, Gene Expression, Journal of Virology
and RNA. He is also a co-editor of the book Translational Control (1996), which
is a definitive text in the field. He received his B.Sc. degree and M.Sc. degree
from Tel-Aviv University and his Ph.D. degree from the Weitzman Institute of
Science. Dr. Sonenberg has been active in the translation field for almost 25
years.
There can be no assurance that the Company will be able to maintain its
consulting arrangements with its SAB members or that such advisors will not
enter into consulting arrangements with competing pharmaceutical or
biotechnology companies, any of which would have a detrimental impact on the
Company's research objectives and could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Dependence on Scientific Advisors."
EMPLOYEES
At March 31, 1998, the Company had 26 full-time employees. Twenty of the
Company's employees are engaged in, or directly support, the Company's research
and development activities. Of the employees engaged in research and development
activities, ten hold Ph.D. degrees. The Company considers relations with its
employees to be good. None of the Company's employees is covered by a collective
bargaining agreement.
The Company's success will depend in large part on its ability to attract
and retain key employees and scientific advisors. The Company's potential growth
and expansion into areas and activities requiring additional expertise, such as
chemistry, are expected to place increased demands on the Company's management
skills and resources. These demands are expected to require a substantial
increase in management and scientific personnel and the development of
additional expertise by existing management personnel. Accordingly, recruiting
and retaining management and operational personnel and qualified scientific
personnel to perform research and development work in the future will also be
critical to the Company's success. There can be no assurance that the Company
will be able to attract and retain skilled and experienced management,
operational and scientific personnel on acceptable terms given the competition
among numerous pharmaceutical and biotechnology companies, universities and
other research institutions for such personnel. The failure to attract and
retain such personnel or to develop such expertise could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors -- Dependence on and Need for Additional Key Personnel" and
"Management."
FACILITIES
RiboGene currently leases approximately 30,000 square feet of laboratory
and office space in Hayward, California under a lease expiring in November 2012,
that provides for annual rent of approximately $531,000, which includes
amortization of $2.0 million of tenant improvements paid by the landlord. The
Company has sublet 5,000 square feet of this facility through February 28, 2001.
In connection with the lease, the Company issued to the landlord a six-year
warrant to purchase 17,850 shares of Common Stock at $31.51 per share. See
"Description of Capital Stock."
LEGAL PROCEEDINGS
The Company is not subject to any material legal proceedings.
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<PAGE> 53
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information as of May 20, 1998 with
respect to the current executive officers, directors and key employees of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Charles J. Casamento(1)................... 52 President, Chief Executive
Officer and Chairman of the
Board of Directors
Laura S. Lehman, Ph.D..................... 40 Vice President of Research
Timothy E. Morris......................... 36 Vice President, Finance &
Administration, Chief Financial
Officer and Assistant Secretary
Charles Gluchowski, Ph.D.................. 42 Director of Drug Discovery
Charles M. Moehle, Ph.D................... 39 Associate Director of
Translational Control Research
Digby W. Barrios(2)....................... 60 Director
Frank J. Sasinowski(3).................... 45 Director
Jon S. Saxe(1)(2)(3)...................... 61 Director
</TABLE>
- ---------------
(1) Member of the Nominating Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
MR. CASAMENTO joined the Company as President, Chief Executive Officer and
Chairman of the Board in June 1993. Prior to joining the Company, he was
co-founder, President and Chief Executive Officer of Interneuron
Pharmaceuticals, Inc., a biopharmaceutical company, from March 1989 until May
1993. Mr. Casamento has also held management positions at Genzyme Corporation,
American Hospital Supply, Johnson & Johnson, Hoffman-LaRoche, Inc. and Sandoz
Inc. Mr. Casamento is also a director of CORTEX Pharmaceuticals, a
biopharmaceutical company. Mr. Casamento holds a bachelor's degree in Pharmacy
from Fordham University and an M.B.A. degree from Iona College.
DR. LEHMAN has served as the Company's Vice President of Research since
January 1996, and before that she was Vice President of Drug Discovery and Drug
Development, since June 1994. Prior to joining the Company, she served as Senior
Director, Medicinal Chemistry, at Amylin Pharmaceuticals, Inc., a pharmaceutical
discovery and development company, from June 1989 to June 1994, and worked as a
Senior Scientist at Schering-Plough Research from 1983 to 1989. Dr. Lehman holds
a B.S. degree in Chemistry from Bucknell University, an M.S. degree in Organic
Chemistry from Bucknell University and a Ph.D. degree in Organic Chemistry from
Duke University.
MR. MORRIS joined the Company as Vice President, Finance & Administration
and Chief Financial Officer in June 1995 and was appointed Assistant Secretary
in October 1997. Prior to joining the Company, he served as Chief Accounting
Officer and Senior Director, Finance at Glycomed Incorporated, a biotechnology
company, from May 1992 until May 1995, and with Ernst & Young from July 1984 to
May 1992. Mr. Morris is a certified public accountant and holds a B.S. degree in
Accounting from California State University, Chico.
DR. GLUCHOWSKI joined the Company as Director of Drug Discovery in January
1997. Prior to joining the Company, he was the Director, Department of Chemistry
at Synaptic Pharmaceutical Corporation, a biotechnology company, from September
1990 until January 1997 and worked as a medicinal chemist with Allergan, Inc.
from 1984 to 1990. Dr. Gluchowski received a B.S. degree in Chemistry from the
Stevens Institute of Technology and a Ph.D. degree in Organic Chemistry from
Texas A&M University.
DR. MOEHLE joined the Company in May 1993 and currently serves as the
Associate Director of Translational Control Research. Prior to joining the
Company, he was at the National Institute of Child
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<PAGE> 54
Health and Human Development from 1988 to 1993, most recently as a Senior Staff
Fellow in the Laboratory of Molecular Genetics. Dr. Moehle holds a B.A. degree
in Biochemistry and Molecular Biology from Northwestern University and a Ph.D.
degree in Biology from Carnegie Mellon University.
MR. BARRIOS joined the Company's Board of Directors in August 1996. He is
currently a consultant to the pharmaceutical and biotechnology industries. From
1982 to 1992, Mr. Barrios served in various positions with Boehringer Ingelheim
Corporation, a pharmaceutical manufacturer, most recently as the President and
Chief Executive Officer. Mr. Barrios also serves as a director of Allelix
Biopharmaceuticals, a biopharmaceutical company, Cypros, Inc., a
biopharmaceutical company, Drug Royalty Corporation, a technology investment
company, Roberts Pharmaceutical Corporation, a pharmaceutical company, Sepracor,
Inc., a pharmaceutical company, and several private organizations.
MR. SASINOWSKI joined the Company's Board of Directors in March 1998. Since
1987, he has been a partner with Hyman, Phelps & McNamara, P.C., a food and drug
law firm. From December 1983 to June 1987, Mr. Sasinowski served in various
positions with the United States Food and Drug Administration.
MR. SAXE joined the Company's Board of Directors in April 1994. He has been
a director since 1989 and President since January 1995 of Protein Design Labs,
Inc., a biotechnology company. From August 1960 to September 1989, Mr. Saxe held
a number of executive positions at Hoffmann-La Roche Inc., including Vice
President, Licensing and Corporate Development. From October 1989 to May 1993,
he served as President and Chief Executive Officer of Synergen, Inc., a
biopharmaceutical company, and from May 1993 to May 1995, as President of Saxe
Associates, a biotechnology consulting firm. Mr. Saxe also serves as a director
of ID Biomedical Corporation, a diagnostics and vaccine development company, and
Incyte Pharmaceuticals, Inc., a genomics company.
The Company's by-laws authorize a board of directors consisting of five
members, and the Company currently has a board of directors consisting of four
members. Officers serve at the discretion of the Board of Directors. There are
no family relationships among any of the directors or executive officers of the
Company.
BOARD COMMITTEES
The Nominating Committee of the Board of Directors was formed in October
1997 to interview, evaluate, nominate and recommend individuals for membership
on the Company's Board of Directors and committees thereof. The Compensation
Committee of the Board of Directors was formed in March 1997 to establish
salaries, incentives and other forms of compensation paid to officers and
employees of the Company. The Compensation Committee also administers the
issuance of stock options and other awards under the Company's stock plans. The
Audit Committee of the Board of Directors was formed in October 1997 to review
the internal accounting procedures of the Company and consult with and review
the services provided by the Company's independent auditors.
DIRECTOR COMPENSATION
Directors who are employees of the Company currently do not receive any
cash compensation from the Company for their services as members of the Board of
Directors, although they are reimbursed for certain expenses in connection with
attendance at Board and committee meetings. Non-employee directors who are not
affiliated with a significant stockholder (the "Independent Directors") receive
$2,000 per meeting plus reimbursement of certain expenses. The Independent
Directors were paid an aggregate of $20,000 in director fees during the last
fiscal year. In 1997, Dr. Barkas and Dr. Treu (each, a former director) were
each granted options to purchase 2,834 shares of the Company's Common Stock
under the 1993 Stock Option Plan. Upon completion of the Offering, all
non-employee directors will be eligible to receive stock options pursuant to the
Company's 1997 Non-Employee Directors' Stock Option Plan. See "-- Stock Plans
and Related Employee Benefit Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in March 1997, the
Board of Directors made all determinations with respect to executive officer
compensation. Of the directors who participated in deliberations concerning
executive officer compensation, either prior to the formation of the
Compensation Committee or in their capacity as a member of the Compensation
Committee, none have served as officers of the
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<PAGE> 55
Company other than Mr. Casamento, who has served as President and Chief
Executive Officer of the Company since June 1993. Certain of the Company's
directors have purchased securities of the Company individually or through an
affiliated entity. See "Certain Transactions" and "Principal Stockholders."
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned in 1997 by the
Company's Chief Executive Officer and the other executive officers who earned in
excess of $100,000 during the fiscal year ended December 31, 1997 (collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
--------------------- COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) ($)
--------------------------- --------- -------- ------------
<S> <C> <C> <C>
Charles J. Casamento..................................... 325,000 50,000 66,407(1)
President, Chief Executive Officer and Chairman of the
Board of Directors
Laura S. Lehman, Ph.D.................................... 160,000 -- --
Vice President of Research
Timothy E. Morris........................................ 162,100 40,525 --
Vice President, Finance & Administration, Chief
Financial Officer and Assistant Secretary
</TABLE>
- ---------------
(1) Represents $47,613 of principal and interest on a note forgiven by the
Company and $18,794 in life and disability insurance premiums paid by the
Company. See "Certain Transactions."
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options to the Named Executive Officers during the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE
% VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES IN PRICE OPTION TERM(3)
OPTIONS FISCAL PER EXPIRATION ---------------------
NAME GRANTED YEAR(1) SHARE(2) DATE 5% 10%
---- ----------- ------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Casamento................. 17,136 26% $3.15 07/24/07 $33,947 $86,028
Laura S. Lehman, Ph.D................ 14,280 22% $3.15 07/24/07 28,289 71,690
Timothy E. Morris.................... 6,069 9% $3.15 07/24/07 12,023 30,468
</TABLE>
- ---------------
(1) Based on options to purchase 64,941 shares of Common Stock granted to
employees in fiscal 1997.
(2) The exercise price is equal to 100% of the fair value of the Common Stock at
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 the time of grant (ten years). Stock price appreciation of five percent
and ten percent is assumed pursuant to rules promulgated by the Securities
and Exchange Commission and does not represent the Company's prediction of
the stock price performance. The potential realizable value is calculated by
assuming that the fair value of the Common Stock at the date of the grant,
as determined by the Board of Directors, appreciates at the indicated rate
for the entire term of the option and that the option is exercised at the
exercise price and sold on the last day of its term at the appreciated
price.
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<PAGE> 56
In 1997, 10,710, 2,142 and 2,142 shares were purchased by Mr. Casamento,
Dr. Lehman and Mr. Morris, respectively, pursuant to purchase rights granted
under the 1993 Stock Plan. Such shares are subject to the Company's right of
repurchase upon termination of employment, which lapses over four years. Such
shares were purchased at fair value ($3.15) as determined by the Company's Board
of Directors.
FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held by the Named
Executive Officers at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(1)
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles J. Casamento................................. 24,331 33,409 $76,866 $118,365
Laura S. Lehman...................................... 8,666 17,723 27,095 67,002
Timothy E. Morris.................................... 4,730 9,192 19,456 36,131
</TABLE>
- ---------------
(1) Based on the initial public offering price of $7.00 per share, less the
option exercise price.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
In May 1993, the Company entered into an employment agreement with Charles
J. Casamento, President, Chief Executive Officer and Chairman of the Board of
Directors of the Company. The agreement provides for an annual base salary of
$200,000, subject to annual review. In addition, the Board of Directors approved
a bonus of up to $150,000 to be paid to Mr. Casamento in the event of a Merger
(as defined in the employment agreement) or an initial public offering of the
Company's Common Stock, and up to an additional $150,000 for the achievement of
specific goals ($50,000 per goal) in 1997, of which $50,000 was paid in
connection with the Series F Private Placement. On the first day of employment
and on the first and second anniversary of employment, the Company loaned Mr.
Casamento $40,000 (for a total of $120,000) in the form of three-year notes with
interest rates of 3.62%, 5.63% and 5.97% per annum, respectively. The loans due
in June of 1996 and 1997 have been forgiven. These loans were made in connection
with cost-of-living adjustments and may be forgiven, at the election of the
Board of Directors, for so long as Mr. Casamento remains employed by the
Company. In addition, in October 1993, the Company provided Mr. Casamento with a
bridge loan in the aggregate amount of $250,000, which loan subsequently was
repaid by Mr. Casamento in October 1994.
In July 1995, the Company entered into a Change of Control agreement with
Mr. Casamento that provides for certain severance benefits in the event his
employment is involuntarily terminated other than for "cause" at any time within
12 months after, or in contemplation of, a Change of Control (defined as a
reorganization in which the current shareholders hold less than a 50% ownership
interest in the surviving entity consummated without the approval of the Board
of Directors, a sale of all or substantially all of the Company's assets, a
liquidation of the Company or a transaction in which more than half of the
Company's Board of Directors is replaced). Severance benefits include a lump-sum
payment equal to 12 months' salary and the continued payment of medical benefits
during the 12 months following termination. In addition, all loans issued by the
Company to Mr. Casamento will be forgiven automatically upon a Change of
Control. The Change of Control agreement also provides that all options held by
Mr. Casamento will immediately vest, and the exercise period of such options
will be extended to a date one year from the earlier of the termination date or
the date upon which any relevant lock-up agreements expire.
In July 1995, the Company also entered into Change of Control agreements
with Dr. Lehman and Mr. Morris that provide for certain severance benefits in
the event their employment is terminated, other than for cause, at any time
within 12 months after, or in contemplation of, a Change of Control. Severance
benefits payable to Dr. Lehman and Mr. Morris include a lump-sum payment equal
to six months' salary and
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<PAGE> 57
continuation of certain medical benefits for the six-month period following
termination. Dr. Lehman and Mr. Morris will receive an additional six months of
vesting on their stock options, and the exercise term of such options will
extend to 12 months from the earlier of the termination date or the expiration
of any relevant lock-up agreements.
Pursuant to an agreement between the Company and Mr. Morris, dated June 30,
1995, in the event that Mr. Morris's employment with the Company is
involuntarily terminated, he is entitled to continue to receive his then current
salary for a period of six months after the termination date.
The Company also has entered into letter agreements with Dr. Lehman and Mr.
Morris, providing each with a bonus payment of 25% of their annual salary upon
the achievement of certain objectives.
STOCK PLANS AND RELATED EMPLOYEE BENEFIT PLANS
1993 Stock Plan
The Company's 1993 Stock Plan, as amended (the "1993 Plan"), was adopted by
the Board of Directors and approved by the Company's stockholders in March 1993.
The 1993 Plan has been amended to increase the number of shares of Common Stock
reserved for issuance under the 1993 Plan to a total of 295,239 shares. As of
March 31, 1998, 86,320 shares had been issued under the 1993 Plan pursuant to
the exercise of stock options or purchase rights, options to purchase a total of
182,433 were outstanding and 26,486 shares remained available for future option
or purchase grants.
The 1993 Plan provides for the grant to employees of the Company (including
officers and employee directors) of "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
for the grant of nonstatutory stock options, to employees and consultants of the
Company, and for the direct issuance of shares of Common Stock pursuant to
Restricted Stock Purchase Agreements. 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 determined for each share as of the date the option to
purchase the share was granted) in excess of $100,000, any such excess options
shall be treated as nonstatutory stock options.
The 1993 Plan is administered by the Compensation Committee of the Board of
Directors (the "Administrator"). The Administrator determines the terms of
options granted under the 1993 Plan, including the number of shares subject to
the option, exercise price, term and exercisability. The exercise price of all
incentive stock options granted under the 1993 Plan must be at least equal to
the fair market value of the Common Stock on the date of grant. The exercise
price of all nonstatutory stock options must equal at least 85% of the fair
market value of the Common Stock on the date of grant. The exercise price of any
incentive stock option granted to an optionee who owns stock representing more
than 10% of the voting power of the Company's outstanding capital stock (a "10%
Stockholder") must equal at least 110% of the fair market value of the Common
Stock on the date of grant. Payment of the exercise price may be made in cash,
promissory notes or other consideration determined by the Administrator. The
term of a stock option may not exceed 10 years (five years if issued to a 10%
Stockholder). No option may be transferred by the optionee other than by will or
the laws of descent or distribution. Each option may be exercised during the
lifetime of the optionee only by such optionee. Options granted to each employee
under the 1993 Plan generally become exercisable for 12.5% of the total number
of shares subject to the options after the six-month period from the date of
grant, and approximately 2% each month thereafter. Similarly, stock purchase
rights granted to employees typically are subject to the Company's right to
repurchase the shares at the purchase price in the event that the employee's
relationship with the Company terminates, which repurchase right typically
lapses in accordance with the vesting schedule set forth in the preceding
sentence.
In the event of certain changes in control of the Company, the 1993 Plan
requires that each outstanding option be assumed or an equivalent option
substituted by the successor corporation. The Administrator has the authority to
amend or terminate the 1993 Plan as long as such action does not adversely
affect any outstanding option and provided that shareholder approval shall be
required for an amendment to increase the number of shares subject to the 1993
Plan, or any change in the designation of the class of persons eligible to be
granted
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<PAGE> 58
options, or a material increase in benefits accruing to participants under the
1993 Plan if the Company is registered under Section 12 of the Exchange Act. If
not terminated earlier, the 1993 Plan will terminate in March 2003.
1997 Equity Incentive Plan
The Company's 1997 Equity Incentive Plan (the "Incentive Plan") was adopted
by the Board in October 1997. Currently, there is an aggregate of 800,000 shares
of Common Stock authorized for issuance under the Incentive Plan.
The Incentive Plan provides for the grant of incentive stock options,
nonstatutory stock options, restricted stock purchase awards and stock bonuses
under the Code, to employees (including officers and employee-directors) and
nonstatutory stock options, restricted stock purchase awards and stock bonuses
to employees (including officers and employee-directors), directors and
consultants of the Company. The Incentive 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 exercise price of options granted under the Incentive Plan is
determined by the Compensation Committee of the Board of Directors, provided
that 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 the option grant,
and the exercise price for an incentive stock option cannot be less than 100% of
the fair market value of the Common Stock on the date of the option grant.
Options granted under the Incentive Plan vest at the rate specified in the
option agreement. Generally, no stock option may be transferred by the optionee
other than by will or the laws of descent or distribution, except a nonstatutory
stock may also be transferred pursuant to a domestic relations order. In all
events, 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 affiliate ceases for any reason (other than by death or permanent and
total disability) may generally exercise vested options in the three-month
period following such cessation. In the case of death or total and permanent
disability, vested options may be exercised for 18 or 12 months, respectively,
after an optionee's relationship with the Company and related entities ceases.
Notwithstanding the foregoing, an optionee's option agreement may provide for
longer or shorter post-termination exercise periods as determined by the
Compensation Committee of the Board of Directors. In no event, however, may an
option be exercised after 10 years following the date of its grant.
No incentive stock option may be granted to any person who at the time of
the grant is a 10% Stockholder 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. In
addition, the aggregate fair market value, determined at the time of grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
the Incentive Plan and all other stock plans of the Company and its affiliates)
may not exceed $100,000.
When the Company becomes subject to Section 162(m) of the Code (which
denies a deduction to publicly held corporations for certain compensation paid
to specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000), no person may be granted options under the Incentive Plan
covering more than 300,000 shares of Common Stock in any calendar year.
Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for the grant of
awards under the Incentive Plan. The Compensation Committee of the Board of
Directors has the authority to reprice outstanding options and to offer
optionees the opportunity to replace outstanding options with new options for
the same or a different number of shares. Both the original and new options will
count toward the limitation set forth above.
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 Compensation Committee
of the Board of Directors. Restricted stock purchases must be at a price equal
to at least 85% of the stock's fair market value on the award date, but stock
bonuses may be awarded in
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consideration of past services without a purchase payment. Rights under a stock
bonus or restricted stock purchase agreement may not be transferred other than
by will, the laws of descent and distribution or a domestic relations order
during such period as the stock awarded pursuant to such an agreement remains
subject to the agreement.
Upon certain changes in control of the Company, all outstanding awards
under the Incentive Plan may either be assumed or substituted by the surviving
entity. If the surviving entity determines not to assume or substitute such
awards, then, with respect to persons then performing services for the Company,
the exercise period for such awards will be accelerated and the awards
terminated if not exercised prior to the change in control. Awards held by other
persons will be terminated if not exercised prior to such event, subject to a
limited number of exceptions. If the surviving entity assumes or substitutes
such awards, and if a person's service as an employee, director or consultant is
terminated within 13 months following the date of the change in control, the
full vesting of any award held by such person shall accelerate and such award
will become exercisable for up to 12 months after the date of full vesting. An
award under the Incentive Plan that has been assumed or substituted by the
surviving entity and is held by a person still providing services to the Company
13 months after the change in control will become fully vested on such date, and
such award will become exercisable for up to 12 months following the date of
full vesting.
1997 Non-Employee Directors' Stock Option Plan
In October 1997, the Board adopted the 1997 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company. The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee.
The aggregate number of shares of Common Stock that may be issued pursuant
to options granted under the Directors' Plan is 80,000. Pursuant to the terms of
the Directors' Plan, each person serving as a director of the Company who is not
an employee of the Company (a "Non-Employee Director") shall upon the date such
person first becomes a Non-Employee Director after the date that the Directors'
Plan is adopted automatically be granted an option to purchase 10,000 shares of
Common Stock. In addition, on the date immediately following the date of each
stockholders meeting, each Non-Employee Director who has been in office for 6
months will automatically be granted an option to purchase 2,500 shares of
Common Stock.
Each initial grant of options under the Directors' Plan will vest in four
equal, annual installments commencing one year from the date of the grant of the
option. Each subsequent annual grant shall become exercisable one year from the
date of grant. The exercise price of the options granted under the Directors'
Plan will be equal to the fair market value of the Common Stock granted on the
date of grant. No option granted under the Directors' Plan may be exercised
after the expiration of 10 years from the date it was granted. Options granted
under the Directors' Plan are generally non-transferable. The Directors' Plan
will terminate in 2007 unless sooner terminated by the Board.
In the event of certain changes of control, options outstanding under the
Directors' Plan will automatically become fully vested and will terminate if not
exercised prior to such change of control.
Employee Stock Purchase Plan
In October 1997, the Board of Directors approved the Employee Stock
Purchase Plan (the "Purchase Plan") with an aggregate of 600,000 shares of
Common Stock reserved for issuance under such plan. 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 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 longer than 27 months.
Generally, employees are eligible to participate if they are employed by
the Company or an affiliate of the Company designated by the Board of Directors.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the
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<PAGE> 60
Board, to the purchase of shares of Common Stock. The price of Common Stock
purchased under the Purchase Plan will be equal to 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. Subject to the terms of an offering,
employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment with the Company.
In the event of certain changes of control, 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 direction.
401(k) Plan
In 1992, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") under which eligible employees may elect to
defer their current compensation up to certain statutorily prescribed annual
limits ($9,500 in 1997) and to contribute such amounts to the 401(k) Plan. The
401(k) Plan permits, but does not require, additional matching contributions to
the 401(k) Plan by the Company on behalf of all participants in the 401(k) Plan.
Effective January 1, 1997, the Company has agreed to match 10% of each
participant's contribution. Each employee's matching contribution vests at a
rate of 25% per year. The 401(k) Plan is intended to qualify under Section 401
of the Code, so that contributions by employees or by the Company to the 401(k)
Plan, and income earned on the 401(k) Plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by the
Company, if any, will be deductible by the Company when made. The trustee under
the 401(k) Plan, at the direction of each participant, invests the 401(k) Plan
employee salary deferrals in selected investment options.
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CERTAIN TRANSACTIONS
In January 1994, the Company purchased the assets of Hyline in exchange for
$800,000 in cash, promissory notes due and payable on January 5, 1995, January
5, 1996, January 5, 1997, and January 5, 1998 in the principal amounts of
$1,121,000, $916,000, $910,000 and $909,000, respectively, and a warrant to
purchase 92,820 shares of Common Stock with an exercise price of $15.87 per
share (the "Hyline Warrant"). Hyline is a beneficial owner of more than 5% of
the outstanding Common Stock. Each such promissory note accrued interest at
3.98% per annum, except that the promissory note due and payable on January 5,
1998 accrued interest at 5.32% per annum. The promissory note due January 1998
was amended to provide for a principal payment of $500,000 in January 1998, with
the remaining principal balance of $409,000, plus accrued interest at a rate of
7% per annum, due in May 1998. As consideration for this amendment, the Company
issued a warrant to purchase 13,923 shares of Common Stock at $15.87 per share.
The warrant expires January 1999. The Company paid in full the principal amounts
of the notes due and payable in 1995, 1996 and 1997 and paid interest on the
notes due and payable in 1995, 1996 and 1997 in the amounts of $44,616, $72,914
and $108,654, respectively. In connection with the asset purchase, the Company
entered into a non-competition agreement with Michael Ashkin, the President and
sole stockholder of Hyline, in exchange for $386,000, of which $82,000 was due
and paid on January 5, 1995, $91,000 was due and paid on January 5, 1996,
$101,000 was due and paid on January 5, 1997 and $112,000 of which is due on May
5, 1998. In addition, the Company entered into a consulting agreement with Mr.
Ashkin. The agreement provides for guaranteed payments of $50,000 per quarter
from January 1995 through December 1999, whether or not he provides services to
the Company. To date, Mr. Ashkin has not performed any services for the Company
under this agreement, and the Company does not expect to use his services in the
future. The Hyline Warrant contains certain antidilution adjustment provisions.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In April 1994, the Company sold an aggregate of 4,000,000 shares (after
giving effect to a three-for-four stock split of the Company's outstanding
Series E Preferred Stock effected in November 1995) of Series E Preferred Stock
at a price of $2.25 per share ($31.51 per share of Common Stock on a post-split,
as-converted basis) in a private placement to certain institutional investors,
including 444,445 shares to entities affiliated with Kleiner Perkins Caufield &
Byers V ("KPCB V"), 666,666 shares to CW Ventures II L.P. ("CW"), 444,445 shares
to Domain Partners II, L.P. ("Domain"), 444,445 shares to Sierra Ventures III
("Sierra"), 888,889 shares to Biotechnology Investments Limited ("BIL") and
666,666 shares to entities affiliated with Oxford Bioscience Partners
("Oxford"). Dr. Alexander E. Barkas, a former director of the Company, was a
partner with KPCB until June 1997. KPCB is an affiliate of KPCB V, a beneficial
owner of more than 5% of the outstanding Common Stock. Charles Hartman, a former
director of the Company, is a partner with CW Group, the general partner of CW,
which is a beneficial owner of more than 5% of the outstanding Common Stock. Dr.
Jesse Treu, a director of the Company, is a general partner of Domain, a
beneficial owner of more than 5% of the outstanding Common Stock. Dr. Petri
Vainio, a former director of the Company, is a partner of Sierra, a beneficial
owner of more than 5% of the outstanding Common Stock. BIL and Oxford each are
beneficial owners of more than 5% of the outstanding Common Stock.
In July and September 1995, the Company issued to certain investors and a
financial institution convertible promissory notes in an aggregate principal
amount of $4,394,680 bearing interest at a rate of 7% per annum, to provide
temporary working capital for the Company. Included in the total principal
amount of notes issued were $733,555 principal amount of notes issued to KPCB V,
$632,375 principal amount of notes issued to CW, $581,875 principal amount of
notes issued to each of Domain and Sierra, and $500,000 principal amount of
notes issued to each of BIL and Oxford. In September 1995, the Company repaid
$765,000 principal amount of these notes to the financial institution. In
November 1995, the remaining outstanding notes were converted into an aggregate
of 1,647,814 shares of Series E Preferred Stock at a rate of one share per $2.25
of principal and interest due and payable (including 332,250 shares to KPCB V,
286,843 shares to CW, 264,180 to each of Domain and Sierra and 227,437 to each
of BIL and Oxford.)
In February 1996, the Company issued to certain investors convertible
promissory notes in an aggregate principal amount of $1,892,500 bearing interest
at a rate of 7% per annum to provide temporary working capital for the Company.
Included in the total amount of notes issued were $434,000 principal amount of
notes
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<PAGE> 62
issued to KPCB V, $395,000 principal amount of notes issued to CW, $346,500
principal amount of notes issued to Domain, $240,000 principal amount of notes
issued to Sierra, $265,000 principal amount of notes issued to BIL and $212,000
principal amount of notes issued to Oxford. In May 1996, such notes were
converted into an aggregate of 860,844 shares of Series E Preferred Stock at a
rate of one share per $2.25 of principal and interest due and payable (including
197,415 shares to KPCB V, 179,675 shares to CW, 157,613 shares to Domain,
109,169 shares to Sierra, 120,541 shares to BIL and 96,431 shares to Oxford).
In May 1996, in connection with the Abbott Agreements, Abbott purchased an
aggregate of 1,555,556 shares of Series E Preferred Stock at a per share price
of $2.25. Abbott also agreed, pursuant to the Abbott Purchase Agreement, to
purchase the Abbott Shares concurrently with the closing of the Offering. See
"Business -- Collaborative and Research Agreements." Abbott is a beneficial
owner of more than 5% of the outstanding Common Stock.
Concurrently with the closing of the Offering, each outstanding share of
Series E Preferred Stock will be converted into 0.0714 of a share of Common
Stock. See "Description of Capital Stock -- Preferred Stock."
In connection with the Series F Private Placement in August 1996, the
Company entered into a Placement Agency Agreement (the "Placement Agency
Agreement") with Paramount Capital, Inc. ("Paramount"). Pursuant to the
Placement Agency Agreement, the Company paid Paramount commissions and
non-accountable expense allowances of $681,586. The Company also granted to
Paramount Placement Agent Unit Options to purchase 228,266 Placement Agent
Units, each consisting of two shares of Series F Preferred Stock and one
Placement Agent Class A Warrant. The Placement Agent Unit Options, which include
cashless exercise provisions, may be exercised for an aggregate of approximately
$283,000 and expire on December 23, 2007. The Placement Agent Class A Warrants
expire on June 22, 2003. The Series F Private Placement was conducted by
Paramount on a best-efforts basis. Accordingly, the compensation paid to
Paramount was based on a percentage of the total amount of Premium Preferred
Units (as defined below) placed by Paramount. The percentage rates used to
determine the commission and the amount of Placement Agent Unit Options issued
was determined by negotiations between the Company and Paramount. Pursuant to
the Placement Agency Agreement, Paramount is entitled to propose one person for
nomination as a voting director of the Company until 2001. The Company is
required to vote all voting securities for which the Company holds proxies
granting it voting discretion, or which the Company is otherwise entitled to
vote, in favor of, and to use its best efforts to cause the election of such
individual. At the Placement Agent's option, in lieu of proposing a voting
director for nomination, it may designate a nonvoting observer who shall be
entitled to attend all meetings of the Board of Directors and any of its
committees. Paramount has currently elected to designate an observer in lieu of
a voting director.
In February 1997 and June 1997, the Company sold an aggregate of 2,282,663
premium preferred units in the Series F Private Placement at a purchase price of
$2.25 per premium preferred unit (each, a "Premium Preferred Unit"). Each
Premium Preferred Unit consists of one share of Series F Preferred Stock and one
Class A Common Stock Warrant. Each share of Series F will be converted upon the
completion of the Offering into 0.6429 of a share of Common Stock (assuming an
offering price of $7.00 per share). The conversion ratio of the Series F
Preferred Stock will depend on the initial public offering price of the Common
Stock sold in the Offering.
The Class A Warrants have a six-year term and entitle the holder to
purchase 0.0714 of a share of Common Stock at an exercise price per share equal
to the lesser of (i) $31.51 or (ii) the effective per share price of common
stock in an initial public offering which results in gross proceeds of at least
$7.5 million to the Company. In the Series F Private Placement, The Aries Trust
purchased 573,334 Premium Preferred Units, Aries Domestic Fund, L.P. (the "Aries
Fund") purchased 315,555 Premium Preferred Units, CW purchased 44,445 Premium
Preferred Units, KPCB V purchased 88,889 Premium Preferred Units and Oxford
purchased 88,889 Premium Preferred Units. The Aries Trust and related entities
constitute a beneficial owner of more than 5% of the outstanding Common Stock.
In connection with and as a condition of the Series F Private Placement,
the Company also entered into a Financial Advisory Agreement with Paramount in
June 1997 (the "Financial Advisory Agreement"), pursuant to which Paramount
receives $4,000 per month for a minimum of 24 months to provide financial
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<PAGE> 63
advisory services to the Company. Although Paramount is under no obligation to
provide any services under the Financial Advisory Agreement, pursuant to such
agreement, Paramount may receive additional compensation for certain referral
services including the introduction of parties by Paramount to the Company in
which the Company completes the sale of securities, sale, merger or acquisition
of the Company, strategic alliance or product acquisition with such parties as
provided for in the Financial Advisory Agreement. In addition, Paramount
received 342,399 Placement Agent Unit Options. The Placement Agent Unit Options,
which include cashless exercise provisions, may be exercised for an aggregate of
$424,500 and expire on December 23, 2007. The Class A Warrants included in the
Placement Agent Unit Options expire on June 22, 2003.
The Placement Agent Unit Options granted to Paramount were distributed by
Paramount in September 1997. As a result of this distribution, Dr. Lindsay
Rosenwald, a former director of the Company, holds 353,947 Placement Agent Unit
Options, the Aries Fund holds 31,556 Placement Agent Unit Options and The Aries
Trust holds 57,333 Placement Agent Unit Options. The balance of 127,879
Placement Agent Unit Options were distributed to designees or employees of
Paramount.
Dr. Rosenwald is the President, Chairman of the Board of Directors and the
sole stockholder of both Paramount Capital Asset Management Inc., the general
partner of the Aries Fund and the investment manager to The Aries Trust, and
Paramount. Dr. Rosenwald was appointed by Paramount to the Board of Directors
pursuant to the rights, described above, but subsequently resigned in September
1997. An employee of Paramount currently serves as an observer on the Board of
Directors of the Company.
Concurrently with the closing of the Offering, each outstanding share of
Series F Preferred Stock will be converted into 0.6429 of a share of Common
Stock (assuming an initial public offering price of $7.00 per share). See
"Description of Capital Stock -- Preferred Stock."
In March 1997, the Company issued to Paramount warrants to purchase 1,785
shares of Common Stock at $31.51 per share. Paramount subsequently distributed
such warrants to an employee of Paramount in September 1997.
In May 1993, the Company entered into an employment agreement with Charles
J. Casamento, President, Chief Executive Officer and Chairman of the Board of
Directors of the Company. The agreement provides for an annual base salary of
$200,000, subject to annual review. Effective July 24, 1997 and retroactive to
January 1, 1997, Mr. Casamento's annual base salary was increased to $325,000.
In addition, the Board of Directors approved a bonus of up to $150,000 to be
paid to Mr. Casamento in the event of a Merger (as defined in the employment
agreement) or an initial public offering of the Company's Common Stock, and up
to an additional $150,000 for the achievement of specific goals ($50,000 per
goal) in 1997, of which $50,000 was paid in connection with the execution of the
Series F Private Placement. On the first day of employment and on the first and
second anniversary of employment, the Company loaned Mr. Casamento $40,000 (for
a total of $120,000) in the form of three-year notes with interest rates of
3.62%, 5.63% and 5.97% per annum, respectively. These loans were made in
connection with cost-of-living adjustments and may be forgiven, at the election
of the Board of Directors, for so long as Mr. Casamento remains employed by the
Company. The loans due in June of 1996 and 1997 have been forgiven. In addition,
in October 1993, the Company provided Mr. Casamento with a bridge loan in the
aggregate of $250,000, which loan subsequently was repaid by Mr. Casamento in
October 1994. In July 1993, Mr. Casamento purchased an aggregate of 10,710
shares of Common Stock. In March 1994, August 1996 and March 1997, Mr. Casamento
purchased an aggregate of 30,794 shares of Common Stock pursuant to purchase
rights issued under the 1993 Stock Plan. In payment for such Common Stock, Mr.
Casamento issued promissory notes to the Company in the aggregate principal
amount of $108,293. Such Notes accrue interest at 5.47%, 5.29%, 6.73% and 6.32%
per annum, respectively. As of December 31, 1997, $95,992 of the aggregate
principal amount of such notes remained outstanding plus an aggregate of $12,625
of accrued interest.
In July 1995, the Company entered into a Change of Control agreement with
Mr. Casamento that provides for certain severance benefits in the event his
employment is involuntarily terminated other than for cause at any time within
12 months after, or in contemplation of, a Change of Control (defined as a
reorganization in which the current stockholders hold less than a 50% ownership
interest in the surviving entity consummated without the approval of the Board
of Directors, a sale of all or substantially all of the Company's
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<PAGE> 64
assets, a liquidation of the Company or a transaction in which more than half of
the Company's Board of Directors is replaced). Severance benefits include a lump
sum payment equal to 12 months' salary and the continued payment of medical
benefits during the 12 months following termination. In addition, all loans
issued by the Company to Mr. Casamento shall automatically be forgiven upon a
Change of Control. The Change of Control agreement also provides that all
options held by Mr. Casamento will immediately vest, and the exercise period of
such options will be extended to a date one year from the earlier of the
termination date or the date upon which any lock-up agreements expire.
In July 1995, the Company also entered into Change of Control agreements
with Dr. Lehman and Mr. Morris that provide for certain severance benefits in
the event their employment is terminated, other than for cause, at any time
within 12 months after, or in contemplation of, a Change of Control. Severance
benefits payable to Dr. Lehman and Mr. Morris include a lump sum payment equal
to six months' salary and continuation of certain medical benefits for the six
month period following termination. Dr. Lehman and Mr. Morris will receive an
additional vesting of six months on their stock options, and the exercise term
of such options will extend to 12 months from the earlier of the termination
date or the expiration of any lock-up agreements.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 31, 1998, as
adjusted to reflect the sale of 2,700,000 shares of Common Stock in the Offering
and the sale by the Company to Abbott of the Abbott Shares by (i) each person
who is known by the Company to own beneficially more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the Named Executive Officers and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES ----------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
---------------- ------------ -------- --------
<S> <C> <C> <C>
Dr. Lindsay Rosenwald(2).................................. 1,235,948 18.9% 19.23%
787 Seventh Avenue
New York, NY 10019
Abbott Laboratories....................................... 682,495 8.22% 11.84%
100 Abbott Park Road
Abbott Park, IL 60064
The Aries Trust(3)........................................ 487,343 9.62% 8.28%
787 Seventh Avenue
New York, NY 10019
Aries Domestic Fund, L.P.(4).............................. 268,227 5.39% 4.60%
787 Seventh Avenue
New York, NY 10019
Kleiner Perkins Caufield & Byers V,....................... 208,369 12.07% 3.61%
a California Limited Partnership(5)
2750 Sand Hill Road
Menlo Park, CA 94025
CW Ventures II, L.P.(6)................................... 163,697 10.45% 2.84%
1041 Third Avenue
New York, NY 10021
Oxford Bioscience Partners L.P.(7)........................ 134,212 6.61% 2.33%
650 Town Center Drive, Suite 810
Costa Mesa, CA 92626
Domain Partners II, L.P................................... 115,627 8.56% 2.01%
One Palmer Square
Princeton, NJ 08542
Sierra Ventures III....................................... 111,979 8.29% 1.94%
a California Limited Partnership(8)
3000 Sand Hill Road
Building A, Suite 210
Menlo Park, CA 94025
Hyline Laboratories, Inc.(9).............................. 106,743 7.32% 1.82%
100 Banks Avenue
Rockville Center, NY 11570
Biotechnology Investment Limited.......................... 88,311 6.54% 1.53%
St. Julian's Court
St. Peter Port
Guernsey, Channel Islands
Digby Barrios(10)......................................... 3,034 * *
Charles J. Casamento(11).................................. 72,766 5.27% 1.26%
Laura S. Lehman(12)....................................... 16,827 1.24% *
Timothy E. Morris(13)..................................... 14,309 1.05% *
Frank J. Sasinowski....................................... 0 * *
Jon S. Saxe............................................... 3,034 * *
All executive officers and directors
as a group (6 persons)(14).............................. 109,970 7.85% 1.89%
</TABLE>
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<PAGE> 66
- ---------------
* Less than one percent
(1) Calculated in accordance with Rule 13d-3 promulgated under the Exchange Act
based on 5,764,055 shares of capital stock outstanding on a post-split,
as-converted basis as of March 31, 1998.
(2) Includes 480,378 shares issuable upon exercise of outstanding Placement
Agent Unit Options, 368,596 shares held by The Aries Trust and 202,870
shares by the Aries Fund. Also includes 118,747 shares issuable upon
exercise of outstanding Class A Warrants and Placement Agent Unit Options
held by The Aries Trust and 65,357 shares issuable upon exercise of Class A
Warrants and Placement Agent Unit Options held by the Aries Fund. Dr.
Rosenwald is the general partner of the Aries Fund and the investment
manager to The Aries Trust. Dr. Rosenwald disclaims beneficial ownership of
the securities held by the Aries Fund and The Aries Trust, except to the
extent of his pecuniary interest therein, if any.
(3) Includes 118,747 shares issuable upon the exercise of Class A Warrants and
Placement Agent Unit Options held by The Aries Trust.
(4) Includes 65,357 shares issuable upon exercise of Class A Warrants and
Placement Agent Unit Options.
(5) Includes 6,346 shares issuable upon exercise of outstanding Class A
Warrants, and 589 shares held by KPCB Zaibatsu Fund I ("KPCB Zaibatsu"), an
entity affiliated with KPCB V.
(6) Includes 3,173 shares issuable upon exercise of outstanding Class A
Warrants.
(7) Includes 25,573 shares held by Oxford Bioscience Partners (Adjunct) L.P.
("OBP Adjunct") and 22,213 shares held by Oxford Bioscience Partners
(Bermuda) ("OBP Bermuda"), entities affiliated with Oxford Bioscience
Partners L.P. ("OBP L.P."). Also includes Common Stock issuable upon
exercise of outstanding Class A Warrants, in the following amounts, 1,269
held by OBP Adjunct, 1,102 held by OBP Bermuda and 3,974 held by OBP L.P.
(8) Includes 2,237 shares held by Sierra Ventures III International, an entity
affiliated with Sierra.
(9) Consists of 106,743 shares of Common Stock issuable upon exercise of
outstanding warrants.
(10) Consists of options to purchase 3,034 shares exercisable within 60 days of
March 31, 1998.
(11) Includes 3,854 shares held by various family members of Mr. Casamento that
Mr. Casamento may be deemed to beneficially own; 13,110 shares subject to
repurchase as of March 31, 1998; and options or stock purchase rights for
the purchase of 29,835 shares exercisable within 60 days of March 31, 1998.
(12) Includes 2,573 shares subject to repurchase as of March 31, 1998 and
options to purchase 9,511 shares exercisable within 60 days of March 31,
1998.
(13) Includes 4,507 shares subject to repurchase as of March 31, 1998 and
options to purchase 6,812 shares exercisable within 60 days of March 31,
1998.
(14) See footnote (5) and footnotes (10) - (13).
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DESCRIPTION OF CAPITAL STOCK
The Company's Amended and Restated Articles of Incorporation authorize
69,688,488 shares of capital stock, consisting of 50,000,000 shares of Common
Stock and 19,688,488 shares of Preferred Stock. In connection with the Offering
and the reincorporation of the Company in Delaware, the Company will adopt a
Certificate of Incorporation (the "Restated Certificate of Incorporation"),
which will authorize the issuance of 35,000,000 shares of capital stock,
consisting of 30,000,000 shares of Common Stock, par value $0.001 per share, and
5,000,000 shares of Preferred Stock, par value $0.001 per share. Set forth below
is a description of the capital stock of the Company.
COMMON STOCK
As of March 31, 1998, there were 2,492,626 shares of Common Stock issued
and outstanding held of record by 116 stockholders, assuming conversion of all
outstanding shares of Preferred Stock. The holders of Common Stock are entitled
to one vote per share on all matters submitted to a vote of stockholders and are
not entitled to cumulative voting rights with respect to the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefore, subject to preferences that may be applicable
to any outstanding Preferred Stock. In the event of liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share ratably
in all net assets remaining after payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption, conversion or other subscription rights,
and there are no sinking fund provisions applicable to the Common Stock. All
currently outstanding shares of Common Stock are, and the shares of Common Stock
being issued and sold in the Offering will be, duly authorized, validly, issued,
fully paid and nonassessable.
PREFERRED STOCK
No shares of Preferred Stock will be outstanding after the Offering. At
March 31, 1998, the Company had outstanding an aggregate of 12,851,076 shares of
Series A, Series B, Series C, Series D, Series E and Series G Preferred Stock.
Each share of such outstanding Preferred Stock will convert automatically into
0.0714 of a share of Common Stock concurrently with the closing of the Offering,
for a total of 917,529 shares of Common Stock. Holders of Series A through
Series E and Series G Preferred Stock have been granted certain registration
rights. See "-- Registration Rights."
At March 31, 1998, the Company had outstanding 2,282,663 shares of Series F
Preferred Stock. The ratio by which the Series F Preferred Stock is convertible
into Common Stock (the "Conversion Ratio") will be determined by the following
formula:
4.5
---
P
where:
<TABLE>
<S> <C> <C>
= the initial public offering price per share of Common Stock
P
</TABLE>
Assuming an initial public offering price of $7.00 per share, the Series F
Preferred Stock will convert into 1,467,510 shares of Common Stock.
The number of shares of Common Stock issuable upon conversion of the
outstanding shares of Series F Preferred Stock is calculated by multiplying the
Conversion Ratio by the number of shares of Series F Preferred Stock
outstanding.
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<PAGE> 68
Thus, when:
<TABLE>
<S> <C> <C> <C>
P = $7.00
4.5
Conversion ratio = $7.00 = .6429
Outstanding shares of Series F
Preferred Stock = 2,282,663 X .6429
= 1,467,510
</TABLE>
Any adjustment made to the conversion ratio of the Series F Preferred Stock
would change the number of shares used in calculations of, among other things,
dilution to new investors, shares held by certain principal stockholders, shares
subject to registration rights and shares eligible for future sale. See
"Dilution," "Principal Stockholders," "-- Registration Rights," and "Shares
Eligible for Future Sale."
Following completion of the Offering and the conversion of all the
outstanding shares of Preferred Stock, the Board of Directors will have the
authority to issue from time to time up to 5,000,000 shares of Preferred Stock
in one or more series and to fix the powers, designations, preferences and
relative, participating, optional or other rights thereof, including dividend
rights, conversion rights, voting rights, redemption terms, liquidation
preferences and the number of shares constituting each such series, without any
further vote or action by the Company's stockholders. The issuance of Preferred
Stock could adversely affect the rights of holders of Common Stock and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.
WARRANTS
At March 31, 1998, there were warrants outstanding to purchase (i) an
aggregate of 20,111 shares of Common Stock at an exercise price of $31.51, (ii)
an aggregate of 106,743 shares of Common Stock at an exercise price of $15.87
per share, (iii) an aggregate of 928 shares of Common Stock at exercise of
$15.44 per share, (iv) an aggregate of 3,793 shares of Common Stock at an
exercise price of $15.82 per share, (v) an aggregate of 1,998 shares of Common
Stock at an exercise price of $11.26, (vi) an aggregate of 17,646 shares of
Common Stock at an exercise price of $14.45 per share, and (vii) an aggregate of
15,100 shares of Common Stock at an exercise price of $7.00 per share. In
addition, the Company has 2,282,663 outstanding Class A Warrants which initially
entitled the holder to purchase .0714 of a share of Common Stock at an exercise
price per share equal to the lesser of (a) $31.51 or (b) the initial public
offering price. If the initial public offering price is $7.00 per share, the
outstanding Class A Warrants will be exercisable into 162,967 shares of Common
Stock. 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, reclassification and consolidations. Each warrant may be
exercised, without the payment of cash, for an adjusted number of shares of
Common Stock. The warrants have terms expiring from September 1998 to June 2002.
Warrant holders have been granted certain registration rights. See
"-- Registration Rights."
PLACEMENT AGENT UNIT OPTIONS
At March 31, 1998, 570,665 Placement Agent Unit Options were outstanding,
at an exercise price of $1.24 per Placement Agent Unit Option. Each Placement
Agent Unit Option entitles the holder thereof to purchase a Placement Agent Unit
consisting of two shares of Series F Preferred Stock and one Class A Warrant.
The Class A Warrants expire on June 22, 2003. The Placement Agent Unit Options
expire on December 23, 2007. The number of shares of Common Stock to be issued
upon exercise of the Placement Agent Unit Options will depend upon the initial
public offering price. The number of shares of Common Stock issuable upon
exercise of the Placement Agent Unit Options is calculated by multiplying the
Conversion Ratio (as calculated above) by 1,141,330 (the aggregate number of
shares of Series F Preferred Stock issuable upon exercise of the Placement Agent
Unit Options). Consequently, following the Offering (assuming an initial public
offering price of $7.00 per share) the Placement Agent Unit Options will be
exercisable for an aggregate of 733,755 shares of Common Stock and an aggregate
of 40,739 Class A Warrants.
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<PAGE> 69
REPRESENTATIVE'S WARRANTS
The Company has agreed to issue to the Representatives warrants to purchase
an aggregate of 270,000 shares of Common Stock, exercisable at any time
following the first anniversary of the date of this Prospectus, each warrant
having an exercise price equal to 165% of the initial public offering price of
the Common Stock and expiring five years from the date of this Prospectus (the
"Representative's Warrants"). The Company has granted the holders of the
Representative's Warrants certain demand and piggy-back registration rights with
respect to the shares of Common Stock issuable upon the exercise of such
warrants. See "-- Registration Rights" and "Underwriting."
REGISTRATION RIGHTS
The holders of 917,529 shares of Common Stock issuable upon conversion of
outstanding preferred stock (except Series F Preferred Stock) and the holders of
warrants exercisable for up to 23,437 shares of Common Stock (collectively, the
"Registrable Securities") will be entitled to certain rights with respect to the
registration of such shares of Common Stock under the Securities Act. Under the
terms of an agreement between the Company and such holders, if the Company
proposes to register any of its Common Stock either for its own account or for
the account of other stockholders, subject to certain exceptions, under the
Securities Act, the holders of Registrable Securities are entitled to notice of
the registration and are entitled to include, at the Company's expense, shares
of such Common Stock therein. The holders of Registrable Securities have waived
their registration rights with respect to the Offering. In addition, holders of
at least 25% of the then-outstanding Registrable Securities may, on two
occasions, require the Company to file a registration statement under the
Securities Act at the Company's expense, registering the Registrable Securities
for public resale. Such rights may not be exercised until 90 days after the
effective date of the Offering. Further, holders of sufficient shares with
registration rights may require the Company to register their shares on Form S-3
at such holders' expense when such form becomes available to the Company,
subject to certain conditions and limitations. Such registration rights expire
in December 2004.
In addition, the holders of an aggregate of 1,467,510 shares of Common
Stock issuable upon conversion of the outstanding Series F Preferred Stock
concurrently with the closing of the Offering, the holders of Class A Warrants
issued in connection with the Series F Private Placement to purchase an
aggregate of 162,967 shares of Common Stock and holders of the Placement Agent
Unit Options (collectively, the "Series F Holders") are entitled to require the
Company to file a shelf registration statement at the Company's expense pursuant
to the Securities Act within 270 days after the closing of the Offering covering
shares of Common Stock then held by the holders of Series F Preferred Stock. The
number of shares of Common Stock to be issued upon conversion of the Series F
Preferred Stock and the exercise of the Placement Agent Unit Options will depend
upon the initial public offering price. See "-- Preferred Stock" and
"-- Placement Agent Unit Options."
Pursuant to the Abbott Purchase Agreement, the Company has granted certain
demand registration rights to Abbott which become operative one year after the
Offering. The registration expenses of any such registration are to be borne by
the Company subject to certain limitations.
The Company will grant to the holders of the Representative's Warrants
certain demand and piggy-back registration rights with respect to the shares of
Common Stock issuable upon the exercise of such warrants.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Under the Company's Certificate of Incorporation, the Company's Board of
Directors has the authority to issue up to 5,000,000 shares of Preferred Stock
and to determine the powers, rights, preferences and privileges of those shares
without any further vote or action by the Company's stockholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. While the Company has no present intention to issue shares of Preferred
Stock, such issuance could dilute the voting power of holders of Common Stock
and, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have
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<PAGE> 70
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company.
In addition, upon the completion of the Company's reincorporation in
Delaware, the Company will be subject to the provisions of Section 203 of the
Delaware General Corporation Law. Section 203 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. A "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, 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 Restated Certification of Incorporation also provides that after the
closing of the Offering, any action required or permitted to be taken by the
stockholders of the Company at an annual meeting or special meeting of
stockholders may only be taken if properly brought before such meeting and may
not be taken by written action in lieu of a meeting. The Restated Certificate of
Incorporation further provides that special meetings of the stockholders may
only be called by the Chairman of the Board of Directors, the Chief Executive
Officer, the Board of Directors or by any person or persons holding at least 10%
of the outstanding capital stock. This provision may discourage another person
or entity from making a tender offer for the Company's Common Stock, because
such person or entity, even if it acquired a majority of the outstanding voting
securities of the Company, would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders meeting, and not by written consent. Under the Company's Amended
and Restated By-Laws (the "By-Laws"), in order for any matter to be considered
"properly brought" before a meeting, a stockholder must comply with certain
requirements regarding advance notice to the Company. This provision could have
the effect of delaying until the next stockholders meeting stockholder actions
which are favored by holders of a majority of the outstanding voting securities
of the Company.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The Restated Certificate of Incorporation and
the By-Laws require the affirmative vote of the holders of at least 66 2/3
percent of the shares of capital stock of the Company issued and outstanding and
entitled to vote to amend or repeal any of the provisions described in the prior
two paragraphs.
The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Common Stock of the Company is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
69
<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering the Company will have outstanding an
aggregate of 5,764,055 shares of Common Stock (6,169,055 shares if the
Underwriters' over-allotment option is exercised in full). Of these shares, the
2,700,000 shares offered hereby will be freely tradeable without restriction or
further registration under the Securities Act, except for any shares held by an
"affiliate" of the Company, as that term is defined in Rule 144. The remaining
3,064,055 shares of Common Stock held by existing stockholders of the Company
(including the Abbott Shares) are Restricted Shares. The Restricted Shares were
issued and sold by the Company in private transactions in reliance upon
exemptions from registration under the Securities Act. Restricted Shares may be
sold in the public market only if registered or if they qualify for an exemption
from registration under the Securities Act, including an exemption under Rule
144 or 701 under the Securities Act. Pursuant to "lock-up" agreements, all
directors and executive officers and certain other stockholders of the Company,
holding in the aggregate approximately 90% of the Restricted Shares have agreed
not to offer, sell, contract to sell, grant any options to purchase or otherwise
dispose of any of such shares for a period 180 days from the date of this
Prospectus without the prior written consent of the Representative.
As of March 31, 1998, options to purchase an aggregate of 182,433 shares of
Common Stock were outstanding under the Company's stock plans and an aggregate
of 1,506,486 shares of Common Stock were reserved for future grants or purchases
under the Company's equity incentive plans. The holders of all such outstanding
options have agreed not to offer, sell, contract to sell, grant any options to
purchase or otherwise dispose of any shares of Common Stock issuable upon
exercise of such options for a period 180 days from the date of this Prospectus
without the prior written consent of the Company, and the Company has agreed in
the Underwriting Agreement that it will not grant any such consent without the
prior written consent of the Representative. After the effective date of the
Offering, the Company intends to file registration statements on Form S-8 to
register an aggregate of 1,506,486 shares of Common Stock reserved for issuance
under its equity incentive plans. Such registration statements will become
effective automatically upon filing. Shares issued under the Company's equity
incentive plans after the filing of the registration statements on Form S-8 may
be sold in the open market subject, in the case of certain holders, to the Rule
144 limitations applicable to affiliates, the above-referenced lockup agreements
and vesting restrictions imposed by the Company.
In addition, as of March 31, 1998, 166,319 shares of Common Stock were
reserved for issuance upon the exercise of warrants (other than Class A
Warrants); 162,967 shares of Common Stock were reserved for issuance upon
exercise of the Class A Warrants; 733,755 shares of Common Stock were reserved
for issuance upon exercise of the Placement Agent Unit Options in respect of
shares of Series F Preferred Stock issuable thereunder; 40,739 shares of Common
Stock were reserved for issuance upon the exercise of the Placement Agent Class
A Warrants; and 270,000 shares of Common Stock were reserved for issuance upon
exercise of the Representative's Warrants. Holders of Placement Agent Unit
Options and warrants to purchase an aggregate of 1,102,017 shares of Common
Stock have agreed not to offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any of their shares of Common Stock or any
securities convertible into or exercisable for shares of Common Stock, for a
period of 180 days from the date of this Prospectus without the prior written
consent of the Representative. See "Underwriting."
Upon expiration of the lockup period, approximately 191,206 Restricted
Shares held by non-affiliates will be eligible for sale in the public market
without restriction pursuant to Rule 144(k) and approximately 1,478,242
Restricted Shares held by affiliates and approximately 756,271 Restricted Shares
held by non-affiliates will be so eligible subject to compliance with the volume
limitations of Rule 144 described below. Sales of Restricted Shares in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the Common Stock or the Company's ability to raise
capital.
Rule 701 permits resales of shares issued pursuant to certain compensatory
benefit plans and contracts commencing 90 days after the issuer becomes subject
to the reporting requirements of the Exchange Act, in reliance upon Rule 144 but
without compliance with certain restrictions, including the holding period
requirements, contained in Rule 144. If all the requirements of Rule 701 are
met, upon expiration of the above-referenced lockup agreements an aggregate of
161,523 shares of Common Stock issuable upon exercise of currently outstanding
options will be eligible for sale pursuant to such rule.
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<PAGE> 72
In general, under Rule 144 as currently in effect, an affiliate of the
Company or a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year will be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the number of shares of Common Stock then
outstanding (57,640) or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks immediately preceding the date on which
notice of the sale is filed with the Commission. Sales pursuant to Rule 144 are
subject to certain requirements relating to manner of sale, notice and
availability of current public information about the Company. A person (or
persons whose shares are aggregated) 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 two years the shares proposed to be sold, is
entitled to sell such shares under Rule 144(k) without regard to the limitations
described above.
The Company is unable to estimate accurately the number of Restricted
Shares that will be sold under Rule 144 since this will depend in part on the
market price for the Common Stock, the personal circumstances of the seller and
other factors. See "Description of Capital Stock -- Preferred Stock."
Following completion of the Offering, holders of 2,385,039 Restricted
Shares and 370,025 shares issuable upon exercise of outstanding warrants will be
entitled to certain registration rights under the Securities Act. See
"Description of Capital Stock -- Registration Rights."
71
<PAGE> 73
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters (the "Underwriters") named below, for whom Gruntal & Co., L.L.C. is
acting as the Representative, have severally agreed to purchase, and the Company
has agreed to sell to the Underwriters, the following respective number of
shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Gruntal & Co., L.L.C........................................
---------
Total............................................. 2,700,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the offering 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 to selected dealers and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares of Common Stock, the offering
price and other selling terms may be changed by the Representative.
The Company has granted to the Underwriters an option, exercisable at any
time during the 45-day period after the date of this Prospectus, to purchase up
to an additional 405,000 shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less underwriting
discounts and commissions. The Underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, in connection with the
Offering. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares listed in the table.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Finally, the
underwriting syndicate may reclaim selling concessions from syndicate members in
the Offering, if the syndicate repurchases previously distributed Common Stock
in syndicate covering transactions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.
Prior to the date six months after the consummation of the Offering, no
Underwriter may offer or sell any shares of Common Stock offered hereby to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations of
1995. Each Underwriter must comply with all applicable provisions of the
Financial Services Act of 1986 with respect to anything done by it in relation
to the Common Stock in, from or otherwise involving the United Kingdom. Each
Underwriter may only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the Common Stock to a
person who is of a kind described in Article 11(3) of
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<PAGE> 74
the Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be issued
or passed on.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company has agreed to issue to the Representative warrants to purchase
up to an aggregate of 270,000 shares of Common Stock, exercisable at any time
following the first anniversary of the date of this Prospectus, each warrant
having an exercise price equal to 165% of the initial public offering price of
the Common Stock set forth on the cover page of this Prospectus, and expiring
five years from the date of this Prospectus. The Representative's Warrants
contain provisions providing for adjustment of the exercise price and the number
and type of securities issuable upon the exercise thereof upon the occurrence of
certain events, including the issuance of any shares of Common Stock or other
securities convertible into or exercisable for shares of Common Stock at a price
per share less than the exercise price, or the market price of the Common Stock,
or in the event of any stock dividend, stock split, stock combination or similar
transaction. Holders of the Representative's Warrants have been granted certain
demand and piggy-back registrations rights under the Securities Act with respect
to the securities issuable upon exercise of the Representative's Warrants. For a
period of twelve months from the date of this Prospectus, the Representative is
generally prohibited from selling, transferring, assigning, pledging or
hypothecating the Representative's Warrants or the Common Stock underlying the
Representative's Warrants. Thereafter, the Representative's Warrants will be
transferable subject to compliance with the Securities Act. See "Description of
Capital Stock -- Registration Rights" and "Shares Eligible For Future Sale."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof. The
Underwriting Agreement provides that upon the closing of the Offering the
Representative will be paid a non-accountable expense allowance equal to 3% of
the gross proceeds of the Offering. The Company also has agreed to pay all
expenses in connection with qualifying the shares of Common Stock offered hereby
for sale under the laws of such states as the Representative may designate,
including expenses of counsel retained for such purpose by the Representative.
The executive officers, directors and certain employees of the Company and
other stockholders, including Abbott and Dainippon, have agreed that they will
not, without the prior written consent of Gruntal & Co, L.L.C., offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock, or securities exchangeable for or convertible into
shares of Common Stock for a period of 180 days from the date of this
Prospectus. The Company has also agreed that it will not, without the prior
written consent of Gruntal & Co, L.L.C., offer, sell, contract to sell, grant
any option to purchase or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock for a period of 180 days after
the date of this Prospectus, except for securities issued under its existing
employee benefit plans or upon exercise of currently outstanding warrants. See
"Shares Eligible for Future Sale."
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the shares of Common
Stock included in the Offering will be determined by negotiations between the
Company and the Representative. Among the factors to be considered in
determining such price will be the history of and prospects for the Company's
business and the industry in which it competes, an assessment of the Company's
management and the present state of the Company's development, its past and
present operations and financial performance, the prospects for future earnings
of the Company, the present state of the Company's research programs, the
current state of the economy in the United States and the current level of
economic activity in the industry in which the Company competes and in
comparable industries, and the current prevailing condition in the securities
markets, including current market valuations of publicly traded companies that
are comparable to the Company.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "RIBO" subject to the Company meeting the tangible net
worth listing requirement. See "Risk Factors -- No Assurance of Nasdaq National
Market Listing."
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<PAGE> 75
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP. Certain legal matters will be passed
upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom (Illinois),
Chicago, Illinois.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997 and for
the period from inception (May 5, 1989) to December 31, 1997 included in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern as described in Note 1 to
the financial statements) appearing elsewhere herein and are included in
reliance upon such report, given on the authority of such firm as experts in
accounting and auditing.
The statements in this Prospectus under the captions "Risk
Factors -- Dependence on Patents and Proprietary Rights" and
"Business -- Patents and Proprietary Rights" relating to United States patent
matters have been reviewed and approved by Pennie & Edmonds LLP, New York, New
York, patent counsel to the Company, and have been included herein in reliance
upon the review and approval by such firm as experts in patent law.
ADDITIONAL INFORMATION
As a result of the Offering, the Company will become subject to the
information and reporting requirements of the Exchange Act, and in accordance
therewith will file periodic reports, proxy statements and other information
with the Commission. The Company intends to furnish to its stockholders annual
reports containing financial statements audited by an independent public
accounting firm and will make available copies of quarterly reports containing
unaudited financial statements for the first three quarters of each fiscal year.
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered by the Company hereby has been filed with
the Commission, Washington, D.C. 20549. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statements and the exhibits and schedules thereto. A copy of
the Registration Statement and exhibits thereto may be inspected without charge
at the public reference facilities maintained by the Commission in Room 1024,
450 Fifth Street, N.W., Washington D.C. 20549, and at the Commission's regional
offices located at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048, and copies of all or any part thereof may be obtained from such
offices, upon payment of certain fees prescribed by the Commission. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information filed electronically with the
Commission. The address of the Commission World Wide Website is
http://www.sec.gov.
74
<PAGE> 76
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Financial Statements
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-8
Notes to Financial Statements............................... F-9
</TABLE>
F-1
<PAGE> 77
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
RiboGene, Inc.
We have audited the accompanying balance sheets of RiboGene, Inc. (a
development stage company) as of December 31, 1996 and 1997, and the related
statements of operations, cash flows and stockholders' equity (deficit) for each
of the three years in the period ended December 31, 1997 and for the period from
inception (May 5, 1989) to December 31, 1997. 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 financial statements referred to above present fairly,
in all material respects, the financial position of RiboGene, Inc. (a
development stage company) at December 31, 1996 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 and for the period from inception (May 5, 1989) to December
31, 1997, in conformity with generally accepted accounting principles.
As more fully described in Note 1 to the financial statements, the Company
is in the development stage, has incurred losses from inception to December 31,
1997 of approximately $35.7 million and expects such losses to continue. At
December 31, 1997, the Company had a working capital deficit and a net
stockholders' deficit of approximately $1.7 million and $162,000, respectively.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans as to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Palo Alto, California ERNST & YOUNG LLP
January 22, 1998, except as to Note 9,
for which the date is May 19, 1998
F-2
<PAGE> 78
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- MARCH 31, MARCH 31,
1996 1997 1998 1998
-------- -------- ----------- -------------
(UNAUDITED)
----------- (NOTE 9)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 1,981 $ 2,045 $ 3,272
Prepaid expenses and other current assets................ 184 207 181
-------- -------- --------
Total current assets............................. 2,165 2,252 3,453
Property and equipment, net................................ 285 471 492
Deferred offering costs.................................... -- 1,142 1,369
Deferred lease expense..................................... -- 290 278
Other assets............................................... 207 157 173
-------- -------- --------
$ 2,657 $ 4,312 $ 5,765
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................... $ 499 $ 1,402 $ 801
Accrued compensation..................................... 263 254 172
Accrued interest payable................................. 294 224 234
Deferred revenue -- related parties...................... 556 556 1,806
Other current liabilities................................ 401 469 438
Current portion of capital lease obligations............. 106 174 157
Current portion of notes payable......................... 1,000 918 467
-------- -------- --------
Total current liabilities........................ 3,119 3,997 4,075
Long-term portion of capital lease obligations............. 137 289 322
Long-term portion of notes payable......................... 1,000 -- --
Other noncurrent liabilities............................... 357 188 142
Commitments
Stockholders' equity (deficit):
Preferred Stock, no par value; 12,658,491, 18,932,344 and
19,688,488 shares authorized at December 31, 1996 and
1997 and March 31, 1998, respectively (5,000,000
shares authorized, $0.001 par value, pro forma);
issuable in series; 12,094,932, 14,377,595 and
15,133,739 convertible preferred shares issued and
outstanding at December 31, 1996 and 1997 and March
31, 1998, respectively (none pro forma) (aggregate
liquidation preference of $40,478,381 and $42,478,381
at December 31, 1997 and March 31, 1998,
respectively)......................................... 29,449 33,533 35,514 $ --
Common Stock, no par value; 25,000,000 shares authorized
at December 31, 1996 and 50,000,000 shares authorized
at December 31, 1997 and March 31, 1998 (30,000,000
shares authorized, $0.001 par value, pro forma);
83,373, 103,845 and 107,587 shares issued and
outstanding at December 31, 1996 and 1997 and March
31, 1998, respectively (2,492,626 shares pro forma)... 290 1,839 1,853 2
Additional paid-in capital................................. -- 1,672 1,672 39,037
Notes receivable from stockholders......................... (111) (147) (147) (147)
Deferred compensation...................................... -- (1,362) (1,269) (1,269)
Deficit accumulated during the development stage........... (31,584) (35,697) (36,397) (36,397)
-------- -------- -------- --------
Total stockholders' equity (deficit)....................... (1,956) (162) 1,226 $ 1,226
-------- -------- -------- ========
$ 2,657 $ 4,312 $ 5,765
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 79
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS PERIOD FROM
INCEPTION ENDED INCEPTION
YEARS ENDED DECEMBER 31, (MAY 5, 1989) MARCH 31, (MAY 5, 1989)
----------------------------- TO DECEMBER 31, --------------- TO MARCH 31,
1995 1996 1997 1997 1997 1998 1998
--------- ------- ------- --------------- ------ ------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Contract research
revenue from
related parties.... $ -- $ 1,112 $ 1,668 $ 2,780 $ 417 $ 749 $ 3,529
Grant revenue......... 407 975 1,303 2,923 313 257 3,180
--------- ------- ------- -------- ------ ------ -------------
Total
revenue..... 407 2,087 2,971 5,703 730 1,006 6,709
--------- ------- ------- -------- ------ ------ -------------
Operating expenses:
Research and
development........ 4,663 4,077 4,130 22,698 999 1,177 23,875
General and
administrative..... 2,758 1,372 1,551 11,639 360 459 12,098
Financial advisory
costs (Note 7)..... -- -- 1,396 1,396 -- -- 1,396
Restructuring costs... -- 219 -- 219 -- -- 219
Acquired in-process
research and
development........ -- -- -- 5,000 -- -- 5,000
--------- ------- ------- -------- ------ ------ -------------
Total
operating
expenses.... 7,421 5,668 7,077 40,952 1,359 1,636 42,588
--------- ------- ------- -------- ------ ------ -------------
Loss from operations.... (7,014) (3,581) (4,106) (35,249) (629) (630) (35,879)
Interest expense, net... (240) (282) (7) (448) (9) (70) (518)
--------- ------- ------- -------- ------ ------ -------------
Net loss................ $ (7,254) $(3,863) $(4,113) $(35,697) $ (638) $ (700) $ (36,397)
========= ======= ======= ======== ====== ====== =============
Basic net loss per
share................. $ (164.86) $(52.92) $(41.13) $(6.44) $(6.73)
========= ======= ======= ====== ======
Weighted average shares
of common stock
outstanding........... 44 73 100 99 104
========= ======= ======= ====== ======
Pro forma net loss per
share................. $ (1.95) $(0.28)
======= ======
Shares used in computing
pro forma net loss per
share................. 2,109 2,469
======= ======
</TABLE>
See accompanying notes.
F-4
<PAGE> 80
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM INCEPTION (MAY 5, 1989) TO MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DURING THE
------------------- ---------------- PAID IN FROM DEFERRED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION STAGE
---------- ------- ------- ------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of shares of Common
Stock to founders for
services in May 1989 at
$0.35 per share.......... -- $ -- 9,093 $ 3 $ -- $ -- $ -- $ --
Issuance of Series A
Preferred Stock for
in-process technology in
May 1990................. 65,329 -- -- -- -- -- -- --
Sale of Series A Preferred
Stock at $6.60 per share
and Series B and Series C
Preferred Stock warrants
at $0.10 per warrant to
investors for cash in
June 1990, net of
issuance costs of $25.... 68,182 437 -- -- -- -- -- --
Exercise of Series B
Preferred Stock warrants
at $10.00 per share in
October 1990............. 75,000 750 -- -- -- -- -- --
Exercise of Common Stock
purchase rights at $14.00
per share................ -- -- 10 -- -- -- -- --
Exercise of Series C
Preferred Stock warrants
at $12.00 per share by
investors for cash in
April 1991 (subsequently
converted to Series B
Preferred Stock)......... 25,000 300 -- -- -- -- -- --
Dividend of Series A
Preferred Stock in June
1991..................... 4,757 -- -- -- -- -- -- --
Conversion of Series C
Preferred Stock to Series
B Preferred Stock in June
1991..................... 5,000 -- -- -- -- -- -- --
Sale of Series B Preferred
Stock at $10.00 per share
to investors for cash in
December 1990 and June
1991, net of issuance
costs of $43............. 187,695 1,834 -- -- -- -- -- --
Issuance of Series B
Preferred Stock at $10.00
per share to consultants
for services performed in
November 1991............ 1,303 13 -- -- -- -- -- --
Sale of Series B Preferred
Stock at $10.00 per share
and Common Stock warrants
at $0.04 per warrant to
investors for cash in
February 1992, net of
issuance costs of $23.... 170,673 1,685 -- -- -- -- -- --
Exercise of Common Stock
options and Common Stock
purchase rights at $14.00
to $16.80 per share...... -- -- 5,072 82 -- (79) -- --
Repurchase of Common Stock
issued to founders at
$0.35 per share.......... -- -- (3,760) (1) -- -- -- --
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
Issuance of shares of Common
Stock to founders for
services in May 1989 at
$0.35 per share.......... $ 3
Issuance of Series A
Preferred Stock for
in-process technology in
May 1990................. --
Sale of Series A Preferred
Stock at $6.60 per share
and Series B and Series C
Preferred Stock warrants
at $0.10 per warrant to
investors for cash in
June 1990, net of
issuance costs of $25.... 437
Exercise of Series B
Preferred Stock warrants
at $10.00 per share in
October 1990............. 750
Exercise of Common Stock
purchase rights at $14.00
per share................ --
Exercise of Series C
Preferred Stock warrants
at $12.00 per share by
investors for cash in
April 1991 (subsequently
converted to Series B
Preferred Stock)......... 300
Dividend of Series A
Preferred Stock in June
1991..................... --
Conversion of Series C
Preferred Stock to Series
B Preferred Stock in June
1991..................... --
Sale of Series B Preferred
Stock at $10.00 per share
to investors for cash in
December 1990 and June
1991, net of issuance
costs of $43............. 1,834
Issuance of Series B
Preferred Stock at $10.00
per share to consultants
for services performed in
November 1991............ 13
Sale of Series B Preferred
Stock at $10.00 per share
and Common Stock warrants
at $0.04 per warrant to
investors for cash in
February 1992, net of
issuance costs of $23.... 1,685
Exercise of Common Stock
options and Common Stock
purchase rights at $14.00
to $16.80 per share...... 3
Repurchase of Common Stock
issued to founders at
$0.35 per share.......... (1)
</TABLE>
F-5
<PAGE> 81
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
PERIOD FROM INCEPTION (MAY 5, 1989) TO MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DURING THE
------------------- ---------------- PAID IN FROM DEFERRED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION STAGE
---------- ------- ------- ------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exercise of Common Stock
options and Common Stock
purchase rights at $16.80 per
share........................ -- $ -- 917 $ 16 $ -- $ (3) $ -- $ --
Repurchase of unvested shares
of Common Stock at prices
ranging from $0.35 to $16.80
per share and cancellation of
notes receivable on
termination of employment of
stockholders................. -- -- (2,629) (41) -- 41 -- --
Payments on notes receivable... -- -- -- -- -- 24 -- --
Sale of Series B Preferred
Stock at $10.00 per share and
Common Stock warrants at
$0.04 per warrant to
investors for cash in June
1992, net of issuance costs
of $19....................... 115,390 1,135 -- -- -- -- -- --
Net loss -- inception (May 5,
1989) to December 31, 1992... -- -- -- -- -- -- -- (5,191)
---------- ------- ------- ---- ------ ----- ------- --------
Balances at December 31, 1992.... 718,329 6,154 8,703 59 -- (17) -- (5,191)
Issuance of Series C Preferred
Stock at $1.50 per share and
Series D Preferred Stock
warrants at $0.01 per share
for cash in April and June
1993, net of issuance costs
of $52....................... 2,805,519 4,159 -- -- -- -- -- --
Exercise of Series D Preferred
Stock warrants at $2.25 in
August 1993.................. 270,222 608 -- -- -- -- -- --
Issuance of Common Stock at
$2.10 per share to an
officer...................... -- -- 10,710 23 -- (23) -- --
Exercise of Common Stock
options and Common Stock
purchase rights at $0.16 to
$21.00 per share............. -- -- 3,787 47 -- (25) -- --
Repurchase of unvested shares
of Common Stock at $16.80 per
share for cancellation of
notes receivable............. -- -- (1,041) (17) -- 17 -- --
Forgiveness of notes
receivable................... -- -- -- -- -- 25 -- --
Net loss -- year ended December
31, 1993..................... -- -- -- -- -- -- -- (3,839)
---------- ------- ------- ---- ------ ----- ------- --------
Balances at December 31, 1993.... 3,794,070 10,921 22,159 112 -- (23) -- (9,030)
Issuance of Series E Preferred
Stock at $2.25 per share in
April 1994, net of issuance
costs of $58................. 4,000,000 8,942 -- -- -- -- -- --
Exercise of Common Stock
options and Common Stock
purchase rights at $2.10 to
$4.20 per share.............. -- -- 22,632 62 -- (51) -- --
Net loss -- year ended December
31, 1994..................... -- -- -- -- -- -- -- (11,437)
---------- ------- ------- ---- ------ ----- ------- --------
Balances at December 31, 1994.... 7,794,070 $19,863 44,791 $174 $ -- $ (74) $ -- $(20,467)
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
Exercise of Common Stock
options and Common Stock
purchase rights at $16.80 per
share........................ $ 13
Repurchase of unvested shares
of Common Stock at prices
ranging from $0.35 to $16.80
per share and cancellation of
notes receivable on
termination of employment of
stockholders................. --
Payments on notes receivable... 24
Sale of Series B Preferred
Stock at $10.00 per share and
Common Stock warrants at
$0.04 per warrant to
investors for cash in June
1992, net of issuance costs
of $19....................... 1,135
Net loss -- inception (May 5,
1989) to December 31, 1992... (5,191)
--------
Balances at December 31, 1992.... 1,005
Issuance of Series C Preferred
Stock at $1.50 per share and
Series D Preferred Stock
warrants at $0.01 per share
for cash in April and June
1993, net of issuance costs
of $52....................... 4,159
Exercise of Series D Preferred
Stock warrants at $2.25 in
August 1993.................. 608
Issuance of Common Stock at
$2.10 per share to an
officer...................... --
Exercise of Common Stock
options and Common Stock
purchase rights at $0.16 to
$21.00 per share............. 22
Repurchase of unvested shares
of Common Stock at $16.80 per
share for cancellation of
notes receivable............. --
Forgiveness of notes
receivable................... 25
Net loss -- year ended December
31, 1993..................... (3,839)
--------
Balances at December 31, 1993.... 1,980
Issuance of Series E Preferred
Stock at $2.25 per share in
April 1994, net of issuance
costs of $58................. 8,942
Exercise of Common Stock
options and Common Stock
purchase rights at $2.10 to
$4.20 per share.............. 11
Net loss -- year ended December
31, 1994..................... (11,437)
--------
Balances at December 31, 1994.... $ (504)
</TABLE>
F-6
<PAGE> 82
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
PERIOD FROM INCEPTION (MAY 5, 1989) TO MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DEFICIT
NOTES ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE DURING THE
------------------- ---------------- PAID IN FROM DEFERRED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION STAGE
---------- ------- ------- ------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994
(brought forward)............ 7,794,070 $19,863 44,791 $ 174 $ -- $ (74) $ -- $(20,467)
Exercise of Common Stock
options and purchase rights
at $3.15 to $4.20 per
share........................ -- -- 3,289 11 -- -- -- --
Repurchase of unvested shares
of Common Stock.............. -- -- (3,808) (13) -- 13 -- --
Repayment and forgiveness of
stockholder notes
receivable................... -- -- -- -- -- 7 -- --
Issuance of Common Stock
warrants at $0.70 per
share........................ -- -- -- 3 -- -- -- --
Issuance of Series E Preferred
Stock at $2.25 per share for
conversion of notes payable
and accrued interest in
November 1995................ 1,647,814 3,708 -- -- -- -- -- --
Net loss -- year ended December
31, 1995..................... -- -- -- -- -- -- -- (7,254)
---------- ------- ------- ------ ------ ----- ------- --------
Balances at December 31, 1995.... 9,441,884 23,571 44,272 175 -- (54) -- (27,721)
Exercise of Common Stock
options and purchase rights
of $2.10 to $4.20 per
share........................ -- -- 39,123 115 -- (57) -- --
Issuance of Series E Preferred
Stock at $2.25 per share for
cash and the conversion of
notes payable and accrued
interest in February and May
1996, net of issuance cost of
$92.......................... 2,653,048 5,878 -- -- -- -- -- --
Net loss -- year ended December
31, 1996..................... -- (3,863)
---------- ------- ------- ------ ------ ----- ------- --------
Balances at December 31, 1996.... 12,094,932 29,449 83,373 290 -- (111) -- (31,584)
Exercise of Common Stock
options and purchase rights
at $3.75 per share, net of
repurchases.................. -- -- 20,472 69 -- (36) -- --
Sale of Series F Preferred
Stock and Common Stock
warrants at $2.25 per unit in
February and June 1997, net
of issuance costs of
$1,052....................... 2,282,663 4,084 -- -- -- -- -- --
Unit options and warrants
issued....................... -- -- -- -- 1,672 -- -- --
Deferred compensation.......... -- -- -- 1,480 -- -- (1,480) --
Amortization of deferred
compensation................. -- -- -- -- -- -- 118 --
Net loss -- year ended December
31, 1997..................... -- -- -- -- -- -- -- (4,113)
---------- ------- ------- ------ ------ ----- ------- --------
Balances at December 31, 1997.... 14,377,595 33,533 103,845 1,839 1,672 (147) (1,362) (35,697)
Exercise of Common Stock
options at $3.15 to $4.20 per
share (unaudited)............ -- -- 3,742 14 -- -- -- --
Sale of Series G Preferred
Stock in February at $2.645
per share net of issuance
cost of $19 (unaudited)...... 756,144 1,981 -- -- -- -- -- --
Amortization of deferred
compensation (unaudited)..... -- -- -- -- -- -- 93 --
Net loss -- three months ended
March 31, 1998 (unaudited)... -- -- -- -- -- -- -- (700)
---------- ------- ------- ------ ------ ----- ------- --------
Balance at March 31, 1998
(unaudited).................... 15,133,739 $35,514 107,587 $1,853 $1,672 $(147) $(1,269) $(36,397)
========== ======= ======= ====== ====== ===== ======= ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
Balances at December 31, 1994
(brought forward)............ $ (504)
Exercise of Common Stock
options and purchase rights
at $3.15 to $4.20 per
share........................ 11
Repurchase of unvested shares
of Common Stock.............. --
Repayment and forgiveness of
stockholder notes
receivable................... 7
Issuance of Common Stock
warrants at $0.70 per
share........................ 3
Issuance of Series E Preferred
Stock at $2.25 per share for
conversion of notes payable
and accrued interest in
November 1995................ 3,708
Net loss -- year ended December
31, 1995..................... (7,254)
--------
Balances at December 31, 1995.... (4,029)
Exercise of Common Stock
options and purchase rights
of $2.10 to $4.20 per
share........................ 58
Issuance of Series E Preferred
Stock at $2.25 per share for
cash and the conversion of
notes payable and accrued
interest in February and May
1996, net of issuance cost of
$92.......................... 5,878
Net loss -- year ended December
31, 1996..................... (3,863)
--------
Balances at December 31, 1996.... (1,956)
Exercise of Common Stock
options and purchase rights
at $3.75 per share, net of
repurchases.................. 33
Sale of Series F Preferred
Stock and Common Stock
warrants at $2.25 per unit in
February and June 1997, net
of issuance costs of
$1,052....................... 4,084
Unit options and warrants
issued....................... 1,672
Deferred compensation.......... --
Amortization of deferred
compensation................. 118
Net loss -- year ended December
31, 1997..................... (4,113)
--------
Balances at December 31, 1997.... (162)
Exercise of Common Stock
options at $3.15 to $4.20 per
share (unaudited)............ 14
Sale of Series G Preferred
Stock in February at $2.645
per share net of issuance
cost of $19 (unaudited)...... 1,981
Amortization of deferred
compensation (unaudited)..... 93
Net loss -- three months ended
March 31, 1998 (unaudited)... (700)
--------
Balance at March 31, 1998
(unaudited).................... $ 1,226
========
</TABLE>
See accompanying notes
F-7
<PAGE> 83
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(MAY 5, 1989) THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, TO MARCH 31, PERIOD FROM INCEPTION
--------------------------- DECEMBER 31, ------------------- (MAY 5, 1989) TO
1995 1996 1997 1997 1997 1998 MARCH 31, 1998
------- ------- ------- ------------- -------- -------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.............................. $(7,254) $(3,863) $(4,113) $(35,697) $ (638) $ (700) $(36,397)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 204 168 140 966 33 50 1,016
Amortization of warrants deferred
compensation...................... -- -- 118 118 -- 154 272
Accrued interest on bridge notes
converted to Preferred Stock...... 78 44 -- 122 -- -- 122
Losses on advances to related
parties........................... 120 -- -- 465 -- -- 465
Non-cash financial advisory costs... -- -- 1,300 1,300 -- -- 1,300
Acquisition of in-process research
and development for notes
payable........................... -- -- -- 4,200 -- -- 4,200
Other............................... 7 -- -- 38 -- 10 48
Changes in assets and liabilities:
Prepaid expenses and other current
assets.......................... 16 (66) (23) (207) (22) 26 (181)
Other assets...................... (7) (162) 50 (157) 86 (16) (173)
Accounts payable.................. 200 205 903 1,402 (118) (601) 801
Deferred revenue -- related
party........................... -- 556 -- 556 (417) 1,250 1,806
Accrued expenses and other
liabilities..................... 388 (25) (180) 1,135 (73) (149) 986
------- ------- ------- -------- ------- ------- --------
Net cash used in operating
activities.......................... (6,248) (3,143) (1,805) (25,759) (1,149) 24 (25,735)
------- ------- ------- -------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment... (4) (14) -- (397) (10) -- (397)
Organization costs.................... -- -- -- (68) -- -- (68)
Advances to related parties........... (40) -- -- (715) -- -- (715)
Repayment of notes
receivable -- officer............... -- -- -- 250 -- -- 250
Purchase of short-term investments.... (500) -- (4,577) (6,481) -- -- (6,481)
Maturities of short-term
investments......................... 500 -- 4,577 4,500 -- -- 4,500
Sales of short-term investments....... 2,000 -- -- 2,000 -- -- 2,000
------- ------- ------- -------- ------- ------- --------
Net cash provided by (used in)
investing activities................ 1,956 (14) -- (911) (10) -- (911)
------- ------- ------- -------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bridge financing........ 3,630 -- -- 3,630 -- -- 3,630
Proceeds from short-term debt......... 3,015 1,893 -- 4,908 -- -- 4,908
Repayment of short-term debt.......... (1,515) (1,500) -- (3,015) -- -- (3,015)
Repayment of notes payable............ (1,200) (1,000) (1,000) (3,200) (1,000) (500) (3,700)
Principal payments on capital lease
obligations......................... (171) (151) (106) (728) (30) (65) (793)
Proceeds from sale-leaseback of
equipment........................... -- -- -- 207 -- -- 207
Deferred offering costs............... -- -- (1,142) (1,142) -- (227) (1,369)
Proceeds from issuances of Common
Stock and warrants, net of
repurchases and repayment of
stockholder notes................... 14 58 33 180 7 14 194
Net proceeds from issuance of
convertible Preferred Stock and
warrants............................ -- 3,941 4,084 27,875 3,233 1,981 29,856
------- ------- ------- -------- ------- ------- --------
Net cash provided by financing
activities.......................... 3,773 3,241 1,869 28,715 2,210 1,203 29,918
------- ------- ------- -------- ------- ------- --------
Net increase (decrease) in cash and
cash equivalents.................... (519) 84 64 2,045 1,051 1,227 3,272
Cash and cash equivalents at beginning
of period........................... 2,416 1,897 1,981 -- 1,981 2,045 --
------- ------- ------- -------- ------- ------- --------
Cash and cash equivalents at end of
period.............................. $ 1,897 $ 1,981 $ 2,045 $ 2,045 $ 3,032 $ 3,272 $ 3,272
======= ======= ======= ======== ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest................ $ 160 $ 335 $ 210 $ 844 $ 118 $ 80 $ 924
======= ======= ======= ======== ======= ======= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Equipment purchased under capital
leases.............................. $ 107 $ 95 $ 326 $ 933 $ -- $ 81 $ 1,014
======= ======= ======= ======== ======= ======= ========
Conversion of debt obligations and
accrued interest to Preferred
Stock............................... $ 3,708 $ 1,937 -- $ 5,645 $ -- $ -- $ 5,645
======= ======= ======= ======== ======= ======= ========
Deferred compensation related to stock
option grants....................... $ -- $ -- 1,480 $ 1,480 $ -- $ -- $ 1,480
======= ======= ======= ======== ======= ======= ========
Warrants issued in connection with
lease and borrowing transactions.... $ -- $ -- $ 372 $ 372 $ -- $ -- $ 372
======= ======= ======= ======== ======= ======= ========
</TABLE>
See accompanying notes.
F-8
<PAGE> 84
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
RiboGene, Inc. (the "Company") was incorporated in the State of California
on May 5, 1989. The Company was originally founded 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 effort initially focused on infections caused by fungi and
viruses. In 1996, the Company expanded its research efforts to include
infections caused by bacteria. The Company is in the development stage and its
principal activities to date have involved performing research and development
on the above technologies.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has sustained operating
losses since inception and expects such losses to continue as it furthers its
research and development programs. From inception to December 31, 1997, the
Company incurred cumulative net losses of approximately $35,697,000, and had a
working capital deficit of $1,745,000 and a net stockholders' deficit of
$162,000 at December 31, 1997. The Company will need to obtain additional funds
from outside sources to continue its research and development activities, fund
operating expenses and pursue regulatory approvals for its products under
development. Management believes that sufficient funds are available to support
planned operations through at least August, 1998. The Company may seek to fund
its operations thereafter through collaborative arrangements and through public
or private financings, including this offering or other debt or equity
financings. If the Company is unable to obtain the necessary capital,
substantial restructuring options may be necessary which would have a material
adverse effect on the Company's business, results of operations and prospects.
The financial statements do not include any adjustments to reflect the possible
future effects in the recoverability and classification of assets or the amounts
and classification of liabilities that might result from the possible inability
of the Company to continue as a going concern.
INTERIM FINANCIAL INFORMATION
The financial information at March 31, 1998 and for the three-month periods
ended March 31, 1997 and 1998 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a form presentation of the financial position of such date and of
the operating results and cash flows for those periods. Results for the 1998
periods are not necessarily indicative of results expected for the entire year.
USE OF ESTIMATES
The preparation of financial statements in accordance 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.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity from
the date of purchase of three months or less to be cash equivalents.
F-9
<PAGE> 85
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. 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 at December 31, 1996 and 1997 and March 31,
1997 and 1998, is comprised of demand deposits with banks and investments in
money market accounts.
DEFERRED OFFERING COSTS
Costs related to offering of the Company's stock are deferred until the
completion of the offering and offset against proceeds from the offering. If the
offering is terminated prior to completion, the costs will be immediately
recognized as an expense.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets which range from four to five years. Assets recorded under
capital leases are amortized using the straight-line method over the shorter of
the useful life or the lease term.
REVENUE RECOGNITION
Revenue earned under collaborative research agreements are recognized as
the related services are performed and research expenses are incurred. Amounts
received in advance of services to be performed are recorded as deferred revenue
until the related expenses are incurred. Non-refundable milestone payments,
which do not require the Company to perform additional services, are recognized
as revenue in the period earned. The Company has not received nor recognized as
revenue any milestone payments to date.
The Company has received government grants which support the Company's
research effort in specific research projects. These grants generally provide
for reimbursement of approved costs incurred as defined in the various awards.
NET LOSS PER SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128") and the
provisions of Securities and Exchange Commission Staff Accounting Bulletin No.
98. SFAS 128 requires the presentation of basic earnings (loss) per share and
diluted earnings (loss) per share, if more dilutive, for all periods presented.
In accordance with 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 as presented in the Statement of
Operations has been computed as described above and also gives effect to the
conversion of the convertible Preferred Stock that will automatically convert
upon completion of the Company's initial public offering (using the as-if
converted method) from the original date of issuance.
F-10
<PAGE> 86
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A reconciliation of shares used in the calculation of pro forma basic net
loss per share and pro forma net loss per share follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ ------------------
1995 1996 1997 1997 1998
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net loss................ $ (7,254) $(3,863) $(4,113) $ (638) $ (700)
======== ======= ======= ======= =======
Weighted average shares
of Common Stock
outstanding........... 44 73 100 99 104
======== ======= ======= ======= =======
Basic net loss per
share................. $(164.86) $(52.92) $(41.13) $ (6.44) $ (6.73)
======== ======= ======= ======= =======
Calculation of shares
outstanding for
computing basic pro
forma net loss per
share:
Shares used in computing
basic net loss per
share................. 100 104
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 (see
Note 9)............... 2,009 2,365
------- -------
Shares used in computing
pro forma net loss per
share................. 2,109 2,469
======= =======
Pro forma net loss per
share................. $ (1.95) $ (0.28)
======= =======
</TABLE>
Diluted net loss per share has not been presented separately as, due to the
Company's net loss position, it is anti-dilutive. Had the Company been in a net
income position at December 31, 1997 and March 31, 1998, shares used in
calculating diluted earnings per share would have included an additional
1,290,000 and 1,286,000, respectively, shares related to the Company's
outstanding stock options and warrants (prior to the application of the treasury
stock method).
ACCOUNTING FOR 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.
F-11
<PAGE> 87
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
establishes standards for reporting comprehensive income and was adopted by the
Company during the three months ended March 31, 1998. The Company did not have
comprehensive income for the three months ended March 31, 1998. SFAS 131
establishes standards for annual and interim disclosures of operating segments,
products and services, geographic areas and major customers, and will be adopted
in the Company's annual financial statements for the year ended December 31,
1998. The Company is in the process of evaluating the disclosure requirements of
SFAS 131, the adoption of which is not expected to have impact on the Company's
results of operations or financial condition.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Laboratory equipment................................... $ 579,000 $ 734,000 $ 785,000
Office and computer equipment.......................... 223,000 352,000 370,000
Furniture and fixtures................................. 204,000 231,000 243,000
Leasehold improvements................................. 37,000 52,000 15,000
---------- ---------- ----------
1,043,000 1,369,000 1,413,000
Less accumulated depreciation and amortization......... (758,000) (898,000) (921,000)
---------- ---------- ----------
Property and equipment, net............................ $ 285,000 $ 471,000 $ 492,000
========== ========== ==========
</TABLE>
Property and equipment includes approximately $890,000 and $781,000 of
equipment under capital leases for the years ended December 31, 1996 and 1997,
respectively, that are pledged as security for the related lease obligations.
Accumulated amortization related to leased assets totaled $648,000 and $338,000
for the years ended December 31, 1996 and 1997, respectively.
3. COLLABORATION AGREEMENTS
On January 27, 1998, the Company entered into a collaboration with
Dainippon Pharmaceutical Co., Ltd. ("Dainippon") for two of its targets in the
antibacterial program (the "Dainippon Collaboration"). As part of the Dainippon
Collaboration, Dainippon has agreed to provide the Company with up to $6.0
million in research support payments, $2.0 million of which was received in
February 1998, and fund additional research and development at Dainippon. The
Company may also be entitled to receive milestone payments upon the achievement
of mostly late-stage clinical and regulatory milestones in the amount of up to
$10.0 million, consisting of up to $5.0 million in milestones through approval
in Japan and an additional $5.0 million through approval in one other major
market territory, for each product developed through the collaboration. RiboGene
also has the right to co-promote, on a country-by-country basis, any products
resulting from the collaboration. In connection with this agreement, Dainippon
also purchased 756,144 shares of Series D preferred stock (see Note 7).
F-12
<PAGE> 88
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
3. COLLABORATION AGREEMENTS (CONTINUED)
In April 1996, the Company entered into collaborative research and license
agreements with Abbott Laboratories ("Abbott") to discover and develop
antifungal products identified using the Company's drug discovery technology
(see Note 10). This agreement grants Abbott the exclusive worldwide right to
develop and market antifungal products discovered with the Company. Abbott
agreed to make contract research payments of up to $5,000,000 for the Company's
antifungal research activity over a three-year period. Specifically, the
Company's activities will include screening compound samples, the identification
of new targets and the design and implementation of assays incorporating these
targets. The Company has no obligation to incur expenses in excess of the funds
provided by Abbott. During 1996 and 1997, Abbott made payments of $1,668,000 in
each year pursuant to this agreement, of which $1,112,000 and $1,668,000,
respectively, was recognized as revenue based on costs incurred during the
period. Collaborative research payments from Abbott are non-refundable. The
agreement also provides milestone payments to the Company for up to $9,000,000
per product as well as royalties on any product sales. On February 6, 1998
Abbott notified the Company of its intent to end its research collaboration with
the Company effective April 8, 1998. In connection with this agreement, Abbott
purchased 1,555,556 shares of Series E Preferred Stock (convertible into 111,066
shares of Common Stock) which resulted in net proceeds to the Company of
$3,500,000. Abbott also agreed to purchase an additional $4.0 million of Common
Stock in a private placement at a purchase price equal to the initial public
offering price (571,429 shares assuming an initial public offering price of
$7.00 per share) assuming the initial public offering results in gross proceeds
to the Company of $16.0 million.
The Company has entered into research agreements with Trega Biosciences
Inc., Pharmacopeia, Inc. and ArQule, Inc. to screen compounds provided by these
companies. The terms of each of these research agreements require the Company to
complete the screening activities within a specific period of time, all of which
are less than one year but not to pay any funds to the other party. In the case
of Pharmacopeia and ArQule, once a compound with specified activity is
identified as a result of the screening activities, then the Company has the
right to negotiate for the rights to develop the compound. Under the Trega
Biosciences agreement, if a compound is selected for further development, the
parties will jointly agree on a development plan which will further specify each
party's obligations. Each party has the right, but not the obligation, to
participate in the development of the compound and each will proportionally
share in the ownership of the compound developed based on each party's
contribution (defined as internal and external development expenditures).
Following initial screening activities, in no case is the Company obligated to
expend additional funds for development. To date, no compounds have been
selected for development under any of these agreements. The agreement with Trega
Biosciences Inc. expires in October 1998. The agreements with Pharmacopeia, Inc.
and ArQule, Inc. can be terminated by the Company without any further obligation
upon 60 and 30 days notice, respectively.
In April 1997, the Company entered into an agreement with the University of
Washington, which was amended in October 1997, pursuant to which RiboGene
received an exclusive worldwide license to certain patent rights and technology.
Under the agreement, the Company paid an upfront license fee and has agreed to
pay a minimal quarterly license maintenance fee and a milestone payment of
$250,000 upon the approval of an NDA for a compound developed using the licensed
patent rights. Once a compound is selected for development, the Company will be
obligated to complete certain development milestones at its own expense. To
date, no compound has been selected for development.
In April 1993, RiboGene entered into an agreement with the University of
Washington and McGill University, under which RiboGene received an option to
acquire an exclusive, worldwide license to certain patent rights and technology
relating to the tumor-suppressing properties of the enzyme PKR. This agreement
F-13
<PAGE> 89
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
3. COLLABORATION AGREEMENTS (CONTINUED)
was amended in April 1996 to extend the term of the option through April 1998,
in exchange for a minimal payment and a commitment by the Company to screen
specified compounds in assays incorporating this technology, which has been
completed, and to conduct preclinical studies on future lead compounds, if
selected. No lead compounds have been selected for development to date. The
funding for these obligations is provided by a 1996 SBIR grant that awarded the
Company up to $640,000 over a two-year period.
4. NOTES PAYABLE
In January and February 1996, the Company issued $1,893,000 principal
amount of bridge notes payable. In May 1996, the $1,893,000 of principal and
$44,000 of accrued interest were converted into 860,844 shares of Series E
Preferred Stock (convertible into 61,464 shares of Common Stock) at a price of
$2.25 per share.
In May 1995, the Company borrowed $750,000 from a bank subject to a note
payable. The note was repaid in July 1995. In connection with this borrowing,
the Company issued the bank a warrant with a five-year term to acquire 13,333
shares of Series E Preferred Stock (which will be convertible into 2,076 shares
of Common Stock) at $2.25 per share.
In July through September 1995, the Company received $4,394,680 in bridge
financing from stockholders. In connection with this transaction, the lenders
purchased warrants at a price of $0.70 per warrant to acquire 15,100 shares of
Common Stock at $7.00 per share. The warrants have a three-year term. In
September 1995, $765,000 of these notes were repaid. In November 1995, the
remaining $3,629,680 of principal and $77,906 of accrued interest were converted
into 1,647,814 shares of Series E Preferred Stock (convertible into 117,653
shares of Common Stock) at a price of $2.25 per share.
In September 1995, the Company borrowed $1,500,000 from a bank under a note
payable. In connection with this borrowing, the Company issued the bank a
warrant with a five-year term to acquire 20,000 shares of Series E Preferred
Stock (which will be convertible into 3,114 shares of Common Stock) at a price
of $2.25 per share. The note was repaid in April 1996.
The fair value of each of the warrants described in the above paragraphs
was determined to be immaterial at the date of issuance. Such determination was
made using the Black-Scholes method with valuation assumptions as follows:
expected life equal to the term of the warrant; a risk free interest rate of 6%;
an expected volatility factor of .5; and a dividend yield of 0%.
In January 1994, in consideration for the acquisition of certain technology
(see Note 5), the Company issued notes payable totaling $4,200,000, which are
due with interest of 4%-5%. At December 31, 1997, notes payable totaling
$1,000,000 remain outstanding including accrued interest, $500,000 of which was
paid in January 1998. Pursuant to a letter of agreement dated December 31, 1997,
the maturity date of the remaining $500,000 note has been extended to May 5,
1998. The interest rate for the extension period is 7%. In consideration for the
extension, the Company issued a warrant to purchase 13,923 shares of Common
Stock with an exercise price of $15.87 per share which expires January 1999. The
fair value of $82,000 assigned to the warrant was determined using the
Black-Scholes method. The Black-Scholes valuation was determined using the
following assumptions: expected life of one year; a risk-free interest rate of
6%; an expected volatility factor of .5; a dividend yield of 0%; and an
estimated fair value of the underlying common stock of $31.75. The value of the
warrants has been reflected as a debt discount and will be amortized to interest
expense over the remaining term of the note payable. The note payable is secured
by the technology and intellectual capital acquired in this transaction. The
fair value of the note, calculated based on a discounted cash flow analysis
F-14
<PAGE> 90
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
4. NOTES PAYABLE (CONTINUED)
using the Company's incremental borrowing rate, does not differ materially from
its carrying value in the financial statements.
5. ACQUISITION OF IN-PROCESS RESEARCH AND DEVELOPMENT
In January 1994, the Company entered into an asset purchase agreement for
certain intangible assets and intellectual property related to several drug
candidates in development. In 1996, the Company discontinued development of
these drug candidates. In exchange for the intangible assets and intellectual
property received, the Company paid $800,000 in cash and issued notes payable
totaling approximately $4,200,000 (see Note 4). The Company also issued a
warrant to purchase 92,820 shares of Common Stock with an exercise price of
$15.87 per share which expires in January 1999. The value assigned to the
warrant using the Black-Scholes method for financial statement purposes was
immaterial. The Black-Scholes valuation was calculated using the following
assumptions: expected life of five years; a risk free interest rate of 6%; an
expected volatility factor of .5; and a dividend yield of 0%, and a fair value
of the underlying common stock of $3.15. In connection with this transaction,
the Company charged $5,000,000 to acquired in-process research and development
as the assets acquired had no alternative future uses.
In connection with the above agreement, the Company entered into a
five-year consulting agreement with the sole shareholder of the seller. The
agreement provides for payments of $50,000 per quarter from January 1995 through
December 1999. In 1995, the Company determined it would no longer require the
services of the consultant at a level commensurate with the amounts payable in
1996 through 1999, and therefore the remaining present value of the unpaid
balance (discounted at 10.5%) amounting to $646,000 was recognized as expense in
the accompanying statement of operations.
6. LEASES
The Company leases certain facilities and laboratory and office equipment.
Future minimum lease payments under such noncancelable leases at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
Year ended December 31,
1998............................................. $ 212,000 $ 618,000
1999............................................. 174,000 603,000
2000............................................. 183,000 590,000
2001............................................. 12,000 603,000
2002............................................. -- 626,000
Thereafter....................................... -- 7,578,000
--------- -----------
Total minimum payments required.................... 581,000 $10,618,000
===========
Less amount representing interest.................. (118,000)
---------
Present value of future lease payments............. 463,000
Less current portion............................... (174,000)
---------
Long-term portion.................................. $ 289,000
=========
</TABLE>
Rent expense for operating leases was approximately $117,000, $213,000 and
$347,000 in the years ended December 31, 1995, 1996 and 1997, respectively. In
1997, the Company entered into a facility lease which
F-15
<PAGE> 91
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
6. LEASES (CONTINUED)
provides for scheduled rent increases annually over the 15-year term. The rent
is being recognized as expense on a straight-line basis and the actual cash flow
is included in the future minimum lease payment schedule above. In connection
with the new facility lease, in November 1997 the Company became obligated to
issue the landlord a six year warrant to purchase 17,850 shares of Common Stock
at $31.51 per share. The warrant was assigned a value of $290,000 which is being
amortized over the vesting period of the warrant. Such valuation was determined
using the Black-Scholes method with the following assumptions: an expected life
of six years; a risk-free interest rate of 6%; a dividend yield of 0%; and an
estimated fair value of the underlying common stock of $30.00.
7. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The authorized and outstanding shares of Preferred Stock and related
liquidation preferences were as follows at December 31, 1997:
<TABLE>
<CAPTION>
LIQUIDATION
SHARES AS PREFERENCE
CONVERTED PER LIQUIDATION
AUTHORIZED SHARES INTO PREFERRED PREFERENCE
DESIGNATION SHARES OUTSTANDING COMMON STOCK SHARE TOTAL
----------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Series A............. 138,269 138,268 9,870 $ 6.60 $ 912,569
Series B............. 800,000 580,061 41,407 $10.00 5,800,610
Series C............. 2,950,000 2,805,519 200,307 $ 1.50 4,208,279
Series D............. 270,222 270,222 19,293 $ 2.25 608,000
Series E............. 8,500,000 8,300,862 592,664 $ 2.25 18,676,939
Series F............. 5,555,554 2,282,663 1,467,510 $ 4.50 10,271,984
---------- ---------- --------- -----------
18,214,045 14,377,595 2,331,051 $40,478,381
========== ========== ========= ===========
</TABLE>
On January 28, 1998 in connection with the Dainippon Collaboration,
Dainippon made a $2.0 million equity investment in the Company by purchasing
756,144 shares of the Company's Series G Preferred Stock, each share of which
will convert into .0714 of a share of Common Stock upon closing of the Offering,
for a total of 53,988 shares of Common Stock. The holders of Series G Preferred
Stock are entitled to receive liquidation preferences of $2.645 per share (total
liquidation preference of $2,000,000).
In February 1997 and June 1997, the Company issued an aggregate of
2,282,663 units (the "Premium Preferred Units") resulting in net proceeds of
approximately $4,100,000. Each Premium Preferred Unit consisted of one share of
Series F Preferred Stock and one Class A Common Stock warrant (the "Class A
Warrants"). The Class A Warrants have a six-year term and initially entitled the
holder to purchase .0714 of a share of Common Stock at an exercise price per
share equal to the lesser of (i) $31.51 or (ii) the effective per share price of
Common Stock in an initial public offering which results in gross proceeds of at
least $7,500,000 to the Company. If the Company's proposed initial public
offering is consummated on the terms presently contemplated (the issuance of
2,700,000 shares at a price per share of $7.00), the outstanding Class A
Warrants will be exercisable into 162,967 shares of Common Stock at an exercise
price of $7.00 per share.
Holders of Series A, B, C, D, E, and G Preferred Stock are entitled to
noncumulative dividends when and if declared by the board of directors. The
holders of Series F Preferred Stock are entitled to receive, prior and in
preference to any declaration or payment of dividend on any other class of
stock, dividends of $2.25 per
F-16
<PAGE> 92
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
share on the first day following the close of the Series F offering and shall be
entitled to receive an additional $1.125 per share on the second anniversary of
the Series F closing and each year thereafter. The dividends shall be payable
only when and if declared by the board of directors; however, dividends not
declared and paid when due shall accumulate and be included in the Series F
Preferred Stock liquidation preference and in the determination of the Series F
Preferred Stock conversion ratio (see discussion below). The initial Series F
Preferred Stock dividend has not been declared or paid. No dividends or other
distributions shall be made to Common stockholders other than dividends payable
solely in Common Stock, unless, at the same time, an equivalent dividend to the
Preferred stockholders has been paid or provided for. No dividends shall be
declared or paid on any class of Preferred Stock while there are any accrued but
unpaid dividends on the Series F Preferred Stock and unless a like dividend is
declared on the Series F Preferred Stock.
All Series of Preferred Stock have voting rights on an as-converted basis.
In addition, the holders of not less than 66 2/3% of the Series F Preferred
Stock are entitled to approve certain transactions including liquidation or the
sale of the Company, the issuance of any securities with terms on par or senior
to the Series F Preferred Stock and the incurrence of any indebtedness above
specified limits. Each share of Series A through E and Series G Preferred Stock
is convertible into .0714 of a share of Common Stock, subject to adjustment for
antidilution. As a result of the provisions related to the undeclared dividend
discussed above, each share of Series F Preferred Stock is initially convertible
into .1429 of a share of Common Stock. The preferred shares will automatically
convert into Common Stock upon the closing of a firm commitment underwritten
public offering under the Securities Act of 1933 in which the aggregate offering
price to the public is not less than $7,500,000 or, as to Series A, B, C, D or
E, at such time as the Company receives the consent of not less than 66 2/3% of
the holders of such Series of Preferred Stock.
The Series F Preferred Stock conversion ratio is subject to adjustment upon
the closing of an initial public offering at an offering price of less than
$31.51 per share. Such adjustment is intended to provide for the conversion of
the Series F Preferred Stock at a value not less than $4.50 per Series F
Preferred share (the original stated value of $2.25 per share, plus the $2.25
per share undeclared dividend discussed above). If the initial public offering
price is below $31.51, the ratio by which the Series F Preferred Stock is
convertible into Common Stock equals $4.50 divided by the initial public
offering price. To the extent that the adjusted conversion price results in the
holders of Series F Preferred Stock receiving in excess of 326,193 shares of
Common Stock, then the fair value of the incremental shares is deemed to be the
equivalent of a preferred stock dividend. Any such deemed dividend will be
recorded at the time of conversion by offsetting charges and credits to
additional paid in capital, without any effect on total stockholders' equity.
There will be no effect on net loss from the conversion. However, the amount
will increase the loss allowable to Common Stock in the calculation of net loss
per share in the period of conversion. If the Company's proposed initial public
offering is consummated on the terms presently contemplated, each share of
Series F Preferred Stock will convert into .6429 of a share of Common Stock,
resulting in the issuance of an incremental 1,141,317 shares of Common Stock and
a non-cash deemed dividend of approximately $8 million.
Series A, B, C, D, E and G Preferred Stock may be redeemed at the option of
the board of directors after April 15, 1999, or earlier, if approved by holders
of 66 2/3% of the outstanding shares of such series. Holders of Series F
Preferred Stock can, at their option, participate in the redemption. At
redemption, the preferred stockholders will receive a redemption price in cash
equal to the original issue price of the respective shares, together with any
declared but unpaid dividends.
In the event of sale, merger, liquidation, dissolution or winding up of the
Company, the holders of Series F Preferred Stock then outstanding will first be
entitled to receive, in preference to all other series of
F-17
<PAGE> 93
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
preferred and Common Stock, $4.50 per share (the original stated value of $2.25
per share, plus the $2.25 per share undeclared dividend discussed above) plus
declared but unpaid dividends. The holders of Series C, D, E and G Preferred
Stock shall be entitled to receive, prior and in preference to the holders of
Series A and B Preferred Stock and Common Stock, the liquidation preferences
noted in the table above, plus declared but unpaid dividends. If assets remain
after such distribution, the holders of Series B Preferred Stock are entitled to
receive the amount shown above in preference to the Series A Preferred
Stockholders and Common Stockholders. Upon completion of the above
distributions, holders of Common Stock shall receive an amount equal to $0.50
per share and any remaining assets shall be distributed among the holders of
Series A, B, C, D, E, F and G Preferred Stock and Common Stock as prescribed in
the Articles of Incorporation.
PLACEMENT AGENT UNIT OPTIONS
In connection with the sale of Premium Preferred Units described above, the
Company issued the placement agent an option to purchase 228,266 units (the
"Placement Agent Units"). Each Placement Agent Unit initially consisted of one
share of Series F Preferred Stock and one Class A Common Stock Warrant. In
addition, the Company entered into a two-year Financial Advisory Agreement with
the Placement Agent pursuant to which the Company issued the Placement Agent
options to purchase 342,399 Placement Agent Units. The options to purchase
Placement Agent Units had an initial exercise price of $2.475 per option and
expire in 10 years. Upon the closing of the Company's initial public offering
and the conversion of the outstanding shares of Series F Preferred Stock, the
options to acquire Placement Agent Units will automatically be adjusted such
that the exercise price per option will decrease to $1.24 and the number of
shares of Series F Preferred Stock included in the Placement Agent Unit will
increase to two. As a result, if the Company's initial public offering is
consummated on the terms presently contemplated, a total of 733,755 shares of
Common Stock and 40,739 Class A Warrants will be issuable for an aggregate
option exercise price of approximately $708,000. The options to acquire
Placement Agent Units issued pursuant to the Financial Advisory Agreement have
been assigned a value of $1,300,000 which has been expensed and included in the
loss from operations for the year ended December 31, 1997, as the Company does
not believe it will receive future services commensurate with this amount. The
value of the Placement Agent Units was determined at the date of issuance using
the Black-Scholes method with valuation assumptions as follows: expected life of
10 years; risk free interest rate of 6%; an expected volatility factor of .5; a
dividend yield of 0%, and a fair value of the underlying units of $4.34. The
fair value of the underlying units was determined by reference to the price paid
by investors for the Premium Preferred Units, giving consideration to the fact
that each Placement Agent Unit consists of two shares of Series F Preferred
Stock and one Class A warrant. The Company has also accrued an additional
$96,000 of fees due to the placement agent.
F-18
<PAGE> 94
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
The Company had issued and outstanding warrants at December 31, 1997 as
follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES AS EXERCISE REMAINING
CONVERTED PRICE CONTRACTUAL
INTO PER SHARE OF LIFE
CLASS OF STOCK SHARES COMMON STOCK COMMON STOCK (IN YEARS)
-------------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Series B Preferred Stock warrants........... 23,334 3,793 $15.82 1.7
Series C Preferred Stock warrants........... 15,000 1,998 $11.26 3.4
Series E Preferred Stock warrants........... 113,332 17,646 $14.45 3.7
Class A Common Stock warrants............... 2,282,663 162,967 $ 7.00 5.5
Other Common Stock warrants................. 142,882 142,882 $17.13 1.6
-------
Total............................. 329,286 $11.92
=======
</TABLE>
At December 31, 1994, 1995 and 1996 there were outstanding warrants to
acquire 93,748, 108,348, and 108,348 shares of Common Stock (on an as-converted
to Common Stock basis), respectively, at weighted average exercise prices per
common share of $15.87, $14.64 and $14.64, respectively. No warrants were
exercised, canceled or forfeited in 1995, 1996 or 1997. All warrants were fully
exercisable upon issuance.
STOCK PLANS
In March 1993, adopted the 1993 Stock Plan (the "1993 Plan"). Under the
terms of the 1993 Plan, the board of directors may grant stock purchase rights
and stock options. Stock purchase rights may not be issued at less than 85% of
the fair value of the Common Stock at the date of grant and generally provide
the Company with a repurchase right in the event of termination of employment
which lapses over periods specified by the board of directors. Options granted
pursuant to the 1993 Plan may be either incentive stock options or nonstatutory
stock options, at the discretion of the board of directors. Incentive stock
options may be granted to employees with exercise prices of no less than the
fair market value and nonstatutory options may be granted to employees or
consultants at exercise prices of no less than 85% of the fair value of the
Common Stock on the grant date, as determined by the board of directors. If, at
the time the Company grants an option, the optionee directly or by attribution
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, the option price shall be at least 110% of the
fair market value and the option shall not be exercised more than five years
after the date of grant. Except as noted above, options expire no more than 10
years after the date of grant or earlier if employment is terminated. Options
become exercisable as determined by the board of directors, generally over a
period of four years. Through December 31, 1997 and March 31, 1998, a total of
295,239 shares have been reserved for issuance under the 1993 Plan.
F-19
<PAGE> 95
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes option activity under the 1990 Plan and the
1993 Plan:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
---------------- --------------
<S> <C> <C>
Balance at December 31, 1994.............................. 90,269 $ 3.22
Granted with exercise prices equal to fair value........ 69,820 $ 3.36
Exercised............................................... (1,147) $ 2.10
Canceled................................................ (1,454) $ 2.80
-------
Balance at December 31, 1995.............................. 157,488 $ 3.22
Granted with exercise prices equal to fair value........ 11,127 $ 3.22
Granted with exercise prices greater than fair value.... 2,142 $31.51
Exercised............................................... (20,823) $ 2.66
Canceled................................................ (20,868) $ 3.36
-------
Balance at December 31, 1996.............................. 129,066 $ 3.78
Granted with exercise prices equal to fair value........ 73,824 $ 3.15
Exercised............................................... (6,850) $ 3.75
Canceled................................................ (9,540) $ 3.16
-------
Balance at December 31, 1997.............................. 186,500 $ 3.57
Granted with exercise prices equal to fair value........ 1,428 $ 3.15
Exercised............................................... (3,742) $ 3.89
Canceled................................................ (1,753) $ 3.15
-------
Balance at March 31, 1998................................. 182,433 $ 3.57
=======
</TABLE>
Through December 31, 1997 and March 31, 1998, the board of directors
granted 56,007 Common Stock purchase rights under the 1993 Plan, all of which
have been exercised for cash and promissory notes. Of this amount, 5,146 shares
have been repurchased through December 31, 1997 and March 31, 1998 and 22,476
shares are subject to the Company's repurchase right at December 31, 1997
(20,317 shares at March 31, 1998) which generally lapses over four years. The
promissory notes bear interest at 5.29% to 6.73%. At December 31, 1997, 26,162
shares were available for future grant or sale (26,486 shares at March 31,
1998).
F-20
<PAGE> 96
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- ------------------------
WEIGHTED-
WEIGHTED- AVERAGE WEIGHTED-
AVERAGE REMAINING AVERAGE
EXERCISE EXERCISE CONTRACTUAL EXERCISE
PRICE NUMBER PRICE LIFE NUMBER PRICE
- ------------- -------------- --------- ----------- ------------ ---------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$2.10 - $2.80 24,870 $ 2.26 6.00 22,716 $ 2.21
$3.15 - $4.20 159,488 $ 3.41 8.30 70,058 $ 3.55
$31.51 2,142 $31.51 8.72 2,142 $31.51
------- -------
186,500 $ 3.57 8.00 94,916 $ 3.86
======= =======
</TABLE>
At December 31, 1996, 69,331 options were exercisable.
For certain options granted in 1997 with an exercise price of $3.15 per
share, the Company has recognized deferred compensation expense of approximately
$1,480,000 which will be amortized to expense over the vesting period of the
options. A total of $118,000 was amortized to compensation expense in 1997.
During 1996, the Company adopted SFAS 123. Using the minimum value method
to value options and stock purchase rights granted to employees in 1995, 1996
and 1997 resulted in a pro forma net loss of $4,175,000 and a pro forma net loss
per share of $1.98 for the year ended December 31, 1997. The effect on reported
historical net loss and net loss per share amounts in 1995 and 1996 was
immaterial and has not been presented. SFAS 123 is applicable only to options
granted subsequent to December 31, 1994 and therefore its pro forma effect will
not be fully realized until 1998. In future years, the applications of SFAS 123
may result in a pro forma net loss which is materially different from actual
reported results. The minimum value method was applied using the following
weighted average assumptions for 1995, 1996, and 1997, respectively; risk free
interest rates of 6.34%, 6.35% and 6.0%, an expected option life of 5 years and
no annual dividends. The weighted-average fair value of options and stock
purchase rights granted with exercise prices equal to the fair value of the
Company's stock on the date of grant during 1995, 1996 and 1997 was $0.85, $0.85
and $0.80, respectively.
In March 1998, the board of directors adopted, subject to stockholder
approval, the 1997 Equity Incentive Plan (the "Incentive Plan"). The Incentive
Plan provides for grants of incentive stock options to employees and
nonstatutory stock options, restricted stock purchase awards, stock bonuses and
stock appreciation rights to employees and consultants of the Company. The
Incentive Plan will supersede the 1993 Plan and 800,000 shares of Common Stock
will be reserved for issuance thereunder.
In March 1998, the board of directors adopted, subject to stockholder
approval, the 1997 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") and reserved 80,000 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 nonemployee directors of the Company.
In March 1998, the board of directors adopted, subject to stockholder
approval, the Employee Stock Purchase Plan (the "Purchase Plan") covering an
aggregate of 600,000 shares of Common Stock. The Purchase Plan permits eligible
employees to purchase Common Stock through payroll deductions at a price equal
to the lower of 85% of the fair market value at the beginning or end of the
applicable offering period.
F-21
<PAGE> 97
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
RESERVED SHARES
The Company has reserved shares of Common Stock for future issuance as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ----------
<S> <C> <C>
Stock option and purchase plans:
Outstanding options....................................... 186,500 182,433
Reserved for future grant or sale......................... 26,162 26,486
Convertible Preferred Stock:
Issued and outstanding.................................... 2,331,051 2,385,039
Upon exercise of Placement Agent Unit Option.............. 733,755 733,755
Upon exercise of other warrants........................... 23,437 23,437
Class A Warrants (including Class A Warrants underlying
Placement Agent Unit Options)............................. 203,706 203,706
Common Stock warrants....................................... 142,882 142,882
---------- ----------
3,647,493 3,697,738
========== ==========
</TABLE>
8. INCOME TAXES
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Net operating loss carryforward............................. $ 9,330,000 $ 10,430,000
Research and development credit carryforward................ 900,000 950,000
Capitalized research and development........................ 850,000 1,050,000
Acquired research and development........................... 1,500,000 1,400,000
Other....................................................... 236,000 486,000
------------ ------------
Gross deferred tax assets................................... 12,816,000 14,316,000
Valuation allowance......................................... (12,816,000) (14,316,000)
------------ ------------
Net deferred tax assets..................................... $ -- $ --
============ ============
</TABLE>
The valuation allowance increased by $3,300,000 and $1,436,000 for the
years ended December 31, 1995 and 1996, respectively.
As of December 31, 1997, the Company had federal net operating loss
carryforwards of approximately $28,400,000. The Company also had federal and
state research and development tax credit carryforwards of approximately
$575,000 and $375,000, respectively. The net operating loss and credit
carryforwards will expire at various dates beginning on 2004 through 2012, if
not utilized.
The Tax Reform Act of 1986 contains provisions that limit the utilization
of net operating loss and tax credit carryforwards if there has been a "change
of ownership." Such a "change of ownership" as described in Section 382 of the
Internal Revenue Code may limit the Company's utilization of its net operating
loss and tax credit carryforwards.
F-22
<PAGE> 98
RIBOGENE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(INFORMATION AT AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
9. INITIAL PUBLIC OFFERING AND RELATED MATTERS
In October 1997, the board of directors authorized the Company to proceed
with an initial public offering (the "Offering") of the Company's Common Stock.
If the offering is consummated under the terms presently anticipated (the
issuance of 2,700,000 shares at a price per share of $7.00), all of the
outstanding Preferred Stock at March 31, 1998 will automatically convert into
2,385,039 shares of Common Stock. Unaudited pro forma stockholders' equity, as
adjusted for the assumed conversion of all outstanding shares of convertible
Preferred Stock as of March 31, 1998, is set forth on the accompanying balance
sheet.
Prior to the effective date of the Offering, the Company expects to file an
Amended and Restated Certificate of Incorporation 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. Following the reverse stock split,
each share of Series A through E Preferred Stock will convert into 0.0714 of a
share of Common Stock. Each share of Series F Preferred Stock will convert into
0.6429 of a share of Common Stock (See Note 7). All common shares and per share
data and Preferred Stock conversion ratios in the accompanying financial
statements have been adjusted retroactively to give effect to the reverse stock
split. The Amended and Restated Certificate of Incorporation will also 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.
F-23
<PAGE> 99
DESCRIPTION OF GRAPHICS
Inside Front Cover:
Gene Expression Graphic
The graphic is a depiction of gene expression, which requires two main phases,
transcription and translation. Transcription is the process of converting
genetic information stored as DNA into a working copy known as messenger RNA
(mRNA). Information contained in the mRNA is translated into a functional
protein by a ribosome and a myriad of soluble translation factors by assembling
amino acids in a specific sequence.
Page 4:
Status of RiboGene Drug Discovery Programs
The graphic depicts the status of RiboGene's antibacterial, antifungal and
antiviral programs.
Page 31:
Figure 1 - The Natural Gene Expression Process
The graphic depicts the two primary stages of the natural gene expression
process known as transcription and translation.
Page 31:
Figure 2 - RiboGene's Drug Discovery Process
The graphic depicts the four stages of RiboGene's drug discovery process. The
four stages are target identification, assay development, lead discovery and
lead optimization.
Page 33:
Figure 3 - Status of RiboGene Drug Discovery Programs
The graphic depicts the status of RiboGene's antibacterial, antifungal and
antiviral programs.
<PAGE> 100
======================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON IS AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE COMMON STOCK
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN 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 SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
---------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
Use of Proceeds......................... 21
Dividend Policy......................... 22
Capitalization.......................... 23
Dilution................................ 24
Selected Financial Data................. 25
Management's Discussion And Analysis of
Financial Condition And Results of
Operations............................ 26
Business................................ 31
Management.............................. 52
Certain Transactions.................... 60
Principal Stockholders.................. 64
Description Of Capital Stock............ 66
Shares Eligible For Future Sale......... 70
Underwriting............................ 72
Legal Matters........................... 74
Experts................................. 74
Additional Information.................. 74
Index To Financial Statements........... F-1
UNTIL , 1998 (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
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
==============================================
</TABLE>
======================================================
2,700,000 SHARES
RIBOGENE LOGO
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
GRUNTAL & CO., L.L.C.
, 1998
======================================================
<PAGE> 101
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 registration fee, the NASD filing fee and the Nasdaq
National Market application fee:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 9,619
NASD filing fee............................................. 3,996
Nasdaq National Market application fee...................... 63,725
Blue Sky fees and expenses.................................. 30,000
Accounting fees............................................. 400,000
Legal fees and expenses..................................... 500,000
Transfer agent and registrar fees........................... 40,000
Printing and engraving...................................... 350,000
Miscellaneous............................................... 35,660
----------
Total............................................. $1,433,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's 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 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
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, 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 1994, the Registrant has sold and issued the following
unregistered securities:
1. In July through September 1995, the Registrant received $4,394,680 in
bridge financing from stockholders. In September 1995, $765,000 of these notes
were repaid. In November 1995, the remaining $3,629,680 of principal and $77,906
of accrued interest were converted into 1,647,814 shares of Series E Preferred
Stock (including 332,250 shares to KPCB V, 286,843 shares to CW, 264,180 shares
to each Domain and Sierra, 227,437 shares each to BIL and Oxford and 45,487
shares to Apertures Associates). In connection with this transaction, the
Registrant issued Warrants to acquire 13,312 shares of Common Stock.
2. In May and September 1995, the Registrant issued a warrant to purchase
an aggregate of 33,333 shares of Series E Preferred Stock to Silicon Valley Bank
in connection with bridge financings in the aggregate of $2,250,000.
3. In January and February 1996, the Registrant issued to certain of its
investors $1,893,000 principal amount of bridge notes. In May 1996, the
$1,893,000 of principal and $44,000 of accrued interest were converted into
860,844 shares of Series E Preferred Stock (including 197,415 shares to KPCB V,
179,675
II-1
<PAGE> 102
shares to CW, 157,613 shares to Domain, 120,541 shares to BIL, 109,169 shares to
Sierra and 96,431 shares to Oxford).
4. In April 1996, the Registrant sold and issued an aggregate of 1,555,556
shares of Series E Preferred Stock to Abbott Laboratories in connection with a
collaborative arrangement for an aggregate of $3,500,000.
5. In April 1996, the Registrant sold and issued an aggregate of 236,648
shares of Series E Preferred Stock (including 185,000 shares to Bio Equity Fund
L.P. and 51,648 shares to Dominion Fund II) for cash in the aggregate amount of
$532,458.
6. In May 1996, the Registrant issued a warrant to purchase an aggregate of
17,778 shares of Series E Preferred Stock to Dominion Ventures, Inc. in
connection with a leasing transaction.
7. In December 1996, the Registrant issued a warrant to purchase an
aggregate of 44,444 shares of Series E Preferred Stock to Venture Lending in
connection with a credit facility in the aggregate of $2,000,000.
8. In February and June 1997, the Registrant sold and issued Premium
Preferred Units consisting of an aggregate of 2,282,663 shares of Series F
Preferred Stock, warrants to purchase an aggregate of 2,282,663 shares of Common
Stock issued to a group of accredited investors (including 573,334 shares to the
Aries Trust, 315,555 shares to Aries Domestic Fund, L.P., 266,667 shares to J.F.
Shea Company, as nominee, 100,000 shares to Palmetto Partners Ltd., 88,889
shares to Oxford, 88,889 shares to KPCB V, 55,000 shares to Bios Equity Fund,
44,445 shares to CW, 44,444 shares to Aperture, 39,556 shares to Dominion and
665,884 shares to other accredited investors) for cash in connection with a
private placement for an aggregate amount of $5,136,000. In connection with this
offering, Paramount Capital Inc., as placement agent, received options
exercisable for an aggregate of 1,141,330 shares of Series F Preferred Stock and
options exercisable for warrants to purchase an aggregate of 143,746 shares of
Common Stock.
9. In November 1997, the Registrant issued to Transamerica Financial
Business Credit Corporation a warrant to purchase up to an aggregate of 6,667
shares of Series E Preferred Stock in connection with a leasing transaction (the
"Transamerica Warrant"). The Transamerica Warrant was issued in reliance on
Section 4(2) of the Securities Act of 1933.
10. In December 1997, the Registrant issued to Hyline Laboratories, Inc. a
warrant to purchase up to an aggregate of 49,120 shares of Common Stock in
connection with the extension of a promissory note due from the Company in
connection with the acquisition of intranasal products from Hyline Laboratories,
Inc.
11. In April 1998, the Registrant issued to Hayward Point I Limited
Partnership a warrant to purchase up to an aggregate of 250,000 shares of Common
Stock in connection with a leasing transaction (the "Hayward Point Warrant").
The Hayward Point Warrant was issued in reliance on Section 4(2) of the
Securities Act of 1933.
12. From January 1, 1993 until March 31, 1998, the Registrant has granted
incentive stock options nonstatutory stock options and purchase rights to
employees, directors and consultants of the Registrant under its 1993 Stock
Option Plan covering an aggregate of 320,192 shares of the Registrant's Common
Stock, at exercise prices ranging from $2.10 to $31.51 per share. Options to
purchase 46,328 shares of Common Stock have been canceled or have lapsed without
being exercised. The Registrant has issued 86,283 shares of its Common Stock to
employees, directors and consultants pursuant to the exercise of stock options
and purchase rights, net of repurchases. At March 31, 1997, 26,522 shares remain
available for grant.
13. In February 1998, the Registrant sold and issued an aggregate of
756,144 shares of Series G Preferred Stock to Dainippon in connection with a
collaborative arrangement for an aggregate of $2,000,000 (the "Series G
Preferred Stock"). The Series G Preferred Stock was issued in reliance on
Section 4(2) of the Securities Act of 1933 and Rule 505 of Regulation D of the
Securities Act of 1933.
The sale and issuance of securities in the transactions described in
paragraphs 1-9 above were deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) adopted thereunder. The purchasers in
each case represented their intention to acquire the securities for investment
only and not with a
II-2
<PAGE> 103
view to distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. All recipients either received
adequate information about the Registrant or had access, through employment or
other relationships, to such information.
The sale and issuance of securities in the transactions described in
paragraph 10 above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder, in that they were
issued either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation, as provided by Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- -----------------------
<C> <S>
**1.1 Form of Underwriting Agreement.
**3.1 Amended and Restated Articles of Incorporation of the
Registrant.
**3.2 Bylaws of the Registrant.
**3.3 Form of Certificate of Incorporation of the Registrant to be
effective upon reincorporation in Delaware.
**3.4 Form of Bylaws of the Registrant to be effective upon
reincorporation in Delaware.
**3.5 Form of Restated Certificate of Incorporation of the
Registrant, to be filed after completion of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, and 3.5.
**4.2 Specimen Stock Certificate.
**4.3 Tenth Amended and Restated Rights Agreement among the
Registrant and the investors named therein, dated January
27, 1998.
**4.4 Form of Class A Warrant Certificates for Purchase of Common
Stock, dated June 23, 1997.
**4.5 Unit Purchase Option Warrant for the Purchase of 342,399
Option Units, issued by the Registrant to Paramount Capital,
Inc., dated June 23, 1997.
**4.6 Unit Purchase Option Warrant for the Purchase of 228,266
Option Units, consisting of Shares of Preferred Stock and
Warrants, issued by the Registrant to Paramount Capital,
Inc., dated June 23, 1997.
**4.7 Warrant Agreement between the Registrant and Paramount
Capital Inc., dated June 23, 1997.
**4.8 Warrant for Common Stock, issued by the Registrant to
Paramount Capital Inc., dated March 12, 1997.
**4.9 Warrant for Series B Preferred Stock, issued by the
Registrant to Dominion Ventures, dated August 9, 1991.
**4.10 Warrant for Series C Preferred Stock, issued by the
Registrant to Dominion Ventures, dated June 18, 1993.
**4.11 Warrant for Series E Preferred Stock, issued by the
Registrant to Dominion Fund II, dated August 2, 1996.
**4.12 Warrant for Series E Preferred Stock, issued by the
Registrant to Silicon Valley Bank, dated September 25, 1995.
**4.13 Warrant for Series E Preferred Stock, issued by the
Registrant to Silicon Valley Bank, dated May 19, 1995.
</TABLE>
II-3
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- -----------------------
<C> <S>
**4.14 Warrant for Series E Preferred Stock, issued by the
Registrant to Venture Lending, dated December 23, 1996.
**4.15 Warrant for Common Stock, issued by the Registrant to SBC
Warburg, dated September 20, 1995.
**4.16 Warrant for Common Stock, issued by the Registrant to Judith
Donaldson, dated September 20, 1995.
**4.17 Warrant for Series E Preferred Stock, issued by the
Registrant to Dominion Ventures, dated June 13, 1994.
**4.18 Warrant for Common Stock, issued by the Registrant to Hyline
Laboratories, dated January 5, 1994.
**4.19 Warrant for Common Stock, issued by the Registrant to Rip
Grossman and Associates, Inc., dated January 5, 1994.
**4.20 Form of Warrant Agreement (including the Form of Warrant) to
be entered into among the Registrant and the Representative.
**4.21 Warrant for Common Stock, issued by Registrant to Hyline
Laboratories, Inc., dated December 31, 1997.
**4.22 Investor Rights Agreement among the Registrant and the
investors named therein, dated June 23, 1997.
**4.23 Amendment to Unit Purchase Option Warrant to purchase
342,399 Option Units, issued by the Registrant to Paramount
Capital, Inc., dated April 6, 1998.
**4.24 Amendment to Unit Purchase Option Warrant to purchase
228,266 Option Units, issued by the Registrant to Paramount
Capital, Inc., dated April 6, 1998
5.1 Opinion of Cooley Godward LLP.
+10.1 License Agreement between the Registrant and Abbott
Laboratories, dated April 26, 1996.
+10.2 Research Agreement between the Registrant and Abbott
Laboratories, dated April 26, 1996.
**10.3 Series E Preferred Stock Purchase Agreement between the
Registrant and Abbott, dated April 26, 1996.
+10.4 License Agreement between the Registrant and University of
Washington, dated April 4, 1997.
+10.5 Collaboration Agreement between the Registrant and Houghten
Pharmaceuticals, dated April 12, 1995, as amended on April
10, 1997.
**10.6 1993 Stock Plan.
**10.7 Stock Option Agreement pursuant to 1993 Stock Plan.
**10.8 Form of Restricted Stock Purchase Agreement pursuant to 1993
Stock Plan.
**10.9 Employment Agreement between the Registrant and Charles J.
Casamento, dated May 11, 1993.
**10.10 Change of Control Agreement between the Registrant and
Charles Casamento, dated July 20, 1995.
**10.11 Employment Letter Agreement between the Registrant and Laura
S. L. Gaeta, dated May 6, 1994.
**10.12 Change of Control Agreement between the Registrant and Laura
S. L. Gaeta, dated July 20, 1995.
</TABLE>
II-4
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- -----------------------
<C> <S>
**10.13 Employment Letter Agreement between the Registrant and
Timothy E. Morris, dated May 31, 1995.
**10.14 Change of Control Agreement between the Registrant and
Timothy E. Morris, dated June 30, 1995.
**10.15 Real Property Lease between the Registrant and Hayward Point
Eden I Limited Partnership, dated March 7, 1997.
**10.16 First Amendment to Real Property Lease between the
Registrant and Hayward Point Eden I Limited Partnership,
dated September 24, 1997.
**10.17 Real Property Lease between the Registrant and Hall
Properties, Inc., dated February 6, 1992.
**10.18 Placement Agency Agreement between the Registrant and
Paramount Capital, Inc., dated August 1, 1996.
**10.19 Subscription Agreement for the Purchase and Sale of Premium
Preferred Units, dated June 23, 1997.
**10.20 Asset Purchase Agreement by and among the Registrant, Hyline
Laboratories, and Michael Ashkin, dated January 5, 1994.
**10.21 Non-Competition Agreement between the Registrant and Michael
Ashkin, dated January 5, 1994.
**10.22 Consulting Agreement between the Registrant and Michael
Ashkin, dated January 5, 1994.
**10.23 Secured Promissory Notes issued to Hyline Laboratories,
dated January 5, 1994.
**10.24 Master Lease Agreement between the Registrant and Dominion
Ventures, dated August 9, 1991.
**10.25 Form of Scientific Advisor Agreement.
**10.26 Consulting Agreement between the Registrant and Michael
Mathews, dated April 13, 1993.
**10.27 Consulting Agreement between the Registrant and Joe B.
Harford, dated July 11, 1997.
**10.28 Consulting Agreement between the Registrant and Michael
Katze, dated February 6, 1997.
**10.29 Consulting Agreement between the Registrant and Nahum
Sonenberg, dated January 29, 1993.
**10.30 Approval of Outside Activity by Alan Hinnebusch, dated
October 15, 1992.
**10.31 Form of Indemnification Agreement between the Registrant and
the parties identified on Attachment A thereto.
**10.32 Financial Advisory Agreement between the Registrant and
Paramount Capital, Inc., dated June 23, 1997.
**10.33 Letter Agreement between the Registrant, Hyline
Laboratories, Inc. and Michael Ashkin dated December 31,
1997.
+10.34 License Agreement between the Registrant and Dainippon
Pharmaceutical Co., Ltd. dated January 27, 1998.
+10.35 Research Agreement between the Registrant and Dainippon
Pharmaceutical Co., Ltd. dated January 27, 1998.
**10.36 1998 Equity Incentive Plan
**10.37 1998 Non-Employee Directors Stock Option Plan
</TABLE>
II-5
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
-------- -----------------------
<C> <S>
**10.38 1998 Employee Stock Purchase Plan
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
23.3 Consent of Pennie & Edmonds LLP.
24.1 Power of Attorney. Reference is made to page II-6.
**27.1 Financial Data Schedule.
</TABLE>
- ---------------
** Previously filed.
+ Confidential treatment has been requested for portions of this exhibit.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide 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.
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 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 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.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus as filed as part of the registration statement in
reliance upon Rule 430A and contained in the 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 the registration statement as of the time it was
declared effective, and (2) for the purpose 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 this offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, RiboGene, Inc.
has duly caused this Amendment No. 7 to the Registration Statement to be signed
on its behalf, by the undersigned, thereunto duly authorized, in the City of
Hayward, County of Alameda, State of California, as of May 20, 1998.
RIBOGENE, INC.
By: /s/ CHARLES J. CASAMENTO
------------------------------------
Charles J. Casamento
President, Chief Executive Officer
and Chairman
Pursuant to the requirements of the Securities Act of 1933, the Amendment
No. 7 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ CHARLES J. CASAMENTO President, Chief Executive May 20, 1998
- ----------------------------------------------------- Officer and Chairman
Charles J. Casamento (Principal Executive
Officer)
/s/ TIMOTHY E. MORRIS Vice President, Finance & May 20, 1998
- ----------------------------------------------------- Administration and Chief
Timothy E. Morris Financial Officer
(Principal Financial and
Accounting Officer)
/s/ DIGBY W. BARRIOS* Director May 20, 1998
- -----------------------------------------------------
Digby W. Barrios
/s/ FRANK J. SASINOWSKI* Director May 20, 1998
- -----------------------------------------------------
Frank J. Sasinowski
/s/ JON S. SAXE* Director May 20, 1998
- -----------------------------------------------------
Jon S. Saxe
*By: /s/ TIMOTHY E. MORRIS
------------------------------------------------
Timothy E. Morris, Attorney-in-Fact
</TABLE>
II-7
<PAGE> 108
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- -----------------------
<C> <S>
**1.1 Form of Underwriting Agreement.
**3.1 Amended and Restated Articles of Incorporation of the
Registrant.
**3.2 Bylaws of the Registrant.
**3.3 Form of Certificate of Incorporation of the Registrant to be
effective upon reincorporation in Delaware.
**3.4 Form of Bylaws of the Registrant to be effective upon
reincorporation in Delaware.
**3.5 Form of Restated Certificate of Incorporation of the
Registrant, to be filed after completion of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, and 3.5.
**4.2 Specimen Stock Certificate.
**4.3 Tenth Amended and Restated Rights Agreement among the
Registrant and the investors named therein, dated January
27, 1998.
**4.4 Form of Class A Warrant Certificates for Purchase of Common
Stock, dated June 23, 1997.
**4.5 Unit Purchase Option Warrant for the Purchase of 342,399
Option Units, issued by the Registrant to Paramount Capital,
Inc., dated June 23, 1997.
**4.6 Unit Purchase Option Warrant for the Purchase of 228,266
Option Units, consisting of Shares of Preferred Stock and
Warrants, issued by the Registrant to Paramount Capital,
Inc., dated June 23, 1997.
**4.7 Warrant Agreement between the Registrant and Paramount
Capital Inc., dated June 23, 1997.
**4.8 Warrant for Common Stock, issued by the Registrant to
Paramount Capital Inc., dated March 12, 1997.
**4.9 Warrant for Series B Preferred Stock, issued by the
Registrant to Dominion Ventures, dated August 9, 1991.
**4.10 Warrant for Series C Preferred Stock, issued by the
Registrant to Dominion Ventures, dated June 18, 1993.
**4.11 Warrant for Series E Preferred Stock, issued by the
Registrant to Dominion Fund II, dated August 2, 1996.
**4.12 Warrant for Series E Preferred Stock, issued by the
Registrant to Silicon Valley Bank, dated September 25, 1995.
**4.13 Warrant for Series E Preferred Stock, issued by the
Registrant to Silicon Valley Bank, dated May 19, 1995.
**4.14 Warrant for Series E Preferred Stock, issued by the
Registrant to Venture Lending, dated December 23, 1996.
**4.15 Warrant for Common Stock, issued by the Registrant to SBC
Warburg, dated September 20, 1995.
**4.16 Warrant for Common Stock, issued by the Registrant to Judith
Donaldson, dated September 20, 1995.
**4.17 Warrant for Series E Preferred Stock, issued by the
Registrant to Dominion Ventures, dated June 13, 1994.
**4.18 Warrant for Common Stock, issued by the Registrant to Hyline
Laboratories, dated January 5, 1994.
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- -----------------------
<C> <S>
**4.19 Warrant for Common Stock, issued by the Registrant to Rip
Grossman and Associates, Inc., dated January 5, 1994.
**4.20 Form of Warrant Agreement (including the Form of Warrant) to
be entered into among the Registrant and the Representative.
**4.21 Warrant for Common Stock issued by the Registrant to Hyline
Laboratories, Inc., dated December 31, 1997.
**4.22 Investor Rights Agreement among the Registrant and the
investors named therein, dated June 23, 1997.
**4.23 Amendment to Unit Purchase Option Warrant to purchase
342,399 Option Units, issued by the Registrant to Paramount
Capital, Inc., dated April 6, 1998.
**4.24 Amendment to Unit Purchase Option Warrant to purchase
228,266 Option Units, issued by the Registrant to Paramount
Capital, Inc., dated April 6, 1998
5.1 Opinion of Cooley Godward LLP.
+10.1 License Agreement between the Registrant and Abbott
Laboratories, dated April 26, 1996.
+10.2 Research Agreement between the Registrant and Abbott
Laboratories, dated April 26, 1996.
**10.3 Series E Preferred Stock Purchase Agreement between the
Registrant and Abbott, dated April 26, 1996.
+10.4 License Agreement between the Registrant and University of
Washington, dated April 4, 1997.
+10.5 Collaboration Agreement between the Registrant and Houghten
Pharmaceuticals, dated April 12, 1995, as amended on April
10, 1997.
**10.6 1993 Stock Plan.
**10.7 Stock Option Agreement pursuant to 1993 Stock Plan.
**10.8 Form of Restricted Stock Purchase Agreement pursuant to 1993
Stock Plan.
**10.9 Employment Agreement between the Registrant and Charles J.
Casamento, dated May 11, 1993.
**10.10 Change of Control Agreement between the Registrant and
Charles J. Casamento, dated July 20, 1995.
**10.11 Employment Letter Agreement between the Registrant and Laura
S. L. Gaeta, dated May 6, 1994.
**10.12 Change of Control Agreement between the Registrant and Laura
S. L. Gaeta, dated July 20, 1995.
**10.13 Employment Letter Agreement between the Registrant and
Timothy E. Morris, dated May 31, 1995.
**10.14 Change of Control Agreement between the Registrant and
Timothy E. Morris, dated June 30, 1995.
**10.15 Real Property Lease between the Registrant and Hayward Point
Eden I Limited Partnership, dated March 7, 1997.
**10.16 First Amendment to Real Property Lease between the
Registrant and Hayward Point Eden I Limited Partnership,
dated September 24, 1997.
**10.17 Real Property Lease between the Registrant and Hall
Properties, Inc., dated February 6, 1992.
**10.18 Placement Agency Agreement between the Registrant and
Paramount Capital, Inc., dated August 1, 1996.
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- -----------------------
<C> <S>
**10.19 Subscription Agreement for the Purchase and Sale of Premium
Preferred Units, dated June 23, 1997.
**10.20 Asset Purchase Agreement by and among the Registrant, Hyline
Laboratories, and Michael Ashkin, dated January 5, 1994.
**10.21 Non-Competition Agreement between the Registrant and Michael
Ashkin, dated January 5, 1994.
**10.22 Consulting Agreement between the Registrant and Michael
Ashkin, dated January 5, 1994.
**10.23 Secured Promissory Notes issued to Hyline Laboratories,
dated January 5, 1994.
**10.24 Master Lease Agreement between the Registrant and Dominion
Ventures, dated August 9, 1991.
**10.25 Form of Scientific Advisor Agreement.
**10.26 Consulting Agreement between the Registrant and Michael
Mathews, dated April 13, 1993.
**10.27 Consulting Agreement between the Registrant and Joe B.
Harford, dated July 11, 1997.
**10.28 Consulting Agreement between the Registrant and Michael
Katze, dated February 6, 1997.
**10.29 Consulting Agreement between the Registrant and Nahum
Sonenberg, dated January 29, 1993.
**10.30 Approval of Outside Activity by Alan Hinnebusch, dated
October 15, 1992.
**10.31 Form of Indemnification Agreement between the Registrant and
the parties identified on Attachment A thereto.
**10.32 Financial Advisory Agreement between the Registrant and
Paramount Capital, Inc., dated June 23, 1997.
**10.33 Letter Agreement between the Registrant, Hyline
Laboratories, Inc. and Michael Ashkin dated December 31,
1997.
+10.34 License Agreement between the Registrant and Dainippon
Pharmaceutical Co., Ltd. dated January 27, 1998.
+10.35 Research Agreement between the Registrant and Dainippon
Pharmaceutical Co., Ltd. dated January 27, 1998.
**10.36 1998 Equity Incentive Plan
**10.37 1998 Non-Employee Directors Stock Option Plan
**10.38 1998 Employee Stock Purchase Plan
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
23.3 Consent of Pennie & Edmonds LLP.
24.1 Power of Attorney. Reference is made to page II-6.
**27.1 Financial Data Schedule.
</TABLE>
- ---------------
** Previously filed.
+ Confidential treatment has been requested for portions of this exhibit.
<PAGE> 1
Exhibit 5.1
Cooley Godward LLP Letterhead
May 20, 1998
RiboGene, Inc.
ROBERT J. BRIGHAM
650/843-5053
[email protected]
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by RiboGene, Inc. (the "Company") of a Registration Statement
on Form S-1 on October 27, 1997, as amended (the "Registration Statement") with
the Securities and Exchange Commission covering the underwritten public
offering of up to 3,105,000 shares of the Company's Common Stock (the "Shares").
In connection with this opinion, we have (i) reviewed the Registration
Statement and related Prospectus, the Company's Certificate of Incorporation
and Bylaws, and the originals or copies certified to our satisfaction, of such
records, documents, certificates, memoranda and other instruments as in our
judgment are necessary or appropriate to enable us to render the opinion
expressed below, and (ii) assumed that the shares of Common Stock will be sold
to the Underwriters at a price established by the Pricing Committee of the
Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ ROBERT J. BRIGHAM
-------------------------
Robert J. Brigham
<PAGE> 1
Exhibit 10.1
*TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 240.24b-2.
ABBOTT-RIBOGENE LICENSE AGREEMENT
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. DEFINITIONS................. .......................................... 5
1.1 Abbott Compound........................................................ 5
1.2 Abbott Patent Rights................................................... 6
1.3 Affiliate.............................................................. 7
1.4 Calendar Year and Calendar Quarter or Quarter.......................... 7
1.5 Confidential Information............................................... 7
1.6 Field.................................................................. 8
1.7 IND.................................................................... 8
1.8 Joint Management Team or JMT........................................... 8
1.9 Know-how............................................................... 8
1.10 NDA.................................................................... 9
1.11 Net Sales of Single Active Product(s).................................. 9
1.12 Not Sales of Combination Product(s).................................... 10
1.13 Net Sales of Delivery System Product(s)................................ 11
1.14 Not Sales of Pharmaceutical Products................................... 12
1.15 Net Sales of Plant Protection Products................................. 12
1.16 Net Sales of Diagnostic Products....................................... 12
1.17 Not Sales.............................................................. 12
1.18 Phase III Studies...................................................... 13
1.19 Product................................................................ 13
1.20 Program Inventions and Joint Program Inventions........................ 13
1.21 Research Agreement..................................................... 14
1.22 Research Program....................................................... 14
1.23 Research Term.......................................................... 14
1.24 RiboGene Compound...................................................... 14
1.25 RiboGene Intellectual Property........................................ 15
1.26 RiboGene Lead......................................................... 15
1.27 RiboGene Patent Rights................................................ 15
1.28 Sale or Sold and First Commercial Sale................................. 16
1.29 Valid Claim............................................................ 16
II. LICENSE GRANTS ........................................................ 17
2.1 Research and Development Purposes...................................... 17
2.2 Program Inventions..................................................... 17
2.3 Compounds ............................................................. 17
III. MILESTONE AND ROYALTY PAYMENTS......................................... 18
3.1 Milestone Payments..................................................... 18
3.2 Royalty Payments....................................................... 19
3.3 Uses Within Abbott Abbott Affiliates, and/or Abbott Sublicensees ...... 22
IV. RECORDS AND ROYALTY PAYMENTS ............................................... 22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.1 Records................................................................ 22
4.2 Exchange Calculation................................................... 23
4.3 How Paid............................................................... 23
4.4 Royalty Statement...................................................... 23
4.5 Withheld Taxes......................................................... 24
V. PATENT RESPONSIBILITIES................................................ 24
5.1 RiboGene Patent Prosecution and Maintenance............................ 24
5.2 Program Invention Patent Prosecution and Maintenance................... 24
5.3 Infringement Defense................................................... 25
5.4 Patent Infringement by Third Parties................................... 25
5.5 Patent Marking......................................................... 26
5.6 Extensions............................................................. 26
VI. PRODUCT DEVELOPMENT AND PROMOTION ..................................... 26
6.1 Development and Approvals ............................................. 26
6.2 Trademarks ............................................................ 26
6.3 Notification of First Commercial Sale ................................. 27
VII. CONFIDENTIALITY ....................................................... 27
7.1 Confidentiality and Nonuse............................................. 27
7.2 Required Disclosure.................................................... 27
7.3 Return of Confidential Information..................................... 28
7.4 Nondisclosure of Third Party Confidential Information.................. 28
7.5 Publicity.............................................................. 28
7.6 Permitted Disclosure................................................... 28
VIII. WARRANTIES AND LIMITATIONS ON RIGHTS................................... 29
8.1 RiboGene Warranties.................................................... 29
8.2 Limitation on Warranties............................................... 29
8.3 Disclaimer............................................................. 29
8.4 Limitations on Rights.................................................. 30
IX. LIABILITIES AND INDEMNITY ............................................. 30
9.1 Liabilities............................................................ 30
9.2 Indemnification........................................................ 31
9.3 Abbott Indemnification................................................. 31
X. TERM AND TERMINATION .................................................. 32
10.1 Term................................................................... 32
10.2 Possible Extension..................................................... 32
10.3 Termination Without Breach............................................. 32
</TABLE>
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<TABLE>
<S> <C>
10.4 Effect of Breach ...................................................... 32
10.5 Effect of Bankruptcy or Agreement Revision ............................ 33
10.6 Consequences of Termination ........................................... 33
XI. MISCELLANEOUS ......................................................... 33
11.1 Notices ............................................................... 33
11.2 Independence of Parties................................................ 34
11.3 Impact on Other Relationships.......................................... 34
11.4 No Third-Party Beneficiaries........................................... 34
11.5 No Waiver.............................................................. 34
11.6 Merger Clause.......................................................... 34
11.7 Alternative Dispute Resolution......................................... 35
11.8 Headings............................................................... 40
11.9 Governmental Compliance and Effect of Invalidity....................... 40
11.10 Assignability.......................................................... 40
11.11 Succession............................................................. 40
11.12 Government Compliance.................................................. 40
11.13 Governing Law.......................................................... 40
</TABLE>
<PAGE> 5
LICENSE AGREEMENT
This License Agreement ("Agreement") is entered into effective as of
April 26, 1996 (the "Effective Date") by and between RiboGene, Inc., a
California corporation with a principal place of business at 21375 Cabot
Boulevard, Hayward, California. 94545 ("RiboGene") and Abbott Laboratories, an
Illinois corporation with a principal place of business at 100 Abbott Park Road,
Abbott Park, Illinois 60064-3500 ("Abbott").
WHEREAS, RiboGene has a number of compounds already identified as
possessing fungicidal and/or fungistatic activity, and is experienced in
screening compounds and materials acting through a eukaryotic translation
mechanism, and Abbott is experienced in the discovery and development of
pharmaceutical products, including those with antifungal properties, and in
obtaining regulatory approval for and in commercializing such pharmaceutical
products; and
WHEREAS, the parties have entered into a Research Agreement (as defined
hereinbelow) under which they will collaborate in a Research Program (as defined
hereinbelow) directed to accelerating the discovery of new pharmaceutical and/or
plant protection products possessing antifungal activity and/or new diagnostic
products related to conditions caused by fungal infections and/or diseases, and
they desire that Abbott have a license, under the terms herein, for evaluation
and possible development and commercialization of Abbott Compounds (as defined
hereinbelow) and/or RiboGene Leads (as defined hereinbelow) for pharmaceutical,
diagnostic and/or plant protection uses relating to mycotic (fungal) infections
and/or diseases.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, Abbott and RiboGene agree as follows:
I. DEFINITIONS
1.1 "Abbott Compound" shall mean any synthetic chemical compound or
biological material, which compound or material:
A. is represented in compound libraries/collections owned or controlled
by Abbott and/or Abbott Affiliate (where 'Affiliate" is defined
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hereinbelow) as of the Effective Date, whether or not the same compound or
material is represented in compound libraries/collections owned or controlled by
RiboGene and/or RiboGene Affiliate as of the Effective Date; or
B. is acquired by or prepared by Abbott independently of the Research
Program; or
C. is acquired or prepared by Abbott under the Research Program,
including any analog of any RiboGene Compound (as defined hereinbelow) prepared
by Abbott, but excluding any RiboGene Compound prepared by Abbott; or
D. is discovered or identified by or for Abbott based on criteria
developed under the Research Program;
which, in each case:
(a) has demonstrated antifungal activity during the Research Program
using RiboGene's translation inhibition screening assays, or using other
translation or non-translation inhibition screening assay(s) developed under the
Research Program, as the principal enabling screen; and
(b) demonstrates a [*] or higher IC(50) value in a mammalian in vitro
translation assay than that demonstrated in a fungal in vitro translation assay,
each assay existing at RiboGene as of the Effective Date, or demonstrates
similar selectivity advantage in another in vitro assay, developed by one party
or both parties during the Research Term (as defined hereinbelow) or agreed upon
by the JMT, over a measure from a corresponding mammalian assay; and
(c) demonstrates an MIC less than or equal to [*] agreed upon by the
JMT; or
E. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above-included compounds or materials.
Abbott Compound does not include a compound or material provided to Abbott by
RiboGene under the Material Transfer Agreement between RiboGene and Abbott
effective June 7, 1995.
1.2 "Abbott Patent Rights" shall mean all patent applications filed in
any country of the world, including all divisions, continuations and
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continuations-in-part thereof, and all patents issuing therefrom, which are
owned, controlled or licensed to Abbott during the term of this Agreement,
including all additions, registrations, confirmations, renewals, extensions,
supplemental protection certificates, reexaminations and reissues thereof, that
claim one or more Abbott Compounds.
1.3 "Affiliate" shall mean, with respect to either party, any legally-
distinct corporation, firm, individual, or other form of business organization,
which directly or indirectly owns, controls, is controlled by, or is under
common control with, a party hereto. An entity shall be regarded as being in
control of another entity if the former entity has the direct or indirect power
to order or cause the direction of the policies of the other entity, whether
through ownership of fifty percent (50%) or more in the United States or thirty
percent (30%) or more outside the United States of the outstanding voting
securities of that entity, through other dominant equity ownership, or by
contract, statute, regulation, or otherwise.
1.4 "Calendar Year" shall mean any consecutive twelve (12)= month
period commencing on any January 1 and ending on the immediately-following
December 31, during the term of this Agreement. "Calendar Quarter" or "Quarter"
shall mean a three (3)-month period commencing on January 1, April 1, July I or
October 1, during the term of this Agreement.
1.5 "Confidential Information" shall mean all valuable, confidential
technical and/or commercial information, know-how or trade secrets, including
but not necessarily limited to development and/or commercialization plans and
strategies, marketing and sales information, patent applications not yet
published, and other information, data or plans relating to a party, which
information is provided by the party originally possessing the information
("Disclosing Party") to the other party ("Receiving Party"), which technical or
business information:
(a) is in writing or in other physical form, marked "Confidential"; or
(b) is disclosed originally by the Disclosing Party orally, visually
and/or in another intangible form, and identified as confidential,
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<PAGE> 8
then subsequently summarized and reduced to a writing or to another physical
form, marked "Confidential" and provided to the Receiving Party within one (1)
month from the original date of disclosure;
but shall not include information' which:
(c) is in or comes into the public domain without breach of this
Agreement; or
(d) can be shown to have been known to or is subsequently independently
developed by or for the Receiving Party, without benefit of the Disclosing
Party's Confidential Information; or
(e) is properly provided, without restriction, to the Receiving Party by
an independent third party; or
(f) is disclosed by the original Disclosing Party on a nonconfidential
basis to any independent third party.
1.6 "Field" shall mean the treatment, mitigation, cure, prevention,
detection, and/or monitoring of fungal (mycotic) infections or diseases, not
including those caused by Pneumocystis carinii, in humans, animals and/or plant
protection.
1.7 "IND" (Investigational New Drug Application) means an application
for an "Investigational Exemption for a New Drug' filed with the United States
Food and Drug Administration or any successor' drug-regulatory entity thereto
("FDA") or the corresponding application filed with the equivalent
pharmaceutical regulatory agency in France, Germany, Great Britain, Italy or
Japan.
1.8 "JOINT MANAGEMENT TEAM" or "JMT" shall mean a committee consisting
of three (3) official representatives appointed by each party hereto that shall
be the primary vehicle for oversight, coordination and modification of the
Annual Research Plans and recommendation(s) of resource reallocations in order
to better meet the objectives of the Research Program.
1.9 "Know-how" shall mean any and all nonpatented technical data,
drawings, documentation, and other information, in each case relating in some
way to the Field, which is owned by RiboGene as of the Effective Date or is
independently generated, acquired or licensed, with the right to sublicense, by
RiboGene during the term of this Agreement and
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which is not included in published patent applications and/or issued patents
within RiboGene Patent Rights (as defined hereinbelow). Know-how may relate to
protein translation (i.e., protein synthesis and mRNA translation), fungal
genetics, RNA stability, the identification and use of pathogen-specific
targets, high throughput screening assays, characteristics of desirable
translation inhibitors, or the development, formulation or marketing thereof,
and may include, without limitation:
(a) research techniques and equipment and modifications thereto,
protocols, processes, and results;
(b) chemical, toxicological, pharmacological, and preformulation
properties of compounds or materials independently owned by or licensed to
RiboGene prior to the Research Program and other translation inhibitors; and
(c) preclinical data and other information relating to the safety or
efficacy of compounds or materials Independently owned by or licensed to
RiboGene prior to the Research Program.
Know-how shall include nonpatented Program Information exclusively assignable to
RiboGene according to the provisions of Section 5.4, Section 6.3 and/or Section
6.4 of the Research Agreement, except for Program Inventions for which Abbott
does not have a nonexclusive license, according to the provisions of Section 6.4
of the Research Agreement. Know-how shall not include Program Information
assignable to or nonexclusively licensed by Abbott according to the provisions
of Section 5.4, Section 6.3 and/or Section 6.4 of the Research Agreement.
1.10 "NDA" (New Drug Application) means an application submitted to the
FDA or the equivalent pharmaceutical regulatory agency in the European Union
(or, if submitted individually until 1998, France, Germany, Great Britain or
Italy) 'or Japan, which contains complete details of the manufacture and testing
of a new drug, for purposes of obtaining regulatory approval to market such new
drug in such country or region, for a particular indication.
1.11 "Net Sales of Single Active Product(s)", by country, for each
particular Single Active Product (as defined immediately below), shall mean the
total or gross invoiced Sales (as defined hereinbelow) in a country, for the
applicable period, of Product(s) (as defined hereinbelow),
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for which one or more Abbott Compounds and/or RiboGene Leads are the sole
therapeutic or prophylactic active ingredient(s) ("Single Active product(s)"),
by Abbott, Abbott Affiliate, or Abbott sublicensee to non-Affiliate
distributor(s) or other third parties, less, where factually applicable,
"Deductions", according to Abbott's standard accounting practices, for:
(i) direct and indirect credits, allowances according to Abbott standard
practices, adjustments and refunds, including price adjustments, rejections and
returns of defective, damaged, outdated or recalled Products;
(ii) offered and taken trade and cash discounts, rebates, commissions,
charge-backs granted to drug wholesalers, management fees paid to group
purchasing organizations, price reductions, retroactive or otherwise, imposed by
governments or government agencies, and distribution fees in amounts customary
to the trade and as required to do business in that country;
(iii) importation, handling, special outbound packing or transportation
and insurance charges separately billed to the customer or prepaid and directly
chargeable to the Sale of Products; and
(iv) sales, excise, use, turnover, inventory, value-added and similar
taxes and/or duties specifically incurred with or imposed upon Sales of
Products, but not including net income tax.
1.12 "Net Sales of Combination Product(s)", by country, for each
particular Combination Product (as defined immediately below), shall mean, for
the applicable period, the lesser of (a) the gross invoiced Sales of the
particular Combination Product containing one or more other therapeutic or
prophylactic active ingredient(s) in addition to one or more Abbott Compounds
and/or RiboGene Leads ("Combination Product") by Abbott, Abbott Affiliate, or
Abbott sublicensee to non-Affiliate distributor(s) or other third parties, in
such country, less any applicable Deductions (as listed above in Section 1.11),
and (b) an amount determined by multiplying the number of grams of Abbott
Compound(s) and/or RiboGene Lead(s) sold in the form of Combination Product to
non-Affiliate distributor(s) or other third parties, in that country, for the
applicable period, by the average price per gram, in such country, of the
corresponding Single Active Product Sold to non-Affiliate distributor(s) or
other third parties in that country, which average price per gram shall
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be computed by dividing the Net Sales of such Single Active Product to
non-Affiliate distributor(s) or other third parties in that country, less any
applicable Deductions, for the applicable period, by the number of grams of
Abbott Compound(s) and/or RiboGene Lead(s) contained in such Net Sales.
If there were no Sales of the corresponding Single Active Product during the
applicable period in that country, then Net Sales of the particular Combination
Product by calculation (b) above shall be determined using the average price per
gram, in all countries in which a Valid Claim exists and the Single Active
Product is Sold, of such Single Active Product. If there were no Sales of the
corresponding Single Active Product during the applicable period in any country
in which a Valid Claim exists, then Net Sales of the particular Combination
Product, in that country, by calculation (b) above shall be determined by
multiplying the gross invoiced Sales of Combination Product, less any applicable
Deductions, by the standard production cost of Abbott Compound(s) and/or
RiboGene Lead(s) in the Combination Product (averaged, if necessary, to reflect
the proportionate standard production costs of the pro-rata share of each Abbott
Compound and/or RiboGene Lead contained in the Product) divided by the sum of
the standard production costs of all active ingredients in the Combination
Product.
1.13 "Net Sales of Delivery System Product(s)", by country, for each
particular Delivery System Product (as defined immediately below) shall mean,
for the applicable period, the number of units of either Single Active Product
or Combination Product, as applicable, sold in a drug delivery system comprising
the particular Single Active Product or Combination Product along with a device,
equipment, instrumentation or other components (not solely container(s) or
packaging) designed to accomplish or assist in the administration of such Single
Active Product or Combination Product, e.g., the Abbott ADD-Vantage(R) System
("Delivery System Product"), multiplied by the average price per unit of
Single Active Product or Combination Product, as applicable, when sold
separately to non-Affiliate distributor(s) or other third parties in that
country, less applicable Deductions (as listed above in Section 1.11), for the
applicable period.
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If there were no Sales of a Single Active Product or a Combination Product that
is incorporated within the particular Delivery System Product, as applicable,
during the particular period, in that country, then Net Sales of the specific
Delivery System Product shall mean the total or gross invoiced Sales in the
country, for the applicable period, of Delivery System Product to non-Affiliate
distributor(s) or other third parties, less, where factually applicable,
Deductions (as listed above in Section 1.11) and less an amount which represents
the proportionate economic value added by the delivery system, based on such
factors and in an amount determined by mutual agreement, using, if applicable,
existing precedents for the same or comparable delivery system(s).
1.14 "Net Sales of Pharmaceutical Products", shall mean the sum of the
aggregate Net Sale's of Single Active Product(s), the aggregate Net Sales of all
Combination Product(s) and the aggregate Net Sales of all Delivery System
Product(s), in each case for human pharmaceutical purposes, for the particular
period.
1.15 "Net Sales of Plant Protection Products", by country, shall mean
the Net Sales of Single Active Product(s), the Not Sales of all Combination
Product(s) and the Net Sales of all Delivery System Product(s), in each case for
plant protection purposes in that country, for the particular period.
1.16 "Net Sales of Diagnostic Products", by country, shall mean, for a
particular period, the total or gross invoiced Sales in that country, for that
period, of Product(s) for which the gross invoiced price includes an amount to
compensate Abbott, an Abbott Affiliate and/or Abbott sublicensee for the
amortized cost of an Instrument system, including services, and/or other
equipment supplied without additional charge to a customer, less any applicable
Deductions (as listed in Section 1.11), less the amount of the Sales reasonably
and demonstrably attributable solely to the instrument system, Including
services, and/or other equipment supplied to the customer, in accordance with
standard accounting practices of Abbott, consistently applied.
1.17 "Net Sale" when used without further modification, shall mean the
aggregate of Net Sales of Single Active Product(s), Net Sales of
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Combination Product(s), Net Sales of Delivery System Product(s), Net Sales of
Plant Protection Products and Net Sales of Diagnostic Products.
1.18 "Phase III Studies" shall mean a series of controlled pivotal
clinical trials, after completion of preliminary efficacy and dose-ranging
studies and after adequate safety data has been established for a Product, that
are necessary to obtain sufficient confirmatory efficacy and safety data for the
preparation and submission of an NDA for such Product for the human therapeutic
indication being investigated by the trials, and which are planned to involve a
sufficient number of patients who suffer from the condition for which the NDA is
to be submitted for submission of such NDA.
1.19 "Product" shall mean (a) any pharmaceutical formulation(s)
containing one or more Abbott Compounds and/or RiboGene Leads which is/are
intended and promoted for human or animal use; or (b) a diagnostic product
comprising one or more Abbott Compounds and/or RiboGene Leads that is intended
and promoted for the detection and/or monitoring of mycotic infections or
diseases in humans, animals or plant protection; or (c) a plant protection
formulation comprising one or more Abbott Compounds and/or RiboGene Leads that
is intended and promoted for the treatment, cure or prevention of mycotic
diseases or infections in plants.
1.20 "Program Inventions" shall mean all inventions, innovations,
improvements, ideas, discoveries, technology, know-how, methods, applications
and products (whether or not patentable) arising under the Research Program,
which are conceived, derived, reduced to practice, made or developed during the
term of and the four (4) months following conclusion of the Research Program by
one or more individuals who are employees of one of the parties at the time of
the inventive contribution of such individual(s). "Joint Program Inventions"
shall mean all inventions, innovations, improvements, ideas, discoveries,
technology, know-how, methods, applications and products (whether or not
patentable) arising under the Research Program, which are conceived, derived,
reduced to practice, made or developed during the term of and the four (4)
months following the conclusion of the Program by at least two individuals, at
least one individual of which is an employee, at the time of the inventive
contribution of such individual, of one of the parties hereto, and at least
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one individual of which is an employee, at the time of the inventive
contribution of such individual, of the other party hereto.
1.21 "Research Agreement" means the Research Agreement between RiboGene
and Abbott of even date which relates to the Research Program.
1.22 "Research Program" shall mean collaborative research activities
between Abbott and RiboGene, based on RiboGene intellectual Property, as revised
and/or extended by Program Inventions and/or Joint Program Inventions, that are
directed to the discovery and development of novel broad spectrum antifungal
compounds of clinical and commercial value in the Field. The Research Program
does not include either activities within Abbott's cell wall inhibition
antifungal program or any other non-translation inhibition-based antifungal
program within Abbott or activities within RiboGene's research targeted
specifically to Pneumocystis carinii infections or diseases.
1.23 "Research Term" shall mean the period beginning on the Effective
Date of the Research Agreement and expiring on the third (3rd) anniversary of
such date, unless otherwise terminated according to the provisions of Article IX
of the Research Agreement or extended by mutual written consent of the parties.
1.24 "RiboGene Compound" shall mean any synthetic chemical compound or
biological material that has demonstrated antifungal activity according to
RiboGene's translation inhibition screening assays, which
A. is either owned by or licensed, with permission to sublicense, to
Ribogene as of the Effective Date, including but not limited to a compound or
material provided to Abbott by RiboGene under the provisions of the Material
Transfer Agreement between RiboGene and Abbott effective June 7, 1995; or
B. is in-licensed by, with the right to sublicense, or acquired by
RiboGene during the Research Term and which does not correspond to an Abbott
Compound within Abbott's or an Abbott Affiliate's libraries/collections prior to
the date of acquisition by RiboGene; or
C. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above included compounds or
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materials.
A RiboGene Compound does not include a compound or material defined as an Abbott
Compound according to the provisions of Section 1.1, or any compound licensed to
RiboGene pursuant to an agreement, effective September, 1993, among RiboGene,
Pharm-Eco Laboratories, Inc. and the University of North Carolina.
1.25 "RiboGene Intellectual Property" shall mean RiboGene Patent Rights
(as defined hereinbelow) and Know-how, as well as Program inventions and/or
Joint Program Inventions assigned exclusively to RiboGene according to the
provisions of Section 6.3 of the Research Agreement and Program Inventions
and/or Joint Program Inventions exclusively assigned to RiboGene and for which
Abbott has a nonexclusive license, according to the provisions of Section 6.4 of
the Research Agreement, or extensions or revisions of any of the above based on
jointly-owned Joint Program Inventions according to the provisions of Section
6.4 of the Research Agreement.
1.26 "RiboGene Lead" shall mean a RiboGene Compound which (a) in the
judgment of the JMT under the Research Program, demonstrates selective fungal
translation inhibition according to RiboGene's mycotic in vitro translation
assays and mammalian in vitro translation assays; and (b) demonstrates an MIC
equal to or less than [*] agreed upon by the JMT; and (c) has a chemical
structure amenable to modification through medicinal or combinatorial
chemistry, as judged by the JMT. A compound or material shall cease to be a
RiboGene Lead if, after [*] periods following the termination or expiration of
the Research Term, Abbott has not Identified such compound or material to
RiboGene as among the [*] RiboGene Leads that Abbott has selected as being
those to which Abbott desires to retain exclusive rights, to the extent that
RiboGene can grant such exclusive rights.
1.27 "RiboGene Patent Rights" shall mean all patent applications and
patents in any country of the world, which relate in some way to the Field and
are exclusively owned by or licensed, with the right to sublicense (which right
RiboGene shall make every reasonable effort to
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<PAGE> 16
obtain), to RiboGene during the term of this Agreement and during the six
(6)-month period thereafter. RiboGene Patent Rights cover one or more compounds
or materials useful in the Field, the preparation and/or use thereof, or other
compositions and/or technology useful in the Research Program, and include all
divisions, continuations, continuations-in-part, additions, registrations,
confirmations, renewals, extensions, supplemental protection certificates,
reexaminations and reissues of the above patent applications and patents.
RiboGene Patent Rights include patent applications and patents assigned to
RiboGene according to the provisions of Section 6.3 of the Research Agreement,
but do not include patent applications and patents assigned to RiboGene,
according to the provisions of Section 6.4 of the Research Agreement, in which
Abbott has a nonexclusive license, under the provisions of Section 6.4. RiboGene
Patent Rights include, but are not necessarily limited to, those patent
applications and/or patents identified in Exhibit A, attached to this License
Agreement and updated by RiboGene, as justified by filing, prosecution, issuance
and/or maintenance circumstances, and reattached hereto.
1.28 "Sale" or "Sold" shall mean the transfer for value (cash and/or
otherwise) in an arm's-length transaction of a Product in any country by Abbott,
Abbott Affiliate, or Abbott sublicensee to a nonaffiliated third-party
distributor, agent or end user after obtaining all necessary government
approvals applicable to such sale. Sales shall be accounted for when shipped,
and credits and refunds shall be accounted for when booked by Abbott in
accordance with Abbott's standard accounting practices. The date of the "First
Commercial Sale" in any country shall be the date of the shipment for such Sale.
1.29 "Valid Claim" shall mean a claim of any issued, unexpired patent
contained within RiboGene Patent Rights or Abbott Patent Rights, which has not
been ruled invalid or unenforceable by a final, unappealed or unappealable
decision of a court of competent jurisdiction or of an administrative agency
having authority over patents and which covers an Abbott Compound or RiboGene
Lead or which covers the use of an Abbott Compound or RiboGene Lead, which use
claim effectively precludes any sale of a compound or material, which is
identical to such Abbott Compound or RiboGene Lead, by any third party, for any
human
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pharmaceutical, animal and/or diagnostic purpose in the Field.
II. LICENSE GRANTS
2.1 Research and Development Purposes RiboGene hereby grants to Abbott
a nonexclusive, worldwide right and license Under RiboGene Intellectual
Property, with the right to grant sublicenses without RiboGene's approval to
Abbott Affiliate(s) and otherwise with RiboGene's approval, which approval shall
not be unreasonably withheld, to identify, make, have made, import, modify, use,
develop, test and file for regulatory approval on Abbott Compounds and/or
RiboGene Compounds for the benefit of Abbott's discovery, development and
commercial preparation of Abbott Compounds and/or RiboGene Leads for use in the
Field.
2.2 Program Inventions RiboGene hereby grants to Abbott a nonexclusive,
perpetual worldwide license to make, have made, import, use, and/or develop any
Program Invention(s), for which one or more employees of RiboGene is/are the
only Inventor(s) of such Program Invention and for which Abbott has a
nonexclusive license, according to the provisions of Section 6.4 of the Research
Agreement, and, subject to the provisions of Section 9.5 of the Research
Agreement, a nonexclusive right and license, during the Research Term, to
practice any Program Invention and/or Joint Program Invention assigned to
RiboGene under the provisions of Section of 6.3 of the Research Agreement.
2.3 Compounds RiboGene hereby grants to Abbott a perpetual, worldwide
right and license under RiboGene Intellectual Property, as applied specifically
and solely to Abbott Compounds and/or RiboGene Leads, with the right to grant
sublicenses, to make, have made, modify, import, use, promote, offer to sell and
sell Abbott Compounds and/or RiboGene Leads for any purpose. Notwithstanding the
grant above, such license shall expire three (3) years following the expiration
or termination of the Research Term with respect to every RiboGene Lead other
than the [*] identified by Abbott to RiboGene as to be retained by Abbott. This
license shall be sole and exclusive to Abbott, except that, during the Research
Term, RiboGene shall also retain such rights under RiboGene Intellectual
Property as are necessary to fulfill the Research Program.
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III. MILESTONE AND ROYALTY PAYMENTS
3.1 Milestone Payments As consideration for the licenses and rights
granted in this Agreement, Abbott shall make milestone payments to RiboGene, by
Product for human pharmaceutical use in the Field, for development of such
Product by Abbott, Abbott Affiliate or Abbott sublicensee for such human
pharmaceutical purposes, as follows:
(a) [*] within twenty (20) business days from the filing date by
Abbott, Abbott Affiliate, or Abbott sublicensee, of the first [*] with such
Product; and
(b) [*] within twenty (20) business days of the initiation of the
first [*] with such Product, but if, and only if, [*] for such Product and no
[*] not later than twenty (20) business days following Abbott's first [*] for
such Product, concurrent with the payment according to the provisions of Section
3.1(c); and
(c) [*] within twenty (20) business days from Abbott's first [*] of
such Product; and
(d) [*] within twenty (20) business days of the first [*] of such
Product.
All payments made hereunder shall be nonrefundable, but if the
particular Product is withdrawn from further development, from
commercialization, or from sale, and Abbott substitutes a different Product with
a similar human pharmaceutical utility profile, as determined in reasonable good
faith by Abbott, into the regulatory process in place of such withdrawn Product,
within four (4) years of the withdrawal of the earlier submission, Abbott shall
receive credit for milestone payments previously made for the withdrawn Product
and shall be obligated to pay only that/those milestone payment(s) which had not
been made with respect to this substitute human pharmaceutical Product.
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Abbott shall pay only one series of milestone payments for all human
pharmaceutical Products in the Field containing a specific Abbott Compound or
RiboGene Lead, regardless of the number of dosage forms, formulations and/or
indications for which Abbott develops and seeks marketing approval for such
Products.
All milestone payments made with respect to one or more Products hereunder shall
be fully creditable against twenty-five percent (25%) of the royalty payments
due for any particular royalty period, according to the provisions of Sections
3.2 and 4.3 hereof, with respect to Sales of such Product(s) until the milestone
payments have been fully credited and taken by Abbott.
3.2 Royalty Payments. As additional consideration for the licenses and
rights granted in this Agreement, Abbott shall pay, or in the case of Sales by
Abbott Affiliate(s) and/or sublicensee(s), cause such Abbott Affiliate(s)
and/or sublicensee(s) to pay, to RiboGene royalties on Net Sales of
Pharmaceutical Product(s) in the Field, by Abbott, Abbott Affiliate, or Abbott
sublicensee, from the date of First Commercial Sale of any Product(s) Sold in a
pharmaceutical formulation for human use in the Field, on a country-by-country
basis in and for countries in which, but for this license, the Sale of such
Product(s) for human pharmaceutical use would infringe at least one Valid Claim,
for the life of the RiboGene or Abbott patent(s) comprising such Valid Claim(s),
according to the following:
(a) on annual (Calendar Year) Net Sales of Pharmaceutical Products
worldwide in the Field of up to and including an aggregate of [*], a royalty of
[*] of such Net Sales; plus
(b) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] but less than or equal to [*] a royalty of [*] of such
Net Sales; plus
(c) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] but less than or equal to [*] a royalty of [*] of such
Net Sales; plus
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(d) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] but less than or equal to [*] a royalty of [*] of such
Net Sales; plus
(e) on annual Net Sales of Pharmaceutical Products worldwide in the
Field of more than [*] a royalty of [*] of such Net Sales.
As an example, if Abbott, Abbott Affiliates, and/or Abbott
sublicensees have aggregate Net Sales of Pharmaceutical Products in the Field in
a given Calendar Year equivalent to [*] Abbott would owe RiboGene royalties of
[*] on the first [*] of such Net Sales (resulting in royalties due of [*], on
the second [*] of such Net Sales [*] on the next [*] of such Net Sales [*] on
the next [*] of Net Sales [*] on the final [*] of such Net Sales [*] for a total
of royalties due for such Calendar Year of [*].
If a Valid Claim does not or does not yet exist in a country in which a Product
is Sold In the Field, and for so long as no other sale of the same chemical or
biological entity is being made by any independent third party, Abbott, or
Abbott Affiliate(s) and/or sublicensee(s), shall pay to RiboGene royalties on
Net Sales of Pharmaceutical Products in the Field, in such country, according to
the provisions above, but the amount used as "gross Invoiced Sales" in the
formulae of Sections 1.12 through 1.14, for purposes of calculating royalties in
such case(s), shall be one-half (1/2) of the actual gross invoiced Sales amount,
until such a Valid Claim exists in such country or until the expiration of three
(3) years from the First Commercial Sale in such country.
Notwithstanding the foregoing, after Abbott has paid RiboGene a total of Eighty
million U.S. Dollars (USD80,000,000) in cumulative royalty payments, not
including creditable milestone payments, according to the provisions of Section
3.2 in connection with Abbott's, Abbott Affiliates', and/or Abbott's
sublicensees' Sales of Product(s) In the Field,. Abbott
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shall pay RiboGene [*] on all of Abbott's, Abbott's Affiliates' and/or Abbott's
sublicensees' Net Sales of Pharmaceutical Products in the Field, by country, for
the remainder of the term that a Valid Claim exists in that country.
As still additional consideration for the licenses and rights granted in this
Agreement, Abbott shall pay to RiboGene royalties on Net Sales of Diagnostic
Product(s) in the Field, Net Sales of Plant Protection Product(s) in the Field
and Net Sales of Single Active Product(s), Net Sales of Combination Product(s)
and Net Sales of Delivery System Product(s) for animal uses in the Field, by
Abbott, Abbott Affiliate, or Abbott sublicensee, from the date of first Sale of
any such Product(s) for such purposes, on a country-by-country basis in and for
countries in which at least one Valid Claim claiming one or more of the Abbott
Compound(s) and/or RiboGene Lead(s) within such Product(s) or the use of such
Abbott Compound(s) and/or RiboGene Lead(s) which provides Abbott, Abbott
Affiliate and/or Abbott sublicensee exclusivity for the Sale of such Product(s)
for such purposes has issued, for the life of the RiboGene or Abbott patent(s)
comprising such Valid Claim(s), according to the following:
(i) a royalty of [*] on annual (Calendar Year) Net Sales for such
purposes worldwide of up to and including an aggregate of [*]; plus
(ii) on annual Not Sales for such purposes worldwide of more than [*] a
royalty of [*] of such Net Sales.
In all cases, Abbott shall pay only one royalty on the Sale of any individual
Product.
Still further, Abbott shall owe RiboGene: (a) on the Sales of Products that are
approved, promoted and Sold for multiple indications, royalties, according to
the provisions of this Section 3.2, on only the portion of the Sales of such
Products comprising at least one Abbott Compound and no RiboGene Lead which is
to or in the Field, as established by a recognized market research firm used by
Abbott, according to Abbott's standard practices, and on all Sales of such
Products comprising at least one RiboGene Lead; (b) on Sales of Products that
are approved and Sold for one
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or more indications outside of the Field, full royalties, according to the
provisions of this Section 3.2, on the Sales of Products comprising at least one
RiboGene Lead, and no royalties on Sales of Products comprising at least one
Abbott Compound but no RiboGene Lead.
3.3 Uses Within Abbott, Abbott Affiliates, and/or Abbott Sublicensees
In the event that a Product is used for human pharmaceutical, veterinary
pharmaceutical, diagnostic or plant protection commercial purposes by Abbott, or
an Abbott Affiliate or Abbott sublicensee, Net Sales for such transfer shall be
calculated as set forth in Sections 1.12 through 1.14, 1.16 and 1.17 above, and
royalties shall be calculated according to the provisions of Section 3.2, except
that the gross "sales" price for purposes of such calculation shall be the
average gross sales price for such Product Sold for such purposes in arms-length
Sales to non-Affiliate distributor(s) or customers by Abbott, Abbott Affiliate
or Abbott sublicensee in the country in which the transfer and/or use occurred
during the Calendar Quarter in which such Product was transferred for the
particular purpose(s) to such entity.
IV. RECORDS AND ROYALTY PAYMENTS
4.1 RECORDS Abbott shall, and shall cause Abbott Affiliates, and
Abbott sublicensees to, keep and maintain true and accurate records consistent
with the letter and spirit of this Agreement. Such records shall be consolidated
semiannually in Abbott headquarters and open to inspection by an independent
certified public accountant selected by RiboGene, and reasonably acceptable to
Abbott, that has been retained at RiboGene's expense. Such accountant may review
such records once in any Calendar Year within two (2) years after the royalty
period to which such records relate, during normal business hours, with at least
thirty (30) business days' written notice. Such accountant shall execute a
reasonable nondisclosure agreement with Abbott prior to commencing any
inspection, and shall have the right to examine the records kept pursuant to
this Agreement solely for the purpose of verifying Abbott's royalty obligations
hereunder, and shall report the findings of such examination of records to
RiboGene as well as to Abbott. If the audit shows that royalties actually due
exceed those previously reported by more than [*], Abbott shall pay all
reasonable expenses of the audit.
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4.2. Exchange Calculation Royalties due shall be calculated on the
aggregate of Net Sales for the applicable purpose, by country, according to the
provisions of Section 3.2, in the national currency of each such country,
converted to U.S. dollars in accordance with Abbott's standard procedures for
converting Sales from the foreign currency in which the Sales were made, which
procedures shall conform to generally accepted accounting principles.
4.3. How Paid Royalties shall be paid quarterly to RiboGene by Abbott
on Net Sales by Abbott, Abbott Affiliates, and/or Abbott sublicensees, in U.S.
dollars within sixty (60) calendar days after the last day of March, June,
September and December during the term of this Agreement and within sixty (60)
calendar days, for domestic Sales, and ninety (90) calendar days, for
international Sales, after the expiration or termination of this Agreement to
fulfill obligations arising from any partial Quarter at the end of this
Agreement, using royalty rates. applicable under Section 3.2 to the aggregate of
total Calendar Year-to-date Net Sales by Abbott, Abbott Affiliate(s), and/or
Abbot sublicensee(s) through the relevant Quarter or partial Quarter, accruing
on Sales during the preceding Quarter. Royalty payments due to RiboGene
hereunder shall be, at Abbott's option, paid by electronic funds transfer or
wire transferred for the account of RiboGene, Inc. [*]
4.4. Royalty Statement Concurrently with Abbott's payment of its
royalty obligations to RiboGene, Abbott shall mail to RiboGene, according to the
provisions of Section 11.1, a statement which shall reference the Calendar
Quarter and Calendar Year for which the payment was made and shall set forth the
payment made; each Product Sold by country in which a Valid Claim exists, and
all other countries until the expiration of [*] years from the First Commercial
Sale; the Net Sales for human pharmaceutical veterinary pharmaceutical,
diagnostic and/or plant protection purposes in that country, as applicable,
expressed in local currency; the exchange rates used; Net Sales by such country
and aggregated for all countries in which a Valid Claim exists, or as otherwise
due, according to the provisions of the third paragraph of
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Section 3.2, which relates to Sales in countries in which a Valid Claim does not
exist, expressed in U.S. dollars for the relevant Calendar Quarter; as well as
the respective Calendar Year-to-date total Net Sales, divided as by quarterly
report categories above, through the relevant Calendar Quarter; the applicable
royalty rate(s); and royalties payable in U.S. dollars for the relevant
Calendar Quarter.
4.5 Withheld Taxes Abbott may withhold from all royalty payments any
taxes lawfully imposed and required to be withheld on such payments by the
government of any jurisdiction in which Abbott, Abbott Affiliate and/or Abbott
sublicensee sells Product(s). All taxes so withheld shall be paid to the
appropriate government entity for the account of RiboGene and Abbott shall
promptly forward to RiboGene all tax receipts evidencing payment of such taxes.
V. PATENT RESPONSIBILITIES
5.1 RiboGene Patent Prosecution and Maintenance RiboGene will, at its
expense, using counsel of its choice, diligently prosecute claims in and
maintain patent applications and patents included in RiboGene Patent Rights in
Australia, Canada, France, Germany, Great Britain, Italy, Japan, Mexico, Spain
and the United States, and other countries agreed upon in good faith by RiboGene
and Abbott, and will timely provide Abbott with copies of all relevant
documentation, which copies and information Abbott shall treat as RiboGene
Confidential Information, in order to advise Abbott of the prosecution of the
applications included in RiboGene Patent Rights. RiboGene may, at any time,
assign any patent(s) or patent application(s) included in RiboGene Patent
Rights, or any extraordinary proceeding relating to such patent(s) or patent
application(s), to Abbott and thereafter RiboGene will fully cooperate with
Abbott in actions which Abbott decides to take with respect to such patent(s) or
patent application(s), and the country in which such patent(s) exists or such
patent application(s) is/are filed shall be thereafter considered a country in
which no Valid Claim exists.
5.2 Program Invention Patent Prosecution and Maintenance According to
the provisions of Article VI of the Research Agreement, Abbott shall have sole
responsibility, employing standards and criteria no
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less rigorous than it employs with respect to the protection of its own
inventions of similar scientific and commercial value, for preparing, in
cooperation with RiboGene's designated patent counsel, filing (domestic and
foreign), prosecuting, issuing, maintaining, defending and enforcing patent
applications and/or patents covering every Program Invention and/or Joint
Program Invention assigned, either solely or jointly, to Abbott or
nonexclusively licensed to Abbott by RiboGene. Abbott shall keep RiboGene fully
aware of the filing and status of and involved with pertinent decisions with
respect to every such patent application and/or patent, shall fully consider
RiboGene's interests and suggestions with respect to the scope and content of
such applications and/or patents, and shall assume all costs associated with all
such patent applications and/or patents in all jurisdictions which it continues
to have an interest.
5.3 Infringement Defense Abbott shall have responsibility, with
RiboGene's cooperation and knowledge, for the defense of any patent infringement
claim, lawsuit or other action brought by any third party against Abbott arising
out of Abbott's development, testing, manufacture, use, marketing or sale of
Products or Abbott's Affiliate's and/or sublicensee's marketing or sale of
Products in any country. If RiboGene Intellectual Property is in jeopardy of
being adversely affected by any resolution or settlement of such action,
RiboGene may participate in any such actions at its option and expense.
5.4 Patent Infringement by Third Parties If either party obtains
knowledge that any independent third party is infringing any patent included in
RiboGene Patent Rights, the party obtaining the knowledge shall advise the other
and Abbott and RiboGene shall consult on a reasonable course of action. Abbott
may, but is not obligated to, institute suit to stop such infringement and
RiboGene shall cooperate fully with Abbott and its counsel in the prosecution of
any such suit filed by Abbott. If Abbott decides not to bring suit and so
advises RiboGene of such decision, or if Abbott fails within six (6) months
after notice thereof either to terminate such infringement or to institute suit,
RiboGene may, but is not obligated to, institute suit against the infringing
party. The party bringing the action shall be entitled to retain, from any
recovery which may be obtained therein, its out-of-pocket litigation costs;
Abbott shall then be entitled to recover its lost profits; RiboGene shall then
be
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entitled to recover lost royalties; and the remainder will be divided equally
between the parties. If a suit brought by Abbott must include RiboGene as a
party, RiboGene will permit itself to be joined in such suit and RiboGene will
cooperate fully in the prosecution of any such suit filed by Abbott, at Abbott's
expense. Each party shall always have the right to be represented by counsel of
its own selection in the protection of RiboGene Patent Rights in any suit
instituted by the other party for infringement, and shall have full access to
all proceedings, documents and information held, developed or obtained in any
such suit.
5.5 Patent Marking Abbott shall mark or shall have marked in an
appropriate manner all containers or packages of Products Sold by or for Abbott,
Abbott Affiliate and/or Abbott sublicensee with the appropriate statutory patent
notice for the particular country to indicate that patent coverage has been
obtained or that patents are pending.
5.6 Extensions RiboGene shall, if Abbott cannot legally, apply for and
diligently seek the maximum extension to which it is entitled, of the term of
any patent included in RiboGene Patent Rights under the Drug Price Competition
and Patent Term Restoration Act of 1984, EEC Council Regulation No. 1768/92 and
comparable laws of other jurisdictions. RiboGene shall notify Abbott of its
intent and Abbott shall supply all relevant documents in its possession and
cooperate in all reasonable ways to assist RiboGene in such efforts. RiboGene
shall provide Abbott with copies of its relevant documents related to these
applications.
VI. PRODUCT DEVELOPMENT AND PROMOTION
6.1 Development and Approvals Abbott and/or, if appropriate, any
Affiliate or sublicensee, shall at such entity's own expense, be solely
responsible for the conduct of all appropriate development activities for
Product(s) and the initiation and pursuit of all necessary registrations and
pricing approvals for marketing Product(s).
6.2 Trademarks Abbott is entitled to promote, market and sell
Product(s), or sublicense others, according to the provisions of Article II, to
promote, market and sell Product(s), under trademarks chosen and owned by
Abbott, or its sublicensee, but approved by RiboGene, which
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approval shall not be unreasonably withheld.
6.3 Notification of First Commercial Sale Abbott shall notify RiboGene
at least thirty (30) days prior to each anticipated First Commercial Sale of a
Product in the United States, Great Britain, France, Germany, Italy or Japan.
VII. CONFIDENTIALITY
7.1 Confidentiality and-Nonuse Abbott and RiboGene agree that, for a
period of ten (10) years from the Effective Date, each will treat as
confidential, limiting access to the Receiving Party employees, and
confidentiality-bound consultants who must know information for purposes
anticipated by this Agreement, and otherwise using at least the same internal
security procedures and at least the same degree of care that it uses to protect
its own confidential, proprietary information, but in no event less than
reasonable care, to prevent the other party's Confidential Information from
entering the public domain or falling into the hands of independent third
parties, or from being used for its own benefit or the benefit of any third
party, except for purposes of this Agreement. No right to use, or any title or
license to the other party's Confidential Information, other than the right to
use such Confidential Information for purposes of this Agreement, shall vest in
the Receiving Party by virtue of disclosure, or the existence of this Agreement.
Should either party use one or more consultants or collaborators for purposes
of this Agreement, that party shall execute appropriate confidentiality
agreements with any such third party consultant(s) or collaborator(s) in order
to protect the secrecy of the other party's proprietary information.
7.2 Required Disclosure If either party is required by a governmental
regulatory agency or court of competent jurisdiction to disclose either the
other party's Confidential Information, or to disclose other details of this
Agreement or of the Research Agreement, the party subject to such requirement
shall inform the other party as soon as practical of such requirement, shall
reasonably cooperate with the other party in efforts such other party may
decide to take to try to protect its Confidential Information, and shall
release such Confidential Information or other details in response to such
requirement only to the limited extent
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required by such authority.
7.3 Return of Confidential Information Upon expiration of this
Agreement, and the request of the original Disclosing Party, or upon early
termination hereof, the Receiving Party, shall, within one (1) month of such
request or early termination, return or deliver all copies of the Disclosing
Party's Confidential Information, which Confidential Information is then in the
Receiving Party's possession to the Disclosing Party, but the Receiving Party
may retain one (1) complete documentation copy of that Confidential Information
for archival purposes, only to assure compliance with this Agreement, but shall
not thereafter use or disclose any of the Disclosing Party's Confidential
Information or claim any rights thereto.
7.4 Nondisclosure of Third Party Confidential Information Neither party
shall disclose to the other any information which is confidential and/or
proprietary to any independent third party, to the best of its knowledge.
7.5 Publicity Except as permitted under Section 7.6, neither party
shall make any press release, or create any advertising, sales or other
promotional literature referring to this Agreement or the relationship
hereunder, or, except as required by applicable laws or regulations, make any
other public written or oral disclosure or statements relating to the Research
Agreement or the relationship between the parties created by this Agreement,
including stating, implying or suggesting that any form of joint venture,
affiliation or other association exists as a result of this Agreement between
RiboGene and Abbott, without the prior written approval of the other party,
which approval shall not be unreasonably withheld.
7.6 Permitted Disclosure Abbott may disclose such information related
to this Agreement as is essential to enable Abbott to carry out the evaluation
and/or development of any product, process or service discovered or developed
employing results of the Research Program or to secure a governmental approval
therefor.
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VII. WARRANTIES AND LIMITATIONS ON RIGHTS
8.1 RiboGene Warranties RiboGene hereby represents and warrants to
Abbott that, as of the Effective Date: (a) RiboGene has all the requisite
resources power and authority to execute, deliver and perform this Agreement;
(b) the terms of this Agreement are not inconsistent with any other contractual
and/or legal obligations it may have, or with its policies or the policies of
any entity with which it is associated; (c) RiboGene believes to the best of its
knowledge, that it owns or otherwise has all necessary rights to RiboGene
Intellectual Property in existence as of the Effective Date, and will own or
otherwise have all necessary rights to the other RiboGene Intellectual Property
on which Abbott may reasonably rely during the term of this Agreement; (d) it
has not engaged and shall not engage In any act inconsistent with this
Agreement, particularly that would allow any third party, Including any
government or government agency, to acquire, own or possess any right or.
Interest Inconsistent with Abbott's rights under this Agreement, except in
connection with any Small Business Innovative -Research Grant(s) received by
RiboGene from the National Institutes of Health prior. to or during the Research
Term; and (e) this Agreement has been duly authorized and, when executed and
delivered by RiboGene shall constitute a legal, binding obligation, enforceable
against RiboGene, according to its terms.
8.2 Limitation on Warranties RiboGene makes no representation or
warranty that the RiboGene Compounds identified to Abbott by RiboGene are novel
entities or will not Infringe the patent rights of others.
8.3 Disclaimer Abbott and RiboGene each understands that neither party
can guarantee the reliability of its research findings and conclusions, and
therefore, except as expressly set forth in this Agreement, NEITHER PARTY HAS
MADE OR MAKES ANY GUARANTEES AND EXTENDS ANY WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY PROVIDED HEREIN. THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES OF DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR THAT ANY RIBOGENE OR ABBOTT COMPOUNDS IDENTIFIED IN THE RESEARCH
PROGRAM WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHTS OF ANY INDEPENDENT THIRD PARTY. FURTHER, THERE ARE NO OTHER
EXPRESS
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OR IMPLIED WARRANTIES ARISING FROM THE COURSE OF DEALING, USAGE OR TRADE
PRACTICES, OR OF ANY OTHER KIND.
8.4 Limitations on Rights Nothing in this Agreement shall be construed
as:
(a) conferring rights to use in advertising, publicity, promotional
or sales literature the name of the other party or anything relating to the
Research Program, without the prior written consent of the other party in each
instance; or
(b) granting, by implication, estoppel, or otherwise as a result of
this Agreement, any activities hereunder or the relationship of the parties, any
license, title, ownership or other rights to the other party's Confidential
Information or under patents or know-how of the other party except as necessary
to accomplish the purposes of this Agreement or except as explicitly provided
herein.
Each party acknowledges that by virtue of this Agreement it acquires only such
rights as set forth under the terms and conditions of this Agreement.
IX. LIABILITIES AND INDEMNITY
9.1 Liabilities Each party shall assume the responsibility for and will
pay all costs and expenses (including reasonable attorneys' fees and expenses of
litigation) related to all suits and claims for losses, damage to property,
including environmental, and injury or death to any persons, including employees
of either, arising out of (a) any failure to strictly adhere to safety
instructions, precautions and information provided by the other party and other
generally-recognized safety practices for the storage, handling, use and/or
disposal of any biological, chemical or other materials under or resulting from
this Agreement or the Research Agreement; (b) any use of information or
materials provided under this Agreement, except in reliance on a willful or
grossly negligent misrepresentation or act of the other party; or (c) any
noncompliance or breach of this Agreement or other willful or negligent act or
omission on its part in the performance of activities and/or obligations under
this Agreement. EXCEPT AS SET FORTH IN SECTION 9.2, IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS OR ANY CONSEQUENTIAL,
SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES OF SUCH
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OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS
AGREEMENT.
9.2 Indemnification Each party (the "Indemnifying Party") shall defend
the other party and such other party's agents, Affiliates, employees, officers,
directors, shareholders and permitted successors and assigns (collectively, the
"Indemnified Parties") against any claim made against any or all of the
Indemnified Parties by any third party, to the extent that such claim arises out
of any negligent, reckless or intentionally wrongful act or omission of the
Indemnifying Party or any breach of this Agreement by the Indemnifying Party.
The Indemnifying Party shall either settle such claim or pay all damages awarded
against any or all of the Indemnified Parties by a court of competent
jurisdiction as a result of such claims, but no indemnification shall
necessarily be provided for such claim if the particular Indemnified Parties do
not notify the Indemnifying Party promptly in writing of the claim, give the
Indemnifying Party the exclusive control of the defense and settlement thereof,
and provide all reasonable assistance in connection with the defense or
settlement thereof, at the Indemnifying Party's expense.
9.3 Abbott Indemnification Abbott shall indemnify, defend and hold
harmless RiboGene, its officers, directors, employees, Affiliates, agents, and
permitted successors and assigns, against any liability, loss or expense
(including reasonable attorneys' fees and expenses of litigation), damage to
property, including environmental, and death or injury to any persons, including
its employees, incurred by or imposed upon any or all of the above in connection
with any claims, suits, actions, demands or judgments arising out of (a)
Abbott's use of information provided by RiboGene hereunder, or Abbott's use,
handling, storage or disposal of any Abbott or RiboGene Compound(s) or
Product(s), except in either case, as results from RiboGene's negligence or
intentional misrepresentation or wrongdoing; and/or (b) any theory of product
liability (including, but not limited to, actions in the form of tort, warranty,
or strict liability) concerning any product, process or service discovered or
developed employing results of the Research Program. RiboGene shall, however,
provide Abbott with assistance and/or information, at Abbott's expense, with
respect to any charge, claim, investigation or proceeding by any third party or
federal, state or local
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governmental authority of competent jurisdiction related to Abbott or RiboGene
Compound(s) or Product(s) or uses thereof according to this Agreement.
X. TERM AND TERMINATION
10.1 Term This Agreement shall be effective upon the date the later
party to sign executes it (which date shall also be entered on page 1 above) and
shall continue in effect through the expiration or termination of Abbott's
obligations hereunder, unless extended in writing in accordance with the
provisions of Section 10.2. Upon the later of the expiration of the
last-to-expire patent within RiboGene Intellectual Property which contains a
Valid Claim or seventeen and one-half (17.5) years from the Effective Date, the
licenses granted under Sections 2.2 and 2.3 to Abbott and Abbott's Affiliates
shall be fully paid-up.
10.2 Possible Extension Upon the mutual agreement of the parties, this
License Agreement may be extended for a period and under such other provisions
and/or amendments to the provisions of this Agreement, to be agreed upon in good
faith negotiations between the parties.
10.3 Termination Without Breach Prior to the expiration of this License
Agreement, Abbott may terminate it in its entirety without cause upon thirty
(30)-days written notice to RiboGene.
10.4 Effect of Breach In the event of a breach by RiboGene of any
material provision of this Agreement, or default by Abbott of any of Abbott's
financial obligations to RiboGene or a material breach by Abbott of Abbott's
confidentiality obligations hereunder, the aggrieved party shall give the party
in breach or default thirty (30)-day written notice to cure or substantially
cure such breach or default. If the breach or default is not cured or not
substantially cured within such thirty (30)-day period, the aggrieved party
shall immediately submit any dispute raised in a response to the aggrieved
party's written notice to the Alternative Dispute Resolution provisions of
Section 11.7, and only if the other party fails to honor the resolution of the
Alternative Dispute Resolution procedures may the aggrieved party terminate this
Agreement upon giving final written notice to the other party.
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10.5 Effect of Bankruptcy or Agreement Revision Abbott may terminate
this Agreement upon the filing of a voluntary petition in bankruptcy by RiboGene
or a third party's filing of an involuntary petition in bankruptcy with respect
to RiboGene, which involuntary petition is not dismissed within forty-five (45)
days after the filing thereof, or if removal of a material part or parts of this
Agreement which are found to be void, invalid or unenforceable according to the
provisions of Section 11.9 would so substantially impair the value of the whole
Agreement to that party as to make continuance impractical.
10.6 Consequences of Termination Expiration or termination of this
Agreement by either party shall not affect the rights and obligations of the
parties that have accrued prior to the effective date of termination of this
Agreement.
XI. MISCELLANEOUS
11.1 Notices All notices required or permitted hereunder shall be
transmitted, or at least immediately affirmed, in writing by facsimile, followed
by confirmation of that facsimile either by registered or certified mail,
postage prepaid, return receipt requested, or by overnight courier, addressed
as follows, or to such other address as may be designated from time to time by
notice given by the respective party:
If to Abbott: Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile No.: (847) 938-5383
Attention: President, Pharmaceutical Products Division
cc: Vice President, Pharmaceutical Discovery
cc: Legal Division
If to RiboGene: RiboGene, Inc.
21375 Cabot Boulevard
Hayward, California 94545
Facsimile No.: (510) 293-2596
Attention: President and CEO
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<PAGE> 34
11.2 Independence of Parties The status of each party under this
Agreement is that of an independent contractor, and neither party has the right
or authority to assume or create any obligation, accept legal process, make
commitments, incur any charges or otherwise bind or act on behalf of the other
or limit the other in any manner whatsoever, except as expressly stated herein.
Neither this Agreement nor any act hereunder shall be construed as constituting
the foundation of a partnership, association, agency, joint venture or any other
entity.
11.3 Impact on Other Relationships Neither the existence of this
Agreement nor the relationship of the parties hereunder shall impede either
party from engaging in any independent activity, including, except as provided
in Section 2.9, as modified by Section 2.10, of the Research Agreement, from
entering into or continuing any agreement with any third party directed to
screening activities and commercial candidate compound identification.
11.4 No Third-Party Beneficiaries No person or entity not a party to
this Agreement, including any employee of any party to this Agreement, shall
have or acquire any rights by reason of this Agreement, nor shall any party
have any obligations or liabilities to such person or entity by reason of this
Agreement.
11.5 No Waiver Failure by either party to enforce, or delay in
exercising, or partial exercise of any covenants or rights or remedies under
this Agreement shall not be deemed or construed as a waiver of such rights nor
shall a waiver by either party in one or more instances be construed as
constituting a continuing waiver or as a waiver in other or subsequent
instances.
11.6 Merger Clause This Agreement constitutes the complete and entire
understanding between the parties with licenses conveyed hereunder, superseding
and replacing all prior oral or written agreements (except for the accrued
rights and obligations of the Research Agreement of even date, the June 8, 1995
Confidential Disclosure Agreement and the June 7, 1995 Materials Transfer
Agreement between the parties), communications, representations, proposals, or
negotiations specifically
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<PAGE> 35
relating to the activities hereunder and subject matter hereof. No change or
addition to or variation or amendment of this Agreement, nor any cancellation or
waiver of any of the terms or provisions hereof, nor any alteration or
modification of any of the terms and conditions hereof, shall be effective or
valid and binding on either party unless in writing and signed by a
duly-authorized representative of the party against which the provision is
applied.
11.7 Alternative Dispute Resolution The parties shall attempt to
amicably resolve disputes arising between them regarding the validity,
construction, enforceability or performance of the terms of this Agreement, and
any differences or disputes in the interpretation of the rights, obligations,
liabilities and/or remedies hereunder, which have been identified in a written
notice from one party to the other, by good faith settlement discussions between
their respective representatives. If the parties have failed to satisfactorily
resolve the dispute or difference after receipt of such written notice and
twenty-eight (28) calendar days having expired without the parties having
reached a satisfactory resolution, either party may initiate Alternative Dispute
Resolution ("ADR") procedures, during which each party shall have the right to
be represented by counsel for resolution of all such disputes.
A. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14)
calendar days after its receipt of such notice, the other party may, by
written notice to the party Initiating the ADR, add additional issues to
be resolved within the same ADA.
B. Within twenty-one (21) calendar days following receipt of the original
ADR notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If the
parties are unable to agree on a mutually acceptable neutral within such
period, either party may request the President of the CPR Institute for
Dispute Resolution ("CPR"), 366 Madison Avenue, 14th Floor, New York,
New York 10017, to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
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<PAGE> 36
than five (5) candidates, believed qualified to
undertake an ADH relating to the subject matter in
dispute, within fourteen (14) calendar days after
receipt of the request, along with a Curriculum Vitae
for each candidate. No candidate shall be an employee,
director, or shareholder of either party or any of their
subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or
her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the
greatest preference) and shall deliver the list to the
CPR within seven (7) calendar days following receipt of
the list of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that
party shall provide a written explanation of the conflict
to the CPR along with its list showing its order of
preference for the candidates. Any party failing to
return a list of preferences on time shall be deemed to
have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR
immediately shall designate as the neutral the candidate
for whom the parties collectively have indicated the
greatest preference. If a tie should result between two
(2) candidates, the CPR may designate either candidate.
If the parties collectively have identified three (3) or
more candidates deemed to have conflicts, the CPR shall
review the explanations regarding conflicts and, in its
sole discretion, may either (i) immediately designate as
the neutral the candidate for whom the parties
collectively have indicated the greatest preference, or
(ii) issue a new list of not less than five (5)
candidates, in which case the procedures set forth in
subparagraphs B(a) - B(d) shall be repeated.
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<PAGE> 37
C. No earlier than twenty-eight (28) calendar days or later than fifty-six
(56 calendar days after selection, the neutral shall hold a hearing to
resolve each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other than
the principal place of business of either party or any of their
subsidiaries or affiliates.
D. At least seven (7) calendar days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) A copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony
of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other
remedy for each issue. The proposed rulings and remedies
shall not contain any recitation of the facts or any
legal arguments and shall not exceed one (1) page per
issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty
(20) pages. This page limitation shall apply regardless
of the number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs D(a) - D(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
E. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine
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<PAGE> 38
whether each party has had the five (5) hours to which
it is entitled.
(b) Each party shall be entitled, but not required, to make
an opening statement, to present regular and rebuttal
testimony, documents or other evidence, to cross-examine
witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time
shall be charged against the party conducting the
cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address
not only issues it raised but also any issues raised by
the responding party. The responding party, if it chooses
to make an opening statement, also shall address all
issues raised in the ADR. Thereafter, the presentation of
regular and rebuttal testimony and documents, other
evidence, and closing arguments shall proceed in the same
sequence.
(d) Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also
shall not be admissible. As to all other matters, the
neutral shall have sole discretion regarding the
admissability of any evidence.
F. Within seven (7) calendar days following completion of the hearing, each
party may submit to the other party and the neutral a posthearing brief
in support of its proposed rulings and remedies, provided that such
brief shall not contain or discuss any new evidence and shall not exceed
ten (10) pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
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<PAGE> 39
G. The neutral shall rule on each disputed issue within fourteen (14)
calendar days following completion of the hearing. Such ruling shall
adopt in its entirety the proposed ruling and remedy of one of the
parties on each disputed issue but may adopt one party's proposed
rulings and remedies on some issues and the other party's proposed
rulings and remedies on other issues. The neutral shall not issue any
written opinion or otherwise explain the basis of the ruling.
F. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the
fees and expenses of a court reporter, and any expenses for a hearing
room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay
100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall
issue with the rulings a written determination as to how
such fees and expenses shall be allocated between the
parties. The neutral shall allocate fees and expenses in
a way that bears a reasonable relationship to the
outcome of the ADR, with the party prevailing on more
issues, or on issues of greater value or gravity,
recovering a relatively larger share of its legal fees
and expenses.
I. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
J. Except as provided in paragraph I or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
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<PAGE> 40
11.8 Headings. Article and Section headings are inserted in this
Agreement for convenience of reference only and no construction, meaning
interpretation or inference shall be derived from them.
11.9 Governmental Compliance and Effect of Invalidity. This Agreement
and performance hereunder is subject to the restrictions, limitations, terms and
conditions of all applicable governmental regulations, approvals and clearances.
If any term or provision of this Agreement is held invalid, illegal or
unenforceable in any respect, for any reason, that invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted as if such term or provision, to the extent the
same shall have been held to be invalid, illegal or unenforceable, had never
been contained herein, with the other provisions of this Agreement remaining in
force.
11.10 Assignability. This Agreement and the rights, obligations,
privileges, and interests hereof may not be assigned by either party, except
that either party may assign this Agreement and rights and interests, in whole
or in part, (i) to any of its Affiliates or (ii) with the consent of the other
party, which consent shall not be unreasonably withheld, to any purchaser of all
or substantially all of its stock or assets of such party (including the assets
associated with the Research Program), or to any acquirer or successor
corporation resulting from any merger or consolidation with or into such
successor corporation.
11.11 Succession. This Agreement and the rights and obligations granted
and undertaken hereunder shall be binding upon and enure to the benefit of the
parties hereto, and their permitted assign(s), successor(s), trustee(s) or
receiver(s) in bankruptcy.
11.12 Government Compliance. RiboGene and Abbott shall comply with all
supranational, federal, state, and local laws, ordinances and regulations
applicable to the shipment, handling, storage, testing, use, development, sale
and/or disposal of any compound or peptide hereunder.
11.13 Governing Law. The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York, U.S.A., excluding its choice of laws
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<PAGE> 41
provisions.
IN WITNESS WHEREOF, authorized representatives of the parties have duly
executed this Agreement in duplicate.
RIBOGENE, INC ABBOTT LABORATORIES
BY: /s/ CHARLES J. CASAMENTO By: /s/ THOMAS R. HODGSON
--------------------------------- -------------------------------------
Name Charles J. Casamento Name: Thomas R. Hodgson
------------------------------ -----------------------------------
Title: Chairman, President & CEO Title: President and Chief Operating
---------------------------- Officer
---------------------------------
Date: April 26, 1996 Date: April 24, 1996
------------------------------ ---------------------------------
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<PAGE> 42
EXHIBIT A
<TABLE>
<CAPTION>
COUNTRY APPLICATION NO. FILING DATE PATENT NO. ISSUE DATE
<S> <C> <C> <C> <C>
US 08/328,258 10/24/93
(PCT) 94/12,161 10/14/94
</TABLE>
<PAGE> 1
Exhibit 10.2
*TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 240.24b-2.
ABBOTT-RIBOGENE RESEARCH AGREEMENT
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
I. DEFINITIONS ..................................................5
1.1 Abbott Compound ..........................................5
1.2 Affiliate ................................................6
1.3 Annual Research Plan .....................................7
1.4 Beneficiary Party ........................................7
1.5 Collateral Party .........................................7
1.6 Contract Year and Contract Quarter .......................7
1.7 Field ....................................................7
1.8 FTE ......................................................8
1.9 Independent Information ..................................8
1.10 Joint Management Team or JMT .............................9
1.11 Know-how .................................................9
1.12 License Agreement .......................................10
1.13 Product .................................................10
1.14 Program Information .....................................10
1.15 Program Inventions and Joint Program Inventions .........11
1.16 Research Program or Program .............................11
1.17 Research Term ...........................................12
1.18 RiboGene Compound .......................................12
1.19 RiboGene Intellectual Property ..........................12
1.20 RiboGene Lead ...........................................13
1.21 RiboGene Patent Rights ..................................13
II. RESEARCH ACTIVITIES ........................................14
2.1 RiboGene Efforts ........................................14
2.2 Abbott Efforts ..........................................14
2.3 Conflict In Terms .......................................14
2.4 Allocation of Resources .................................14
2.5 Laboratory Records ......................................15
2.6 Reporting and Access ....................................15
2.7 Compliance ..............................................15
2.8 Binding Effect ..........................................15
2.9 Exclusivity .............................................15
2.10 Exception to Exclusivity ................................16
III. OVERSIGHT OF THE RESEARCH PROGRAM .........................17
3.1 JMT Duties ..............................................17
3.2 JMT Composition .........................................17
3.3 RiboGene Representatives ................................18
3.4 Meetings ................................................18
3.5 Decision Making .........................................19
3.6 Annual Research Plan ....................................19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
IV. RESEARCH SUPPORT ...........................................19
4.1 Abbott Funding ..........................................19
4.2 Control .................................................20
V. CONFIDENTIALITY OF INDEPENDENT AND PROGRAM INFORMATION ......20
5.1 Confidentiality and Nonuse ..............................20
5.2 Required Disclosure .....................................21
5.3 Return of Independent and Program Information ...........21
5 4 Program Information .....................................22
5.5 Nondisclosure of Third Party Confidential Information....23
5.6 Publicity ...............................................23
5.7 Permitted Disclosure ....................................23
5.8 Publications ............................................23
VI. RIGHTS TO PROGRAM INVENTIONS ...............................24
6.1 Disclosure of Inventions ................................24
6.2 Determination of Inventorship ...........................24
6.3 First Assignment of Rights ..............................24
6.4 Alternate Assignment of Rights ..........................25
6.5 ownership Rights ........................................29
6.6 Invention Use During the Research Term ..................29
6.7 Invention Rights Following the Research Term ............29
VII. WARRANTIES AND LIMITATIONS ON RIGHTS ......................30
7.1 RiboGene Warranties .....................................30
7.2 Limitation on Warranties ................................31
7.3 Disclaimer ..............................................31
7.4 Limitations on Rights ...................................31
VIII. LIABILITIES AND INDEMNITY ................................32
8.1 Liabilities .............................................32
8.2 Indemnification .........................................32
IX. TERM AND TERMINATION .......................................33
9.1 Term ....................................................33
9.2 Possible Extension ......................................33
9.3 Termination Without Breach ..............................33
9.4 Effect of Breach ........................................34
9.5 Effect of Bankruptcy or Agreement Revision ..............34
9.6 Consequences of Termination .............................35
X. MISCELLANEOUS ...............................................35
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
10.1 Notices .................................................35
10.2 Independence of Parties .................................36
10.3 Impact on Other Relationships ...........................36
10.4 No Third-Party Beneficiaries ............................36
10.5 No Waiver ...............................................37
10.6 Merger Clause ...........................................37
10.7 Alternative Dispute Resolution ..........................37
10.8 Headings ................................................42
10.9 Governmental Compliance and Effect of Invalidity ........42
10.10 Assignability ...........................................42
10.11 Succession ..............................................43
10.12 Government Compliance ...................................43
10.13 Governing Law ...........................................43
</TABLE>
<PAGE> 5
RESEARCH AGREEMENT
This Research Agreement ("Agreement") is entered into effective as of
April 26, 1996 (the "Effective Date") by and between RiboGene, Inc., a
California corporation with a principal place of business at 21375 Cabot
Boulevard, Hayward, California 94545 ("RiboGene") and Abbott Laboratories, an
Illinois corporation with a principal place of business at 100 Abbott Park Road,
Abbott Park, Illinois 60064-3500 ("Abbott").
WHEREAS, RiboGene is experienced in translation biochemistry, particularly
in eukaryotic translation mechanisms, and in screening compounds and materials
for fungicidal and fungistatic activity, and owns or has exclusive licenses to a
number of compounds already identified as possessing such activity, and Abbott
is experienced in the discovery and development of small molecule pharmaceutical
products, including those with antifungal properties, and in obtaining
regulatory approval for and in commercializing such pharmaceutical products; and
WHEREAS, the parties desire to collaborate in a Research Program (as
defined hereinbelow) directed to accelerating the discovery of new
pharmaceutical and/or agricultural products possessing antifungal activity
and/or new diagnostic products related to conditions caused by fungal Infections
and/or diseases, and to provide for a license to Abbott for the evaluation and
possible development and eventual commercialization of such products.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, Abbott and RiboGene agree as follows:
I. DEFINITIONS
1.1 "Abbott Compound" shall mean any synthetic chemical compound or
biological material, which compound or material:
A. is represented in compound libraries/collections owned or controlled
by Abbott and/or Abbott Affiliate (where "Affiliate" Is defined hereinbelow) as
of the Effective Date, whether or not the same compound or material is
represented in compound libraries/collections owned or controlled by RiboGene
and/or RiboGene Affiliate as of the Effective Date;
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<PAGE> 6
or
B. is acquired by or prepared by Abbott independently of the Research
Program; or
C. is acquired or prepared by Abbott under the Research Program,
including any analog of any RiboGene Compound (as defined hereinbelow) prepared
by Abbott, but excluding any RiboGene Compound prepared by Abbott; or
D. is discovered or identified by or for Abbott based on criteria
developed under the Research Program; which, in each case:
(a) demonstrates antifungal activity during the Research Program
using RiboGene's translation inhibition screening assays, or using other
translation or non-translation inhibition screening assay(s) developed under the
Research Program, as the principal enabling screen; and
(b) demonstrates a [*] or higher IC(5O) value in a mammalian in
vitro translation assay than that demonstrated in a fungal in vitro translation
assay, each assay existing at RiboGene as of the Effective Date, or demonstrates
similar selectivity advantage in another in vitro assay, developed by one party
or both parties during the Research Term (as defined hereinbelow) or agreed upon
by the JMT, over a measure from a corresponding mammalian assay; and
(c) demonstrates an MIC (less than or equal to) [*] agreed upon by
the JMT;
E. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above-included compounds or materials.
Abbott Compound does not include a compound or material provided to Abbott by
RiboGene under the Material Transfer Agreement between RiboGene and Abbott
effective June 7, 1995.
1.2 "Affiliate" shall mean, with respect to either party, any
legally-distinct corporation, firm, individual, or other form of business
organization, which directly or indirectly owns, controls, is controlled by, or
is under common control with, a party hereto. An entity shall be regarded as
being in control of another entity if the former entity has the direct or
indirect power to order or cause the direction of the policies of
-6-
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 7
the other entity, whether through ownership of fifty percent (50%) or more in
the United States or thirty percent (30%) or more outside the United States of
the outstanding voting securities of that entity, through other dominant equity
ownership, or by contract, statute, regulation, or otherwise.
1.3 "Annual Research Plan shall mean the statement of objectives for
the activities of RiboGene and Abbott under the Research Program for the
particular Contract Year (as defined hereinbelow), and the reasonably-detailed
description of and timetable for the research activities planned for such
Contract Year, consistent with and designed to accomplish the goals of the
Research Program that is to be conducted during that particular Contract Year,
which is prepared by RiboGene and Abbott, and reviewed and revised and/or
approved by the Joint Management Team (as defined hereinbelow). The Annual
Research Plan for the first Contract Year shall be attached hereto as Exhibit I,
with subsequent Annual Research Plan s being attached hereto as Exhibits II, III
and so forth, as appropriate, upon approval of such Annual Research Plans by the
Joint Management Team.
1.4 "Beneficiary Party" shall mean the party, or possibly parties
according to the provisions of Section 6.4, to this Agreement to which is
assigned or licensed a Program Invention or Joint Program Invention, according
to the provisions of Section 6.3 or Section 6.4.
1.5 "Collateral Party" shall mean the party to this Agreement which can
use a Program Invention for purposes of this Agreement, but to which such
Program Invention is not assigned or licensed for use thereafter.
1.6 "Contract Year" shall mean any consecutive twelve (12)-month period
commencing on the Effective Date, or commencing on any twelve (12)-month
anniversary of such date, during the Research Term. "Contract Quarter" shall
mean a three (3)-month period commencing on the Effective Date or on any three
(3)-month anniversary of such date, during the term of this Agreement.
1.7 "Field" shall mean the treatment, mitigation, cure,
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<PAGE> 8
prevention, detection, and/or monitoring of mycotic (fungal) infections or
diseases, not including those caused by Pneumocystis carinii, in humans, animals
and/or plant protection.
1.8 "FTE" means the time and work output equivalent to one full-time
employee who is proficient in the performance of all assigned duties and
responsibilities.
1.9 "Independent Information" shall mean all valuable, confidential
technical and commercial information, know-how or trade secrets, including all
proprietary scientific and other information or samples which either party has
prior to, or may independently develop or obtain during the term of, this
Agreement that is not obtained as a result of the Research Program, such as
research and business capabilities and strategies, drug targets, ligands,
related research, development plans, or other information related to that party,
possibly including but not necessarily limited to Know-how (as defined
hereinbelow), research methodologies, protocols, receptors, receptor agonists or
antagonists, modulators of transcription factors, screening and testing assays
patent applications not yet published, commercialization plans, independent
research activities or strategies, safety and toxicity results, pharmacological
or pharmacokinetic data, formulation and process information, medical uses,
delivery mechanisms, or other information, data or plans, provided by the party
originally possessing the information ("Disclosing Party") to the other party
("Receiving Party"), which technical or business information:
(a) is in writing or in other physical form, marked
"Confidential", or
(b) is disclosed originally by the Disclosing Party orally,
visually or in some other form and identified as confidential, then subsequently
summarized and reduced to a reasonably-detailed writing or to another physical
form, marked "Confidential and delivered to the Receiving Party within one (1)
month from the original date of disclosure; but shall not include information
which:
(c) is in or comes into the public domain without breach of this
Agreement; or
(d) can be shown to have been known to or subsequently
independently developed by or for the Receiving Party without benefit of
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<PAGE> 9
the Disclosing Party's Independent Information; or
(e) is properly provided to the Receiving Party, without
restriction, by an independent third party under no obligation of
confidentiality to the Disclosing Party; or
(f) is disclosed by the original Disclosing Party on a
nonconfidential basis to any independent third party.
1.10 "Joint Management Team" or "JMT" shall mean a committee consisting
of three (3) official representatives appointed by each party hereto that shall
be the primary vehicle for oversight, coordination and modification of the
Annual Research Plans and recommendation(s) of resource reallocations in order
to better meet the objectives of the Research Program.
1.11 "Know-how" shall mean any and all nonpatented technical data,
drawings, documentation, and other information, in each case relating in some
way to the Field, which is owned by RiboGene as of the Effective Date or is
independently generated, acquired or licensed, with the right to sublicense, by
RiboGene during the term of this Agreement and which is not included in
published patent applications and/or issued patents within RiboGene Patent
Rights (as defined hereinbelow). Know-how may relate to protein translation
(i.e., protein synthesis and mRNA translation), fungal genetics, RNA stability,
the identification and use of pathogen-specific targets, high throughput
screening assays, characteristics of desirable translation inhibitors, or the
development, formulation or marketing thereof, and may include, without
limitation:
(a) research techniques and equipment and modifications thereto,
protocols, processes, and results;
(b) chemical, toxicological, pharmacological, and preformulation
properties of compounds or materials independently owned by or licensed to
RiboGene prior to the Research Program and other translation Inhibitors; and
(c) preclinical data and other information relating to the safety
or efficacy of compounds or materials independently owned by or licensed to
RiboGene prior to the Research Program.
Know-how shall include nonpatented Program information exclusively assignable to
RiboGene according to the provisions of Section 5.4, Section
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<PAGE> 10
6.3 and/or Section 6.4, except for Program Inventions for which Abbott does
not have a nonexclusive license, according to the provisions of Section 6.4.
Know-how shall not include Program Information assignable to or nonexclusively
licensed by Abbott according to the provisions of Section 5.4, Section 6.3
and/or Section 6.4.
1.12 "License Agreement" shall mean the License Agreement between Abbott
and RiboGene of even date which, inter alia, conveys rights to RiboGene
Compounds and to the benefits of RiboGene Intellectual Property.
1.13 "Product" shall mean (a) any pharmaceutical formulation(s)
containing one or more RiboGene Leads and/or Abbott Compounds, which is/are
intended and promoted for human or animal use; or (b) a diagnostic product
comprising one or more Abbott Compounds and/or RiboGene Leads, that is intended
and promoted for the detection and/or monitoring of mycotic infections or
diseases in humans, animals or plant protection; or (c) a plant protection
formulation comprising one or more Abbott Compounds and/or RiboGene Leads, that
is intended and promoted for the treatment, cure or prevention of mycotic
diseases or infections in plants.
1.14 "Program Information" shall mean valuable technical or other
information, which is solely or jointly generated as a direct result of the
Research Program, including, but not necessarily limited to, Annual Research
Plans, mechanisms of action, screening methodologies, patent applications not
yet published, translation inhibitor characteristics, new Abbott Compounds, the
identity of or other Program-generated information related to RiboGene
Compounds, efficacy and toxicity results, bioavailability data, formulation and
process information, delivery mechanisms, know-how and/or ideas, which
information:
(a) is in writing or in other physical form, dated and marked
"Program Information"; or
(b) is disclosed originally by a party hereto orally, visually or
in another form and identified as Program Information, then subsequently
summarized and reduced to a writing or to another physical form, marked "Program
Information", and delivered to the other party hereto within one (1) month from
the original date of disclosure; or
(c) which should reasonably be kept confidential, at least until
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Abbott can make a decision about its commercial relevance and/or value; but
shall not include information which:
(d) is in or comes into the public domain without breach of this
Agreement; or
(e) can be shown to have been known to or is subsequently
independently developed by the Collateral Party without benefit of the Program
Information; or
(f) Is properly provided, without restriction, to the party
claiming exception to Program Information treatment, according to the provisions
of Section 5.4, by an independent third party which has not obtained such
information under an obligation of confidentiality to one of the parties.
1.15 "Program Inventions" shall mean all inventions, innovations,
improvements, ideas, discoveries, technology, know-how, methods, applications
and products (whether or not patentable) arising under the Research Program,
which are conceived, derived, reduced to practice, made or developed during the
term of and the four (4) months following conclusion of the Research Program by
one or more individuals who are employees of one of the parties at the time of
the inventive contribution of such individual(s). "Joint Program Inventions"
shall mean all inventions, innovations, improvements, ideas, discoveries,
technology, know-how, methods, applications and products (whether or not
patentable) arising under the Research Program, which are conceived, derived,
reduced to practice, made or developed during the term of and the four (4)
months following the conclusion of the Program by at least two individuals, at
least one individual of which is an employee, at the time of the inventive
contribution of such individual, of one of the parties hereto, and at least one
individual of which is an employee, at the time of the inventive contribution of
such individual, of the other party hereto.
1.16 "Research Program or "Program" shall mean collaborative research
activities between Abbott and RiboGene, based on RiboGene Intellectual Property,
as revised and/or extended by Program Inventions and/or Joint Program
Inventions; that are directed to the discovery and development of novel broad
spectrum antifungal compounds of clinical and commercial value in the Field. The
Research Program does not include either activities within Abbott's cell wall
inhibition antifungal program
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or any other non-translation inhibition-based antifungal program within Abbott
or activities within RiboGene's research targeted specifically to Pneumocystis
carinii infections or diseases.
1.17 "Research Terms" shall mean a period of three (3) Contract Years,
unless otherwise terminated according to the provisions of Article IX below or
extended by mutual written consent of the parties.
1.18 "RiboGene Compound" shall mean any synthetic chemical compound or
biological material that has demonstrated antifungal activity according to
RiboGene's translation inhibition screening assays, which
A. is either owned by or licensed, with permission to sublicense, to
RiboGene as of the Effective Date, including but not limited to a compound or
material provided to Abbott by RiboGene under the provisions of the Material
Transfer Agreement between RiboGene and Abbott effective June 7, 1995; or
B. is in-licensed by, with the right to sublicense, or acquired, by
RiboGene during the Research Term and which does not correspond to an Abbott
Compound within Abbott's or an Abbott Affiliate's libraries/collections prior to
the date of acquisition by RiboGene;
C. is any salt, ester, amide, complex, chelate, hydrate, isomer,
stereoisomer, crystalline or amorphous form, prodrug, metabolite, metabolic
precursor, or analog of any of the above-included compounds or materials.
A RiboGene Compound does not include a compound or material defined as an Abbott
Compound according to the provisions of Section 1.1, or any compound licensed to
RiboGene pursuant to an agreement, effective September, 1993, among RiboGene,
Pharm-Eco Laboratories, Inc. and the University of North Carolina.
1.19 "RiboGene Intellectual Property" shall mean RiboGene Patent Rights
(as defined hereinbelow) and Know-how, as well as Program inventions and/or
Joint Program Inventions assigned exclusively to RiboGene according to the
provisions of Section 6.3 and Program Inventions and/or Joint Program
Inventions exclusively assigned to RiboGene and for which Abbott has a
nonexclusive license, according to the provisions of Section 6.4, or extensions
or revisions of any of the
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above based on jointly-assigned Joint Program Inventions according to the
provisions of Section 6.4.
1.20 "RiboGene Lead" shall mean a RiboGene Compound which (a) in the
judgment of the JMT under the Research Program, demonstrates selective fungal
translation inhibition according to RiboGene's mycotic in vitro translation
assays and mammalian in vitro translation assays; and (b) demonstrates an MIC
less than or equal to [*] agreed upon by the JMT; and (c) has a chemical
structure amenable to modification through medicinal or combinatorial chemistry,
as judged by the JMT. A compound or material shall cease to be a RiboGene Lead
if, after [*] following the termination or expiration of the Research Term,
Abbott has not identified such compound or material to RiboGene as among the up
to [*] RiboGene Leads that Abbott has selected as being those to which Abbott
desires to retain exclusive rights, to the extent RiboGene can grant such
exclusive rights.
1.21 "RiboGene Patent Rights" shall mean all patent applications and
patents in any country of the world, which relate in some way to the Field and
are exclusively owned by or licensed, with the right to sublicense (which right
RiboGene shall make every reasonable effort to obtain), to RiboGene during the
term of this Agreement and during the six (6)-month period thereafter. RiboGene
Patent Rights cover one or more compounds or materials useful in the Field, the
preparation and/or use thereof, or other compositions and/or technology useful
in the Research Program, and include all divisions, continuations,
continuations-in-part, additions, registrations, confirmations, renewals,
extensions, supplemental protection certificates, reexaminations and reissues of
the above patent applications and patents. RiboGene Patent Rights include patent
applications and patents assigned to RiboGene according to the provisions of
Section 6.3, but do not include patent applications and patents assigned to
RiboGene according to the provisions of Section 6.4, in which Abbott has a
nonexclusive license, under the provisions of Section 6.4. RiboGene Patent
Rights include, but are not necessarily limited to, those identified in Exhibit
A attached to this Research Agreement, and updated by RiboGene, as justified by
filing, prosecution, issuance and/or maintenance circumstances, and reattached
hereto.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 14
II. RESEARCH ACTIVITIES
2.1 RiboGene Efforts RiboGene shall use all reasonable efforts to
expeditiously perform its part of the Research Program substantially in
accordance with the terms and conditions of this Agreement, including the
descriptions and timetables of the Annual Research Plans and any additional
specifications as may be proposed by the JMT and agreed upon in writing by the
parties hereto from time to time during the Research Term.
2.2 Abbott Efforts Abbott shall expend at least [*] per year in support
of its own activities under the Research Program, in addition to its separate,
but related support of RiboGene's activities, according to the provisions of
Section 4.1; shall identify, at its sole option, and permit RiboGene to use
pertinent Abbott technology, only during the Research Term, and only for
purposes of the Program; and will provide to RiboGene such of its research data,
results and conclusions which it deems necessary to accomplish the objectives of
the Research Program.
2.3 Conflict in Terms In the event of a conflict between the Annual
Research Plans and this Agreement, the terms and conditions of this Agreement
shall control.
2.4 Allocation of Resources RiboGene shall allocate sufficient
resources and effort to carry out its obligations under the Research Program.
RiboGene shall assign not fewer than eight (8) FTE scientific personnel,
identified to Abbott, comprising at least three (3) Ph.D. or M.D. and the
remainder at least Bachelor of Science qualified researchers, with the aggregate
skills and experience, and shall obtain and/or dedicate sufficient equipment and
facilities, to fulfill the expectations that the parties have for the Program.
RiboGene shall promptly inform Abbott of any changes in the assignments of any
such FTE's and shall promptly add or substitute individuals of comparable or
superior skills into the Program in place of one or more of the original FTE's,
as circumstances dictate, and shall apprise Abbott, in advance, of all such
plans.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 15
2.5 Laboratory Records RiboGene shall keep and maintain detailed
records of its research and screening activities and laboratory data generated
in the course of or otherwise in connection with the Research Program in order
for RiboGene to furnish complete and accurate information to the Joint
Management Team and Abbott, to the extent necessary for RiboGene to fulfill its
obligations under the Research Program. RiboGene shall permit Abbott to have
reasonable access to such records, and to facilities where RiboGene's research
and screening under the Research Program is being conducted, upon reasonable
notice and during regular business hours. All information obtained as a result
of such access shall be treated as RiboGene's Independent Information or as
Program Information, as the case may be.
2.6 Reporting and Access During the term of this Agreement, each party
shall frequently communicate with the other on the progress of and results
achieved in the Research Program; and may be required by the JMT to provide all
representatives and alternates, if applicable, to the JMT, at such times as
determined by and in a format agreed upon by the JMT, with detailed written
reports of its activities under the Program, as well as the data and results
obtained by it in connection with the Research Program.
2.7 Compliance Each party shall conduct its part of the Research
Program in compliance with all federal, state and local laws, ordinances,
regulations, standards and guidelines applicable thereto, including but not
limited to all applicable environmental regulations and guidelines.
2.8 Binding Effect Each party's employees involved in the Research
Program shall be bound as employees of that party by all confidentiality and
invention-assignment terms of this Agreement.
2.9 Exclusivity During the Research Term, including any extension
thereof, and for six (6) months thereafter, subject to the provisions of Section
9.6, and except as provided in Section 2.10 or in connection with any Small
Business Innovative Research Grant(s) received by RiboGene from the National
Institutes of Health prior to or during the Research Term, neither RiboGene nor
any of its Affiliates, without receiving the written approval of Abbott, shall
conduct or have conducted independent
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research in the Field, or accept funding for research in the Field from or
provide research services in the Field to or consult in the Field for any third
party or permit any third party to use or benefit from any RiboGene Intellectual
Property in the Field, or invest or become a partner or shareholder in or
provide funding or technology or personnel to any entity for purposes of
conducting research in or developing or commercializing products for the Field,
or establish a joint venture in the Field with any entity.
2.10 Exception to Exclusively The provisions of Section 2.9
notwithstanding, RiboGene may screen synthetic chemical compounds and/or
biological Materials owned and provided by an agrochemical company, with which
RiboGene is negotiating as of the Effective Date and the identity of which
RiboGene will disclose to Abbott as RiboGene Confidential Information on the
Effective Date, in either or both of the two translation-based antifungal assays
within RiboGene Intellectual Property that are in existence on the Effective
Date, with the understanding that:
(a) RiboGene and/or Abbott shall compare the library of compounds
and/or materials provided by the agrochemical company with those in Abbott's or
Abbott Affiliate's libraries and those identified as RiboGene Compounds, and
RiboGene shall, without identifying the reason to the agrochemical company,
refuse to screen any compounds and/or materials identified as Abbott Compounds
or RiboGene Compounds, according to the definitions above, for the agrochemical
company;
(b) RiboGene shall use its best efforts to obtain the right,
under the rights of the agrochemical company, for Abbott, Abbott Affiliates
and/or Abbott sublicensees, for the same milestone and royalty obligations as in
the License Agreement and no other consideration, to modify, make, have made,
develop, use, register, promote, offer for sale and sell such agrochemical
company's compounds and/or materials for human or animal therapeutic and/or
diagnostic purposes; and
(c) RiboGene shall not grant rights to the agrochemical company to
use RiboGene technology or any results of the use of RiboGene technology to
identify, make, have made, import, use, evaluate, develop, promote, offer to
sell and/or sell any compound or material for the treatment, mitigation, cure,
prevention, detection and/or monitoring of fungal infections or diseases in
humans or animals.
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III. OVERSIGHT OF THE RESEARCH PROGRAM
3.1 JMT Duties The duties of the Joint Management Team shall be to:
(a) Review, modify, and/or approve, in writing, each Annual
Research Plan;
(b) Receive and review communications and/or reasonably detailed
reports, according to the provisions of Section 2.6, from each party on its
activities under each Annual Research Plan, and otherwise monitor the progress
of the Research Program, modifying such Annual Research Plan(s) and/or making
recommendations to both parties for the modification of the Research Program in
order to better fulfill the objectives of the parties;
(c) Approve, in writing, the significant use of every third party
entity which RiboGene would like to use in the performance of its material
obligations under the Research Program; and
(d) Review all preclinical data, generated by RiboGene and/or
Abbott hereunder, on all Abbott Compounds and RiboGene Compounds, identify and
select RiboGene Leads and promising Abbott Compounds as foci for further work
under the Research Program, and, when appropriate, recommend to Abbott that it
should consider and/or adopt a plan to develop one or more particular Abbott
Compounds and/or RiboGene Leads which demonstrate an attractive antifungal
activity and safety profile, according to the standards which the JMT shall
adopt.
3.2 JMT Composition The Joint Management Team shall be comprised of
three (3) official representatives appointed by each party, initially
comprising:
From Abbott From RiboGene
Jacob J. Plattner, Ph.D. Laura S.L. Gaeta, Ph.D.
Paul A. Lartey, Ph.D. Charles M. Mochle, Ph.D.
Robert C. Goldman, Ph.D. Simon R. Green, Ph.D.
and shall be chaired by Dr. Jacob J. Plattner from Abbott. Each party may
appoint one or more alternates for such party's representatives upon reasonable
notice to the other party, with an alternate being counted for purposes of
constituting a quorum and/or being able to vote on a JMT
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matter, according to the provisions of Section 3.5 in both cases, only if the
representative for whom the alternate is substituting is not present. Either
party may change any of its official representatives or alternates, if
applicable, to the JMT, and Abbott may replace the chair of the JMT, upon
reasonable notice to the other party.
3.3 RiboGene Representatives Should two (2) or more of the official
RiboGene representatives initially appointed to the JMT relinquish active
participation in the Research Program, RiboGene shall notify Abbott, in advance
if possible, and RiboGene and Abbott shall promptly confer to evaluate the
potential impact of such losses on the Research Program. They shall, as
necessary, develop alternatives acceptable to both parties to assure
continuation of effective research oversight and direction. In the event the
parties are unable to agree upon an acceptable alternative after good faith
discussions, Abbott shall have the right, but not the obligation, to immediately
terminate this Research Agreement without further liability if Abbott reasonably
determines that RiboGene will not be replacing a departed/departing
representative with an individual of comparable or superior skills, experience
and qualifications, except for the reimbursement of RiboGene's documented,
reasonable, irrevocable commitments, which cannot otherwise be mitigated, as
provided and limited in Section 9.3.
3.4 Meetings The Chair shall convene the JMT in person at least once in
each Contract Quarter, with the meeting location alternating between Abbott
Park, Illinois and Hayward, California, or at sites otherwise agreed upon by the
parties. A representative of the party which is acting as host of the meeting
(i.e., the party located closest to the meeting site or, if the meeting is not
near the headquarters of either, the party which had not hosted the most recent
previous meeting) shall keep detailed records of such meeting and decisions,
and shall distribute copies of such records, together with a copy of all
written reports presented at the meeting, to all designated representatives and
alternates, if applicable, of the JMT. The Chair of the JMT shall be
responsible for keeping an official copy of all JMT meeting minutes and all
reports to the JMT. When a physical meeting is impractical, but JMT business
must be conducted between physical meetings, the Chair may convene a
teleconference of representative(s) and/or alternate(s), if applicable, of
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the parties, and the Chair shall designate a representative of one of the
parties to record and distribute a detailed record of such teleconference. In
all cases, each party shall pay all costs incurred by its own participation in
and, as applicable, its hosting of JMT meetings.
3.5 Decision Making The attendance or presence of at least two (2)
official representative(s) and/or previously-designated alternate(s), if
applicable, of each party shall constitute a quorum for purposes of the JMT
taking any action. All decisions of the JMT shall be reached by majority vote of
all of the official representatives/alternates present in person or by proxy,
with each official representative having one (1) vote on the JMT, and, if
necessary to break a tie in any vote, the Chair having one (1) extra vote.
3.6 Annual Research Plan Not later than sixty (60) days prior to the end
of each Contract Year following which research under this Agreement is to
continue, RiboGene and Abbott will jointly provide an Annual Research Plan for
the following Contract Year (including, if relevant, any twelve (12)-month
extension of the initial three (3)-year Research Term), to the JMT, which shall
review and attempt to approve the Annual Research Plan for the following
Contract Year by not later than thirty (30) days prior to the end of the
then-current Contract Year. Notwithstanding anything in this Agreement to the
contrary, the JMT may at any time during the term of this Agreement amend the
current Annual Research Plan.
IV. RESEARCH SUPPORT
4.1 Abbott Funding As consideration for RiboGene exerting all reasonable
efforts in the conduct of the Research Program and for the rights granted
hereunder, Abbott shall provide to RiboGene Five million United States dollars
(USD5,000,000) in funding, including payments for salaries, supplies,
materials, technology and other costs attributable to the Program, calculated on
a fully-burdened basis in accordance with standard accounting practices, for the
first three (3) years of the Research Program. In fulfillment of its obligations
hereunder, Abbott shall pay to RiboGene: Four hundred seventeen thousand U.S.
Dollars (USD417,000) within fifteen (15) calendar days after the Effective Date
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and within fifteen (15) calendar days of each of the following ten (10)
successive three (3)-month anniversaries thereof, and four hundred thirteen
thousand U.S. dollars (USD413,000) by January 31, 1999 for total payments of
five million United States dollars (USD5,000,000) during the initial three
(3)-year Research Term. RiboGene shall have no obligation to incur expenses in
the conduct of the Research Program in excess of the amounts funded under this
Section 4.1, unless RiboGene shall receive sufficient additional funding from
Abbott to cover such additional expenses, payable by Abbott based on invoices
for expenses, which expenses have been preapproved in writing by the JMT before
such additional expenses are incurred, with such invoices, or other
documentation acceptable to the JMT, being submitted to Abbott within thirty
(30) days of the end of the Contract Quarter during which such additional
expenses were incurred. In the event of premature termination of the Research
Program or any other event resulting in an incorrect payment by Abbott, RiboGene
shall remit any overpayment amount in such incorrect payment to Abbott, subject
to the provisions of Section 9.3, within thirty (30) days after such overpayment
occurs or is identified by either of the parties and, if necessary, brought to
RiboGene's attention.
4.2 Control RiboGene shall closely monitor expenditures for the
Research Program and shall take all necessary steps to cause the funds provided
by Abbott to be spent in accordance with this Agreement to accomplish the
objectives of the Research Program. It shall provide to the JMT, within thirty
(30) calendar days of the end of each Contract Quarter and within forty-five
(45) days of the end of the Research Term, as the case may be, either a detailed
written report of costs incurred by it in its Research Program activities during
the preceding Contract Quarter or a summary report of the costs incurred by it
during the entire Research Program.
V. CONFIDENTIALTY OF INDEPENDENT AND PROGRAM INFORMATION
5.1 Confidentiality and Nonuse Abbott and RiboGene agree that, for a
period of ten (10) years from the Effective Date, each will treat as
confidential, limiting access to the Receiving Party employees and
confidentiality-bound consultants who must know information for purposes
anticipated by this Agreement, and otherwise using at least the
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same internal security procedures and at least the same degree of care that it
uses to protect its own confidential, proprietary information, but in no event
less than reasonable care, to prevent the other party's Independent Information
that it receives and accepts under this Agreement, and Program Information,
according to the provisions of Section 5.4, generated under the provisions of
this Agreement, from entering the public domain or falling into the hands of
independent third parties, or from being used for its own benefit or the benefit
of any third party, except for purposes of this Agreement. No right to use, or
any title or license to the other party's Independent Information or Program
Information, other than the right to use such Independent Information and
Program Information for purposes of this Agreement, shall vest in the Receiving
Party or the Collateral Party, as the case may be, by virtue of disclosure, or
the existence of this Agreement, or the conduct of the Research Program. Should
either party use one or more independent consultants or collaborators for
purposes of this Agreement, that party shall execute appropriate confidentiality
agreements with any such third party consultant(s) or collaborator(s) in order
to protect the secrecy of the other party's proprietary information.
5.2 Required Disclosure If either party is required by a governmental
regulatory agency or court of competent jurisdiction to disclose either the
other party's Independent Information or Program Information, deemed
confidential to the other party under the provisions of Section 5.4, or to
disclose other details of this Agreement or of the Research Program, the party
subject to such requirement shall: (a) inform the other party as soon as
practical of such requirement; (b) reasonably cooperate with the other party in
efforts such other party may decide to take to try to protect its Independent
Information and/or Program information; and (c) release such Independent
Information and/or Program Information or other Program or Agreement details in
response to such requirement to the extent, and only to the extent, required by
such authority.
5.3 Return of Independent and Program Information Upon expiration of
this Agreement, and the request of the original Disclosing Party or Beneficiary
Party, as the case may be, or upon early termination hereof, the Receiving Party
or Collateral Party, as the case may be, shall,
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within one (1) month of such request or early Agreement termination, return or
deliver all copies of the Disclosing Party's Independent Information, as well as
Program Information deemed confidential to such party under the provisions of
Section 5.4, which Independent Information and Program Information is then in
the Receiving Party's/Collateral Party's possession, to the Disclosing
Party/Beneficiary Party, but the Receiving Party/Collateral Party, as the case
may be, may retain one (1) complete documentation copy of that Independent
and/or Program Information for archival purposes, only to assure compliance with
this Agreement, but shall not thereafter use or disclose any of the Disclosing
Party's Independent Information and/or the Beneficiary Party's Program
Information or claim any rights thereto.
5.4 Program Information All Program Information generated under this
Agreement shall be considered confidential by the party generating and the party
receiving such information from generation thereof through at least ninety (90)
days after the Receiving Party has received a reasonably-detailed description of
such Program information. RiboGene shall deem Program Information which relates
to Abbott Compounds and/or RiboGene Leads, and the characteristics, processes
for making and use thereof, and is identified and summarized in reasonable
detail in a writing, marked "Confidential", that is provided to RiboGene by
Abbott within the above-described ninety (90)-day period, to be Abbott's
property (Abbott being the "Beneficiary Party" and RiboGene being the
"Collateral Party", in this case) and to treat it in the same way it would treat
Abbott's Independent Information under the provisions of Section 5.1. Abbott
shall likewise deem Program Information which relates to the RiboGene's
proprietary screening and lead-identification technologies (i.e., Know-how)
existing on the Effective Date, and is identified and summarized in reasonable
detail in a writing, marked "Confidential", that is provided to Abbott by
RiboGene within the above-described ninety (90) day period, to be RiboGene's
property (RiboGene being the "Beneficiary Party" and Abbott being the
"Collateral Party", in this case) and to treat it in the same way it would treat
RiboGene's Independent Information under the provisions of Section 5.1. Program
Information which relates to one or more Program Inventions or Joint Program
Inventions, according to the provisions of Section 6.4, shall be kept
confidential by both parties at least until Abbott can determine the commercial
relevance or value of
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such Program Information or Joint Program Invention, which Abbott will make all
reasonable efforts to do in a reasonable amount of time. RiboGene may request
Abbott, at any time, to release any portion of Program Information from the
foregoing confidentiality restrictions and Abbott will not unreasonably refuse
such request. Unless such Program Information is released by Abbott or
otherwise published in a patent application, such Program Information shall be
considered confidential by both parties at least during the Research Term.
5.5 Nondisclosure of Third Party Confidential Information Neither
party shall disclose to the other any information which is confidential and/or
proprietary to any independent third party.
5.6 Publicity Except as permitted under Section 5.7, neither party
shall make any press release, or create any advertising, sales or other
promotional literature referring to this Agreement or the relationship
hereunder, or, except as required by applicable laws or regulations, make any
other public written or oral disclosure or statements relating to the Research
Program or the relationship between the parties created by this Agreement,
including stating, implying or suggesting that any form of joint venture,
affiliation or other association exists as a result of this Agreement between
RiboGene and Abbott, without the prior written approval of the other party,
which approval shall not be unreasonably withheld.
5.7 Permitted Disclosure Abbott may disclose such information related
to the Research Program as is essential to enable Abbott to carry out the
evaluation and/or development of any product, process or service discovered or
developed employing results of the Research Program or to secure a governmental
approval therefor.
5.8 Publications Each party shall submit to the other, at least
forty-five (45) days prior to submission for publication or from otherwise
sharing with independent third parties, either the draft of any manuscript
comprising details of or results from the Research Program that such furnishing
party intends to submit for publication, or the subject matter comprising such
details or results that it would otherwise like to share with independent third
parties. Within such forty-five (45)-day period,
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the receiving party will advise the furnishing party, in good faith, of any
potential material adverse consequences of such disclosure perceived by the
receiving party. The furnishing party may then either (i) delete the sensitive
Independent Information and/or Program Information from the manuscript and
substitute scientifically-meaningful information that does not contain the
receiving party's Independent Information or its Program Information still
subject to confidential treatment by the furnishing party according to the
provisions of Section 5.4, or (ii) suspend plans for such publication or other
disclosure. Upon Abbott's request, or Abbott's approval of RiboGene's request,
RiboGene shall acknowledge Abbott's support of the Research Program in approved
scientific publications or other approved communications.
VI. RIGHTS TO PROGRAM INVENTIONS
6.1 Disclosure of Inventions Program Inventions shall be promptly
disclosed by the originating party to the other party, and Joint Program
Inventions shall be promptly fully shared between the parties.
6.2 Determination of Inventorship Upon the sharing of reasonably-full
details of such Program Inventions and Joint Program Inventions, the respective
patent authorities of the parties shall determine inventorship of such Program
Inventions and Joint Program Inventions, in good faith, according to United
States patent practice. In the event such patent authorities of the parties
cannot agree on the determination of inventorship of a Program Invention or
Joint Program Invention, the parties shall jointly refer the question of such
inventorship to independent outside patent counsel jointly selected and paid in
equal measure by the parties, and the parties shall be bound by the
determination of inventorship of the Program invention or Joint Program
Invention made by such independent patent counsel.
6.3 First Assignment of Rights The respective patent authorities of the
parties shall make an initial determination of the subject matter of the
Program Invention or Joint Program Invention, using all reasonable efforts to
resolve any disagreement between them, and based on that/those determination(s),
Program Inventions or Joint Program Inventions which directly relate to Abbott
Compounds and/or RiboGene
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Leads and the processes of making and use thereof shall be assigned to Abbott,
with all rights to make, have made, import, use, offer to sell, sell and/or
sublicense such Program Inventions or Joint Program Inventions, regardless of
the inventorship of such Inventions, and Program Inventions or Joint Program
Inventions which directly relate to RiboGene's proprietary screening and
lead-identification technologies in existence as of the Effective Date shall be
assigned to RiboGene, with all rights to make, have made, import, use, offer to
sell, sell and/or sublicense such Program Inventions or Joint Program
Inventions, regardless of the inventorship of such Inventions. Abbott shall be
responsible for all decisions, with reasonable consideration of the
confidentiality interests of RiboGene, as well as for all costs related to all
preparation and filings (domestic and international), and related patent
prosecution, issuance, maintenance, enforcement and defense, according to
Abbott's patent policies and procedures, directly related to Abbott Compounds
and/or RiboGene Leads and the processes of making and use thereof. RiboGene
shall be responsible for all decisions, with reasonable consideration of the
confidentiality interests of Abbott, as well as for all costs, related to all
preparation and filings (domestic and international), and related patent
prosecution, issuance, maintenance, enforcement and defense, according to
RiboGene's patent policies and procedures, directly related to RiboGene's
proprietary screening and lead-identification technologies in existence as of
the Effective Date. Each Collateral Party, under this Section 6.3, shall
cooperate with the Beneficiary Party's designated patent counsel to provide
reasonable assistance, at the Beneficiary Party's expense, in any activities the
Beneficiary Party chooses to pursue to protect its interests In such Program
Inventions and/or Joint Program Inventions, without any obligation to or
remaining right In that Collateral Party under any resulting patent(s). However,
neither party shall have any obligation to the other party to file, prosecute,
issue, maintain, enforce or defend any patent application or patent claiming a
Program Invention or Joint Program Invention related to its interests as
delineated immediately above.
6.4 Alternate Assignment of Rights (a) As to any Program Inventions
which do not fit Into either the category directly assignable to Abbott or the
category directly assignable to RiboGene according to the provisions of Section
6.3, which are made solely by Inventors who are
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employees or associates, at the time of inventive contribution, of either
RiboGene or Abbott, the party of which the inventors are employees or
associates, shall have the right to elect to retain title to those Program
Inventions.
If the party, the employee(s) of which is/are sole inventor(s) of such Program
Invention, is Abbott, Abbott shall be responsible for all decisions and costs
related to whether to file for patent protection, as well as to the preparation,
domestic and/or foreign filing(s), related patent prosecution, issuance,
maintenance, enforcement and defense of patent applications and/or patents
covering such Program Invention, according to its patent policies and
procedures.
If that party is RiboGene, RiboGene shall offer the Program Invention to Abbott,
and if, within forty-five (45) days of receiving a reasonably-detailed written
description of the Program Invention, Abbott notifies RiboGene that Abbott is
interested in having a nonexclusive license, with the right to sublicense only
for Abbott's direct research and/or production benefit, under any resulting
patent rights in such Program Invention, Abbott shall, in good faith, assume the
responsibility, employing standards and criteria no less rigorous than it
employs with respect to the protection of its own inventions of similar
scientific and commercial value, keeping RiboGene fully aware of the filing and
status of any patent application(s) and/or patent(s) covering such Program
Invention and involved with pertinent decisions with respect to such patent
application(s) and/or patent(s) and fully considering RiboGene's interests and
suggestions with respect to the scope and content of such application(s) and/or
patent(s), for preparing, in cooperation with RiboGene's designated patent
counsel, filing (domestic and foreign--with RiboGene as assignee of such
application(s)), prosecuting, issuing, maintaining, defending and enforcing such
patents and/or patent applications, including assuming all costs, and receiving
for its own benefit all recoveries, associated with all patent applications
and/or patents in which it has an interest. Failure by Abbott to notify
RiboGene, within such forty-five (45) day period, of Abbott's interest in having
a nonexclusive license to such Program invention shall be deemed to be a waiver
of Abbott's interest in such a license.
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In cases of a RiboGene Program Invention in which Abbott notifies RiboGene that
Abbott has no interest, or after forty-five (45) days following Abbott's receipt
of a reasonably-detailed description of such Program Invention when Abbott has
not indicated an interest to RiboGene, or in specific cases of actual or
possible patent application(s) and/or patent(s) claiming such RiboGene Program
Invention in jurisdictions in which Abbott has no or no longer has an interest,
Abbott, according to the particular circumstances, shall relinquish all rights
to and interest in such Program Invention to RiboGene and/or shall offer to
assign such patent application(s) and/or patent(s) claiming such RiboGene
Program Invention to RiboGene, or if RiboGene has no interest, may abandon such
patent application(s) and/or patent(s), at Abbott's option and according to
Abbott's policies. Upon either relinquishing its interest or assigning such
patent application(s) and/or patent(s) to RiboGene, Abbott shall cooperate with
and provide reasonable assistance to RiboGene, at RiboGene's expense, for any
activities RiboGene chooses to pursue with respect to such patent application(s)
and/or patent(s) claiming such Program Invention, including filing patent
application(s), or assuming all rights to the filing(s) or other actions that
Abbott has already taken with respect to that Program Invention, and/or taking
such other action(s) as it desires, in its sole discretion and at its sole
expense from then on, with respect to such Program Invention, and Abbott will
consequently have no rights or obligations relative to patent rights covering
that particular Program Invention either anywhere or in particular
jurisdictions, as the case may be.
(b) As to any Joint Program Inventions which do not fit into either the
category directly assignable to Abbott or the category directly assignable to
RiboGene according to the provisions of Section 6.3, wherein employees or
associates of each of the parties have been identified as inventors of the same
invention conceived and reduced to practice under the Program, according to
United States patent practice, each party may elect to retain its undivided
interest in such Joint Program Invention and will consult with the other party
on whether and where to file patent applications on such Joint Program
Invention.
If, within forty-five (45) days of the mutual written agreement that there is a
Joint Program Invention on which one or more patent applications
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should be filed, Abbott notifies RiboGene that it is interested in retaining its
undivided interest under any resulting patent rights in such Joint Program
Invention, Abbott shall, in good faith, assume the responsibility, employing
standards and criteria no less rigorous than it employs with respect to the
protection of its own inventions of similar scientific and commercial value,
keeping RiboGene fully aware of the filing and status of any patent application
and/or patent covering such Program Invention and involved with pertinent
decisions with respect to such patent application and/or patent and fully
considering RiboGene's interests and suggestions with respect to the scope and
content of such application and/or patent, for preparing, in cooperation with
RiboGene's designated patent counsel, filing (domestic and foreign--with both
Abbott and RiboGene being named assignees of such application(s)), prosecuting,
issuing, maintaining, defending and enforcing such patent applications and/or
patents, including assuming all costs associated with all patent applications
and/or patents in which it continues to have an interest.
As in Section 6.4(a), in cases of actual or possible patent applications and/or
patents claiming a particular Joint Program Invention in jurisdictions in which
Abbott has no or no longer has an interest, or if Abbott has no interest in
retaining its rights In such Joint Program Invention, Abbott, according to the
particular circumstances, shall relinquish all rights to, interest in or
obligations under any patent application or patent covering such Joint Program
Invention to RiboGene, and/or shall offer to assign such patent applications
and/or patents to RiboGene, or if RiboGene has no interest, the, parties will
jointly abandon such patent application(s) and/or patent(s), according to
Abbott's policies. Upon either relinquishing its interest or assigning such
patent application(s) and/or patent(s) to RiboGene, Abbott shall cooperate with
and provide reasonable assistance to RiboGene, at RiboGene's expense, for any
activities RiboGene chooses to pursue with respect to such patent applications
and/or patents, including filing patent application(s), or assuming all rights
to the filing(s) or other actions that Abbott has already taken with respect to
that Joint Program Invention, and/or take such other action(s) at it/they
desire(s), in, its/their sole discretion and at its/their sole expense from then
on, with respect to such Joint Program Invention, and Abbott will consequently
have no rights or obligations relative to patent rights covering that particular
Joint Program Invention
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either anywhere or in particular jurisdictions, as the case may be.
6.5 Ownership Rights RiboGene acknowledges that Abbott shall have full
ownership, title, interest and all rights in and to all Abbott Compounds and,
subject to the provision of the second sentence of Section 1.20, each RiboGene
Lead provided under this Agreement, to the extent that RiboGene is able to grant
such exclusive ownership to same, and that Abbott, at its own expense, may use
such Abbott Compounds and/or RiboGene Leads in any manner that Abbott, at its
sole option, shall choose, not limited to development of such Abbott Compound
and/or RiboGene Lead for an indication identified with the Research Program.
RiboGene shall not disclose any information which is specific to such Abbott
Compounds and/or RiboGene Leads, not including information related to RiboGene
Intellectual Property which does not involve Abbott Compounds and/or such
RiboGene Leads, except pursuant to the Research Program. Any Information,
inventions or discoveries (whether patentable or not), innovations, ideas,
communications, correspondence, notes, laboratory notebooks, reports, data,
records, results, and all derived products, which are conceived, reduced to
practice, made or developed by or for Abbott with such Abbott Compounds,
RiboGene Leads and/or Product(s) based thereon, as well as all files,
registrations or marketing approvals related to such Abbott Compounds, RiboGene
Leads and/or Product(s), shall be the sole property of Abbott. Abbott
acknowledges that, under this Agreement, Abbott shall have no right to restrict
RiboGene's activities with any compound or material other than Abbott Compounds
and RiboGene Leads.
6.6 Invention Use During the Research Term Notwithstanding any of the
ownership and/or rights provisions of Sections 6.3, 6.4 and 6.5, RiboGene shall
have a nonexclusive, nontransferrable, royalty-free license to practice any
Program Invention assigned to Abbott and/or Joint Program Invention for purposes
of the Research Program during the Research Term.
6.7 Invention Rights Following the Research Term Following the
termination or expiration of the Research Term, each party may practice any
Program Invention and/or Joint Program Invention for which that party is the
sole or joint title holder and/or patentee, and for which it has not forfeited
its rights, according to the provisions of Section 6.4,
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without obligation to the other party. Also following such termination or
expiration, RiboGene shall also be free to nonexclusively license its rights to
Program Invention(s) under Section 6.4(a) or Joint Program Invention(s) under
Section 6.4(b) that are solely or jointly assigned to RiboGene, and may
exclusively license such rights to such Program Invention(s) and Joint Program
Invention(s) in which Abbott has failed to exercise or has disclaimed an
interest, without obligation to Abbott.
VII. WARRANTIES AND LIMITATIONS ON RIGHTS
7.1 RiboGene Warranties RiboGene hereby represents and warrants to
Abbott that, as of the Effective Date: (a) RiboGene has or will have upon
execution of this Research Agreement and the fulfillment of Abbott's financial
obligations hereunder, all the requisite resources, power and authority to
execute, deliver and perform this Agreement based on RiboGene's assumptions
regarding its funding requirements; (b) RiboGene will commit the resources and
skilled personnel necessary to fulfill its obligations under the Research
Program and will spend the research funds provided by Abbott hereunder solely in
support of the Program and for RiboGene's fully-burdened expenses related
specifically thereto; (c) the terms of this Agreement are not inconsistent with
any other contractual and/or legal obligations it may have, or with its policies
or the policies of any entity with which it is associated; (d) RiboGene believes
to the best of its knowledge, that it owns or otherwise has all necessary rights
to the screening and lead-identification technology and other RiboGene
Intellectual Property in existence as of the Effective Date that it proposes to
apply in the Research Program, and will own or otherwise have all necessary
rights to the anticipated screening and lead-identification technology and other
RiboGene Intellectual Property that it is developing and proposes to apply in
the Research Program; (e) it has experience with respect to the safety and
handling of the types of biological materials and synthetic chemicals that it
may be screening for Abbott hereunder; (f) it will provide all safety and
handling information related to materials, including RiboGene Compounds, or
other results coming from the Research Program and all know-how related thereto
of which it is aware, upon delivery of such materials or results to Abbott; (g)
it has not and shall not engage in any act inconsistent With this Agreement,
particularly that would allow any third party, including
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any government or government agency, to acquire, own or possess any right or
interest inconsistent with Abbott's rights in any invention (whether patentable
or not), trade secret, or other proprietary right that arises out of or is made
as a consequence of this Agreement; and (h) this Agreement has been duly
authorized and, when executed and delivered by RiboGene, shall constitute a
legal, binding obligation, enforceable against RiboGene, according to its terms.
7.2 Limitation on Warranties RiboGene makes no representation or
warranty that the RiboGene Compounds identified to Abbott by. RiboGene hereunder
are novel entities or will not infringe the patent rights of others, but only
that the RiboGene Compounds which may be provided to Abbott hereunder will be
representative samples of such entities.
7.3 Disclaimer Abbott and RiboGene each understands that neither party
can guarantee the reliability of its research findings and conclusions, and
therefore, except as expressly set forth in this Agreement, NEITHER PARTY HAS
MADE OR MAKES ANY GUARANTEES AND EXTENDS ANY WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY PROVIDED HEREIN. THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES OF DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR THAT ANY RIBOGENE OR ABBOTT COMPOUNDS IDENTIFIED IN THE RESEARCH
PROGRAM WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHTS OF ANY INDEPENDENT THIRD PARTY. FURTHER, THERE ARE NO OTHER
EXPRESS OR IMPLIED WARRANTIES ARISING FROM THE COURSE OF DEALING, USAGE OR TRADE
PRACTICES, OR OF ANY OTHER KIND.
7.4 Limitations on Rights Nothing In this Agreement shall be construed
as:
(a) conferring rights to use in advertising, publicity,
promotional or sales literature the name of the other party. or anything
relating to the Research Program, without the prior written consent of the other
party In each instance; or
(b) granting, by implication, estoppel, or otherwise as a result of
this Agreement, any activities hereunder or the relationship of the parties, any
license, title, ownership or other rights to the other party's Independent
Information or Program Information or under patents
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or know-how of the other party except as necessary to accomplish the purposes of
the Research Program and this Agreement or except as explicitly provided herein.
Each party acknowledges that, by virtue of this Agreement it acquires only such
rights as set forth under the terms and conditions of this Agreement.
VIII. LIABILITIES AND INDEMNITY
8.1 Liabilities Each party shall assume the responsibility for and
will pay all costs and expenses (including reasonable attorneys' fees and
expenses of litigation) related to liability, losses or damage to property,
including environmental, and injury or death to any persons, including employees
of either, incurred in connection with any claims, suits, actions, demands or
judgments arising out of (a) any failure by such party to strictly adhere to
safety instructions, precautions and information provided by the other party
and/or other generally-recognized safety practices for the storage, handling,
use and/or disposal of any biological, chemical or other materials employed
under or resulting from this Agreement; (b) any use by such party of information
or materials developed under the Research Program or the use, handling, storage
or disposal of any Abbott Compound(s) or RiboGene Compound(s) resulting from the
Research Program, except in reliance on a willful or grossly negligent
misrepresentation or wrongdoing of the other party; or (c) any noncompliance or
breach of this Agreement or other willful or negligent act or omission on its
part in the performance of activities and/or obligations under this Agreement.
Each party shall, however, provide the party assuming responsibility with
assistance and/or information, at the responsible party's reasonable expense,
with respect to any charge, claim, investigation or proceeding. EXCEPT AS SET
FORTH IN SECTION 8.2, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR LOST PROFITS OR ANY CONSEQUENTIAL, SPECIAL INCIDENTAL, OR INDIRECT
DAMAGES OF SUCH OTHER PARTY, HOWEVER CAUSED AND/OR ON ANY THEORY OF LIABILITY,
ARISING OUT OF THIS AGREEMENT.
8.2 Indemnification Each party (the "Indemnifying Party") shall defend
the other party and such other party's agents, Affiliates, employees, officers,
directors, shareholders and permitted successors and
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assigns (collectively, the "Indemnified Parties") against any claim made against
any or all of the Indemnified Parties by any third party, to the extent that
such claim arises out of any negligent, reckless or intentionally wrongful act
or omission of the Indemnifying Party or breach of this Agreement by the
Indemnifying Party. The Indemnifying Party shall either settle such claim or pay
all damages awarded against any or all of the Indemnified Parties by a court of
competent jurisdiction as a result of such claims, but no indemnification shall
necessarily be provided for such claim if the particular Indemnified Party(ies)
does/do not notify the Indemnifying Party promptly in writing of the claim, give
the Indemnifying Party the exclusive control of the defense and settlement
thereof, and provide all reasonable assistance In connection with the defense
or settlement thereof, at the Indemnifying Party's expense.
IX TERM AND TERMINATION
9.1 Term This Agreement shall be effective upon the Effective Date and
shall continue in effect through the expiration or termination of the Research
Term, unless extended in writing in accordance with the provisions of Section
9.2.
9.2 Possible Extension Upon the mutual agreement of the parties, this
Research Agreement may be extended for a period and under such other provisions
and/or amendments to the provisions of this Agreement, to be agreed upon in good
faith negotiations between the parties.
9.3 Termination Without Breach Prior to the expiration of the Research
Term, Abbott may terminate this Agreement in its entirety without cause upon
sixty (60)-days written notice to RiboGene. Upon such termination, Abbott shall
reimburse RiboGene for all documented, reasonable irrevocable commitments made
by RiboGene on behalf of the Research Program that are not covered by payments
made by Abbott to RiboGene prior to such termination, but in no event shall
Abbott be obliged to make payments to RiboGene which shall result in total
aggregate payments, according to the provisions of Article IV, of more than Five
million U.S. dollars (USD5,000,000) without the prior written approval of
Abbott. RiboGene shall, however, use all reasonable efforts to mitigate these
costs by, inter alia, reassigning personnel and transferring supplies,
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materials and/or technology, where practical. In the event of any overpayment by
Abbott, RiboGene shall remit the same to Abbott within thirty (30) days of the
termination of the Research Program.
9.4 Effect of Breach In the event of a breach by RiboGene of any
material provision of this Agreement, or default by Abbott of any of Abbott's
financial obligations to RiboGene or a material breach by Abbott of Abbott's
confidentiality obligations hereunder, the aggrieved party shall give the party
in breach or default thirty (30)-day written notice to cure or substantially
cure such breach or default. If the breach or default is not cured or not
substantially cured within such thirty (30)-day period, the aggrieved party
shall immediately submit any dispute raised in a response to the aggrieved
party's written notice to the Alternative Dispute Resolution provisions of
Section 10.7, and only if the other party fails to honor the resolution of the
Alternative Dispute Resolution procedures may the aggrieved party terminate this
Agreement upon giving final written notice to the other party.
9.5 Effect of Bankruptcy or Agreement Revision Abbott may terminate
this Agreement upon the filing of a voluntary petition in bankruptcy by RiboGene
or a third party's filing of an involuntary petition in bankruptcy with respect
to RiboGene, which involuntary petition is not dismissed within forty-five (45)
days after the filing thereof, or if removal of a material part or parts of this
Agreement which are found to be void, invalid or unenforceable according to the
provisions of Section 10.9 would so substantially impair the value of the whole
Agreement to Abbott as to make continuance Impractical. If at any time during
the anticipated term or any extended term of this Agreement RiboGene files for
bankruptcy or an involuntary petition with respect to RiboGene is not dismissed,
and providing Abbott shall have paid to RiboGene or trustee(s) therefor at least
one million U.S. dollars (USD1,000,000) anticipated under the provisions of
Section 4.1 and all reasonable additional amounts, If any, that are owed to
RiboGene for activities actually fulfilled under the provisions of an extension
to this Agreement, provided for in Section 9.2, Abbott shall receive sufficient
representative amounts of all RiboGene Compound(s), whether originally
independently owned by or licensed to RiboGene or subsequently owned, purchased
or licensed by RiboGene during the Research Term, to complete or have completed
the
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anticipated Provisions and/or possibilities of this Agreement and shall
thereafter have a fully paid-up, nonterminable, nonexclusive license from
RiboGene and/or its trustee(s) to screen and/or otherwise use RiboGene Compounds
and RiboGene Intellectual Property to complete the anticipated provisions and/or
possibilities of the Research Program. At Abbot's option, Abbott shall have the
right under RiboGene Intellectual Property to make, have made, import, develop,
use, and otherwise evaluate Abbott Compounds and/or RiboGene Compounds, and,
with RiboGene's trustee(s) acting in RiboGene's stead, the right to obtain an
exclusive license to make, have made, import, use, offer for sale and sell
RiboGene Compounds and/or Products for consideration (i) equal to one hundred
percent (100%) of that anticipated in the License Agreement, in the event that
RiboGene files for bankruptcy, or an involuntary petition with respect to
RiboGene is not dismissed within forty-five (45) days after the filing thereof,
after the conclusion of the Research Term, or (ii) that shall be negotiated in
good faith between Abbott and the trustee(s), but will be no more than fifty
percent (50%) of that anticipated in the License Agreement, in the event that
RiboGene files for bankruptcy, or an involuntary petition with respect to
RiboGene is not dismissed within forty-five (45) days after the filing thereof,
prior to the conclusion of the Research Term.
9.6 Consequences of Termination Expiration or termination of this
Agreement by either party shall not affect the rights and obligations of the
parties that have accrued prior to the effective date of termination of this
Agreement, including provisions referenced In the License Agreement which
survive this Agreement, to the extent such survival is necessary for the
interpretation of a provision of the License Agreement. Should Abbott terminate
this Agreement under the provisions of Section 9.3, or should Abbott fail to
honor the resolution of the Alternative Dispute Resolution provisions of Section
10.7 initiated by RiboGene under the provisions of Section 9.4, RiboGene's
obligation under Section 2.9 shall terminate immediately upon termination of
this Agreement.
X. MISCELLANEOUS
10.1 Notices All notices required or permitted hereunder shall be
transmitted, or at least immediately affirmed, in writing by facsimile, followed
by confirmation of that facsimile either by registered or
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certified mail, postage prepaid, return receipt requested, or by overnight
courier, addressed as follows, or to such other address as may be designated
from time to time by notice given by the respective party:
If to Abbott: Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile No.: (847) 938-1674
Attention: V.P., Anti-Infective Discovery, PPD R&D
cc: Vice President, Pharmaceutical Discovery
cc: Legal Division
If to RiboGene: RiboGene, Inc.
21375 Cabot Boulevard
Hayward, California 94545
Facsimile No.: (510) 293-2596
Attention: President and CEO
10.2 Independence of Parties The status of each party under this
Agreement is that of an independent contractor, and neither party has the right
or authority to assume or create any obligation, accept legal process, make
commitments, incur any charges or otherwise bind or act on behalf of the other
or limit the other in any manner whatsoever, except as expressly stated herein.
Neither this Agreement nor any act hereunder shall be construed as constituting
the foundation of a partnership, association, agency, joint venture or any other
entity.
10.3 Impact on Other Relationships Neither the existence of this
Agreement nor the relationship of the parties hereunder shall impede either
party from engaging in any Independent activity, or, except as provided in
Section 2.9, as modified by Section 2.10, from entering into or continuing any
agreement with any third party directed to screening activities and commercial
candidate compound identification.
10.4 No Third-Party Beneficiaries No person or entity not a party to
this Agreement, including any employee of either party to this Agreement, shall
have or acquire any rights by reason of this Agreement,
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nor shall any party have any obligations or liabilities to such person or entity
by reason of this Agreement, except as provided under the provisions of Article
VIII.
10.5 No Waiver Failure by either party to enforce, or delay in
exercising, or partial exercise of any covenants or rights or remedies under
this Agreement shall not be deemed or construed as a waiver of such rights nor
shall a waiver by either party in one or more instances be construed as
constituting a continuing waiver or as a waiver in other or subsequent
instances.
10.6 Merger Clause This Agreement constitutes the complete and entire
understanding between the parties with respect to the screening and lead
identification activities anticipated hereunder, superseding and replacing all
prior oral or written agreements (except for the accrued rights and obligations
of the June 8, 1995 Confidential Disclosure Agreement and June 7, 1995 Materials
Transfer Agreement between the parties), communications, representations,
proposals, or negotiations specifically relating to the activities hereunder and
subject matter hereof. No change or addition to or variation or amendment of
this Agreement, nor any cancellation or waiver of any of the terms or provisions
hereof, nor any alteration or modification of any of the terms and conditions
hereof, shall be effective or valid and binding on either party unless in
writing and signed by a duly-authorized representative of each party.
10.7 Alternative Dispute Resolution The parties shall attempt to
amicably resolve disputes arising between them regarding the validity,
construction, enforceability or performance of the terms of this Agreement, and
any differences or disputes in the interpretation of the rights, obligations,
liabilities and/or remedies hereunder, which have been identified in a written
notice from one party to the other, by good faith settlement discussions between
their respective representatives. If the parties have failed to satisfactorily
resolve the dispute or difference after receipt of such written notice and
twenty-eight (28) calendar days having expired without the parties having
reached a satisfactory resolution, either party may initiate Alternative Dispute
Resolution ("ADR") procedures, during which each party shall have the right to
be
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represented by counsel, for resolution of all such disputes.
A. To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14)
calendar days after its receipt of such notice, the other party may, by
written notice to the party initiating the ADR, add additional issues to
be resolved within the same ADR.
B. Within twenty-one (21) calendar days following receipt of the original
ADR notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If the
parties are unable to agree on a mutually acceptable neutral within such
period, either party may request the President of the CPR Institute for
Dispute Resolution ("CPR"), 366 Madison Avenue, 14th Floor, New York,
New York 10017, to select a neutral pursuant to the following
procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates, believed qualified to undertake
an ADR relating to the subject matter in dispute, within
fourteen (14) calendar days after receipt of the request,
along with a Curriculum Vitae for each candidate. No
candidate shall be an employee, director, or shareholder
of either party or any of their subsidiaries or
affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
Impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the
greatest preference) and shall deliver the list to the
CPR, within seven (7) calendar days following receipt of
the list of candidates. If a party believes a conflict of
interest exists regarding any of the candidates, that
party shall provide a written explanation of the conflict
to the CPR along with its list showing its order of
preference for the candidates. Any party failing to return
a list of preferences on time shall be deemed to
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have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR
immediately shall designate as the neutral the candidate
for whom the parties collectively have indicated the
greatest preference. If a tie should result between two
(2) candidates, the CPR may designate either candidate. If
the parties collectively have identified three (3) or more
candidates deemed to have conflicts, the CPR shall review
the explanations regarding conflicts and, in its sole
discretion, may either (i) immediately designate as the
neutral the candidate for whom the parties collectively
have indicated the greatest preference, or (ii) issue a
new list of not less than five (5) candidates, in which
case the procedures set forth in subparagraphs B(a) - B(d)
shall be repeated.
C. No earlier than twenty-eight (28) calendar days or later than fifty-six
(56) calendar days after selection, the neutral shall hold a hearing to
resolve each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the
parties cannot agree, the neutral shall designate a location other than
the principal place of business of either party or any of their
subsidiaries or affiliates.
D. At least seven (7) calendar days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony
of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy
for each issue. The proposed rulings and remedies
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shall not contain any recitation of the facts or any legal
arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty
(20) pages. This page limitation shall apply regardless of
the number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs D(a) - D(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
E. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine
whether each party has had the five (5) hours to which it
is entitled.
(b) Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal
testimony, documents or other evidence, to cross-examine
witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately
after their direct testimony, and cross-examination time
shall be charged against the party conducting the
cross-examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address
not only issues it raised but also any issues raised by
the responding party. The responding party, if it chooses
to make an opening statement, also shall address all issues
raised in the ADR. Thereafter, the presentation of regular
and rebuttal testimony and documents, other evidence, and
closing arguments shall proceed in the same sequence.
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<PAGE> 41
(d) Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances.
Affidavits prepared for purposes of the ADR hearing also
shall not be admissible. As to all other matters, the
neutral shall have sole discretion regarding the
admissibility of any evidence.
F. Within seven (7) calendar days following completion of the hearing, each
party may submit to the other party and the neutral a posthearing brief
in support of its proposed rulings and remedies, provided that such
brief shall not contain or discuss any new evidence and shall not exceed
ten (10) pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
G. The neutral shall rule on each disputed issue within fourteen (14)
calendar days following completion of the hearing. Such ruling shall
adopt in its entirety the proposed ruling and remedy of one of the
parties on each disputed issue but may adopt one party's proposed
rulings and remedies on some issues and the other party's proposed
rulings and remedies on other issues. The neutral shall not issue any
written opinion or otherwise explain the basis of the ruling.
H. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the
prevailing party (including all expert witness fees and expenses), the
fees and expenses of a court reporter, and any expenses for a hearing
room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such
fees and expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall
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<PAGE> 42
issue with the rulings a written determination as to how
such fees and expenses shall be allocated between the
parties. The neutral shall allocate fees and expenses in a
way that bears a reasonable relationship to the outcome of
the ADR, with the party prevailing on more issues, or on
issues of greater value or gravity, recovering a
relatively larger share of its legal fees and expenses.
I. The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction.
J. Except as provided in paragraph I or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral shall have the authority to impose sanctions for unauthorized
disclosure of Confidential Information.
10.8 Headings. Article and Section headings are inserted in this
Agreement for convenience of reference only and no construction, meaning,
interpretation or inference shall be derived from them.
10.9 Governmental Compliance and Effect of Invalidity. This Agreement and
performance hereunder is subject to the restrictions, limitations, terms and
conditions of all applicable governmental regulations, approvals and clearances.
If any term or provision of this Agreement is held invalid, illegal or
unenforceable in any respect, for any reason, that invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this
Agreement shall be interpreted as if such term or provision, to the extent the
same shall have been held to be invalid, illegal or unenforceable, had never
been contained herein, with the other provisions of this Agreement remaining in
force.
10.10 Assignability. This Agreement and the rights, obligations,
privileges, and interests hereof may not be assigned by either party, except
that either party may assign this Agreement and rights and interests, in whole
or in part, (i) to any of its Affiliates, provided that the assigning party
continues to guarantee the performance of such
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<PAGE> 43
Affiliate(s), or (ii) with the consent of the other party, which consent shall
not be unreasonably withheld, to any purchaser of all or substantially all of
its stock or assets of such party (including the assets associated with the
Research Program), or to any acquirer or successor corporation resulting from
any merger or consolidation with or into such successor corporation.
10.11 Succession. This Agreement and the rights and obligations granted
and undertaken hereunder shall be binding upon and enure to the benefit of the
parties hereto, and their permitted assign(s), successor(s), trustee(s) or
receiver(s) in bankruptcy.
10.12 Government Compliance. RiboGene and Abbott shall comply with all
federal, state, and local laws, ordinances and regulations applicable to the
shipment, handling, storage, testing, use, development, sale and/or disposal of
any compound or peptide hereunder.
10.13 Governing Law. The validity, construction, and performance of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York, U.S.A., excluding its choice of laws provisions.
IN WITNESS WHEREOF, authorized representatives of the parties have duly
executed this Agreement in duplicate.
RIBOGENE, INC ABBOTT LABORATORIES
By: /s/ CHARLES J. CASAMENTO By: /s/ THOMAS R. HODGSON
------------------------------ ----------------------------------------
Name: Charles J. Casamento Name: Thomas R. Hodgson
Title: Chairman, President & CEO Title: President and Chief Operating Officer
--------------------------- --------------------------------------
Date: April 26, 1996 Date: April 24, 1996
--------------------------- --------------------------------------
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<PAGE> 44
EXHIBIT A
<TABLE>
<CAPTION>
COUNTRY APPLICATION NO. FILING DATE PATENT NO. ISSUE DATE
<S> <C> <C> <C> <C>
U.S 08/328,258 10/24/93
(PCT) 94/12,161 10/14/94
</TABLE>
<PAGE> 45
EXHIBIT I
ABBOTT/RIBOGENE ANNUAL RESEARCH PLAN
FOR ANTIFUNGAL COMPOUND DEVELOPMENT
(April, 1996-April, 1997)
This Exhibit represents the initial Annual Research Plan, stating the objectives
and describing the activities for the first Contract Year of the Research
Program under the Abbott-RiboGene Research Agreement of April, 1996.
Modifications to this Program will occur as the result of further discussions of
the Joint Management Team (JMT). It is understood that the conditions and other
provisions of the Research Agreement apply and control this Exhibit in all
respects.
RESEARCH GOALS
The Abbott/RiboGene Research Program shall be focused on, but not limited to,
research and development directed to both oral and intravenous forms of
compounds, which have broad spectrum antifungal activity, for use in treatment
of systemic fungal infections. An objective of this Research Program during the
initial phase (the period after the Research Agreement is signed, but before the
JMT has convened) of the Agreement is to capitalize on the full potential of
RiboGene's proprietary and novel approaches to developing inhibitors of fungal
protein translation.
RESEARCH PROGRAM COMPONENTS
PRIMARY SCREENS
It shall be the priority of RiboGene scientists to complete the screening of
RiboGene libraries through RiboGene's GCN4 and yEF-3 primary translation
inhibition screening assays. Upon signing of the Research Agreement, Abbott will
begin to provide compounds from Abbott's library to RiboGene for screening in
these same two primary assays. The rate, at Abbott's option, at which these
compounds will be provided to RiboGene shall be targeted to providing RiboGene
with samples of all compounds to be tested from the Abbott library over a 12
month period.
<PAGE> 46
SECONDARY SCREENS
Compounds identified as reactive in the primary screens will undergo further
testing at RiboGene and at Abbott. RiboGene will perform in vitro translation
testing using both fungal and mammalian translation systems. The spectrum of
antifungal activity for compounds identified by the primary screens will be
determined at Abbott and will include, but not be limited to, testing vs. [*]
species.
TERTIARY SCREENS
Compounds identified by the JMT as candidates for tertiary screening will be
tested at Abbott in in vivo models of acute and chronic fungal infections. In
addition, Abbott will perform appropriate pharmacokinetic and acute toxicity
studies on these compounds.
CHEMISTRY
The JMT shall determine which RiboGene Compounds should be structurally
modified at Abbott using traditional medicinal chemistry and/or combinatorial
chemistry methods to attempt to improve the pharmaceutical properties of these
compounds. All compounds which represent modifications of RiboGene Compounds
derived from these approaches shall be evaluated for protein synthesis
inhibition and antifungal activity at both RiboGene and Abbott.
DEVELOPMENT OF NEW ANTIFUNGAL PRIMARY SCREENING ASSAYS RiboGene will initiate
and direct and Abbott will participate in planning research toward the
development of new translation-based primary screening assays which identify [*]
inhibitors and compounds which suppress [*] during the first 8 months of the
Research Program. The goal during this period is to bring on line 2 additional
primary screens, one within 6 months, and one within 8 months from the Inception
of the Research Program.
DATA MANAGEMENT Abbott and RiboGene shall organize an electronic system of
Research Program data collection, management and sharing within a period not to
exceed 45 days from the beginning of the Research Program. Abbott shall
communicate such information regarding its computerized data
collection/management systems and software for
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the omitted portions.
<PAGE> 47
recording and tracking data to allow RiboGene to establish Abbott-compatible
systems within its laboratories and to develop an electronic data sharing system
for communicating information relating to antifungal compounds which result from
the Research Program. This system is also intended to facilitate rapid and
complete integration of data generated in RiboGene's translation inhibition
antifungal screening of Abbott Compounds into the Abbott library database.
Certain biological and chemical data concerning RiboGene Compounds and certain
Abbott Compounds, for which there are no previous restrictions to other Abbott
or confidential third party collaborations, may also be made available to
RiboGene through this database on a confidential basis. Similarly, Abbott shall
treat as confidential, and not disclose to a third party without prior consent
from RiboGene, confidential information provided to this database by RiboGene.
RiboGene will ensure that they have in place appropriate instrumentation and
software to facilitate rapid and timely communication of data between RiboGene
and Abbott.
STRATEGIC PROJECT MANAGEMENT
In order to fully capitalize on the diversity of backgrounds, creativity and
intellectual contributions of all parties, the JMT and possibly additional
designates of each party shall meet together with the RiboGene Scientific
Advisory Board to discuss antifungal drug development strategies and related
scientific issues within the first 90 days after the Research Agreement is
signed.
Certain antifungal compounds may be identified by the JMT as potential clinical
candidates based on scientific evidence. The ultimate decision to move such a
compound forward into clinical trials shall be the sole responsibility of
Abbott and will include, but not necessarily be limited to, an evaluation of the
compound's competitive efficacy and safety profile, formulation of the
compound, the degree of difficulty and cost of manufacturing the particular
compound and the antifungal marketplace. Abbott shall inform RiboGene in a
timely manner regarding its decisions on clinical development of antifungal
compounds resulting from the Research Program.
COMMUNICATION
Abbott and RiboGene scientists will communicate by phone, telefax, mail, or
through approved and properly protected computerized networks in order to insure
timely exchange of information between parties. Hard copies of all data and
overheads shall be provided
<PAGE> 1
Exhibit 10.4
*TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 240.24b-2.
EXCLUSIVE PATENT LICENSE
AGREEMENT
Effective as of this 4 day of April, 1997 (the "Effective Date"), the University
of Washington, a public institution of higher education having administrative
offices in Seattle, Washington ("UW") and RiboGene, Inc., a company organized
and existing under the laws of California and having a place of business at
21375 Cabot Blvd., Hayward, California, 94545 ("Licensee"), agree as follows:
1.0 PREAMBLE
1.1 UW has developed and owns or is in possession of certain technology
("INVENTION," defined further below) relating to regulation of Protein Kinase
Rna (PKR)-activated protein by hepatitis C virus Non-Structural (NS) 5A protein.
1.2 UW desires that the INVENTION be used as soon as possible in the public
interest, and to this end desires to transfer the INVENTION to a company capable
of commercially exploiting the INVENTION.
1.3 Licensee desires, for the purpose of commercial exploitation, to acquire a
license to certain patent rights in and to the INVENTION.
2.0 DEFINITIONS
2.1 Terms defined in this Definitions Article, and parenthetically defined
elsewhere in this Agreement, shall throughout this Agreement have the meaning
here or there provided. Defined terms may be used in the singular or in the
plural, as sense shall require. Terms defined in this Definition Article will be
printed in capital letters for ease of reference.
2.2 "INVENTION" shall mean work done in the University laboratory of Dr. Michael
G. Katze identifying a new target for anti-hepatitis C virus therapeutics
consisting of intervention in the regulation of PKR-activated protein by
hepatitis C virus NS5A protein as described in [*].
2.3 "LICENSED PATENTS" shall mean the United States Patent(s) and any Patents
issued from the United States Patent Application(s) listed below, together with
all corresponding foreign patents now issued or issued during the term of this
Agreement, which relate to the INVENTION, and all reissues, divisionals and
continuations thereof:
<TABLE>
<CAPTION>
Patent # Country Issue Date
-------- ------- ----------
<S> <C> <C> <C>
[*] [*] [*]
</TABLE>
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 2
2.4 "LICENSED SUBJECT MATTER" shall mean any subject matter, including but not
limited to products and processes, covered in whole or in part by any issued,
unexpired patent claim or a claim in a pending patent application contained in
the LICENSED PATENTS in the country in which said subject matter is made, used,
or sold.
2.5 "FIELD OF USE" shall mean all fields of use.
2.6 "SUBFIELD OF USE" shall mean a specific field of use that falls within the
FIELD OF USE, such as, but not limited to, the screening of anti-hepatitis
therapeutics with a certain class of compounds.
2.6 "TERRITORY" shall mean worldwide.
3.0 GRANT
3.1 UW hereby grants to Licensee, and Licensee accepts, an exclusive license,
with the right to sublicense, under the LICENSED PATENTS to import, make, have
made, use, sell, offer for sale and have sold LICENSED SUBJECT MATTER in the
TERRITORY and for the FIELD OF USE of LICENSED PATENTS.
3.2 The license granted above is subject to a reserved non-exclusive license in
UW to make, have made, and use products, processes, or other subject matter
covered by LICENSED PATENTS for research and development purposes.
4.0 SUBLICENSING
4.1 During the term of this Agreement, Licensee shall have the right to grant
non-exclusive sublicenses to LICENSED PATENTS in the LICENSED FIELD OF USE and
for the TERRITORY with terms and conditions not less favorable to UW than those
required of Licensee by Articles 5, 6, 7, 8, 9 and 17 of this Agreement.
4.2 Any and all sublicenses in and to LICENSED PATENTS granted by Licensee shall
be subject prior approval of UW. UW shall not unreasonably withhold or delay
such approval.
4.3 Licensee agrees to forward to UW a copy of any and all fully executed
sublicense agreements pertaining to LICENSED PATENTS within thirty (30) days of
the date of execution of said sublicenses.
5.0 DILIGENCE
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<PAGE> 3
5.1 Licensee, during the term of this Agreement, shall utilize reasonable
efforts in proceeding with the development, manufacture, sale, and other
commercial exploitation of LICENSED PATENTS, and in creating a supply and demand
for LICENSED SUBJECT MATTER.
5.2 Licensee shall use reasonable efforts to identify a lead compound as a
therapeutic. Licensee shall use reasonable efforts to meet the following
schedule of performance milestones, counting from the date when a lead compound
is selected for clinical development by mutual agreement between the parties.
<TABLE>
<CAPTION>
Years After Selection of Lead
-----------------------------
Milestone Compound
--------- -----------------------------
<S> <C>
[*] [*]
</TABLE>
These milestones represent Licensee's realistic estimate of the schedule
it will be able to keep in the event there are no unexpected or clinical
obstacles. Adverse results at any stage could significantly extend the periods
required to meet any or all of the milestones listed.
5.3 In the event that UW becomes aware of third parties that wish to license the
LICENSED PATENTS in a SUBFIELD OF USE UW shall notify Licensee, in writing, of
such third party interest ("Third Part Notification"). Licensee shall have
ninety (90) days from the date of the Third Party Notification to determine if
such third party interest would result in competition to Licensee, and to inform
UW, in writing, with supporting documentation, of Licensee's determination
("Licensee's Determination").
5.3 (i) If Licensee determines that such third party interest would not
result in competition to Licensee, then within sixty (60) days of the date of
Licensee's Determination Licensee shall notify UW, in writing, of which of the
following options it has elected to exercise:
5.3(i)(a) commence active research and development of LICENSED
PATENTS in the field requested by the third party;
5.3(i)(b) grant a sublicense to said third party to import,
make, have made, use, sell, offer for sale and have sold LICENSED SUBJECT MATTER
in the FIELD OF USE; or
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<PAGE> 4
5.3(i)(c) grant the right to UW to directly license said third
parties to make, have made, use, sell and offer for sale LICENSED SUBJECT MATTER
in tie FIELD OF USE.
In the event Licensee selects the option outlined in Article 5.3(i)(a)
or 5.3(i)(b), Licensee or its sublicensees (if any) shall use reasonable effort
and diligence to proceed with the development, manufacture, and sale or lease of
LICENSED SUBJECT MATTER in the FIELD OF USE.
5.3 (ii) If Licensee determines that such third party interest would
result in competition to Licensee, and UW concurs with this decision, then UW
shall inform the third party that the area of the third party's interest is not
available for licensing.
5.3 (iii) If Licensee determines that such third party interest would
result in competition to Licensee, and UW disputes Licensee's decision, then UW
and Licensee shall resolve this dispute through the following mechanism.
5.3(iii)(a) UW and Licensee shall first attempt to resolve this
dispute through good faith discussions. Any dispute may, at the election of
either party, be referred to the chief executive officers of each party.
5.3(iii)(b) If Licensee and UW are unable to resolve the dispute
of 5.3(iii) through good faith discussions within seventy-five (75) days of
Licensee's Determination, then either party may seek to resolve it by initiating
an Alternative Dispute Resolution ("ADR") in which the Judicial Arbitration and
Mediation Services ("JAMS"), Seattle, Washington shall select the arbitrator
("Arbitrator") as provided herein. If JAMS is not in existence at the time of
such dispute the American Arbitration Association, Seattle, Washington shall be
substituted.
5.3(iii)(c) Selection of Arbitrator. An ADR shall be initiated
by a party by sending written notice thereof to the other party and JAMS, which
notice shall state the issues to be resolved. Within twenty (20) business days
after receipt of such notice, the other party may, by sending written notice to
the initiating party and JAMS, add issues to be resolved. Within twenty (20)
business days after the date of the original ADR notice, JAMS shall nominate to
the parties at least five (5) qualified nominees from JAMS's panel. The parties
shall have ten (10) business days after the receipt of such nominations to agree
on a Arbitrator or, failing to agree, to rank-order their preferences with the
most preferred being given the lowest number, and mail the rank-order to JAMS.
JAMS shall notify the parties of their selection. If all nominees are
unacceptable to a party, the procedure shall be repeated and, if the parties
cannot select an Arbitrator the second time, JAMS shall select the Arbitrator.
5.3(iii)(d) ADR Hearing. The Arbitrator shall hold a hearing to
resolve the issues within one hundred twenty (120) business days after
selection. The location of the hearing shall be Seattle, Washington. Each party
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<PAGE> 5
may be represented by counsel. Prior to the hearing, the parties shall be
entitled to engage in discovery under procedures of the Federal Rules of Civil
Procedure; provided, however, that a party may not submit more than thirty (30)
written interrogatories or take more than three (3) depositions. There shall not
be, and the Arbitrator shall not permit, any discovery within thirty (30) days
of the hearing. The Arbitrator shall have sole discretion regarding the
admissibility of evidence and conduct of the hearing. At least ten (10) business
days prior to the hearing, each party shall submit to the other party and the
Arbitrator a copy of all exhibits on which such party intends to rely at the
hearing, a pre-hearing brief (up to 30 pages) and a proposed disposition of the
dispute (up to 5 pages). The proposed disposition shall be limited to proposed
rulings and remedies on each issue, and shall contain no argument on or analysis
of the facts or issues; provided, however, that the parties will not present
proposed monetary remedies. Within ten (10) business days after close of the
hearing, each party may submit a post-hearing brief (up to 5 pages) to the
Arbitrator.
5.3(iii)(e) ADR Ruling; Fees and Expenses. The Arbitrator shall
render a disposition on the proposed rulings as expeditiously as possible after
the hearing, but not later than fifteen (15) business days after the conclusion
of the hearing. The Arbitrator shall rule on each issue and shall adopt in its
entirety the proposed ruling of one of the parties on each issue. The
Arbitrator's disposition shall be final and not appealable, except that either
party shall have the right to appeal such disposition on the basis it was
affected by fraud or bad faith in connection with the ADR proceedings. The
reasonable fees and expenses of the Arbitrator, as well as the standard charges
of JAMS for its assistance, shall be borne equally by the parties or as they may
otherwise agree.
5.3(iii)(f) JAMS Rules. Except as otherwise provided in this
Section 5.3(iii), JAMS Rules shall be used in connection with the ADR.
5.3(iii)(g) Waiver. A party shall not be prohibited from
bringing a claim for resolution under this Section 5 on the ground that the
claim could have been brought during an earlier proceeding under this Section 5.
5.4 If Licensee fails to adhere to the diligence obligations set forth in this
Diligence Article or elsewhere in this Agreement, UW shall notify Licensee, in
writing, and if after written notice thereof such failure is not cured within
sixty (60) days, UW may terminate this Agreement immediately following the end
of the specified sixty (60) day cure period.
6.0 PATENT PROSECUTION AND COST RECOVERY
6.1 Licensee shall conduct the prosecution of any and all patent applications,
whether pending or not yet filed at the time of execution of this Agreement, in
LICENSED PATENTS, and of the maintenance and other management of any and
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<PAGE> 6
all issued patents in LICENSED PATENTS; provided that Licensee shall supply to
UW copies of all papers received and filed in connection with the prosecution
thereof in sufficient time for UW to comment hereon. Licensee shall give due
consideration to advice and recommendations of UW.
6.2 In the event of a dispute concerning prosecution of the LICENSED PATENTS, UW
and Licensee shall first attempt to resolve the dispute through good faith
discussions. In the absence of a resolution, either party may refer the dispute
to an independent patent attorney, to which the other party has no reasonable
objection, whose decision the parties agree to adopt. The reasonable fees and
expenses of the independent patent attorney shall be borne by the losing party,
or in the event a compromise position is recommended, equally by the parties.
6.3 Should Licensee elect not to prosecute patent applications and/or maintain
patents in the Licensed Patents in any country, Licensee shall notify UW in
writing of such elections, and UW may, at its sole option and sole expense,
undertake such prosecution. In this case UW shall have no further obligations to
Licensee for, and Licensee shall have no further rights to, the patent
applications and/or patents which Licensee elects not to prosecute and/or
maintain in the countries in which Licensee has elected not to prosecute and/or
maintain such patent applications and/or patents.
7.0 LICENSING FEES AND ROYALTY
7.1 Licensee agrees to pay to UW a one-time, non-refundable, non-creditable
license issue fee of [*] due and payable within thirty (30) days of the
execution of this Agreement. UW shall notify Licensee that such payment is due
by inclusion of an invoice with the execution copies of this Agreement.
7.2 Licensee agrees to pay or cause to be paid to UW a non-refundable,
noncreditable license maintenance fee due and payable within thirty (30) days of
the end of each calendar quarter during the term of this Agreement of [*]. UW
shall invoice RiboGene for such amount. Such license maintenance fee shall be
paid up to and through the date of issuance or date of abandonment of the last
of the PATENT RIGHTS to issue or be abandoned, but not beyond the date of
issuance or abandonment of the last of the PATENT RIGHTS to issue or be
abandoned.
7.3 Licensee agrees to pay or cause to be paid to UW a milestone payment of [*]
upon approval of an NDA on any compound the development of which involved the
use of or could not
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<PAGE> 7
have been developed but for the PATENT RIGHTS. Such milestone payment shall be
made within thirty (30) days of approval of the NDA.
8.0 PAYMENT AND REPORTS
8.1 Until Licensee or any sublicensees engage in commercial use or sale of
LICENSED SUBJECT MATTER, Licensee shall prepare and submit to UW within thirty
(30) days of December 31 of each year a report regarding the progress of
Licensee and any sublicensees in developing LICENSED SUBJECT MATTER for
commercial exploitation. Said report shall include such particulars as are
necessary to demonstrate compliance with diligence obligations set forth in the
Diligence Article of this Agreement.
8.2 All payments required under this Agreement shall be made in U.S. dollars by
check or money order payable to the University of Washington, and delivered to
UW as specified in this Agreement; or, if so directed in writing by UW, in such
currency, form, and to such account as UW may designate.
8.3 Licensee agrees to pay a late fee for any overdue licensing fee due UW under
terms of this Agreement. The late fee shall be computed as [*] of the
outstanding, unpaid balance. The payment of such a late fee shall not foreclose
or limit UW from exercising any other rights it may have as a consequence of the
lateness of any payment.
9.0 TERM AND TERMINATION OF AGREEMENT
9.1 The term for this Agreement shall extend from the Effective Date of this
Agreement to the last to occur of:
(a) expiration of twenty years (20) years after the Effective Date of
this Agreement;
(b) expiration of the last patent under the LICENSED PATENTS
unless sooner terminated in accordance with the provisions set forth in this
Agreement.
9.2 Article 9.1 notwithstanding, this Agreement shall terminate sixty (60) days
from the date of written notice by UW to Licensee for cause if Licensee fails to
adhere to the diligence obligations or obligations to settle infringements of
LICENSED PATENTS as set forth in the Diligence Article and Infringement Article
of this Agreement. UW's option to terminate this Agreement shall be in addition
to any and all other legal remedies which UW may have for the enforcement of
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<PAGE> 8
any and all terms hereof, and does not in any way limit any other legal remedy
UW may have.
9.3 Unless the laws then in effect void the effectiveness of this provision,
this Agreement, and the license granted to Licensee hereinabove, shall terminate
immediately in the event that (1) Licensee seeks liquidation, reorganization,
dissolution or winding-up of itself, is insolvent or evidence exists as to its
insolvency, or Licensee makes any general assignment for the benefit of its
creditors; (2) a petition is filed by or against Licensee, or any proceeding is
initiated by or against Licensee, or any proceeding is initiated against
Licensee as a debtor, under any bankruptcy or insolvency law; or (3) a receiver,
trustee, or any similar officer is appointed to take possession, custody, or
control of all or any part of Licensee's assets or property.
9.4 If UW fails to perform an obligation to Licensee as set forth in this
Agreement, Licensee shall notify UW of such failure, in writing, and if after
written notice thereof such failure is not cured within sixty (60) days,
Licensee may terminate this Agreement immediately following the end of the
specified sixty (60) day cure period. Licensee may not terminate this Agreement
for any reason other than with cause.
9.5 The provisions under which this Agreement may be terminated shall be in
addition to any and all other legal remedies which either party may have for the
enforcement of any and all terms hereof, and do not in any way limit any other
legal remedy such party may have.
9.6 Termination of this Agreement shall terminate all rights and licenses
granted to Licensee relating to LICENSED PATENTS.
9.7 Upon termination of this Agreement, any and all existing sublicense
agreement shall be immediately assigned to UW and UW agrees to keep them in
force to the extent that UW is capable of performing as a licensor in place of
Licensee.
9.8 Termination by UW or Licensee under the options set forth in this Agreement
shall not relieve Licensee from any financial obligation to UW accruing prior to
or after termination or from performing according to any and all other
provisions of this Agreement expressly agreed to survive termination.
9.9 In the event that there remain no valid, enforceable, and infringed LICENSED
PATENTS covering LICENSED SUBJECT MATTER, then following termination Licensee
and any sublicensees shall have no further obligation to pay royalties thereon
or to account to UW therefor.
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<PAGE> 9
10.0 NOTICES
10.1 Any notice or other communication required or permitted to be given by
either party hereto shall be deemed to have been properly given and be effective
upon the date of delivery if delivered in writing to the respective addresses
set forth below, or to such other address as either party shall designate by
written notice given to the other party. If notice or other communication is
given by facsimile transmission, said notice shall be confirmed by prompt
delivery of the hardcopy original.
In the case of Licensee:
All correspondence regarding this Agreement should be addressed to Charles J.
Casamento, C.E.O.
Street Address: 21375 Cabot Blvd.
Hayward, California 94545
USA
Facsimile Address: (510) 732-7741
In the case of UW:
All correspondence regarding this Agreement should be addressed to Director of
the Office of Technology Transfer and copied to Karen L. Deyerle, Manager,
Health Sciences.
Street Address: University of Washington
Office of Technology Transfer
1107 N.E. 45th Street, Suite 200
Seattle WA 98105-4631
USA
Facsimile Address: (206) 685-9452
11.0 PROPRIETARY RIGHTS
11.1 Licensee will not, by performance under this Agreement, obtain any
ownership interest in LICENSED PATENTS or any other proprietary rights or
information of UW, its officers, inventors, employees, students, or agents.
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<PAGE> 10
12.0 PATENT MARKING
12.1 Licensee shall mark, and shall require any sublicensee to mark, any and all
material forms of LICENSED SUBJECT MATTER or packaging pertaining thereto made
and sold by Licensee (and/or by its sublicensees) in the United States with an
appropriate patent marking identifying the pendency of any U.S. patent
application and/or any issued U.S. or foreign patent forming any part of
LICENSED PATENTS. All LICENSED SUBJECT MATTER shipped to or sold in other
countries shall be marked in such a manner as to provide constructive notice to
potential infringers pursuant to the patent laws and practice of the country of
manufacture or sale.
13.0 PATENT INFRINGEMENT
13.1 If either party learns of an infringement by a Third Party of the Licensed
Patents in the Field of Use, such party shall promptly notify the other party
and shall provide such other party with available evidence of such infringement.
13.2 Licensee shall have the first right to elect to enforce the Licensed
Patents against third parties worldwide. In the event Licensee shall so elect,
Licensee may do so in UW's name only if required by law, otherwise Licensee
shall institute such suit in Licensee's name only. Licensee shall determine the
worldwide strategy and UW shall assist and cooperate with Licensee in any such
enforcement in the Field of Use. Licensee shall consult with UW and keep UW
regularly advised of Licensee's strategies, plans, progress and results of any
such enforcement action. Licensee shall bear all associated costs and expenses
(including attorney's fees). UW shall, at Licensee's expense, provide reasonable
and prompt cooperation and assistance to Licensee in connection with any such
suit, except that Licensee shall not bear the expense of costs associated with
the use of UW's own resources in providing such cooperation and assistance, such
as employee time. In the event damages or recoveries shall be awarded in such
action, such amounts shall be applied first to reimburse Licensee for any costs,
including attorney's fees, incurred in bringing such action. Remaining amounts
will be divided between UW and Licensee as follows: UW - [*]; Licensee - [*].
13.3 In the event Licensee elects not to enforce the Licensed Patents against
any Third Party in the Field of Use, Licensee shall so notify UW in writing
within one hundred twenty (120) days of the learning of such infringement. Then,
UW shall have the right, but not the obligation, to elect to enforce the
Licensed Patents against such Third Party worldwide in the Field of Use. In the
event UW shall so elect UW shall determine the worldwide strategy and Licensee
shall assist and cooperate with UW in any such enforcement. UW may bring such
suit
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 11
in its own name, or if required by law, in its and Licensee's name. UW shall
consult with Licensee and keep Licensee regularly advised of UW's strategies
plans, progress and results of any such enforcement action. Licensee shall, at
UW's expense, provide reasonable and prompt cooperation and assistance to
Licensee in connection with any such suit, except that UW shall not bear the
expense of costs associated with the use of Licensee's own resources in such
cooperation and assistance, such as employee time.. UW shall bear all associated
costs and expenses (including attorney's fees). In the event damages or
recoveries shall be awarded in such action, such amounts shall be applied first
to reimburse UW for any costs incurred in bringing such action. Remaining
amounts will be retained by UW.
13.4 Neither Licensee nor UW is obligated under this Agreement to institute a
suit against an alleged infringer of LICENSED PATENTS.
14.0 PATENT VALIDITY
14.1 If Licensee challenges the validity or enforceability of any of LICENSED
PATENTS, Licensee agrees not to suspend any payments and shall put into escrow
any and all payments due UW until such time as that patent in LICENSED PATENTS
is determined to be valid and enforceable by final judgment of a court of
competent jurisdiction from which no appeal can be or is taken. Within thirty
(30) days of such final judgment that the patent in the LICENSED PATENTS is
valid and enforceable all monies in such escrow account shall be paid to UW.
14.2 Except as provided for in Article 14.1, Licensee may, but shall not be
obligated to, elect to defend the Licensed Patents against third party claims
that the Licensed Patents in the Field of Use are invalid or unenforceable.
Licensee shall consult with UW and keep UW regularly advised of Licensee's
strategies, plans, progress and results of any such defense. UW may, at its
expense, select counsel of its choice to assist Licensee's counsel in connection
with such defense and shall assist and cooperate with Licensee in any such
defense. Licensee shall bear all associated costs and expenses (including
attorney's fees) and pay all damages and settlement amounts.
14.3 In the event Licensee does not elect to defend the Licensed Patents as set
forth in 14.1 above, UW may defend the Licensed Patents and shall bear all
associated costs and expenses (including attorney's fees) and pay all damages
and settlement amounts.
14.4 Neither party will take any action including entering into any settlement
action or agree to any settlement that may negatively impact the Licensed
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<PAGE> 12
Patents without the express prior written consent of the other party, such
consent not to be unreasonably withheld or delayed.
15.0 USE OF NAMES
15.1 Nothing contained in this Agreement shall be construed as conferring any
right to use in advertising, publicity or other promotional activities any name,
trade name, trademark or other designation of a party hereto including any
contraction, abbreviation or simulation of any of the foregoing, unless the
express written permission of the other party has been obtained. Licensee hereby
expressly agrees not to use the name "University of Washington" without prior
written approval from UW.
16.0 REPRESENTATIONS AND WARRANTIES
16.1 UW represents and warrants that it has the right to grant the license in
and to LICENSED PATENTS.
16.2 Nothing in this Agreement shall be construed as:
(a) A representation or warranty by UW as to the patentability, validity,
scope, or usefulness of LICENSED PATENTS; or
(b) A representation or warranty by UW that anything made, used, sold, or
otherwise disposed of under any license granted in this Agreement is or
will be free from infringement of patents or other proprietary rights not
included in LICENSED PATENTS.
16.3 UW EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED,
PERTAINING TO THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
INVENTION, LICENSED SUBJECT MATTER, TECHNICAL INFORMATION, OR ANYTHING ELSE
LICENSED, DISCLOSED, OR OTHERWISE PROVIDED TO LICENSEE UNDER THIS AGREEMENT.
UW'S TOTAL LIABILITY UNDER THIS AGREEMENT IS LIMITED TO THE COSTS AND FEES PAID
TO UW UNDER THIS AGREEMENT.
17.0 INDEMNIFICATION
17.1 Licensee agrees to indemnify, hold harmless and defend UW, its officers,
inventors, employees, students, and agents, against any and all claims, suits,
losses, damages, costs, fees and expenses resulting from or arising out of
exercise of this Agreement including, but not limited to, any damages, losses or
liabilities
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<PAGE> 13
whatsoever with respect to death or injury to any person and damage to any
property arising from the possession, use, or operation of LICENSED SUBJECT
MATTER by Licensee in any manner whatsoever. This indemnification clause shall
survive the termination of this Agreement.
17.2 From the first human clinical testing of LICENSED SUBJECT MATTER, Licensee
shall maintain general liability insurance, including product liability and
contractual liability coverage, in an amount commensurate with reasonable
commercial practice but in no case less than one million dollars. Licensee's
general liability insurance shall name UW as an additional insured. Licensee
must declare whether the insurance is provided on a "claims-made" form and must
notify UW if coverage is canceled.
17.3 Licensee shall provide to UW within thirty (30) days prior to the
initiation of human clinical trials with respect to LICENSED SUBJECT MATTER
certificates evidencing the existence of the insurance required under Article
17.2. Licensee shall issue irrevocable instructions to its insurance agent and
so the issuing company to notify UW of any discontinuance or lapse of such
insurance not less than thirty (30) days prior to the time that any such
discontinuance or lapse is due to become effective. License shall provide UW a
copy of such instructions upon their transmittal to the insurance agent and
issuing company. Licensee shall further provide UW, at least semi-annually,
proof of continued coverage.
18.0 APPLICABLE LAWS
18.1 Licensee agrees to abide by all applicable federal, state, and local laws
and regulations pertaining to the management and commercial deployment of
LICENSED SUBJECT MATTER under this Agreement.
18.2 LICENSED SUBJECT MATTER may be subject to restrictions concerning the
export of products or technical data from the United States. Accordingly,
Licensee agrees that Licensee shall not export or re-export, directly or
indirectly, any LICENSED SUBJECT MATTER to any country for which the United
States Government or other competent authority at the time of export requires an
export license or other approval, without first obtaining such license or
approval from the appropriate governmental authority.
18.3 This Agreement shall be construed in accordance with, and its performance
shall be governed by, the laws of the State of Washington.
18.4 Any suit, action, or proceeding arising out of or relating to this
Agreement shall be decided in King County, Washington.
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<PAGE> 14
19.0 ATTORNEY'S FEES
19.1 If any dispute shall arise under this Agreement, other than a bona fide
dispute concerning the validity and/or scope of LICENSED PATENTS, the prevailing
party shall be entitled to its reasonable attorney's fees and costs of
litigation and appeal.
20.0 GENERAL
20.1 If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be in any way affected or impaired thereby.
20.2 No omission or delay of either party hereto in requiring due and punctual
fulfillment of the obligations of any other party hereto shall be deemed to
constitute a waiver by such party of its rights to require such due and punctual
fulfillment, or of any other of its remedies hereunder.
20.3 No amendment or modification hereof shall be valid or binding upon the
parties unless it is made in writing, cites this Agreement, and signed by duly
authorized representatives of UW and Licensee.
20.4 This Agreement, and any rights or obligations hereunder, may be assigned by
the University but shall not be assigned, transferred or delegated in whole or
in part by Licensee, whether by a merger, a sale of assets, or in any other
manner, except with the University's express written approval. Any attempted
assignment, transfer or delegation in breach of this provision shall be deemed
to be void and no effect, and shall entitle the University to terminate this
Agreement upon written notice to Licensee. Except as otherwise provided, this
Agreement shall be binding upon and inure to the benefit of the parties'
successors and lawful assigns.
20.5 The headings of the several sections of this Agreement are inserted for
convenience and reference only, and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
20.6 This Agreement embodies the entire understanding of the parties and
supersedes all previous communications, representations, or understandings,
either oral or written, between the parties relating to the subject matter
hereof.
SIGNATURES BEGIN ON NEXT PAGE
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<PAGE> 15
IN WITNESS WHEREOF, UW and Licensee have executed this Agreement, in duplicate
originals but collectively evidencing only a single contract, by their
respective duly authorized officers, on the dates hereinafter written.
Licensee University of Washington
By: /s/ LAURA S. LEHMAN By: /s/ ROBERT C. MILLER, JR.
------------------------------- -------------------------------------
Name: Laura S. Lehman Name: Robert C. Miller, Jr., Ph.D.
---------------------------- -----------------------------------
Title: Vice President of Research Title: Director, Technology Transfer
--------------------------- ----------------------------------
Date: April 9, 1997 Date: March 4, 1997
---------------------------- ----------------------------------
UNIVERSITY OF WASHINGTON PERSONNEL:
THE BELOW-NAMED PERSONNEL UNDERSTAND AND CONCUR WITH THIS AGREEMENT.
By: /s/ MICHAEL G. KATZE By: /s/ MICHAEL J. GALE, JR.
------------------------------- -------------------------------------
Name: Michael G. Katze Name: Michael J. Gale, Jr.
---------------------------- -----------------------------------
Title: Professor, Microbiology Title: Senior Fellow
--------------------------- ----------------------------------
Date: 4/3/97 Date: 4/3/97
---------------------------- ----------------------------------
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<PAGE> 1
Exhibit 10.5
*TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 240.24b-2.
EXTENSION OF JOINT COLLABORATION AGREEMENT
This Extension Of Joint Collaboration Agreement (the "Extension") is
made this 10th day of April, 1997 by and between Houghten Pharmaceuticals, Inc.
("Houghten") and RiboGene, Inc. ("RiboGene").
RECITALS
Whereas, Houghten and RiboGene are parties to that certain Joint
Collaboration Agreement dated April 12, 1995 (the "Agreement"), the Screening
Term (as defined in the Agreement) of which is due to expire on April 12, 1997,
and
Whereas, Houghten and RiboGene would like to extend the Screening Term
for an additional one year period.
NOW, THEREFORE, for and in consideration of the premises, and the
mutual covenants contained herein, the parties agree as follows:
1. Screening Term. The definition of Screening Term set forth in
Section 1.24 of the Agreement is hereby amended in its entirety as follows:
"1.24. "Screening Term" shall mean the period during
which Active Screening may be conducted commencing on the
Effective Date and terminating three (3) years from the
Effective Date unless earlier terminated as provided herein
or unless extended by mutual agreement.''
2. Other Terms. Except as set forth above, all other defined
terms, conditions and provisions of the Agreement shall apply to this Extension
and the Agreement shall remain in full force and effect.
3. Multiple Counterparts. This Extension may be executed in
multiple counterparts, each of which shall be deemed an original for all
purposes.
IN WITNESS WHEREOF, the parties have executed this Extension as of the
date first above written.
HOUGHTEN PHARMACEUTICALS, INC. RIBOGENE, INC.
By: /s/ [sig] By: /s/ [sig]
-------------------------------- --------------------------------
Name: /s/ [sig] Name: /s/ LAURA S. LEHMAN
-------------------------------- --------------------------------
Title: Vice President Title: Vice President of Research
-------------------------------- --------------------------------
<PAGE> 2
JOINT COLLABORATION AGREEMENT
THIS JOINT COLLABORATION AGREEMENT (the "Agreement") dated as of April
12, 1995 (the "Effective Date"), is entered into between HOUGHTEN
PHARMACEUTICALS, INC., a Delaware corporation ("HPI"), and RIBOGENE, INC. a
California corporation ("RIBOGENE").
WITNESSETH:
WHEREAS, HPI has rights to proprietary synthesis and screening
technologies which, when applied, may reduce the time and development expense of
identifying potentially useful compounds for therapeutic and/or diagnostic
purposes.
WHEREAS, RiboGene has Assays for direct screening of compounds which
have potential to identify therapeutic and/or diagnostic products.
WHEREAS, both HPI and RiboGene desire to enter into a joint screening
and development agreement with respect to the identification of compounds
therefrom under the terms and conditions specified herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, covenants and warranties herein contained, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 "Active Screening" shall mean the activity of RiboGene screening
Combinatorial Libraries, Iteration Mixtures, and/or Confirmatory Samples using
the Assays to identify potential Candidates during the Screening Phase of this
Agreement.
1.2 "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under common control with, a party to this
Agreement. A corporation or other entity shall be regarded as in control of
another corporation or entity if it owns or directly or indirectly controls more
than fifty percent (50%) of the voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or other entity.
1.3 "Assays" shall mean the RiboGene Assays described in Exhibit A, as
well as those assays which may be added by mutual agreement.
<PAGE> 3
1.4 "Candidate" shall mean each fully sequenced compound identified
by RiboGene after completion of the Interation Process, or each compound
identified by RiboGene after completion of the Scanning Process, any of which
compounds demonstrate activity in an Assay justifying further investigation as
a Joint Compound in the Development Phase of the Collaboration Program or as a
Developing Party Compound.
1.5 "Collaboration Program" shall mean the overall program described
in Section 3.1 hereto consisting of both the Screening Phase and the
Development Phase.
1.6 "Combinatorial Libraries" shall mean the following libraries as
well as any other libraries which may hereafter be added to such definition by
mutual agreement of the parties:
[*]
1.7 "Confirmatory Sample" shall mean a [*] (i) a compound identified
from the Initial Screening of a Combinatorial Library by the Scanning Process,
or (ii) a fully sequenced compound identified from the completion of the
Iteration Process.
1.8 "Developing Party Compound" shall mean a Candidate upon which one
party decides to conduct further development and research pursuant to the
provisions hereof (the "Developing Party") after the other party has decided
not to continue with or participate in such development and research.
1.9 "Development Phase" shall mean that the phase of the Collaboration
Program described in Sections 3.4 and 3.6 hereof.
1.10 "Development Term" shall be the term during which the Development
Phase activities with respect to a Joint Compound/or the developing party's
development of a Developing Party Compound shall occur commencing on the date
the parties or developing party decide to enter into said activities or
development respectively, and terminating when neither party has a Joint
Compound or Developing Party Compound under development.
1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "HPI Proprietary Rights" shall mean all rights owned or licensed
to HPI regarding the Materials, and HPI's rights to Joint Compounds including
without limitation (except as limited and provided elsewhere in this agreement)
(i) compounds derived from the described Materials and Joint Compounds, (ii)
methods of making the compounds, Materials and Joint Compounds, (iii) patents,
patent applications and patent rights and divisions, continuations, renewals,
reissues
2
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<PAGE> 4
and extensions of the foregoing now existing, hereafter filed, issued or
acquired; and (iv) rights relating to the protection of trade secrets and
confidential information.
1.13 "Initial Screening" shall mean the first screening of each
Combinatorial Library by RiboGene.
1.14 "Iteration Mixture" shall mean the mixture of compounds ordered by
RiboGene [*] of a defined chemical component and provided by HPI at the
intervening stages of the Iteration Process [*].
1.15 "Iteration Process" shall mean, with respect to [*] each stage of
the HPI screening and synthesis process after the Initial Screening, pursuant to
which each possible combination of mixtures [*] from such Combinatorial Library
[*] (ii) screened by RiboGene, and (iii) evaluated at each stage and reassayed
when necessary by RiboGene [*]
1.16 "Interest" shall mean the percentage which either party will be
entitled to receive of any revenues which may be generated as a result of the
parties' jointly owned intellectual property with respect to a Joint Compound or
Developing Party Compound, for example by licensing or sale of such property or
of Products containing such Joint Compound or Developing Party Compound. The
Interests of the respective parties in any particular Joint Compound or
Developing Party Compound will be determined as described in Exhibit D.
1.17 "Joint Compound" shall mean a Candidate, upon which the parties
jointly, after reviewing the Research Committee's recommendations, decide to
conduct further development and research and share the expenses of development
as provided in Exhibit D.
1.18 "Materials" shall include all of the Combinatorial Libraries,
Iteration Mixtures, specific iteration mixtures and Confirmatory Samples
furnished by HPI during the Screening Phase.
1.19 "Product" shall mean any product for the treatment or prevention
of disease, or other conditions in humans, or the diagnosis of disease, for the
specified Targets which incorporates a Joint Compound or Developing Party
Compound in its entirety or as modified or which is the result directly or
indirectly of discovery or identification using the Iteration Process or
Scanning Process, the manufacture or use of which is covered by, of which, but
for the Agreement would infringe any HPI Proprietary Rights or RiboGene
Proprietary Rights.
1.20 "Research Committee" shall mean that entity organized and acting
pursuant to Article 5 or this Agreement.
3
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the omitted portions.
<PAGE> 5
1.21 "RiboGene Proprietary Rights" shall mean all rights owned or
licensed to RiboGene with respect to rights to the Assays, use of the Assays for
screening purposes, methods for screening compounds in the Assays, and rights to
Joint Compounds including, without limitation, (except as limited and provided
elsewhere in this agreement) (i) patents, patent application and patent rights
and all divisions, continuations, renewals, reissues and extensions of the
foregoing now existing, hereafter filed, issued or acquired, and (ii) rights
relating to the protection of trade secrets and confidential information.
1.22 "Screening" shall mean the testing by RiboGene of each of the
mixtures which constitute a Combinatorial Library or Iteration Mixture, or of
individual compounds to determine the activities of each in Assays.
1.23 "Screening Phase" shall mean that phase of the Collaboration
Program described in Sections 3.2 and 3.3 hereof.
1.24 "Screening Term" shall mean the period during which Active
Screening may be conducted commencing on the Effective Date and terminating
two (2) years from the Effective Date unless earlier terminated as provided
herein or unless extended by mutual agreement.
1.25 "Scanning Process" shall mean with respect to a positional
scanning library listed at Section 1.7(g) and described in Exhibit C, the
process of identifying and verifying Candidates by conducting an Initial
Screening and the screening of Confirmatory Samples.
1.26 "Targets" [*] identified in Exhibit A as it exists at the
time at the execution of this Agreement or as may be modified by mutual
agreement hereafter.
1.27 "Third Party Obligations" shall mean obligations to pay
milestones, royalties or other fees to a third party by a party under a
licensing or other agreement for use of (i) an Assay, (ii) the Screening
process used hereunder, or (iii) any compounds or Products discovered or for
which uses are identified as a result of this Collaboration Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as follows:
2.1 AUTHORIZATION AND ENFORCEMENT OF OBLIGATIONS. Such party (a)
has the requisite power and authority and the legal right to enter into this
Agreement and to perform its obligations hereunder, and (b) has taken all
necessary action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
4
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<PAGE> 6
been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation, enforceable against such party in accordance
with its terms.
2.2 NO CONFLICT. The execution and delivery of this Agreement and
the performance of such party's obligations hereunder (a) do not conflict with
or violate any requirement of applicable laws or regulations or any contractual
obligation of such party, and (b) do not conflict with, or constitute a default
or require any consent under, any contractual obligation of such party.
2.3 NON-INFRINGEMENT. To the best of its knowledge, the performance
of such party's obligations or granting of rights to the other party hereunder
shall not infringe patent rights, copyrights, trademarks or trade secrets of any
third party.
2.4 THIRD PARTY OBLIGATIONS. Such party is not subject to any Third
Party Obligations except as set forth in Exhibit F hereto.
ARTICLE 3
SCREENING AND DEVELOPMENT PROGRAMS
3.1 PURPOSE AND SCOPE. The general purposes of the Collaboration
Program are twofold and to be addressed in two phases: (i) to utilize the HPI
Combinatorial Libraries, Iteration Mixtures and Confirmatory Samples to conduct
screenings of the compounds in the various Combinatorial Libraries during the
Screening Phase with one or more of the Assays to identify Candidates, and (ii)
to select Joint Compounds chosen from the Candidates which may have utility to
treat one or more of the Targets and during the Development Phase to develop
Products incorporating the Joint Compounds (or analogs or derivatives thereof)
for one or more of the Targets.
3.2 SCREENING PHASE GENERAL RESPONSIBILITIES. Each party shall, at
its own expense, have the following responsibilities during the Screening Phase:
3.2.1 HPI shall provide, by mutual agreement, any of its
current and future Combinatorial Libraries (when such
future Combinatorial Libraries are available), and other
reasonable amounts of other Materials requested by
RiboGene, including Iteration Mixtures, specific
iteration mixtures identified at the screening of a
stage of the Iteration Process prior to identification
of a Candidate, and Confirmatory Samples to enable
RiboGene to conduct the Active Screening.
3.2.2 RiboGene shall by mutual agreement screen the Materials
with a view to identifying potential Candidates and
recommend to the Research Committee which Candidates
should become Joint Compounds.
5
<PAGE> 7
3.3 SCREENING PHASE ACTIVITIES.
3.3.1 INITIAL SCREENING. RiboGene shall screen each
Combinatorial Library delivered to RiboGene by HPI with the Assays to identify
one or more compound mixtures [*]
3.3.2 ITERATION PROCESS. For active compounds identified from
an Initial Screening of any Combination Libraries, [*] RiboGene shall place an
order with HPI for related Iteration Mixtures to begin the Iteration Process.
Upon receipt of such order, HPI shall cause to be synthesized and provide to
RiboGene such Iteration Mixtures, which RiboGene shall screen using the
applicable Assays.
3.3.3 SCANNING PROCESS. For active compounds identified from
an Initial Screening of the [*] Combinatorial Library, RiboGene shall place an
order with HPI for Confirmatory Samples to continue the Scanning Process. Upon
receipt of such order, HPI shall cause to be prepared and deliver the
Confirmatory Samples.
3.3.4 RESEARCH DURATION. The Active Screening portion of the
Screening Phase shall be performed during the Screening Term.
3.3.5 DELIVERY. HPI shall deliver the Materials as soon as
practicable following receipt of a written order, but in no event later than
forty-five (45) days from the receipt of such order.
3.4 DEVELOPMENT PHASE RESPONSIBILITIES. Once a Candidate is, or
Candidates are, identified and both parties, after reviewing the Research
Committee's recommendations, have given written notice pursuant to Section 3.5
to proceed with respect to such Candidate or Candidates becoming Joint
Compounds, then the Development Phase shall commence with respect to those Joint
Compounds. Each party shall have, in addition to any other responsibility
assigned by the Research Committee or by mutual agreement of the parties, the
below specified responsibilities with respect to those Joint Compounds:
3.4.1 HPI shall:
(a) Expend reasonable efforts to modify Joint
Compounds [*]
(b) Provide reasonable amounts of Joint Compounds or
modified Joint Compounds [*]
3.4.2 RiboGene shall:
(a) Expend reasonable efforts to test Joint
Compounds and Modified Joint Compounds [*]
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 8
(b) Proceed under guidance of the Research
Committee with pharmacological testing of
Joint Compounds and modified Joint Compounds.
(c) Take the lead in filing and prosecution of
patent applications as authorized by the
Research Committee.
3.5 JOINT COMPOUND NOTICE. A party must given written notice of its
intent to participate in the Development Phase with respect to a Candidate to
the other party with a copy to the Research Committee within thirty (30) days
after receipt of the Research Committee's written recommendation. Failure to
give such written notice within said thirty (30) days shall be deemed a
decision not to participate.
3.6 DEVELOPMENT PHASE ACTIVITIES. In addition to the activities
described in Section 3.4 above, the Development Phase shall consist of any and
all activities agreed to by the parties upon recommendation of the Research
Committee which are necessary to fully develop Products for commercialization
with costs to be shared as generally described in Exhibit D. Additional
provisions concerning the Development Phase shall be based on the guidelines
set forth in Exhibit D. A party may agree to participate in the Development
Phase with respect to one or more Candidates and decide not to participate with
respect to other Candidates.
3.7 DEVELOPING PARTY COMPOUNDS. With respect to Developing Party
Compounds, responsibilities for development, including the discretion to
continue, shall be solely the responsibility of the developing party. Sections
3.4 (except with respect to the notice provision) and 3.6 shall not be
applicable, but provisions in Exhibit D shall be applicable, as provided
therein. [*] HPI shall grant a license, or sublicense, if available, subject to
any necessary third party approval and license requirements, as well as then
existing third party rights, to RiboGene under the HPI Proprietary Rights to
make, have made, use and sell Products incorporating a Developing Party Compound
or derivatives thereof for the Target if RiboGene is the developing party. If
HPI is the developing party of a Developing Party Compound, then HPI shall have
access to the RiboGene Assay(s) with respect to such Developing Party Compound
and RiboGene shall grant an exclusive license or sublicense, if available, to
HPI under the RiboGene Proprietary Rights to make, have made, use and sell
Products incorporating a Developing Party Compound or derivatives thereof. The
non-developing party will use reasonable efforts to perform any remaining
obligations in a timely manner for the developing party. So long as HPI or its
sublicenses is diligently pursuing development of a Developing Party Compound,
RiboGene will not make the Assay used to identify the Developing Party Compound
or any usage therefor available to a third party for purposes of screening
combinatorial libraries similar to the Combinatorial Libraries at least for the
Targets of the Developing Party Compound, unless RiboGene is required to do so
by a third party agreement existing at the time that HPI became the developing
party of the Developing Party Compound.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 9
ARTICLE 4
LICENSE OF SCREENING RIGHTS TO RIBOGENE
4.1 LICENSE. HPI hereby grants to RiboGene, under the HPI
Proprietary Rights, during the Screening Term, a non-transferable license to
screen the Materials against the Assays in accordance with this Agreement.
4.2 USAGE RIGHTS. The Materials are provided to RiboGene pursuant
to Article 4 solely for the purpose of screening by only RiboGene using the
Assays as provided in this Agreement, and any other use or attempted transfer of
such Materials will be a material breach of this Agreement. RiboGene understands
and acknowledges that the Materials and [*] compounds contained therein are for
research use only and shall not be administered to humans in any manner or form.
4.3 LIMITATIONS. Nothing herein shall be deemed to grant any
rights or other interests in favor of RiboGene with respect to the HPI
Proprietary Rights other than as expressly set forth in this Agreement.
RiboGene shall have no rights with respect to any compounds contained in the
Combinatorial Libraries or Iteration Mixtures or derivatives of any of them
which do not become Candidates. Any rights with respect thereto shall remain
with HPI.
ARTICLE 5
RESEARCH COMMITTEE
5.1 CREATION OF THE RESEARCH COMMITTEE. The parties hereby agree
to the creation of a Research Committee of four (4) persons to facilitate the
collaboration called for herein. The Research Committee shall consist of two
(2) representatives nominated by each party. One (1) representative nominated
by each party shall be a senior scientific officer of such party, who shall be
the senior representative and chief coordinator for such party. Each party
shall be free to change its representatives on notice to the other or to send a
substitute representative to any Research Committee meeting. The Chief
Scientific Officer, or equivalent, of each party, if not otherwise designated as
a member of the Research Committee, shall have the right to attend Research
Committee meetings.
5.2 REGULAR MEETINGS. During the Screening Phase, the
Research Committee shall meet face to face at least once each three (3) months
and have telephonic meetings monthly in the months when there are no face to
face meetings. If both parties agree to participate in the Development Phase,
the Research Committee shall have similar meetings at similar intervals with
respect to Joint Compounds in the Development Phase. However, if both parties
do not agree to participate in the Development Phase with respect to a
particular Candidate or one party ceases to participate after commencement of
the Development Phase with respect to a Joint Compound while the other party
continues development, the Research Committee shall have no further
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 10
responsibility with respect to that Candidate, Joint Compound or Developing
Party Compound. The Research Committee shall be disbanded when no Candidates,
Joint Compounds or Products are in the Development Phase, and the Screening
Phase has been totally discontinued or completed. Any meetings may be called by
either party on fourteen (14) days notice to the other and, unless otherwise
agreed, shall alternate between the offices of the parties. To the extent
practicable, each party shall disclose to the other proposed agenda items in
advance of the meeting. The senior representative of the party hosting the
meeting shall chair that meeting and shall have the right to vote or otherwise
make decisions on behalf of that party. Each party shall pay all of its own
costs and expenses incurred in connection with such meetings.
5.3 RESPONSIBILITIES OF THE RESEARCH COMMITTEE. During the duration
of the Collaborating Program, the Research Committee shall be the primary
vehicle for interaction between the parties. The Research Committee shall serve
at the behest of the parties in order to assist in the management of the
Collaboration Program, recommend scientific priorities for both the Screening
and Development Phases, and review and advise scientific direction and
settlement of operating issues. Without limiting the foregoing, the Research
Committee shall be responsible for: (i) amending research and development plans
agreed to with respect to the Collaboration Program; (ii) monitoring the
progress of the Collaboration Program; (iii) recommending work plans and
budgets for each Joint Compound and Product, subject to both parties' approval,
for the Development Phase; (iv) recommending whether patents should be filed;
(v) evaluating the potential of Joint Compounds; (vi) advising which Candidates
should become Joint Compounds; and (vii) preparing with the cooperation of both
parties the progress reports described in Section 6.3. All decisions by the
Research Committee shall require agreement by the senior representative of both
parties present at the meeting, and each party shall act in good faith in
attempting to reach agreement on such decisions. Any disputes shall be resolved
in accordance with Article 10 of this Agreement.
ARTICLE 6
DEVELOPMENT AND PROGRESS REPORTING
OF JOINT COMPOUNDS
6.1 CONDUCT OF RESEARCH AND DEVELOPMENT. RiboGene and HPI shall
work diligently and use reasonable good faith efforts to identify and develop
Joint Compounds and to commercialize Products pursuant to the following
restrictions:
6.1.1 The parties shall be entitled to exercise prudent and
reasonable business judgement in meeting the obligations of this Section 6.1.
6.1.2. The parties shall use commercially reasonable efforts to
obtain all necessary governmental approvals for the manufacture, use and sale of
Products except for Products incorporating Developing Party Compounds in which
instance the developing party has the discretion to decide when to proceed.
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<PAGE> 11
6.2 DISCLOSURE.
6.2.1 Within thirty (30) days after completion of Initial
Screening, completion of each stage of the Iteration Process or the
Confirmatory Sample screening of the Scanning Process, but in no event less
frequently than quarterly, RiboGene shall deliver a written report to the
senior representative of each party to the Research Committee in reasonable
specific detail, setting forth the results of the Active Screening.
6.2.2 The parties will make available and, upon request,
disclose to each other and the Research Committee, all information relating to
the Joint Compounds discovered or synthesized pursuant to the Collaboration
Program. All information which is significant with respect to the Collaboration
Program will be disclosed to the other party promptly after it is learned or
its significance is appreciated. Each party shall keep complete accounts and
records (including such lab notebooks, clinical data and other research records
as are customarily maintained in connection with drug discovery and
development) relating to its research and development activities under the
Screening Phase.
6.2.3 The parties will exchange reports quarterly presenting a
meaningful summary of their research and development activities, and each party
will make presentations thereof, in addition to those made to or by the Research
Committee, as reasonably requested by the other party but not in excess of twice
per year. Each party will also communicate informally and through the Research
Committee to inform the other parties of research and development performed
under the Collaboration Program. Each party will provide the other with raw
data in original form or photocopies thereof for any and all work carried out
under this Agreement as reasonably requested by the other party. The parties
agree to cooperate with each other to facilitate the understanding and use of
information exchanged pursuant to this Section 6.2. All information contained in
reports made pursuant to this Agreement or otherwise communicated between the
parties will be maintained under obligations of confidentiality under Article 14
of this Agreement.
6.2.4. To ensure compliance with Third Party Obligations of a
party hereto, complete and accurate records regarding the use of technology
licensed by a third party to a party hereunder shall be maintained which records
shall reflect what third party technology was utilized, if any, in connection
with discovery of a Joint Compound, Developing Party Compound, or Product
hereunder. Both parties shall have access to such records in order to reasonably
satisfy the reporting requirements to third parties.
6.3 PROGRESS REPORTING. In addition to other reports required
under Section 6.2, not later than January 15th and July 15th of each calendar
year, the Research Committee shall prepare a written progress report covering
activities under the Collaboration Program, the development and testing of all
Joint Compounds and the obtaining of the governmental approvals necessary for
marketing. Such progress reports shall include but not be limited to the
following topics:
o Summary of work completed
o Activities related to sublicenses
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- Summary of work in progress
- Current schedule of anticipated events or milestones
- Market plans for the introduction of Products, and
- Activities relating to obtaining governmental approvals
necessary for marketing Products.
The form of such progress reports shall be determined by the
Research Committee and shall be in such form to provide information necessary to
satisfy reporting obligations to third parties whose technology is being
utilized under the Collaboration Program. The parties shall take precautions to
protect confidentiality as intended by Article 14 in meeting the reporting
obligations to third parties. With respect to Developing Party Compounds and
Products not subject to Research Committee supervision, the developing party
shall still be required to prepare the reports for the other party.
ARTICLE 7
COMMERCIALIZATION OF PRODUCTS BY PARTIES
7.1 JOINT COMMERCIALIZATION. If the parties jointly decide to
proceed with the commercialization of Candidates into Joint Compounds and/or
Products incorporating such Joint Compounds, or derivatives thereof, the parties
intend to share profits and losses proportionally based on the contribution each
party has agreed to make to the total costs of the Development Phase with
respect to those Joint Compounds and/or Products. The parties shall negotiate in
good faith a commercialization agreement which, in addition to the provisions
described in Exhibit D, shall reflect among other matters each party's Interest,
Third Party Obligations, reporting requirements, procedures for
commercialization and which party is entitled to carry the lead in decision
making with respect to product development.
7.2 ONE PARTY DEVELOPMENT. If, after completion of the Screening
Phase with respect to a Candidate, only one party, pursuant to Section 3.5,
responds affirmatively in writing that the party desires to continue with the
development of that Candidate, then that party must notify the other party in
writing of its intent to proceed on its own to develop the Candidate as a
Developing Party Compound within six (6) months after the other party gave, or
failed to give, written notice of its intent not to participate in the
Development Phase with respect to such Candidate. The Candidate may then become
a Developing Party Compound subject to the applicable provisions of Exhibit D.
The party wishing to develop must give both written notice of its intent to
proceed and actually commence development during that six (6) month period for
the Candidate to become a Developing Party Compound or that party may not
individually decide to develop a Candidate as a Developing Party Compound
without again presenting the opportunity for joint development through written
notice to the other party. If the other party does not give written notice of
its intent to participate in the joint development within thirty (30) days
thereafter, the party desiring to develop may do so subject to the same
above-stated commencement of development limitations. The developing party shall
be responsible for all commercial decisions with respect to a Developing Party
Compound.
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7.3 ABANDONED CANDIDATES. If the parties do not jointly decide to
proceed with the development of a Candidate as a Joint Compound or if neither
party gives written notice to the other of its intent to develop such Candidate
as a Developing Party Compound pursuant to Section 7.2 hereof, such Candidate
shall be deemed "abandoned" for the purposes of this Agreement. If a Candidate
is abandoned, (i) HPI may make such Candidate available to third parties, and
(ii) RiboGene shall cease using or developing such Candidate. If HPI derives
any revenues or other benefit from its use, licensing or sale of any abandoned
Candidate which is used against the Targets, then RiboGene shall share equally
in such revenues or benefit, provided HPI was not required to put forth
significant additional effort with respect to the development of such abandoned
Candidate after the abandonment. In such instance where HPI put in significant
additional effort, the parties shall agree in good faith how the derived
revenues or benefit shall be divided to reflect HPI's additional effort in the
development. Except as set forth above, RiboGene shall have no interest in any
abandoned Candidate.
ARTICLE 8
OWNERSHIP; PATENTS
8.1 OWNERSHIP.
8.1.1 HPI PROPRIETARY RIGHTS AND RIBOGENE PROPRIETARY
RIGHTS. RiboGene acknowledges and agrees that RiboGene has no rights in or to
the HPI Proprietary Rights, other than the license rights specifically granted
herein. HPI acknowledges that HPI has no rights in or to RiboGene Proprietary
Rights except as may be granted herein. Notwithstanding the above, and except
as provided in Section 4.3, the parties agree that Candidates, Joint Compounds
and Products incorporating Joint Compounds or derivatives thereof shall be
jointly owned, and that the nondeveloping party shall have the rights granted
herein in a Developing Party Compound and Products incorporating a Developing
Party Compound or derivatives thereof.
8.1.2 OWNERSHIP OF INVENTIONS. Subject to the provisions of
this Agreement, the right, title and interest in all inventions, discoveries,
improvements or other technology directed at a Developing Party Compound, Joint
Compound or Product incorporating such Developing Party Compound or Joint
Compound or derivatives thereof with respect to the Targets and all processes
or uses relating thereto, whether or not patentable (collectively, the
"Inventions"), together with all patent applications or patents based thereon,
made during or as a result of the screening hereunder shall be owned jointly by
the parties and the rights to any Net Distributions as defined in Section D of
Exhibit D arising from such Inventions shall be based on the Interest of each
party. Each party shall promptly disclose to the other party the conception or
reduction to practice of Inventions by employees or other acting on behalf of
such. Each party hereby represents and agrees that all employees and other
persons acting on its behalf in performing its obligations under the Agreement
shall be obligated under a binding written agreement or applicable law to
assign to such party or its Affiliate all Inventions made or developed by such
employee or other person.
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8.1.3 OWNERSHIP OF RESEARCH DATA. Each party shall jointly own
all data and information generated or collected by the activities under this
Collaboration Program; however, use and reference to such data and information
may be restricted as provided elsewhere herein.
8.2 PATENTS. The Research Committee shall recommend upon which Joint
Compounds, Products and Inventions the parties should file one or more joint
patent applications. The parties shall jointly determine whether or not to file
such joint patent applications after receiving the Research Committee
recommendation. RiboGene shall file, with each party to share out-of-pocket
expenses according to their Interest, patent applications for Joint Compounds
and Products, and HPI shall provide reasonable cooperation relative thereto. If
RiboGene fails to use commercially reasonable efforts to pursue this obligation,
then HPI may file and/or prosecute the patent at joint expense of the parties
also according to their Interest. The developing party may file, at its sole
discretion and own expense, patent applications for Developing Party Compounds
in both parties' names and the nondeveloping party shall provide reasonable
cooperation relative thereto. A nondeveloping party shall not file or prosecute
patent applications with respect to Developing Party Compounds.
8.3 ENFORCEMENT OF PATENT RIGHTS.
8.3.1 Each party shall use good faith and commercially
reasonable efforts (i) to enforce its own Proprietary Rights against infringers,
and (ii) to consult with the other party both prior to and during said
enforcement. Upon learning of significant and continuing infringement of such
rights belonging to the other party by a third party in a manner that may have a
bearing on the collaboration hereunder, HPI or RiboGene, as the case may be,
promptly shall provide notice to the other party in writing of the fact and
shall supply the other party with all evidence possessed by the notifying party
pertaining to and establishing said infringement(s). Whenever rights to Products
hereunder are affected which are not covered under joint patent applications,
the party whose Proprietary Rights are allegedly being infringed shall have six
(6) months from the date of receipt of notice under this Section 8.3 to abate
the infringement, or to file suit against at least one of the infringers, at its
sole expense, following consultation with the other party. The party whose
Proprietary Rights are allegedly being infringed shall not be obligated to bring
or maintain more than one such suit at any time with respect to claims directed
to any one method of manufacture or composition of matter.
8.3.2 If a joint patent application or a patent based thereon
allegedly is being infringed, HPI and RiboGene shall cooperate in seeking to
abate the infringement or in bringing suit against the alleged infringing party.
Unless the parties mutually agree otherwise, expenses shall be apportioned based
on each party's Interest in the Product in connection with which the patent
infringement is alleged. All monies recovered upon final judgment or settlement
of any such suit shall be shared by HPA and RiboGene pro rata based on each
party's percentage of monetary contributions to prosecution of the abatement of
the infringement or the suit against the infringing party. Thus, if a party
fails to pay its prescribed share of the expenses, that party's share of the
settlement shall be reduced accordingly. Notwithstanding the foregoing, HPI and
RiboGene shall fully cooperate with each other in the planning and execution of
any action to enforce the Proprietary Rights affected hereunder. A party holding
more than a fifty percent
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(50%) Interest in a Joint Compound, a Developing Party Compound or Product may
sue on its own behalf if the other party refuses to participate.
8.4 ASSIGNMENTS. Each party to which any portion of the Inventions
vests other than as intended and set forth in this Article 8 shall, to the
extent required by the intent or provisions herein, immediately assign to the
other party such portion of the right, title, and interest therein to carry out
the intentions herein. Each party agrees to cooperate with the other and take
all reasonable additional actions and execute such agreements, instruments, and
documents as may be reasonably required to perfect the others's ownership
interest in accordance with the intent of this Article 8 including, without
limitation, the execution of necessary and appropriate instruments of
assignment.
ARTICLE 9
SALE OF LICENSE OF INTEREST
9.1 SCREENING PHASE.
9.1.1 If both parties decide to jointly sell their interests
with respect to a compound or Candidate which is still in the Screening Phase,
the parties agree that the net proceeds from any sale shall be divided equally
without consideration of Third Party Obligations. A party shall pay from its
share of the net proceeds all Third Party Obligations such party may owe. In
arriving at net proceeds, all reasonable out-of-pocket transaction costs (e.g.
attorney fees) shall be deducted from gross proceeds and paid directly to the
person or entity owed or reimbursed to the party who has paid the person or
entity for such costs.
9.1.2 If the parties jointly license their interests in any
Candidates or partially sequenced compounds during the Screening Phase, the
parties agree that any revenues received with respect to such licensing shall
be equally shared as described in Paragraph 9.1.1 including, without limitation,
any initial payment, milestone fees or royalties.
9.2 DEVELOPMENT PHASE. During the Development Phase, either party,
at any time with respect to Candidates for which both parties are actively
participating in such phase, may initiate discussions to buy out the other
party's interest or sell its own rights in any one or more Developing Party
Compound, Joint Compound or Product. However, neither party shall be obligated
to sell or buy the other's interest either partially or in total. The parties
agree that a sale or license of any Joint Compound or Product to a third party
shall be governed by the terms described in Exhibit D hereto.
9.3 DEVELOPING PARTY COMPOUND. The sale or license of a Developing
Party Compound or any Product incorporating a Developing Party Compound shall
be governed by Sections C.3 and D of Exhibit D.
9.4 DISCLOSURE OBLIGATION. Each party will be obligated to
immediately advise the other party when it becomes aware of, or is approached
by, a prospective third party buyer of, or
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licensee for, a Joint Compound or Product, and the proposed terms of any offer
tendered by such third party. The parties shall jointly consider any proposal.
9.5 MILESTONE AND ROYALTY OBLIGATIONS. In the case of a sale or
license of a Joint Compound or a Product incorporating a Joint Compound or
derivative thereof, the net proceeds after deducting reasonable out-of-pocket
expenses (e.g. attorney fees) incurred in connection with that transaction
shall be shared based on each party's Interest in such Joint Compound or
Product. Each party shall be required to pay its own Third Party Obligations
from the gross proceeds provided, however, in no event shall a party's net
proceeds, after accounting for that party's Third Party Obligations, be less
than the amounts determined under Section D.2 of Exhibit D. In the case of a
Developing Party Compound, the existing Third Party Obligations described in
Exhibit F shall be paid from the gross revenues received and the net proceeds
shall be divided per Exhibit D.
9.6 PROVISIONS TO INCORPORATE. Any sale or license envisioned
under this Article 9 may require the incorporation of certain reporting, due
diligence, indemnification and other provisions in order for HPI and/or
RiboGene to comply with certain requirements of third party licensing
agreements. The parties agree that such provisions shall be included in any
sales or license when necessary.
ARTICLE 10
DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
10.1 DISPUTE RESOLUTION. If a disagreement, dispute, controversy or
claim should arise out of or relating to the interpretation of or performance
under, this Agreement, or the breach, or invalidity thereof, the parties will
attempt in good faith to resolve their differences before resorting to the
termination procedures provided in Article 11 of this Agreement by submitting
such dispute to the Chief Executive Officers of the parties (or their
designees) for consideration for a period of thirty (30) days. If the parties
do not resolve such dispute during that thirty (30) day period, the parties
agree to then endeavor to settle the dispute by mediation administered by the
American Arbitration Association (AA) under its Commercial Mediation Rules
before resorting to binding arbitration. Thereafter, either party shall be
free to initiate binding arbitration. Any arbitration hereunder shall be
conducted under the Commercial Arbitration Rules of the AA. California
Arbitration Law shall govern, except in the event a stay is sought pursuant to
California Code of Civil Procedure Section 1281.2(c) in which event the parties
agree the issue shall be resolved under the United States Arbitration Act.
Each such arbitration shall be conducted by a single, neutral arbitrator
appointed in accordance with such rules. The arbitrator is to be appointed
within thirty (30) days after submission to arbitration with the hearing to
commence as soon as practicable thereafter but in no event more than sixty (60)
days after the arbitrator's appointment. Any such arbitration shall be held in
San Diego, California. The arbitrator shall have the authority to grant
specific performance, and to allocate between the parties the costs of
arbitration in such equitable manner as the arbitrator may determine. Judgment
upon the award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award and
an order of enforcement, as the case may be. In no event shall a
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demand for arbitration be made after the date when institution of a legal or
equitable proceeding based upon such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. Neither party, nor the
arbitrator, may disclose the existence, content or results of the arbitration,
without the prior written consent of the other party. Notwithstanding the
foregoing, each party shall be entitled to institute judicial proceedings
against the other party outside arbitration to enforce the instituting party's
rights hereunder through specific performance, injunction, declaratory judgment
or similar equitable relief.
10.2 GOVERNING LAW, JURISDICTION AND VENUE. This Agreement is made in
accordance with and shall be governed and construed under the laws of the State
of California, without regard to the principles of conflicts of laws rules. In
any legal action relating to this Agreement, each party consents to the exercise
of jurisdiction over it by a state or federal court in California and that if a
party brings an action other than an action to enforce an arbitration decision,
it shall be instituted in San Diego if first instituted by RiboGene and in San
Francisco if first instituted by HPI. In any action or proceeding outside of
binding arbitration to enforce rights under this Agreement, the prevailing party
shall be entitled to recover costs and expenses including, without limitation,
attorney's fees.
ARTICLE 11
TERM AND TERMINATION
11.1 TERM. This Agrement shall remain in full force and effect from
the Effective Date and, unless otherwise terminated by operation of law or by
acts of the parties in accordance with the terms of this Agreement, or unless
extended by mutual agreement of the parties, shall remain in effect until the
expiration of the latest of (a) the Screening Term, (b) the Development Term, or
(c) a party's obligations to make payments required pursuant to this Agreement.
This Section does not extend the Screening Term.
11.2 EARLY TERMINATION. If a party breaches any material obligation
of this Agreement, including failure to make any payment when due and payable
hereunder, and such party fails to cure such breach within ten (10) days of
written notice concerning untimely payments provided for herein or sixty (60)
days after receipt of written notice concerning any other failure, the
nonbreaching party may terminate this Agreement by providing written notice to
the breaching party. Additionally, either party may terminate this Agreement
upon the insolvency of, or filing of either a voluntary petition by, or an
involuntary petition against (if not dismissed within sixty (60) days after
filing), the other party.
11.3 EFFECT OF TERMINATION. Upon termination of this Agreement prior
to its term set forth in Section 11.1 above, the screening activities set forth
in Article 3 shall cease. Notwithstanding any termination, the provisions of
Articles 2, 7, 8, 9, 10, and 12 through 15 shall survive to the extent
obligations have accrued thereunder prior to termination and including without
limitation the obligation of a party to make the payments provided for herein. A
party shall have
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the right to continue to pursue any Developing Party Compound which that party
is developing at its own expense, even in the event of termination of this
Agreement.
ARTICLE 12
INDEMNIFICATION, LIABILITY, INFRINGEMENT
12.1 INDEMNITY. Each party (the "Indemnifying Party") shall defend
the other party and such other party's Affiliates, officers, directors,
shareholders, employees and agents (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any claims made against the Indemnified
Parties by third parties to the extent that such claims arise out of the
negligent, reckless or intentionally wrongful acts or omissions of, this
Agreement. A licensor of enabling technology shall also be included as an
Indemnified Party if the party licensed by such licensor is required by the
terms of the licensing agreement to include an indemnity in its sublicenses but
only to the extent that the technology licensed under such agreement is
utilized in performance of this Agreement. The Indemnifying Party shall either
settle such claims or pay all damages and costs finally awarded against the
Indemnified Parties by a court of competent jurisdiction as a result of such
claims. The Indemnifying Party shall have no liability for any such claim if
the Indemnified Parties do not notify the Indemnifying Party promptly in
writing of the claim, give the Indemnifying Party the exclusive control of the
defense and settlement thereof, and provide reasonable assistance in connection
therewith, at the Indemnifying Party's expense. A party hereto who is the
Indemnified Party may, at its option and own expense, have its own counsel and
participate in any proceedings even though the defense of such proceedings are
under the control of the Indemnifying Party.
12.2 ADDITIONAL INDEMNITY FOR SOLELY DEVELOPED PRODUCTS. The
Developing Party shall defend the nondeveloping party and its Affiliates,
officers, directors, shareholders, employees and agents (collectively, the
"Nondeveloping Indemnified Parties" for purposes of this Section 12.2) against
any claims made against the Nondeveloping Indemnified Parties by third parties
to the extent that such claims arise out of the manufacture, use or sale of
any Developing Party Compound and any Product incorporating a Developing Party
Compound including without limitation (i) the infringement or alleged
infringement of a third party's intellectual property rights, (ii) the inherent
property of any such Developing Party Compound, (iii) the development or
manufacture of any Developing Party Compound by Developing Party, its
Affiliates, or sublicensees, or (iv) the use of any such Developing Party
Compound or Product incorporating a Developing Party Compound manufactured,
used or sold by the Developing Party, its Affiliates or sublicensees by any
human regardless of whether such use was contemplated by the Parties
(collectively, the "Liabilities"); and shall either settle such claims or pay
all damages and costs finally awarded against the Nondeveloping Indemnified
Parties by a court of competent jurisdiction as a result of such claims out of
the gross proceeds derived from the sale or license of such Developing Party
Compound and each Product incorporating such Developing Party Compound. Except
with respect to claims and suits based on strict liability related to the
inherent property of a Developing Party Compound and each Product incorporating
such Developing
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<PAGE> 19
Party Compound, the parties shall share the Liabilities which exceed the gross
proceeds ("Excess Liabilities") derived from the sale or license of such
Developing Party Compound and Product based on their respective Interests
therein. Excess Liabilities related to strict liability shall be paid solely by
the Developing Party. The Developing Party shall have no liability for any such
claim (i) unless it receives prompt written notification of such claim, is given
exclusive control of the defense and settlement thereof, and is provided with
all reasonable assistance in connection therewith by the Indemnified Parties, at
the Developing Party's expense, or (ii) to the extent that such claim arises out
of the nondeveloping party's breach of this Agreement, negligence or willful
misconduct. A licensor of enabling technology shall also be included as a
Nondeveloping Indemnified party if the party licensed by such licensor is
required by the terms of the licensing agreement to include any indemnity in its
sublicenses but only to the extent that the technology licensed under such
agreement is utilized in performance of this Agreement. A party hereto who is
the Nondeveloping Indemnified Party may, at its option and own expense, have its
own counsel and participate in any proceedings even though the defense of such
proceedings are under the control of the Indemnifying Party.
12.3 RIGHT TO REIMBURSEMENT. Without limiting the right of the
parties under Sections 12.1 and 12.2, a party which is entitled to
indemnification against a claim under either Sections 12.1 or 12.2, and is not
provided such defense or indemnification by the other party, shall have the
right to defend itself in such claim and obtain reimbursement from the other
party for its reasonable legal fees and other costs incurred in defending itself
in such suits, and for any payments or amounts which it pays as a result of
settlements made or judgments awarded in any suit based on such claim. Such
right of reimbursement shall be in addition to all other remedies which the
party defending itself under this Section 12.3 possesses with respect to the
other party.
12.4 LIABILITY AND INDEMNIFICATION FOR PRODUCTS INCORPORATING JOINT
COMPOUNDS.
12.4.1 Subject to the provision of Section 12.4.2 through 12.4.4
and pursuant to Section 9.1.1, the parties shall subtract from the gross
proceeds from the sale or licensing of any Product to a third party or by one of
the parties hereto which incorporates a Joint Compound the amount of any and all
liabilities, damages, losses, costs and expenses, including attorney's fees, and
further subtracting without limitation any product liabilities resulting from
(i) the infringement or alleged infringement of a third party's intellectual
property rights (ii) the inherent properties of any such Joint Compound, (iii)
the development or manufacture of any Joint Compound by either party or any of
their respective Affiliates, or (iv) the use of any such Product manufactured,
used or sold by either party or their Affiliates by any human being regardless
of whether such use was contemplated by the Parties (collectively, the Joint
Compound "Liabilities") arising from any suit or claim by a third party alleging
personal injury or property damage based on the development, use, manufacture,
promotion or sale of any such Product.
12.4.2 Notwithstanding the provisions of Section 12.4.1 above,
HPI shall indemnify and hold RiboGene and its Affiliates, officers, directors,
shareholders and agents harmless from and against Joint Compound Liabilities to
the extent such Joint Compound Liabilities are finally determined by a court of
competent jurisdiction (or by specific reference in a
18
<PAGE> 20
settlement agreement to which both Parties have consented) to have arisen from
the breach of this Agreement by HPI, willful misconduct or gross negligence (but
not the strict liability or liabilities resulting from the inherent properties
of any Joint Compound) of HPI or its Affiliates relating to the use, manufacture
or sale of any Product which incorporates a Joint Compound.
12.4.3 Notwithstanding the provisions of Section 12.4.1 above,
RiboGene shall indemnify and hold HPI and its Affiliates, officers, directors,
shareholders and agents harmless from and against Joint Compound Liabilities to
the extent such Joint Compound Liabilities are finally determined by a court of
competent jurisdiction (or by specific reference in a settlement agreement to
which both Parties have consented) to have arisen from the breach of this
Agreement by RiboGene, willful misconduct or gross negligence (but not the
strict liability or liabilities resulting from the inherent properties of any
Joint Compound) of RiboGene or its Affiliates relating to the use, manufacture
or sale of any Product which incorporates a Joint Compound.
12.4.4 Each Party shall notify the other promptly upon receipt
of any notice of any product liability claim or lawsuit subject to this Section
12.4. Such notice shall be a condition to any indemnity provided for herein. The
party responsible for distributing a Product which incorporates a Joint Compound
which is the subject of such claim, shall be responsible for defending such
claim except as to any claim for which such party expects to seek indemnity from
the other party under Section 12.4.2 or 12.4.3 above, in which case the latter
party shall defend such claim. HPI or RiboGene, as the case may be, may at their
election and expense participate in any such litigation controlled by the other
party. The party defending such claim or suit may settle any such claim or suit
only with the written consent of the other party, which shall not be
unreasonably withheld.
12.5 INSURANCE. Each party shall maintain product liability insurance
with respect to its development, manufacture and sale of Products, in such
amount as it customarily maintains with respect to its development, manufacture
and sale of other comparable products, and shall name the other party as an
additional insured party. Notwithstanding the above, the insurance will at a
minimum meet the requirements both parties have to their respective licensors
with respect to technology licensed from said licensors and utilized in
performance of this Agreement, and, if required, shall name such licensors as
additional insured parties. Each party shall maintain such insurance while it
develops, manufactures or sells Products, and thereafter shall maintain such
insurance in effect for a reasonable period after the cessation of sale or other
distribution of such Product. Each party shall provide a copy of the policy
providing such product liability insurance to the other party promptly after
such policy becomes effective, and shall thereafter notify such other party
promptly after any change in the terms of such policy.
19
<PAGE> 21
ARTICLE 13
DISCLAIMER OF WARRANTIES; FURTHER ACTION
13.1 DISCLAIMER BY HPI. THE LICENSED COMBINATORIAL LIBRARIES,
ITERATION MIXTURES AND CONFIRMATORY SAMPLES ARE PROVIDED BY HPI "AS IS" AND
WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES; AND, TO
THE BEST OF HPI's KNOWLEDGE THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER DOES
NOT INFRINGE UPON INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. IN NO EVENT
WILL HPI OR ANY OF ITS LICENSORS WHOSE TECHNOLOGY IS UTILIZED BY THE PARTIES IN
THE PERFORMANCE OF THIS AGREEMENT BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSE RIGHTS BY RIBOGENE
HEREUNDER.
13.2 DISCLAIMER BY RIBOGENE. THE ASSAYS ARE PROVIDED BY RIBOGENE
"AS IS" AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE
PRACTICES; AND, TO THE BEST OF RIBOGENE'S KNOWLEDGE THE PERFORMANCE OF ITS
OBLIGATIONS HEREUNDER DOES NOT INFRINGE UPON INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES. IN NO EVENT WILL RIBOGENE OR ANY OF ITS LICENSORS WHOSE
TECHNOLOGY IS UTILIZED BY THE PARTIES IN THE PERFORMANCE OF THIS AGREEMENT BE
LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM
EXERCISE OF THE LICENSE RIGHTS BY HPI HEREUNDER.
13.3 COMPLIANCE WITH LAW. Each party and its respective authorized
sublicensees shall comply with all applicable laws, regulations, and
governmental orders in connection with their activities hereunder, including
without limitation all research and development activities and the manufacture,
use and sale of Products. Without limiting the foregoing, each party and its
respective authorized employees shall observe all applicable United States and
foreign laws with respect to the transfer of Products and related technical
data to foreign countries, including without limitation, the International
Traffic in Arms Regulation and Export Administration Regulations.
13.4 ADDITIONAL DOCUMENTS. Each party agrees to execute such
further papers or agreements as may be necessary to effect the purposes of this
Agreement.
20
<PAGE> 22
ARTICLE 14
CONFIDENTIALITY
RiboGene and HPI acknowledge that they have executed a separate Mutual
Nondisclosure Agreement, a copy of which is attached as Exhibit E, and the
parties intend that such Mutual Nondisclosure Agreement shall be effective with
respect to all disclosures and discoveries under this Agreement.
ARTICLE 15
MISCELLANEOUS
15.1 WAIVER. No waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be deemed
a waiver as to any subsequent or similar breach or default.
15.2 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder except as incident to the merger, consolidation,
reorganization, or acquisition of stock or assets affecting a majority of the
assets or voting control of the assigning party. HPI or RiboGene may assign
their respective rights and/or obligations to any of their respective
Affiliates.
15.3 NOTICES. Any notice or other communication required or
permitted to be given to either party hereto shall be in writing and shall be
deemed to have been properly given and to be effective on the date of delivery
if delivered in person or by facsimile or five (5) days after mailing by
registered or certified mail, postage paid, to the other party at the following
address:
In the case of HPI: Houghten Pharmaceuticals, Inc.
3550 General Atomics Court
San Diego, CA 92121
Attention: President
Phone: 619/455-3814
Fax: 619/455-2544
21
<PAGE> 23
In the case of RiboGene: RiboGene, Inc.
21375 Cabot Blvd.
Hayward, CA 94545
Attention: President
Phone: 510/732-5551
Fax: 510/732-7741
Either party may change its address for communications by a notice to the other
party in accordance with this Section.
15.4 AMENDMENT. No amendment or modification hereof shall be valid
or binding upon the parties unless made in writing and signed by both parties.
15.5 PUBLIC ANNOUNCEMENT AND DISCLOSURE. In consideration of the
terms hereof, HPI and RiboGene may agree to make a public announcement of the
collaboration. The content shall be agreed upon by both parties Even if no
public announcement is agreed upon, either party may disclose the existence of
this Agreement to investors and prospective investors. No other announcement,
public release or notice of any kind may be issued without the written consent
of both parties, which consent shall not be unreasonably withheld.
Notwithstanding the above, either party may disclose previously disclosed
non-confidential information without the consent of the other. A party shall
not disclose the names of the other party's licensors of technology utilized in
the performance of this Agreement without the written consent of the other
party.
15.6 FORCE MAJEURE. Any delays in performance by any party under
this Agreement (other than a party's failure to pay money to the other party)
shall not be considered a breach of this Agreement if and to the extent caused
by occurrences beyond the reasonable control of the party affected, including
but not limited to acts of God, embargoes, governmental restrictions, strikes or
other concerted acts of workers, fire, flood, explosion, riots, wars, civil
disorder, rebellion or sabotage. The party suffering such occurrence shall
immediately notify the other party and any time for performance shall be
extended by the actual time of delay caused by the occurrence.
15.7 INDEPENDENT CONTRACTORS. In making and performing this
Agreement, RiboGene and HPI act and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between HPI and RiboGene. At no time shall one party make commitments or incur
any charges or expenses for, or in the name of, the other party.
15.8 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties
to this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
22
<PAGE> 24
15.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity, or under any other agreement between the
parties. All of such rights, powers and remedies shall be cumulative, and may
be exercised successively or cumulatively.
15.10 ENTIRE AGREEMENT. This Agreement and any and all Exhibits
referred to herein embody the entire understanding of the parties with respect
to the subject matter hereof and supersedes all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, both RiboGene and HPI have executed this Agreement,
in duplicate originals, by their respective officer hereunto duly authorized,
as of the day and year hereinabove written.
HOUGHTEN PHARMACEUTICALS, INC. RIBOGENE, INC.
By: /s/ ROBERT S. WHITEHEAD By: /s/ CHARLES J. CASAMENTO
----------------------------- -----------------------------
Robert S. Whitehead Charles J. Casamento
President and CEO Chairman, President and CEO
23
<PAGE> 25
EXHIBIT A
ASSAYS TO BE PERFORMED BY RIBOGENE
The Assays will be based on translational targets and shall include some or all
of the following:
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 26
EXHIBIT B
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 27
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 28
EXHIBIT C
[*]
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 29
EXHIBIT D
DEVELOPMENT PHASE PROVISIONS
The following provisions, in addition to applicable provisions of the Joint
Collaboration Agreement to which this Exhibit D is attached, shall govern the
Development Phase and the development of Developing Party Compounds unless and
until such provisions are incorporated in substance, amended or superseded by
the terms of a subsequent agreement. Each Joint Compound, Product and
Developing Party Compound shall be treated separately in the application of
these provisions.
A. FUNDING.
At such time as both parties agree to commence the Development Phase
with respect to a particular Candidate becoming a Joint Compound, the parties,
after reviewing the Research Committee's recommendations as to a budget and
otherwise, shall agree on the percentage contribution to be made by each party
to the funding of the budget with respect to that Joint Compound in the
Development Phase. Until amended as herein provided, all costs incurred in
connection with such Joint Compound and development of the Product in the
Development Phase shall then be apportioned between the parties based on these
agreed-to percentage contributions and each party's Interest in that Joint
Compound and/or Products incorporating such Joint Compound or derivatives
thereof shall be based on that party's overall contribution to the Development
Phase for such Joint Compound and/or Product. Either party ("Proposing Party")
may at any time during the Development Phase with respect to that Joint Compound
and/or Product with at least three months notice, advise the other party
("Non-Proposing Party") of its wish to increase or decrease the percentage
contribution. The Non-proposing Party is under no obligation to accept any
proposal that would cause an increase in the Proposing Party's percentage
contribution. In the event that the Proposing party wishes to decrease its
percentage contribution to that Joint Compound and/or Product, the Non-proposing
party may (1) increase the future payments it makes to the Development Phase for
that Joint Compound and/or Product against budget to make up part or all of the
decreased contribution for the budget from the Proposing party in which instance
the Interest of each party would be adjusted monthly to reflect the overall
percentage contribution of each party to the Development Phase for that Joint
Compound and/or Product; (2) reduce its own contribution against budget so as to
reflect the Proposing Party's reduction without altering the overall percentage
contribution of both parties with the budget to be adjusted accordingly to
reflect such reduction; or (3) propose cessation of the funding altogether,
resulting in either a cessation of the Development Phase for that Joint Compound
and/or Product or an attempted sale or license of the rights of both parties in
the Development Phase for that Joint Compound and/or Product. Notwithstanding
any provision to the contrary, neither party's Interest may be devalued to less
[*] in a Candidate, Developing Party Compound, Joint Compound and/or Product
even if one party chooses not to, or fails to, make any percentage contribution
to the Development Phase for that Candidate, Developing Party Candidate, Joint
Compound and/or Product.
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 30
B. VALUATION OF CONTRIBUTION.
1. [*]
2. [*]
3. [*]
4. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 31
[*]
5. [*]
6. [*]
C. SALE OR LICENSE OF INTEREST.
[*]
1. [*]
2. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 32
[*]
3. [*]
D. DISTRIBUTION OF REVENUE
1. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 33
2. [*]
3. [*]
E. INSURANCE.
Effective as of such time as any Product enters human clinical trials,
the parties with respect to that Product (with the costs to be shared
based on each party's participation in cost sharing as set forth in
Section A), or through their sublicensee(s), shall insure their
activities under this Agreement and obtain, keep in force and maintain
insurance, including without limitation product liability insurance, in
amounts sufficient to cover their obligations under this Article E and
consistent with reasonable business practice in the industry. Without
limiting the foregoing, coverage shall in no event be less than the
following:
Comprehensive or Commercial Form General Liability Insurance
(contractual liability included) with limits as follows:
1. Each occurrence $1,000,000
2. Products/Completed Operations Aggregate $5,000,000
3. Personal and Advertising Injury $1,000,000
4. General Aggregate (commercial form only) $5,000,000
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 34
It should be expressly understood, however, that the coverages and limits
referred to under the above shall not in any way limit each party's liability.
Certificates of insurance evidencing compliance with all requirements shall be
requested. Such certificates shall:
1. Provide for thirty (30) day advance written notice to the other
party of any modification;
2. Indicate that both parties have been endorsed as insureds under
the coverages referred to under the above; and
3. Include a provision that the coverages will be primary and will
not participate with nor will be excess over any valid and
collectable insurance or program of self-insurance carried or
maintained by either party.
<PAGE> 35
EXHIBIT E
MUTUAL NONDISCLOSURE AGREEMENT
This MUTUAL NONDISCLOSURE AGREEMENT ("Agreement") is made effective as
of the 1st day of October, 1993, by and between HOUGHTEN PHARMACEUTICALS, INC.,
a Delaware corporation, and RiboGene, Inc., to assure the protection and
preservation of the confidential and/or proprietary nature of information to be
disclosed or made available between the parties in connection with certain
negotiations or discussions.
WHEREAS, in order to pursue these discussions, the parties have agreed
to mutual disclosures of certain data and other information which are of a
proprietary and confidential nature (as defined in paragraph 2 below and
referred to herein as "Confidential Information").
NOW, THEREFORE, in reliance upon and in consideration of the following
undertakings, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Subject to the limitations set forth in Paragraph 2,
Confidential Information shall be deemed to include any information, process,
technique, compound, library, method of synthesis, program, design, drawing,
formula or test data relating to any research project, work in process,
development, engineering, manufacturing, marketing, servicing, financing or
personnel matter relating to the disclosing party, its present or future
products, sales, suppliers, customers, employees, investors, or business,
whether in oral, written graphic or electronic forms.
2. The term "Confidential Information" shall not be deemed to
include information which, to the extent that the recipient of Confidential
Information can establish by competent written proof:
a. at the time of disclosure is in the public domain;
b. after disclosure, becomes part of the public domain by
publication or otherwise, except by (i) breach of this
Agreement by the recipient or (ii) disclosure by any
person or affiliate company to whom Confidential
Information was disclosed under this Agreement;
c. was (i) in recipient's possession in documentary form at
the time of disclosure by the disclosing party or (ii)
subsequently and independently developed by recipient's
employees who had no knowledge of or access to the
Confidential Information;
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<PAGE> 36
d. recipient shall receive from a third party who has the
lawful right to disclose the Confidential Information
and who shall not have obtained the Confidential
Information either directly or indirectly from the
disclosing party; or
e. disclosure is required by law or regulation.
In the event that Confidential Information is required to be
disclosed pursuant to subsection (e), the party required to make disclosure
shall notify the other to allow that party to assert whatever exclusions or
exemptions may be available to it under such law or regulation.
3. Each party shall maintain in trust and confidence and not
disclose to any third party or use for any unauthorized purpose any Confidential
Information received from the other party. Each party may use such Confidential
Information only to extent required to perform the evaluation. Confidential
Information shall not be used for any purpose or in any manner that would
constitute a violation of any laws or regulations, including, without
limitation, the export control laws of the United States. No other rights or
licenses to trademarks, inventions, copyrights, or patents are implied or
granted under this Agreement.
4. Confidential Information supplied shall not be reproduced in any
form except as required to perform evaluation.
5. The responsibilities of the parties are limited to using their
reasonable and best efforts to protect the Confidential Information from
unauthorized use or disclosure. Both parties shall advise their employees or
agents who might have access to such Confidential Information of the
confidential nature thereof. No Confidential Information shall be disclosed to
any officer, employee or agent of either party who does not have a need to know
such information to perform the evaluation.
6. All Confidential Information (including copies thereof) shall
remain the property of the disclosing party, and shall be returned to the
disclosing party after the receiving party's need for it has expired, or upon
request of the disclosing party, and in any event, upon completion or
termination of this Agreement.
7. This Agreement shall continue in full force and effect for so
long as the parties continue to exchange Confidential Information. This
Agreement may be terminated at any time upon ten (10) days' written notice to
the other party. The termination of this Agreement shall not relieve either
party of the obligations imposed by this Agreement with respect to Confidential
Information disclosed prior to the effective date of such termination and the
provisions hereof shall survive the termination of this Agreement for a period
of three (3) years from the date of such termination.
8. This Agreement shall be governed by the laws of the State of
California's those laws are applied to contracts entered into and to be
performed in California.
9. Neither party shall reveal the fact that Confidential
Information has been disclosed pursuant to this Agreement or that either party
is making an evaluation. It is understood that disclosure pursuant to this
Agreement is not a public disclosure or sale or offer for sale of any product,
but is made for the limited purpose of evaluation.
10. This agreement contains the entire agreement of the parties and
may not be changed, modified, amended or supplemented except by a written
instrument signed by both parties. The
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<PAGE> 37
unenforceability of any provision on this Agreement shall not affect the
enforceability of any other provision of this Agreement. Neither this
Agreement nor the disclosure of any Confidential Information pursuant to this
Agreement by any party shall restrict such party from disclosing any of its
Confidential Information to any third party.
11. Each party hereby acknowledges and agrees that in the event of any
breach of this Agreement by the other party, including, without limitation, the
actual or threatened disclosure of a disclosing party's Confidential Information
without the prior express written consent of the disclosing party, the
disclosing party will suffer an irreparable injury, such that no remedy at law
will afford it adequate protection against, or appropriate compensation for,
such injury. Accordingly, each party hereby agrees that the other party shall be
entitled to specific performance of a receiving party's obligations under this
Agreement, as well as such further injunctive relief as may be granted by a
court of competent jurisdiction.
AGREED TO AS OF THE FIRST DATE ABOVE:
HOUGHTEN PHARMACEUTICALS, INC. Company: RiboGene, Inc.
3550 General Atomics Court ----------------------------
San Diego, CA 92121 Address: 21375 Cabot Boulevard
-----------------------------
Hayward, CA 94583
-----------------------------
By: /s/ GILBERT R. MINTZ By: /s/ VINCENT J. MILES
----------------------- --------------------------------
Name: GILBERT R. MINTZ Name: VINCENT J. MILES
----------------------- --------------------------------
(Print Name) (Print Name)
Title: Title: Vice President, Business
---------------------- Development
---------------------------------
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<PAGE> 38
EXHIBIT F
THIRD PARTY OBLIGATIONS
[*]
B. HPI
1. Chiron Corporation and its affiliate Chiron Mimotopes Pty. Ltd.
("Chiron")
a. [*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 39
[*]
[*]
2. [*]
[*]
[*]
[*]
[*]
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 40
HPI Activity
[*]
- ----------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 1
EXHIBIT 10.34
*TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 240.24b-2.
LICENSE AGREEMENT
THIS AGREEMENT ("AGREEMENT") is entered into as of the _____ day of
_________, 1998 the "EFFECTIVE DATE") by and between RIBOGENE INC., a California
corporation ("RIBOGENE"), and DAINIPPON PHARMACEUTICAL CO., LTD. ("DAINIPPON"),
a corporation organized under the laws of Japan.
RECITALS
WHEREAS, Dainippon and RiboGene concurrently with this Agreement are
entering into a research agreement (the "Research Agreement") for the discovery
of compounds which are active in certain RiboGene assays; and
WHEREAS, the parties wish to develop and market novel therapeutic
products based on compounds identified pursuant to the Research Agreement; and
WHEREAS, in connection with the establishment of the relationship
between the parties, on or before February 13, 1998 Dainippon is purchasing
shares of RiboGene stock in the amount of US$ 2 million pursuant to a stock
purchase agreement agreed upon between the parties on or before February 5,
1998;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "CONFIDENTIAL INFORMATION" shall mean a party's confidential
information, including, without limitation, Dainippon Know-How, RiboGene
Know-How, Collaboration Know-How, Development Plans, engineering designs and
drawings, research data, manufacturing processes and techniques, scientific,
manufacturing, marketing, and business plans, financial or personnel matters
relating to the party, its present or future products, sales, suppliers,
customers, employees, investors or business.
1.2 "NET SALES" shall mean, with respect to a Product, and on a
country-by-country basis, the gross invoice price of all Product sold by
Dainippon, its Affiliates or sublicensees to an independent third party after
deducting, if not already deducted in the amount invoiced (a) trade, quantity
and cash discounts actually taken, (b) returns, rebates and allowances, (c)
duties, sales and excise taxes and (d) transportation and insurance charges.
With respect to sales of combination products, which shall consist of Products
combined with one or more additional active ingredients, the parties will agree
on a method of allocation in the event the situation arises. Sales among
Dainippon and its Affiliates or sublicensees shall not be deemed Net Sales.
Products shall be considered sold when invoiced by Dainippon.
1.
<PAGE> 2
1.3 "MAJOR MARKET" shall mean any one of the following countries:
Japan, USA, United Kingdom, France, Germany, or Italy. For purposes of this
Agreement, the term "Major Market" shall also include any number of countries
within the European Union sufficient to obtain Regulatory Approvals throughout
the European Union.
1.4 "PRODUCT" shall mean any pharmaceutical product, including all
formulations, line extensions or modes of administration thereof, which contains
a Licensed Compound as an active ingredient or compound which is derived from a
Licensed Compound for replacement of the Licensed Compound.
1.5 "PHASE III" shall mean that phase in the clinical development of
a Product during which expanded controlled and/or uncontrolled studies are
conducted after preliminary evidence of effectiveness of the Product has been
obtained, and which studies are intended to gather additional information about
effectiveness and safety that is needed to evaluate the overall benefit-risk
relationship of the Product, to provide an adequate basis for physician labeling
and to support a filing for marketing approval.
1.6 "TERRITORY" shall mean the entire world.
1.7 Each of the following terms shall have the meaning given it,
respectively, in the Research Agreement:
"Active Compounds", "Affiliate", "Assays", "Collaboration Know-How",
"Collaboration Patents", "Collaboration Technology", "Dainippon Know-How",
"Dainippon Patents", "Dainippon Substances", "Dainippon Technology",
"Development Program", "FDA", "Field", "GLP Toxicology Studies", "Inactive
Derived Compound", "IND", "NDA", "Licensed Back-Up Compound", "Licensed
Compound", "Regulatory Approval(s)", "Research Committee", "Research Program",
"Research Term", "RiboGene Know-How", "RiboGene Patents", " RiboGene
Substances", "RiboGene Technology", "Tail End Period", and "Targets".
ARTICLE 2
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
2.1 CONDUCT OF THE DEVELOPMENT PROGRAM. With respect to each
Licensed Compound, Dainippon will conduct a Development Program designed to
obtain Regulatory Approval in the Territory.
2.2 DUE DILIGENCE.
(a) The parties agree that the goal of the Development
Program for each Licensed Compound shall be to develop and commercialize a
Product in the entire Territory. To that end, Dainippon shall devote the same
degree of attention, resources and diligence to the preclinical and clinical
development of each Licensed Compound as it devotes to its own high priority
compounds and products.
2.
<PAGE> 3
(b) In particular, Dainippon shall make commercially
reasonable efforts to conduct for each Product clinical trials in the countries
of the Major Market as early as possible, and to seek Regulatory Approval for
each Product in these countries.
(c) Further, Dainippon shall make commercially reasonable
efforts to launch and sell each Product in each country in the Territory as
early as possible, but in no case shall Dainippon launch and sell a Product in
any country in the Territory [*] for such Product in that country has been
granted, unless the parties agree on an extension of such period or unless the
delay is caused by any reason not controllable by Dainippon [*]. [*] if
Dainippon has not launched the Product in that country it may, at its option,
either (i) [*] the Product in that country or (ii) pay RiboGene [*] which would
have been payable to [*] for [*] based upon Dainippon's good faith estimates of
[*] and the applicable [*] determined as provided in Section 5.2(a). If
Dainippon elects to [*] the Product in such country, RiboGene shall have the
right, if necessary, under all applicable Dainippon owned Collaboration
Technology to sublicense, make, have made, use and sell such Product in such
country and the right to [*] upon reimbursement to Dainippon of its development
and regulatory costs, applicable to such Product for such country. Such rights
shall be royalty-bearing if the Product contains a Licensed Compound which is,
or is derived from, a Dainippon Substance but otherwise shall be royalty-free.
If Dainippon elects to [*] such payment shall not [*] which may become due upon
Net Sales by Dainippon.
2.3 OBLIGATION TO INFORM. Dainippon shall keep RiboGene informed on
the development of each Licensed Compound (including, but not limited to written
updates on the progress of each filing with the FDA or its equivalent non-US
Regulatory Authority), such reports to be provided to RiboGene on [*] and upon
the completion of each major phase in the clinical development.
2.4 DISCONTINUANCE OF COMMERCIALIZATION. If Dainippon discontinues
the development, marketing or sales of all the Products in all the countries,
RiboGene shall have a perpetual, exclusive, royalty-bearing, worldwide,
sublicensable license under Dainippon owned Collaboration Technology to
research, develop, make, have made, use and sell any such Products and to use
and apply non-compound related Collaboration Technology in the Field. If
Dainippon discontinues the development, marketing or sales of a certain Product
in a certain country, RiboGene shall have the right, if necessary, under all
applicable Dainippon owned Collaboration Technology to sublicense, make, have
made, use and sell such Product in such country and to cause Dainippon to assign
all related applications for Regulatory Approvals upon reimbursement to
Dainippon of its development and regulatory costs, applicable to such Product
for such country. Such rights shall be royalty-bearing if the Product contains a
Licensed Compound which is, or is derived from, a Dainippon Substance but
otherwise shall be royalty-free.
ARTICLE 3
CO-PROMOTION
3.1 OPTION RIGHT. RiboGene shall have the option to co-promote any
Products in North America and in Europe ("Co-promotion Territory").
3.
<PAGE> 4
3.2 EXERCISING OF OPTION. The option shall be exercised by written
notice to Dainippon no later than one hundred eighty (180) days after filing of
the NDA for the respective Product on a country-by-country basis. It is
understood that RiboGene shall carry out the co-promotion by itself and shall
not grant the right of co-promotion to any third party. Furthermore, it is the
intent of the parties that the co-promotion shall be made in a manner to
strengthen the marketing and profitability of the Product. At the same time as
the notice is delivered to Dainippon, RiboGene shall provide Dainippon with its
proposed plan of the co-promotion. Within ninety (90) days from delivery of the
notice to Dainippon, the parties shall negotiate and agree on the terms of the
co-promotion agreement in good faith. Such terms shall include a provision for
Dainippon to pay RiboGene a co-promotion fee, in addition to royalties on Net
Sales, in an amount based on the amount of RiboGene's co-promotion activity, and
a provision on overall framework of the co-promotion, including appropriate
degree of RiboGene's participation in the co-promotion, to the satisfaction of
Dainippon and RiboGene, and such other customary terms as the parties agree, and
shall be from time to time reviewed and, if necessary, modified by mutual
agreement of the parties to reflect the then-current situation, particularly the
profitability of both parties. The co-promotion fee shall equal RiboGene's Fully
Burdened Cost plus [*] percent [*] of the costs of (iv) below. The term "Fully
Burdened Cost" shall mean (i) direct costs specifically identifiable incurred
for the advertising, promotion and marketing of a Product in the Co-Promotion
Territory, including, without limitation, advertisements, conventions,
promotional literature, market research and market planning, direct mail,
product samples, marketing services, sales training programs, activities
relating to promotion and marketing to managed care customers, launch expenses,
(ii) post-approval medical and clinical trial costs, (iii) costs of product
liability insurance, (iv) all costs incurred to operate and maintain a marketing
and sales force which promotes the Product in the Territory, including, without
limitation, salaries, benefits, incentives, personal computers, and car leases,
all as determined in accordance with GAAP. For purposes of clarification, if
RiboGene does not exercise the option to co-promote a Product, the royalty
obligations of Section 5.2 shall apply. Unless RiboGene can utilize Dainippon's
facilities or other resources as described in, or relating to facilities or
resources described in (i), (ii) and (iii), RiboGene shall use its own
facilities or resources to the extent that such facilities or resources are
agreed to in advance by Dainippon. If RiboGene utilizes Dainippon's facilities
or resources, the costs of (i), (ii) and (iii) above shall not be included in
"Fully Burdened Cost;" in any other case, the costs of (i), (ii) and (iii) above
shall be included in "Fully Burdened Cost" and be reimbursed to RiboGene by
Dainippon. Notwithstanding the above provisions, in the event Dainippon
sublicenses the Product in any of the countries in the Co-Promotion Territory,
Dainippon shall make its reasonable efforts to have the sublicensee accept the
co-promotion by RiboGene and conditions as provided for above in such country.
However, if Dainippon sublicenses the Product in the United States, Dainippon
shall require the sublicensee to accept the co- promotion by RiboGene. In the
event RiboGene is acquired by or merged into a company reasonably unacceptable
to Dainippon for co-promotion in any countries, the above option of co-promotion
shall no longer be exercisable unless otherwise agreed upon.
ARTICLE 4
OWNERSHIP OF INTELLECTUAL PROPERTY; LICENSE GRANTS
4.
<PAGE> 5
4.1 OWNERSHIP. Ownership of Dainippon Technology, RiboGene
Technology and Collaboration Technology shall be allocated to each party as
provided in Section 3.1 of the Research Agreement.
4.2 DEVELOPMENT AND COMMERCIALIZATION LICENSE.
(a) LICENSE GRANT BY RIBOGENE. RiboGene hereby grants
Dainippon the right and license, with the right to sublicense, to develop, make,
have made, use and sell Products in the Territory solely within the Field under
RiboGene Technology and the RiboGene-owned and jointly owned Collaboration
Technology. The license granted herein shall be exclusive, even as to RiboGene,
except for the co-promotion rights retained by RiboGene as set forth in Article
3. Exhibit 4.2 hereto shall list all Licensed Compounds and the patents and
patent applications included in the RiboGene Technology and the RiboGene-owned
and jointly owned Collaboration Technology licensed under this subsection (a),
updated from time to time to include new Licensed Compounds and the patent
applications and issued patents relating thereto. Dainippon covenants and agrees
that it will not use, directly or indirectly, the RiboGene Technology or
RiboGene solely owned Collaboration Technology for any purpose other than
developing, making, having made, using or selling Products in the Territory in
the Field under this Agreement.
(b) REGISTRATION. Dainippon may register an exclusive
license (senyo jisshiken) granted with respect to the patents licensed under
this Agreement in the Japanese Patent Office and RiboGene shall cooperate
reasonably with Dainippon in such registration.
(c) ADDITIONAL USES. If Dainippon desires to have the rights
and licenses under RiboGene Technology or RiboGene solely owned Collaboration
Technology to develop and sell a Licensed Compound outside the Field, it may
notify RiboGene as provided in Section 3.4 of the Research Agreement.
ARTICLE 5
COMMERCIAL TERMS
5.1 DEVELOPMENT MILESTONES. Dainippon shall pay to RiboGene the
following amounts in the course of the development of each Product:
<TABLE>
<CAPTION>
Milestone Event/Due Date* Amount (net of withholding)
------------------------- ---------------------------
Japan Major Market (other than Japan)
----- -------------------------------
<S> <C> <C>
Start of first human clinical trial [*] [*]
Start of first Phase III trial [*] [*]
Filing of first NDA [*] [*]
Launch in first Major Market [*] [*]
</TABLE>
5.
<PAGE> 6
*Each milestone payment shall be made for each Product only once regardless of
any substitution of a Licensed Back-up Compound for a Licensed Compound and any
consequent repetition of a milestone event.
Any withholding tax levied at source relating to the milestone payments payable
to RiboGene under Section 5.1 shall be borne by Dainippon. RiboGene shall
reasonably assist Dainippon with respect to payment of the tax.
5.2 ROYALTIES.
(a) ROYALTY PAYMENTS. Dainippon shall pay to RiboGene a
royalty on Net Sales as follows:
<TABLE>
<CAPTION>
ROYALTY RATE IN PERCENT (%) PAYABLE ON PORTION OF ANNUAL NET SALES
(IN U.S. $MILLIONS)
UNITED STATES REST OF WORLD
<S> <C> <C>
[*] [*] 75 or less
[*] [*] More than 75 less than 150
[*] [*] 150 or more
</TABLE>
(b) ROYALTY TERM.
(i) In any country where the manufacture, use or
sale of a Product is not covered by a Collaboration Patent or RiboGene Patent,
royalties shall be payable in such country until the expiration of [*] from the
date of first commercial sale of such Product in such country.
(ii) In any country where the manufacture, use or
sale of a Product is covered by a Collaboration Patent or RiboGene Patent,
royalties shall be payable in such country until the later of (i) [*] from the
first commercial sale of such Product in such country and (ii) the expiration of
the last to expire of such Collaboration Patent or RiboGene Patent.
ARTICLE 6
PAYMENTS; RECORDS; AUDIT
6.1 PAYMENT; REPORTS.
(a) MILESTONE PAYMENTS. Dainippon shall make the milestone
payments under Sections 5.1 within thirty (30) days of the Due Date by means of
wire transfer to RiboGene's account in a bank in the United States to be
designated by RiboGene.
6.
<PAGE> 7
(b) ROYALTY PAYMENTS.
(i) Royalty amounts payable to RiboGene under
Section 5.2 shall be paid in U.S. Dollars within ninety (90) days of the end of
each March, June, September and December. Each payment of royalties shall be
accompanied by a statement of the amount of Net Sales during such period, the
amount of aggregate Net Sales to date as of the end of such period where
necessary in determination of royalty rates, and the amount of royalties due on
such sales.
(ii) Royalty payments and reports for the sale of
Products shall be made for each three month period ending on the last day of
March, June, September and December. For the purpose of calculating royalties on
Net Sales generated in currencies other than U.S. dollars, such Net Sales shall
be converted into U.S. dollars at the rate of exchange on the last business day
of the relevant royalty period, established by the Bank of Tokyo-Mitsubishi,
Tokyo. All royalty payments owed under this Agreement shall be made by means of
wire transfer to RiboGene's account in a bank in the United States to be
designated by RiboGene.
(iii) If RiboGene does not receive payment of any sum
on the date it is due, simple interest shall thereafter accrue on the sum due to
RiboGene until the date of payment at the per annum rate of two percent (2%)
over the then current prime rate of Citibank in New York City, which rate shall
vary concurrently with any change in the prime rate.
(iv) Any withholding tax levied at source relating to
the royalties payable to RiboGene under Section 5.2 shall be borne by RiboGene.
Dainippon shall reasonably assist RiboGene in obtaining a tax credit under the
applicable taxation treaties and laws, including by providing appropriate
evidence of RiboGene's payment of the withholding tax.
6.2 RECORDS AND AUDIT.
(a) During the term of this Agreement and for a period of
two (2) years thereafter, Dainippon shall keep complete and accurate records
pertaining to the sale or other disposition of the Products commercialized by
it, in sufficient detail to permit RiboGene to confirm the accuracy of all
payments due hereunder.
(b) RiboGene shall have the right to cause an independent,
certified public accountant to audit such records to confirm Dainippon's Net
Sales and royalty payments; provided, however, that such auditor shall not
disclose Dainippon's confidential information to RiboGene, except to the extent
such disclosure is necessary to verify the amount of royalties due under this
Agreement.
(c) Such audits may be exercised once a year, within two (2)
years after the royalty period to which such records relate, upon notice to
Dainippon and during normal business hours.
(d) RiboGene shall bear the full cost of such audit unless
such audit discloses an understatement of more than five percent (5%) from the
amount of the Net Sales or royalties
7.
<PAGE> 8
previously paid. In such case, Dainippon shall bear the full cost of such audit.
In case that such audit discloses an overpayment of royalties by Dainippon, such
overpayment shall be refunded to Dainippon. The terms of this Section 6.2 shall
survive any termination or expiration of this Agreement for a period of two (2)
years.
ARTICLE 7
PATENT PROSECUTION AND DEFENSE
7.1 PATENT PROSECUTION. The provisions made in Section 5.1 of the
Research Agreement for the filing, prosecution and maintenance of Collaboration
Patents shall apply, and all such matters shall be governed thereby.
7.2 INFRINGEMENT OF PATENTS BY THIRD PARTIES.
(a) Notice. Each party shall promptly notify the other in
writing of any alleged or threatened infringement of RiboGene Patents, Dainippon
Patents, or Collaboration Patents which may adversely impact the rights of the
parties hereunder.
(b) DAINIPPON PATENTS AND RIBOGENE PATENTS.
(i) The party which is the holder of Dainippon
Patents or RiboGene Patents, respectively, shall have the sole right, but not
the obligation, to bring at its expense an appropriate action against any person
or entity directly or contributorily infringing its patents. If the patent
holder brings an action against an alleged infringer, the other party shall
cooperate reasonably with the patent holder in any such efforts.
(ii) Any recovery obtained by the patent holder as a
result of such action, whether obtained by settlement or otherwise, shall be
disbursed as follows: first, each party shall be reimbursed for any reasonable
expenses incurred in bringing or assisting in such action (including counsel
fees). If the infringement was made by a third party product which competed with
a Product in the Territory, the remaining proceeds shall be received by
Dainippon and added to Net Sales. In the event of any other kind of
infringement, the remaining proceeds shall retained by the patent holder.
(iii) No settlement, compromise or other disposition
of any such action which compromises a party's rights under this Agreement shall
be entered into without such party's prior consent, which shall not be
unreasonably withheld.
(c) COLLABORATION PATENTS.
(i) If a Collaboration Patent is infringed in the
Territory, Dainippon shall have the right, but not the obligation, to bring, at
its own expense, an appropriate action against any person or entity directly or
contributorily infringing such Collaboration Patent. In such event, RiboGene
shall cooperate reasonably with Dainippon in any such action, including if
8.
<PAGE> 9
required to bring such action, consenting to be named as a party to such action
and the furnishing of a power of attorney.
(ii) In the event Dainippon fails to institute an
infringement suit or take other reasonable action to protect the relevant
Collaboration Patent, RiboGene shall have the right, upon sixty (60) days of
notification of Dainippon, to institute such suit or take other appropriate
action at its own expense in its own name, the joint owners' name, or both. In
such event, Dainippon hereby agrees to cooperate reasonably with RiboGene in any
such effort, including if required to bring such action, consenting to be named
as a party to such action and the furnishing of a power of attorney.
(iii) In the event that the above provisions of (i)
and (ii) are not enforceable under the applicable laws, the parties shall meet
and discuss in good faith how to respond to the infringement.
(iv) Regardless of which party brings the action, any
recovery obtained by settlement or otherwise shall be disbursed as follows: the
party bringing such action shall first ensure that any reasonable expenses
incurred in assisting in such action (including counsel fees) by both parties
are reimbursed. Thereafter, the party bringing such action shall ensure that the
net recovery shall be received by Dainippon and added to Net Sales.
7.3 INFRINGEMENT OF THIRD PARTY RIGHTS.
(i) JOINT STRATEGY. In the event that any Product
developed, manufactured or sold hereunder becomes the subject of a claim for
patent, copyright or other proprietary right infringement in the Territory
("Product Infringement Claim"), and irrespective of whether Dainippon or
RiboGene is charged with said infringement, and the venue of such claim, the
parties shall promptly confer to discuss the claim.
(ii) DEFENSE. Dainippon shall have the responsibility
to conduct the defense of any Product Infringement Claim against Dainippon at
its own expense. If Dainippon decides not to assume the responsibility for the
defense of a Product Infringement Claim, it shall so declare to RiboGene in
writing within ninety (90) days from being notified of the claim, but at least
thirty (30) days prior to the date on which a response or other filing with a
judicial body is due. In that event, RiboGene shall have the right, but not the
obligation, to conduct the defense of the Product Infringement Claim. The party
which assumes responsibility for such defense shall bear all costs for the
conduct thereof. In such event, the other party shall have the right, but not
the obligation, to participate in any such suit, at its sole option and at its
own expense. Each party shall reasonably cooperate with the party conducting the
defense of the Product Infringement Claim, including if required to conduct such
defense, furnishing a power of attorney. Neither party shall enter into any
settlement that affects the other party's rights or interests without such other
party's written consent, which consent shall not be unreasonably withheld. In
the event Dainippon and RiboGene shall enter into an agreement providing for
RiboGene to co-promote a Product as provided in Section 3.2, then such agreement
shall provide for such amendment as may be appropriate for this Section 7.3
(ii). Furthermore, in the event
9.
<PAGE> 10
that the above provision in Section 7.3 (ii) is not enforceable under the
applicable laws, the parties shall meet and discuss in good faith how to respond
to the Product Infringement Claim.
7.4 PATENT MARKING. Dainippon shall mark, if necessary, all Products
manufactured, used or sold under the terms of this Agreement, or their
containers, in accordance with the applicable patent marking laws, as required.
ARTICLE 8
PUBLICATION; PUBLICITY
The provisions of Article 6 of the Research Agreement shall apply to the
rights and obligations of the parties regarding publication and publicity during
the term of this Agreement.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants:
9.1 CORPORATE POWER. Such party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
9.2 DUE AUTHORIZATION. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
9.3 BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.
9.4 INTELLECTUAL PROPERTY. Such party (i) has the full right to
grant the licenses granted by it under this Agreement; and (ii) is not aware, to
the best of its knowledge, of any claims by third parties to a conflicting
ownership interest in its solely-owned Patents.
9.5 RIBOGENE DISCLAIMER. THE RIBOGENE TECHNOLOGY AND COLLABORATION
TECHNOLOGY LICENSED HEREUNDER IS PROVIDED "AS IS" AND RIBOGENE EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO.
10.
<PAGE> 11
9.6 DAINIPPON DISCLAIMER. THE DAINIPPON TECHNOLOGY AND COLLABORATION
TECHNOLOGY LICENSED HEREUNDER IS PROVIDED "AS IS" AND DAINIPPON EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO.
ARTICLE 10
INDEMNIFICATION
The provisions of Article 8 of the Research Agreement shall apply to the
rights and obligations of the parties under this Agreement regarding
indemnification.
ARTICLE 11
CONFIDENTIALITY
11.1 DISCLOSURE OF CONFIDENTIAL INFORMATION. Confidential Information
disclosed by one party to the other pursuant to and during the term of this
Agreement shall be subject to the confidentiality obligations set forth below:
(a) if disclosed in writing and marked "confidential" or
"proprietary" by the disclosing party prior to or at the time of the disclosure
thereof, or if it would be apparent to a reasonable person, familiar with the
disclosing party's business and the industry, that such information is of a
confidential or proprietary nature; and
(b) if within 30 days after disclosure of Confidential
Information, the disclosing party informs the receiving party in writing of the
confidential nature of the disclosed information, describing such information
and referencing the place and date of the oral, visual or written disclosure and
the names of the employees or officers of the receiving party to whom such
disclosure was made.
11.2 CONFIDENTIALITY AND NON-USE. Except to the extent expressly
authorized by this Agreement or unless otherwise agreed in writing by the
parties, each party agrees that, for the combined term of this Agreement and the
Research Agreement, and for [*] thereafter, it shall keep confidential and shall
not publish or otherwise disclose and shall not use for any purpose other than
as provided for in this Agreement any Confidential Information, unless the
receiving party can demonstrate by competent proof that such Confidential
Information:
(a) was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure by the other
party;
(b) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving party;
11.
<PAGE> 12
(c) became generally available to the public or otherwise
part of the public domain after it disclosure and other than through any act or
omission of the receiving party in breach of such Agreements;
(d) was disclosed to the receiving party, other than under
an obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing party not to disclose such information to others;
or
(e) was independently discovered or developed by the
receiving party without the use of Confidential Information belonging to the
disclosing party.
11.3 AUTHORIZED DISCLOSURE.
(a) Each party may disclose Confidential Information
belonging to the other party to Affiliates and sublicensees who agree to be
bound by similar terms of confidentiality. In addition, each party may disclose
Confidential Information of the other party to the extent such disclosure is
reasonably necessary to: (i) comply with applicable securities laws and
regulations and other applicable governmental regulations, (ii) file or
prosecute patents relating to Collaboration Technology, (iii) prosecute or
defend litigation, (iv) file applications for Regulatory Approvals for Active
Compounds, Licensed Back-Up Compounds, Licensed Compounds and Products, and (v)
conduct pre-clinical or clinical trials with Active Compounds, Licensed
Compounds and Products.
(b) Notwithstanding the foregoing, in the event a party is
required to make a disclosure of the other party's Confidential Information
pursuant to subsection (a) above, it will, except where impracticable, give
reasonable advance notice to the other party of such disclosure and use best
efforts to secure confidential treatment of such information. In any event, the
parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.
ARTICLE 12
IMPORT AND EXPORT CONTROLS
12.1 UNITED STATES LAWS. The parties understand and acknowledge that
each of them is subject to regulation by agencies of the U.S. government,
including the U.S. Department of Commerce, which prohibit export, re-export or
diversion of certain products and technology to certain countries. Any and all
obligations of Dainippon or RiboGene to provide access to or license any
technology pursuant to this Agreement, as well as any technical assistance shall
be subject in all respects to such United States laws and regulations as shall
from time to time govern the license and delivery of technology and products
abroad by persons subject to the jurisdiction of the United States, including
the Export Administration Act of 1979, as amended, any successor or interim
controlling legislation, and the Export Administration Regulations issued by the
Department of Commerce, International Trade Administration, Bureau of Export
Administration. Both parties also agree to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (the "ACT") and shall refrain from making any
payments to third parties
12.
<PAGE> 13
which would cause Dainippon or RiboGene to violate the Act. Dainippon and
RiboGene shall each provide the other party with such reasonable assistance as
may be required for the party requesting such assistance to comply with all
United States laws, ordinances, rules, regulations and the like of all
governmental units or agencies having jurisdiction pertaining to this Agreement,
including without limitation, obtaining all import, export and other permits,
certificates, licenses or the like required by such United States laws,
ordinances, rules, regulations, and the like, necessary to permit the parties to
perform hereunder and to exercise their respective rights hereunder.
12.2 NON-UNITED STATES LAWS. Dainippon and RiboGene shall each
provide the other party with such reasonable assistance as may be required for
the party requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies having jurisdiction pertaining to this Agreement, including without
limitation, obtaining all import, export and other permits, certificates,
licenses or the like required by such non-United States laws, ordinances, rules,
regulations and the like, necessary to permit the parties to perform hereunder
and to exercise their respective rights hereunder.
ARTICLE 13
TERM; TERMINATION
13.1 TERM. Except as provided under Section 13.2 below, the term of
this Agreement shall commence upon the Effective Date and shall expire on the
expiration date of the last to expire royalty obligation.
13.2 TERMINATION ON MATERIAL BREACH. If either party materially
breaches the Agreement, including without limitation its due diligence
obligations under Section 2.2, and the breaching party has not (i) cured the
breach or (ii) initiated good faith efforts to cure such breach to the
reasonable satisfaction of the non-breaching party, within sixty (60) days of
notice of breach from the non-breaching party, the non-breaching party may
terminate this Agreement upon expiration of such sixty (60)-day period.
13.3 LICENSES UPON EXPIRATION OR TERMINATION. Upon expiration of this
Agreement, Dainippon shall have a fully paid, nonexclusive license under
RiboGene Technology and Collaboration Technology relating to the Products
commercialized under this Agreement. In the event this Agreement is terminated
by RiboGene based on a material breach by Dainippon, then Dainippon's license
and rights shall terminate and RiboGene shall have a perpetual, paid-up,
worldwide license under Dainippon Technology and Dainippon-owned and jointly
owned Collaboration Technology to make, have made, use and sell Products. In the
event this Agreement is terminated by Dainippon based on a material breach by
RiboGene, then RiboGene's license and rights shall terminate and Dainippon shall
have a perpetual, paid-up worldwide exclusive license under RiboGene Technology
and RiboGene owned and jointly owned Collaboration Technology to make, have
made, use and sell Products.
13.
<PAGE> 14
13.4 SURVIVING RIGHTS AND OBLIGATIONS. The rights and obligations of
the parties under Sections 4.1, 6.2, 13.3, 13.6, 14.6, and Articles 7, 8, 9, 10
and 11 shall survive termination or expiration of this Agreement.
13.5 ACCRUED RIGHTS. The 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 any damages arising from any breach
hereunder.
13.6 TERMINATION FOR BANKRUPTCY. To the extent permitted by law, in
the event either party becomes insolvent, files bankruptcy or is declared
bankrupt, the other party may terminate this Agreement immediately; provided,
however, in the event of such termination the insolvent or bankrupt party shall
assign to the other the intellectual property rights licensed under this
Agreement subject only to the payment of any royalties agreed herein with
respect to such intellectual property.
ARTICLE 14
MISCELLANEOUS
14.1 WAIVER. No waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be deemed a
waiver as to any subsequent or similar breach or default.
14.2 ASSIGNMENT. Neither party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning party or (ii) to an Affiliate;
provided, however, that in no event shall either party's rights and obligations
hereunder be assigned without prior written notice to the other party. In any
case, neither party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their permitted
successors and assigns.
14.3 NOTICES. Any notice or other communication required or permitted
to be given to either party hereto shall be in writing and shall be deemed to
have been properly given and to be effective on the date of delivery if
delivered in person or by facsimile or fourteen (14) days after mailing by
registered or certified airmail, postage paid, to the other party at the
following address:
In the case of RiboGene: RiboGene Inc.
26118 Research Road
Hayward, CA 94545
Fax: 510-293-2596
Attention: President
with a copy to: Cooley Godward LLP
14.
<PAGE> 15
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Fax: (650) 857-0663
Attention: Brian C. Cunningham, Esq.
In the case of Dainippon: Dainippon Pharmaceutical Co., Ltd.
6-8 Doshomachi 2-chome, Chuo-ku
Osaka 541-0045, Japan
Fax: 011-81-6-203-0059
Attention: President
Either party may change its address for communications by a notice to the other
party in accordance with this section.
14.4 HEADINGS. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
14.5 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
14.6 CONSTRUCTION OF AGREEMENT AND CHOICE OF LAW, JURISDICTION AND
VENUE.
(a) This Agreement and its terms and conditions shall be
governed exclusively by and construed according to the laws of California,
U.S.A., excluding its choice of law provisions and also excluding the United
Nations Convention on Contracts for the International Sale of Goods. The
official text of the Agreement and any Notices given or accounts or statements
required hereby shall be in English.
(b) All disputes which may arise between the parties hereto
in relation to the interpretation or administration of this Agreement shall be
resolved by the agreement of the Chief Executive Officers or the Presidents of
the respective parties. Any disputes which cannot be resolved in this manner
shall be finally settled by arbitration in accordance with the Conciliation and
Arbitration Rules of the International Chamber of Commerce. The arbitration
shall be held in San Francisco, California. The award rendered by the
arbitration shall in any case be final and binding upon the parties hereto.
14.7 FORCE MAJEURE. Any delays in performance by any party under this
Agreement (other than either party's failure to pay money to the other party,
unless such failure results solely from wire transfer failures beyond the
control of the paying party, or the like) shall not be considered a breach of
this Agreement if and to the extent caused by occurrences beyond the reasonable
control of the party affected, including but not limited to acts of God,
embargoes, governmental restrictions, strikes or other concerted acts of
workers, fire, flood, explosion, riots, wars, civil disorder, rebellion or
sabotage. The party suffering such occurrence shall
15.
<PAGE> 16
immediately notify the other party as soon as practicable and any time for
performance hereunder shall be extended by the actual time of delay caused by
the occurrence.
14.8 INDEPENDENT CONTRACTORS. In making and performing this
Agreement, Dainippon and RiboGene are and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between RiboGene and Dainippon. At no time shall one party make commitments or
incur any charges or expenses for or in the name of the other party.
14.9 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
14.10 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity, or under any other agreement between the
parties. All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
14.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
14.12 ENTIRE AGREEMENT. This Agreement and any and all Exhibits
referred to herein embodies the entire understanding of the parties with respect
to the subject matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, both Dainippon and RiboGene have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, as of the day and year hereinabove written.
RIBOGENE, INC. DAINIPPON PHARMACEUTICAL CO., LTD.
By: By:
--------------------------------- ------------------------------------
Name: Charles J. Casamento Name: Takeshi Tomotake
Title: Chairman, President and Title: President
Chief Executive Officer
16.
<PAGE> 17
EXHIBIT 4.2
LICENSED COMPOUNDS
1.
<PAGE> 1
EXHIBIT 10.35
*TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS
200.80(b)(4), 200.83 AND 240.24b-2.
RESEARCH AGREEMENT
THIS AGREEMENT ("AGREEMENT") is entered into as of the _____ day of
_________, 1998 ("EFFECTIVE DATE") by and between RIBOGENE INC., a California
corporation ("RIBOGENE"), and DAINIPPON PHARMACEUTICAL CO., LTD. ("DAINIPPON"),
a corporation organized under the laws of Japan.
RECITALS
WHEREAS, RiboGene has developed screening assays and other technology
useful in the identification of anti-bacterial compounds; and
WHEREAS, Dainippon and RiboGene possess and will acquire libraries of
natural and synthetic compounds which have potential therapeutic pharmaceutical
utility; and
WHEREAS, RiboGene and Dainippon desire to establish a research
relationship where RiboGene will screen both company's compound libraries using
certain assays, and will conduct research with some or all of the compounds
which show activity in those assays;
WHEREAS, the parties desire to develop and commercialize one or more
compounds discovered under this Agreement under a separate agreement granting
Dainippon certain licenses ("LICENSE AGREEMENT") executed by and between the
parties of even date herewith;
WHEREAS, in connection with the establishment of the relationship
between the parties, on or before February 13, 1998 Dainippon is purchasing
shares of RiboGene stock in the amount of US$ 2 million pursuant to a stock
purchase agreement agreed upon between the parties on or before February 5,
1998;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "ACTIVE COMPOUND" shall mean each Dainippon or RiboGene
Substance which meets the criteria set forth in Exhibit 1.1 (including any such
Substance which was screened in Assays prior to the Effective Date and for which
the Research Committee determines that such criteria are met), and each
derivative or analogue thereof developed in the course of, but not after, the
Research Program or the Tail End Period, if such derivative or analog thereof
meets the criteria set forth in Exhibit 1.1.
1.2 "AFFILIATE" shall mean (i) any corporation or other entity
("Parent") which directly or indirectly owns or controls at least fifty percent
(50%) of the outstanding voting securities of a party, (ii) any corporation or
other entity in which a party owns or controls at least
1.
<PAGE> 2
fifty percent (50%) equity interest, and (iii) any corporation or other entity
in which a Parent of a party owns or controls at least fifty percent (50%)
equity interest.
1.3 "ASSAYS" shall mean the Target specific assays of RiboGene
described in Exhibit 1.3, and any additional Target specific assays developed by
or licensed (with the right to sublicense) to RiboGene during the Research Term.
Prior to their use in the Research Program, Exhibit 1.3 shall be amended to
include such additional assays.
1.4 "COLLABORATION KNOW-HOW" shall mean all inventions, discoveries,
materials and information developed by either party in the course of the
Research Program, but not after the Research Program. Collaboration Know-How
shall not include Collaboration Patents.
1.5 "COLLABORATION PATENTS" shall mean any and all patents,
including, without limitation, any substitutions, extensions, reissues,
renewals, supplementary protection certificates and inventors' certificates,
which have not been held invalid or unenforceable by a non-appealable or
non-appealed decision of a court of competent jurisdiction, issuing from patent
applications filed in any jurisdiction, including, without limitation, any
provisionals, divisionals, continuations, continuations-in- part, which cover
inventions or discoveries made by either party alone or both parties jointly in
the course of the Research Program, but not after the Research Program.
1.6 "COLLABORATION TECHNOLOGY" shall mean all Collaboration Patents
and Collaboration Know-How.
1.7 "CONFIDENTIAL INFORMATION" shall mean a party's confidential
information, including, without limitation, Dainippon Know-How, RiboGene
Know-How, Collaboration Know-How, Research Plans, engineering designs and
drawings, research data, manufacturing processes and techniques, scientific,
manufacturing, marketing, and business plans, financial or personnel matters
relating to the party, its present or future products, sales, suppliers,
customers, employees, investors or business.
1.8 "DAINIPPON KNOW-HOW" shall mean all inventions, discoveries,
materials and information which both (i) Dainippon owns, controls or has a
license to (with a right to sublicense) as of the Effective Date or which arise
outside of the Research Program or the Development Program from time to time
during the term of this Agreement or the License Agreement, and (ii) are
necessary or useful for the conduct of the Research Program, the Development
Program, or the manufacture, use or sale of Products. Dainippon Know-How shall
not include Dainippon Patents.
1.9 "DAINIPPON PATENTS" shall mean any and all patents other than
Collaboration Patents, including, without limitation, any substitutions,
extensions, reissues, renewals, supplementary protection certificates and
inventors' certificates, which have not been held invalid or unenforceable by a
non-appealable or non-appealed decision of a court of competent jurisdiction,
issuing from patent applications filed in any jurisdiction, including, without
limitation, any provisionals, divisionals, continuations, continuations-in-part,
which (i) Dainippon owns, controls or has a license to (with the right to
sublicense) as of the Effective
2.
<PAGE> 3
Date, and (ii) would be infringed by the conduct of the Research Program, the
Development Program, or the manufacture, use or sale of Products.
1.10 "DAINIPPON SUBSTANCES" shall mean those natural extracts,
natural compounds and synthetic compounds which Dainippon owns or has licensed
or sublicensed, and has the right to license or sublicense as of the Effective
Date or during the Research Term, and which are screened in Assays in the course
of the Research Program.
1.11 "DAINIPPON TECHNOLOGY" shall mean, collectively, the Dainippon
Patents, the Dainippon Know-How and the Dainippon Substances.
1.12 "DEVELOPMENT PROGRAM" shall mean the program of preclinical and
clinical development activities undertaken by Dainippon pursuant to the License
Agreement.
1.13 "FDA" shall mean the United States Food and Drug Administration.
1.14 "FIELD" shall mean therapeutic treatment of bacterial infections
in humans with anti-bacterial pharmaceutical products which have activity
against the Targets.
1.15 "GLP TOXICOLOGY STUDIES" shall mean the preclinical toxicology
studies carried out in accordance with Good Laboratory Practices described in
the U.S. Federal Register dated December 22, 1988, as amended, or the Japanese
or European equivalent, which are intended to enable the filing of an IND.
1.16 "INACTIVE DERIVED COMPOUND" shall mean each derivative or
analogue of Dainippon Substance or RiboGene Substance synthesized in the course
of, but not after, the Research Program, which does not meet the criteria set
forth in Exhibit 1.1.
1.17 "IND" stands for "Investigational New Drug Application" and
shall mean an application for approval by the FDA or the equivalent non-U.S.
regulatory authority, to commence human clinical testing of a drug.
1.18 "LICENSED BACK-UP COMPOUNDS" shall mean [*] Active Compounds
recommended by the Research Committee and selected by Dainippon which are of the
same chemical class as a Licensed Compound.
1.19 "LICENSED COMPOUND" shall mean a compound which is an Active
Compound and which is recommended by the Research Committee and selected by
Dainippon for GLP Toxicology Studies and further development under the License
Agreement.
1.20 "NDA" or "NEW DRUG APPLICATION" shall mean an application for
approval by the FDA or an equivalent non-U.S. authority required for the
marketing and sale of a Product in the Territory.
1.21 "PRODUCT" shall have the meaning as defined in the License
Agreement.
1.22 "REGULATORY APPROVAL(S)" shall mean all approvals of INDs and
NDAs, new drug approvals, marketing approvals, pricing approvals, licenses,
permits, and other
3.
<PAGE> 4
authorizations, which are required for conducting clinical trials with a
Product, and for manufacturing and selling a Product in compliance with
applicable laws and regulations in the Territory;
1.23 "RESEARCH PROGRAM" shall mean the research program with respect
to the Targets described in Exhibit 1.23 hereto, as amended from time to time by
the Research Committee in accordance with Section 2.2(c).
1.24 "RESEARCH COMMITTEE" shall mean that committee formed pursuant
to Section 2.2 hereof.
1.25 "RESEARCH TERM" shall mean the period of three (3) years
commencing on the Effective Date, unless extended pursuant to Section 2.2(c).
1.26 "RIBOGENE KNOW-HOW" shall mean all inventions, discoveries,
materials and information which both (i) RiboGene owns, controls or has a
license (with a right to sublicense) as of the Effective Date or which arise
outside the Research Program or the Development Program during the term of this
Agreement or the License Agreement, and (ii) are necessary or useful for the
conduct of the Research Program, the Development Program, or the manufacture,
use or sale of Products. RiboGene Know-How shall not include RiboGene Patents.
1.27 "RIBOGENE PATENTS" shall mean any and all patents other than
Collaboration Patents, including, without limitation, any substitutions,
extensions, reissues, renewals, supplementary protection certificates and
inventors' certificates, which have not been held invalid or unenforceable by a
non-appealable or non-appealed decision of a court of competent jurisdiction,
issuing from patent applications filed in any jurisdiction, including, without
limitation, any provisionals, divisionals, continuations, continuations-in-part,
which (i) RiboGene owns, controls or has a license to (with the right to
sublicense) as of the Effective Date, and (ii) would be infringed by the conduct
of the Research Program, the Development Program, or the manufacture, use or
sale of Products.
1.28 "RIBOGENE SUBSTANCES" shall mean those natural extracts, natural
compounds and synthetic compounds which RiboGene owns or has licensed or
sublicensed, and has the right to license or sublicense as of the Effective Date
and during the Research Term, and which are screened in Assays in the course of
the Research Program.
1.29 "RIBOGENE TECHNOLOGY" shall mean, collectively, the RiboGene
Patents, the RiboGene Know-How, the RiboGene Substances, and the Assays.
1.30 "TAIL END PERIOD" shall mean the period of one (1) year from the
completion or termination of the Research Term, the purpose of which is to
permit Dainippon to select Licensed Compounds.
1.31 "TARGETS" shall mean ppGpp and Deformylase.
1.32 "TERRITORY" shall have the meaning as defined in the License
Agreement
4.
<PAGE> 5
ARTICLE 2
RESEARCH PROGRAM
2.1 CONDUCT OF THE RESEARCH PROGRAM. RiboGene and Dainippon will
conduct the Research Program under the direction of the Research Committee.
2.2 RESEARCH COMMITTEE.
(a) FORMATION OF RESEARCH COMMITTEE. The Research Committee
shall consist of an equal number of members from Dainippon and RiboGene,
appointed and substituted by each party as necessary from time to time. Each
member shall have appropriate technical credentials and knowledge and ongoing
familiarity with the Research Program. The chairperson of the Research Committee
shall be an employee of the party hosting the meeting. All decisions of the
Research Committee shall be unanimous and shall be recorded in the minutes of
the Research Committee.
(b) MEETINGS OF RESEARCH COMMITTEE. The Research Committee
shall meet quarterly at such times as shall be mutually agreed upon by the
parties and at a site alternating between RiboGene's and Dainippon's place of
business, or as otherwise mutually agreed. Dainippon and RiboGene shall bear the
travelling expenses and accommodation charges of its own members attending
meetings of the Research Committee.
(c) RESPONSIBILITIES OF THE RESEARCH COMMITTEE. The Research
Committee shall coordinate the activities carried out under the Research Program
and monitor the progress of the Research Program. The Research Committee may
revise or extend the Research Program as necessary to achieve the overall goal
of discovering Active Compounds, developing Licensed Compounds, and
commercializing Products; provided, however, that any such revision or extension
shall be subject to agreement, if necessary, as to reimbursement of any
additional costs. In particular, the Research Committee shall carry out the
following responsibilities during the Research Term and the Tail End Period:
(1) define the yearly research and development objectives,
(2) determine which Dainippon or RiboGene Substances have
shown sufficient activity in one or more Assays to be
classified as an Active Compound,
(3) define and coordinate activities required to carry out
further development and optimization of Active
Compounds,
(4) recommend to Dainippon the Licensed Compounds and the
Licensed Back-Up Compounds for development under the
License Agreement and updating the list of Licensed
Compounds in Exhibit 4.2,
(5) determine the scope, countries, timing and other matters
relating to patent applications to be filed under this
Agreement.
(d) MODIFICATION OF CRITERIA FOR ACTIVE COMPOUND AND
LICENSED COMPOUND. The Research Committee shall monitor the appropriateness of
the criteria for Active Compound and Licensed Compound set forth in Exhibits 1.1
and Exhibit 2.3, respectively, in light of the results obtained from the
Research Program and may, if warranted,
5.
<PAGE> 6
modify such criteria as necessary in order to achieve the objectives of the
Research Program. Any such modifications shall be in a writing, signed by both
parties, which amends Exhibit 1.1 or Exhibit 2.3, as the case may be.
2.3 SELECTION AND ABANDONMENT OF COMPOUNDS.
(a) ACTIVE COMPOUNDS. Each Dainippon Substance and RiboGene
Substance which meets the criteria set forth in Exhibit 1.1 to the satisfaction
of the Research Committee shall be designated as an Active Compound and shall be
further developed and optimized.
(b) LICENSED COMPOUNDS. Each Active Compound which meets the
criteria set forth in Exhibit 2.3 to the satisfaction of the Research Committee
may be recommended by the Research Committee to Dainippon which shall have the
right to select from those so recommended the Active Compound for the GLP
Toxicology Study and further development and commercialization under the License
Agreement. Such selection shall be made by written notice to RiboGene. Each
Active Compound so selected shall be designated a Licensed Compound and shall be
covered by the terms of the License Agreement.
(c) LICENSED BACK-UP COMPOUNDS. The Research Committee shall
recommend to Dainippon, and Dainippon shall select the Licensed Back-Up
Compounds for each Licensed Compound selected as hereinabove provided. Such
selection shall be made by written notice to RiboGene at the same time the
related Licensed Compound is selected. Dainippon shall have the right to
substitute any Licensed Back-Up Compound for the related Licensed Compound as
provided in the License Agreement.
(d) REMAINING ACTIVE COMPOUNDS AND SUBSTANCES. Each
Dainippon Substance, RiboGene Substance and Active Compound not selected as a
Licensed Compound or Licensed Back-Up Compound and each Inactive Derived
Compound shall be returned to the party having ownership thereof in accordance
with Section 3.1(c).
2.4 [*] During the term of the Research Program, RiboGene will [*]
at Dainippon's request and expense, [*] to facilitate and enhance the
collaboration between the parties under the Research Program. Dainippon will [*]
from time to time, at RiboGene's request and expense, [*]. Each party may
replace its visiting research scientist from time to time with a different
visiting research scientist.
2.5 OBLIGATION TO INFORM. Each party hereby agrees to keep the
Research Committee fully informed on a monthly basis of the progress of the
Research Program. Such monthly reports shall describe the results of the
research work carried out under the Research Program, including the results of
the screening activities conducted with the Assays and in vitro and in vivo
antibacterial activity tests, but shall not include information on inactive
Compounds or Substances, except that the information on those inactive Compounds
or Substances structurally related to Active Compound or possible Active
Compound shall be included in such monthly reports.
2.6 RESOURCE ALLOCATION. Each party shall devote the same degree of
attention, resources and diligence to its respective obligations under the
Research Program as it devotes to high priority compounds of its own discovery
and development programs. RiboGene shall devote
6.
<PAGE> 7
an average of [*] to the Research Program during the Research Term. RiboGene
shall promptly inform Dainippon of any changes in the assignments of any such
FTEs and shall promptly add or substitute individuals of comparable or superior
skills into the Research Program, in place of one or more of the original FTEs,
as circumstances dictate, and shall inform Dainippon, in advance, of all plans
of such additions or substitutions of individuals.
2.7 ADDITIONAL TARGETS. At any time during the Research Term, the
parties may wish to expand the scope of the Research Program to cover targets in
addition to the Targets. The parties shall determine in good faith negotiations
whether they can agree on the terms of a separate agreement which shall cover
the discovery, development and commercialization of compounds acting on those
additional targets; provided, however, neither party shall be obligated to enter
into such negotiations or to reach agreement if negotiations are conducted.
2.8 EXCLUSIVE COLLABORATION. Dainippon and RiboGene agree that
during the term of this Agreement, the collaboration under the Research Program
shall be on an exclusive basis within the Field.
ARTICLE 3
OWNERSHIP OF INTELLECTUAL PROPERTY; LICENSE GRANTS
3.1 OWNERSHIP.
(a) DAINIPPON TECHNOLOGY. RiboGene acknowledges and agrees
that Dainippon is and shall remain the sole owner of the Dainippon Technology
and that RiboGene has no rights in or to any of them other than the license and
rights specifically granted herein and the licenses granted pursuant to the
License Agreement.
(b) RIBOGENE TECHNOLOGY. Dainippon acknowledges and agrees
that RiboGene is and shall remain the sole owner of the RiboGene Technology and
that Dainippon has no rights in or to any of them other than the rights
specifically granted herein and the license to be granted pursuant to the
License Agreement.
(c) COLLABORATION TECHNOLOGY.
(i) Dainippon shall own all rights under
Collaboration Technology regarding Active Compounds, Licensed Compounds,
Licensed Back-Up Compounds, Inactive Derived Compounds and Products which are
Dainippon Substances, or which are derived by Dainippon from Dainippon
Substances. RiboGene shall have no rights to such Collaboration Technology owned
by Dainippon except as expressly granted under this Agreement or the License
Agreement.
(ii) RiboGene shall own all rights under
Collaboration Technology regarding Active Compounds, Licensed Compounds,
Licensed Back-Up Compounds, Inactive Derived Compounds and Products which are
RiboGene Substances, or which are derived by RiboGene from RiboGene Substances.
Dainippon shall have no rights to such Collaboration Technology owned by
RiboGene except as expressly granted under this Agreement or the License
Agreement.
7.
<PAGE> 8
(iii) The parties shall jointly own all rights under
Collaboration Technology regarding Active Compounds, Licensed Compounds,
Licensed Back-Up Compounds, Inactive Derived Compounds and Products which are
derived by RiboGene from Dainippon Substances or by Dainippon from RiboGene
Substances.
(iv) The parties understand that the optimization of
Active Compounds and generation of derivatives of the Dainippon Substances and
the RiboGene Substances shall be conducted by each party primarily with its own
Substances, unless the parties specifically agree otherwise in writing. The
parties understand further that such agreement shall not be unreasonably
withheld if this would result in significant delays in the progress of the
Research Program.
(v) Collaboration Technology which does not relate
to Active Compounds, Licensed Compounds, Licensed Back-Up Compounds, Inactive
Derived Compounds or Products shall be owned by either party alone or jointly
with the other party depending on whether such Collaboration Technology was
developed by a party alone or jointly with the other party. Inventorship shall
be determined in accordance with the rules of inventorship under U.S. patent
laws. Neither party shall have rights to such Collaboration Technology owned
solely by the other party except as expressly granted under this Agreement or
the License Agreement.
3.2 MUTUAL RESEARCH LICENSE.
(a) LICENSE GRANT. Each party hereby grants to the other
party non-royalty bearing, worldwide, non-exclusive licenses under Dainippon
Technology, RiboGene Technology, and Collaboration Technology, respectively, for
the sole purpose of conducting the Research Program. The parties understand that
the Assays will be disclosed to Dainippon only for the purpose of conducting the
Research Program.
(b) SUBLICENSING. Neither party may grant sublicenses under
the licenses granted in subsection (a) above, except in the context of contract
research or contract development by a third party as part of the Research
Program, and then only after the prior written approval of the licensor. The
terms of any sublicense shall conform with the terms of this Agreement in all
respects.
3.3 USE OF A PARTY'S OWN SUBSTANCES. Notwithstanding anything to the
contrary in this Article 3, each party shall retain the right to use freely its
own Dainippon or RiboGene Substances, respectively, which are not Active
Compounds.
3.4 RESEARCH. RiboGene and Dainippon agree that during the period of
the Research Agreement and License Agreement, RiboGene has the right in any
field to use or apply, have its Affiliates use or apply, grant to any third
party a license under RiboGene owned or jointly owned Collaboration Technology
to research, develop, make, have made, use and sell Active Compounds, other than
Licensed Compounds, Licensed Back-Up Compounds and Products; provided, however,
[*]. In addition, [*] agrees [*] or [*] which [*]. If Dainippon notifies
RiboGene that it desires to have the rights and licenses under RiboGene
Technology or RiboGene solely owned Collaboration Technology to sublicense,
research, develop, make, have
8.
<PAGE> 9
made, use and sell any Active Compound [*] if any, as may be reached at that
time. It is understood that Dainippon [*] use and apply, or have its Affiliates
use and apply or grant to any third party a license under Dainippon owned and
jointly owned Collaboration Technology to research, develop, make, have made,
use and sell Active Compound [*].
ARTICLE 4
FINANCIAL TERMS
4.1 RESEARCH PROGRAM FUNDING. Dainippon shall support RiboGene's
costs of conducting the Research Program by making research payments as follows:
Due Date Amount
- -------- ------
Signing of this Agreement US$2,000,000
First Anniversary of this Agreement US$2,000,000
Second Anniversary of this Agreement US$2,000,000
RiboGene shall provide Dainippon with a statement of the details of RiboGene's
estimated costs of conducting the Research Program prior to the above payment by
Dainippon and quarterly reports describing actual costs and expenses actually
incurred at RiboGene. Any costs incurred by RiboGene during the Tail End Period
for conducting research activities assigned to it by the Research Committee will
be reimbursed by Dainippon. If an installment of the Research Program Funding
would have become due on a date after Dainippon gives notice of termination of
this Agreement pursuant to Section 11.2, then on such date Dainippon shall pay
only such portion of the installment as shall apply to the remaining period of
the Research Term which will occur after such date. If any amount of the
Research Program Funding already paid by Dainippon hereunder is not used for the
Research Program upon termination of this Agreement except for material breach
by Dainippon, such unused amount shall be refunded to Dainippon.
4.2 MANNER OF PAYMENT. Dainippon shall make the payments under
Sections 4.1 within thirty (30) days of the due date by means of wire transfer
to RiboGene's account in a bank in the United States to be designated by
RiboGene.
4.3 EQUITY PURCHASE. Dainippon agrees to purchase $2,000,000 in
equity of RiboGene. Such equity purchase shall be made on or before February 13,
1998, as the purchase of 756,144 shares of RiboGene's Series G Preferred Stock
("Series G Preferred") at a price per share of $2.645. The Series G Preferred
shall have substantially the same terms and conditions and shall be accompanied
by substantially the same investors rights as RiboGene's Series E Preferred
stock purchased by its existing major collaboration partner. The Stock Purchase
Agreement, Amended Articles of Incorporation and Investors Rights Agreement and
forms of closing certificates and related documents shall be prepared and agreed
by Dainippon and RiboGene not later than February 5, 1998.
9.
<PAGE> 10
ARTICLE 5
PATENT PROSECUTION AND DEFENSE
5.1 PATENT PROSECUTION.
(a) Applications for RiboGene Patents and Dainippon Patents
shall be prosecuted and maintained by RiboGene and Dainippon, respectively, at
such party's option and its own expense. However, RiboGene agrees it will not
discontinue prosecuting or maintaining any such patent or application in any
country of the Territory which covers a Licensed Compound or Product for which
Dainippon has commenced preclinical development in the Territory unless
Dainippon shall otherwise agree.
(b) Each party shall be responsible for filing and
prosecuting applications for its solely-owned Collaboration Patents, and for
maintaining its solely-owned Collaboration Patents, in the Territory. The
Research Committee will decide which party shall prosecute jointly-owned
Collaboration Patents; [*] will bear [*] the cost of prosecuting jointly-owned
patent applications and maintaining jointly-owned Collaboration Patents in the
Territory; provided, however, that [*] shall bear such costs for applications
and patents for any Licensed Compound or Product commencing as of [*]. The
Research Committee also shall determine the countries in which to file
applications for such Collaboration Patents in the Territory.
(c) The prosecuting party shall keep the other party
informed of the status of any applications for Collaboration Patents and any
patents issued thereon. In particular, the prosecuting party shall provide to
the other party a copy of any proposed filings or letters to and from the patent
offices in the countries of the Territory. The other party shall have the right
to review such drafts and letters, and shall provide comments to the prosecuting
party within thirty (30) days after receipt thereof. The prosecuting party shall
consider the other party's comments in good faith and revise the draft filings
or letters as reasonably necessary to address the other party's concerns.
(d) In the event that the prosecuting party decides not to
proceed with prosecuting an application for a Collaboration Patent or filing a
patent application in a country of the Territory, or not to maintain a
Collaboration Patent in a country of the Territory, it shall give the other
party sixty (60) days' notice before any relevant deadline, and the other party
shall have the right to pursue, at its own expense, prosecution of such patent
application or maintenance of such patent in the country, and such patent in the
country shall be excluded from the licenses granted herein or in the License
Agreement. However, RiboGene agrees it will not discontinue prosecuting or
maintaining any such patent or application in any country of the Territory which
covers a Licensed Compound or Product for which Dainippon has commenced
preclinical development in the Territory unless Dainippon shall otherwise agree.
(e) Each party agrees to cooperate with the other and take
all reasonable additional actions and execute such agreements, instruments, and
documents as may be reasonably required to prosecute patent applications as
provided in this section, and to perfect the other's ownership interest in
Collaboration Patents as allocated in Section 3.1, including, without
limitation, the execution of necessary and appropriate instruments of
assignment.
10.
<PAGE> 11
5.2 INFRINGEMENT OF PATENTS BY THIRD PARTIES. Infringement of
Dainippon Patents, RiboGene Patents or Collaboration Patents by third parties as
well as infringement of third party patents by Dainippon shall be governed by
the provisions of the License Agreement.
ARTICLE 6
PUBLICATION; PUBLICITY
6.1 PUBLICATION.
(a) REVIEW AND APPROVAL. Each party to this Agreement
recognizes that the publication of papers, including oral presentations and
abstracts, regarding the Collaboration Know-How and the Collaboration Patents,
subject to reasonable controls to protect Confidential Information, will be
beneficial to both parties. However, each party shall have the right to review
and approve any paper proposed for publication by the other party, including
oral presentations and abstracts, which utilizes data generated from the
Research Program and/or includes Collaboration Know-How or Confidential
Information of the reviewing party.
(b) REVIEW AND APPROVAL PROCESS. At least thirty (30) days
before any such paper is presented or submitted for publication, the party
proposing publication shall deliver a complete copy to the other party. The
receiving party shall review any such paper and give its comments to the
publishing party within thirty (30) days of the delivery of such paper to the
receiving party. With respect to oral presentation materials and abstracts, the
parties shall make reasonable efforts to expedite review of such materials and
abstracts, and shall return such items as soon as practicable to the publishing
party with appropriate comments, if any, but in no event later than thirty (30)
days from the delivery date thereof to the receiving party. The publishing party
shall comply with the other party's request to delete references to any
Confidential Information in any such paper and agrees to withhold publication of
same in order to permit the parties to obtain patent protection, if either of
the parties deem it necessary, in accordance with the terms of this Agreement.
6.2 PUBLICITY. Except as otherwise provided herein or required by
law, no party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to the existence of or the performance under
this Agreement, without the prior written approval of the other party, which
approval shall not be unreasonably withheld, but in no case shall be withheld
for longer than fifteen (15) days.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants:
7.1 CORPORATE POWER. Such party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
11.
<PAGE> 12
7.2 DUE AUTHORIZATION. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
7.3 BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having authority over it.
7.4 INTELLECTUAL PROPERTY. Such party (i) has the full right to
grant the licenses granted by it under this Agreement; and (ii) is not aware, to
the best of its knowledge, of any claims by third parties to a conflicting
ownership interest in its solely-owned Patents.
7.5 RIBOGENE DISCLAIMER. THE RIBOGENE TECHNOLOGY, INCLUDING THE
RIBOGENE SUBSTANCES, PROVIDED HEREUNDER, IS PROVIDED "AS IS" AND RIBOGENE
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN
ALL CASES WITH RESPECT THERETO. Without limiting the generality of the
foregoing, RiboGene expressly does not warrant (i) the success of any study or
test commenced pursuant to the Research Program, or (ii) the safety or
usefulness for any purpose of RiboGene Technology or the Collaboration Know-How.
7.6 DAINIPPON DISCLAIMER. THE DAINIPPON TECHNOLOGY, INCLUDING THE
DAINIPPON SUBSTANCES, PROVIDED HEREUNDER ARE PROVIDED "AS IS" AND DAINIPPON
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN
ALL CASES WITH RESPECT THERETO. Without limiting the generality of the
foregoing, Dainippon expressly does not warrant the safety or usefulness for any
purpose of the Dainippon Technology or the Collaboration Know-How.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY RIBOGENE. RiboGene shall indemnify Dainippon,
its Affiliates and sublicensees, and all their officers, directors, employees
and agents, for any reasonable out-of-pocket costs and expenses (including court
and arbitration costs, witness fees and reasonable attorneys' fees),
non-appealed or non-appealable judicial or arbitration damage awards, and
settlement payments agreed with the third party claimants, payable or owed by
Dainippon in connection with any demands, law suits and other legal actions of
third parties ("Third Party Claim") arising from (i) the performance or breach
of this Agreement or the
12.
<PAGE> 13
License Agreement by RiboGene, (ii) any negligent actions or willful misconduct
by RiboGene, its Affiliates, agents or sublicensees, and (iii) the possession,
manufacture, use, sale or administration of Active Compounds, Inactive Derived
Compounds, Licensed Compounds, Licensed Back-Up Compounds or Products by
RiboGene or RiboGene's Affiliates or sublicensees.
8.2 INDEMNIFICATION UNDERTAKING BY DAINIPPON. Dainippon shall
indemnify RiboGene, its Affiliates and sublicensees, and all their officers,
directors, employees and agents, for any reasonable out-of-pocket costs and
expenses (including court and arbitration costs, witness fees and reasonable
attorneys' fees), non-appealed or non-appealable judicial or arbitration damage
awards, and settlement payments agreed with the third party claimants payable or
owed by RiboGene in connection with any Third Party Claim arising from (i) the
performance or breach of this Agreement or the License Agreement by Dainippon,
(ii) any negligent actions or willful misconduct by Dainippon, its Affiliates,
agents or sublicensees, and (iii) the possession, manufacture, use, sale or
administration of Active Compounds, Inactive Derived Compounds, Licensed
Compounds, Licensed Back-Up Compounds or Products by Dainippon or Dainippon's
Affiliates or sublicensees.
8.3 CONDITIONS AND LIMITATIONS OF INDEMNIFICATION OBLIGATION.
(a) In order to maintain the right to be indemnified by the
other party ("Indemnitor"), the party claiming indemnification ("Indemnitee")
must:
(i) notify the Indemnitor promptly after learning of
a Third Party Claim;
(ii) allow the Indemnitor to manage and control (by
way of intervention or otherwise) the defense and/or settlement of any such
Third Party Claim against the Indemnitee;
(iii) cooperate with the Indemnitor in the defense or
the settlement negotiations of Third Party Claims as reasonably required by the
Indemnitor;
(iv) abstain from making any statements or taking any
actions which damage the defense against a Third Party Claim (including, without
limitation, any statements against the interest of the Indemnitee or admissions
of causation or guilt);
(v) submit to the Indemnitor for prior approval
(which shall not be unreasonably withheld) any out-of-pocket expenditures to be
made in connection with the defense against a Third Party Claim.
(b) The Indemnitor shall not agree to any settlement that
adversely affects the Indemnitee's rights or interest without the Indemnitee's
prior written approval (which approval shall not be unreasonably withheld). If
the Indemnitor assumes the control of the defense against a Third Party Claim,
any out-of-pocket costs and expenses of the Indemnitee approved pursuant to
subsection (v) above shall be reimbursed based on an invoice and receipts
showing the payment of such costs and expenses.
13.
<PAGE> 14
(c) The Indemnitor shall have no obligation to indemnify the
Indemnitee to the extent that a Third Party Claim results from the negligence or
willful misconduct of the Indemnitee.
ARTICLE 9
CONFIDENTIALITY
9.1 DISCLOSURE OF CONFIDENTIAL INFORMATION. Confidential Information
disclosed by one party to the other pursuant to and during the term of this
Agreement shall be subject to the confidentiality obligations set forth below:
(a) if disclosed in writing and marked "confidential" or
"proprietary" by the disclosing party prior to or at the time of the disclosure
thereof, or if it would be apparent to a reasonable person, familiar with the
disclosing party's business and the industry, that such information is of a
confidential or proprietary nature; and
(b) if within 30 days after disclosure of Confidential
Information, the disclosing party informs the receiving party in writing of the
confidential nature of the disclosed information, describing such information
and referencing the place and date of the oral, visual or written disclosure and
the names of the employees or officers of the receiving party to whom such
disclosure was made.
9.2 CONFIDENTIALITY AND NON-USE. Except to the extent expressly
authorized by this Agreement or unless otherwise agreed in writing by the
parties, each party agrees that, for the combined term of this Agreement and the
License Agreement, and for [*] thereafter, it shall keep confidential and shall
not publish or otherwise disclose and shall not use for any purpose other than
as provided for in this Agreement any Confidential Information, unless the
receiving party can demonstrate by competent proof that such Confidential
Information:
(a) was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure by the other
party;
(b) was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving party;
(c) 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 such Agreements;
(d) was disclosed to the receiving party, other than under
an obligation of confidentiality to a third party, by a third party who had no
obligation to the disclosing party not to disclose such information to others;
or
(e) was independently discovered or developed by the
receiving party without the use of Confidential Information belonging to the
disclosing party.
14.
<PAGE> 15
9.3 AUTHORIZED DISCLOSURE.
(a) Each party may disclose Confidential Information
belonging to the other party to Affiliates and sublicensees who agree to be
bound by similar terms of confidentiality. In addition, each party may disclose
Confidential Information of the other party to the extent such disclosure is
reasonably necessary to: (i) comply with applicable securities laws and
regulations and other applicable governmental regulations, (ii) file or
prosecute patents relating to Collaboration Technology, (iii) prosecute or
defend litigation, (iv) file applications for Regulatory Approvals for Active
Compounds, Licensed Back-Up Compounds, Licensed Compounds and Products, and (v)
conduct pre-clinical or clinical trials with Active Compounds, Licensed
Compounds and Products.
(b) Notwithstanding the foregoing, in the event a party is
required to make a disclosure of the other party's Confidential Information
pursuant to subsection (a) above, it will, except where impracticable, give
reasonable advance notice to the other party of such disclosure and use best
efforts to secure confidential treatment of such information. In any event, the
parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.
ARTICLE 10
IMPORT AND EXPORT CONTROLS
10.1 UNITED STATES LAWS. The parties understand and acknowledge that
each of them is subject to regulation by agencies of the U.S. government,
including the U.S. Department of Commerce, which prohibit export, re-export or
diversion of certain products and technology to certain countries. Any and all
obligations of Dainippon or RiboGene to provide access to or license any
technology pursuant to this Agreement, as well as any technical assistance shall
be subject in all respects to such United States laws and regulations as shall
from time to time govern the license and delivery of technology and products
abroad by persons subject to the jurisdiction of the United States, including
the Export Administration Act of 1979, as amended, any successor or interim
controlling legislation, and the Export Administration Regulations issued by the
Department of Commerce, International Trade Administration, Bureau of Export
Administration. Both parties also agree to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (the "ACT") and shall refrain from making any
payments to third parties which would cause Dainippon or RiboGene to violate the
Act. Dainippon and RiboGene shall each provide the other party with such
reasonable assistance as may be required for the party requesting such
assistance to comply with all United States laws, ordinances, rules, regulations
and the like of all governmental units or agencies having jurisdiction
pertaining to this Agreement, including without limitation, obtaining all
import, export and other permits, certificates, licenses or the like required by
such United States laws, ordinances, rules, regulations and the like, necessary
to permit the parties to perform hereunder and to exercise their respective
rights hereunder.
10.2 NON-UNITED STATES LAWS. Dainippon and RiboGene shall each
provide the other party with such reasonable assistance as may be required for
the party requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies having jurisdiction pertaining to this Agreement, including without
15.
<PAGE> 16
limitation, obtaining all import, export and other permits, certificates,
licenses or the like required by such non-United States laws, ordinances, rules,
regulations and the like, necessary to permit the parties to perform hereunder
and to exercise their respective rights hereunder.
ARTICLE 11
TERM; TERMINATION
11.1 TERM. This Agreement shall expire at the end of the Tail End
Period following the Research Term; provided, however, that Dainippon shall have
the option to forego the Tail End Period and terminate the Research Program at
the end of the Research Term by giving thirty (30) days prior written notice to
RiboGene.
11.2 VOLUNTARY TERMINATION BY DAINIPPON. Dainippon may give notice of
termination of this Agreement at any time after one (1) year from the Effective
Date which notice shall be effective one hundred eighty (180) days' after the
date received by RiboGene. Dainippon shall reimburse RiboGene for the costs of
any activities pursuant to the Research Program for which obligations were
undertaken prior to receipt of such notice and which are incurred during or
after the one hundred eighty (180) days period to the extent that such costs are
not covered by the Research Program Funding already paid by Dainippon at that
time pursuant to Section 4.1. If Dainippon terminates this Agreement pursuant to
this Section 11.2, all rights and licenses to Active Compounds, Licensed
Compounds, Licensed Back-Up Compounds, RiboGene Technology and Collaboration
Technology granted to Dainippon under this Agreement or the License Agreement
shall terminate.
11.3 TERMINATION FOR MATERIAL BREACH. If either party materially
breaches this Agreement, including, without limitation, its due diligence
obligations under Section 2.7, and the breaching party has not within sixty (60)
days of notice of breach from the non-breaching party (i) cured the breach or
(ii) initiated good faith efforts to cure such breach to the reasonable
satisfaction of the non-breaching party, the non-breaching party may terminate
this Agreement upon expiration of such sixty (60)-day period.
11.4 LICENSES UPON TERMINATION FOR MATERIAL BREACH. In the event this
Agreement is terminated by Dainippon based on a material breach by RiboGene,
then RiboGene's license and rights shall terminate and Dainippon shall have a
perpetual, paid-up exclusive worldwide license under RiboGene Technology and
RiboGene owned and jointly owned Collaboration Technology to research, develop,
make, have made, use and sell any Active Compound in any field. In the event
this Agreement is terminated by RiboGene based on a material breach by
Dainippon, then Dainippon's license and rights shall terminate and RiboGene
shall have a perpetual, paid-up exclusive worldwide license under Dainippon
Technology and Dainippon owned and jointly owned Collaboration Technology to
research, develop, make, have made, use and sell any Active Compound in any
field.
11.5 LICENSES AFTER EXPIRATION OR TERMINATION. If upon expiration or
termination of this Agreement other than due to breach by RiboGene, Dainippon
has not developed at least one (1) Licensed Compound, or if such development
terminates during pre-clinical or clinical studies RiboGene shall have a
perpetual exclusive royalty-bearing worldwide license under Dainippon solely
owned Collaboration Technology to
16.
<PAGE> 17
research, develop, make, have made, use and sell any Active Compound and to use
and apply non-compound related Collaboration Technology in the Field.
11.6 SURVIVING RIGHTS. The obligations and rights of the parties
under Sections 3.1, 3.3, 3.4, 4.1, 11.4, 11.5, 11.8, 12.6, and Articles 5, 6, 7,
8, and 9 shall survive expiration or termination of this Agreement.
11.7 ACCRUED RIGHTS; SURVIVING OBLIGATIONS. The 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 any damages
arising from any breach hereunder.
11.8 TERMINATION FOR BANKRUPTCY. To the extent permitted by law, in
the event either party becomes insolvent, files bankruptcy or is declared
bankrupt, the other party may terminate this Agreement immediately; provided,
however, in the event of such termination the insolvent or bankrupt party shall
assign to the other the intellectual property rights licensed under this
Agreement subject only to the payment of any royalties agreed herein with
respect to such intellectual property.
ARTICLE 12
MISCELLANEOUS
12.1 WAIVER. No waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be deemed a
waiver as to any subsequent or similar breach or default.
12.2 ASSIGNMENT. Neither party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning party or (ii) to an Affiliate;
provided, however, that in no event shall either party's rights and obligations
hereunder be assigned without prior written notice to the other party. In any
case, neither party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their permitted
successors and assigns.
12.3 NOTICES. Any notice or other communication required or permitted
to be given to either party hereto shall be in writing and shall be deemed to
have been properly given and to be effective on the date of delivery if
delivered in person or by facsimile or fourteen (14) days after mailing by
registered or certified airmail, postage paid, to the other party at the
following address:
17.
<PAGE> 18
In the case of RiboGene: RiboGene, Inc.
26118 Research Road
Hayward, CA 94545
Fax: (510) 293-2596
Attention: President
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Fax: (650) 857-0663
Attention: Brian C. Cunningham, Esq.
In the case of Dainippon: Dainippon Pharmaceuticals Co., Ltd..
6-8 Doshomachi 2 chome, Chuo-ku
Osaka 541-0045
Japan
Fax: 011 81 6 203 0059
Attention: President
Either party may change its address for communications by a notice to the other
party in accordance with this section.
12.4 HEADINGS. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
12.5 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
12.6 CONSTRUCTION OF AGREEMENT AND CHOICE OF LAW; RESOLUTION OF
DISPUTES.
(a) This Agreement and its terms and conditions shall be
governed exclusively by and construed according to the laws of California,
U.S.A., excluding its choice of law provisions and also excluding the United
Nations Convention on Contracts for the International Sale of Goods. The
official text of the Agreement and any notices given or accounts or statements
required hereby shall be in English.
(b) All disputes which may arise between the parties hereto
in relation to the interpretation or administration of this Agreement shall be
first referred to the Research Committee for resolution. Any disputes which the
Research Committee is unable to resolve within a reasonable period of time shall
be resolved by the agreement of the Chief Executive Officers or the Presidents
of the respective parties.
(c) Any disputes which cannot be resolved in this manner
shall be finally settled by arbitration in accordance with the Conciliation and
Arbitration Rules of the
18.
<PAGE> 19
International Chamber of Commerce. The arbitration shall be held in San
Francisco. The award rendered by the arbitration shall in any case be final and
binding upon the parties hereto.
12.7 FORCE MAJEURE. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The party
suffering such occurrence shall immediately notify the other party as soon as
practicable and any time for performance hereunder shall be extended by the
actual time of delay caused by the occurrence.
12.8 INDEPENDENT CONTRACTORS. In making and performing this
Agreement, Dainippon and RiboGene are, and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between RiboGene and Dainippon. At no time shall one party make commitments or
incur any charges or expenses for or in the name of the other party.
12.9 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
12.10 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity, or under any other agreement between the
parties. All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
12.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
12.12 ENTIRE AGREEMENT. This Agreement and any Exhibits referred to
herein embodies the final and complete understanding of the parties with respect
to the subject matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
19.
<PAGE> 20
IN WITNESS WHEREOF, both Dainippon and RiboGene have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, as of the day and year hereinabove written.
RIBOGENE, INC. DAINIPPON PHARMACEUTICAL CO., LTD.
By: By:
--------------------------------- ------------------------------------
Name: Charles J. Casamento Name: Takeshi Tomotake
Title: Chairman, President and Title: President
Chief Executive Officer
20.
<PAGE> 21
EXHIBIT 1.1
CRITERIA FOR ACTIVE COMPOUNDS
[*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
i.
<PAGE> 22
EXHIBIT 1.3
ASSAYS
[*]
[*]
[*]
[*]
[*]
[*]
[*]
i.
<PAGE> 23
EXHIBIT 1.23
RESEARCH PROGRAM
RiboGene Responsibility
[*]
Joint Responsibility
[*]
Dainippon Responsibility
[*]
ii.
<PAGE> 24
EXHIBIT 1.23 (CONTINUED)
TIME FRAME
[*]
<TABLE>
<S> <C> <C> <C> <C>
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
</TABLE>
iii.
<PAGE> 25
EXHIBIT 1.23 (continued)
RiboGene Resources
RiboGene anticipates [*] during the Research Term. The [*] approximately as
follows over the term of the Research Program.
Annual Breakdown:
[*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
iv.
<PAGE> 26
EXHIBIT 2.3
CRITERIA FOR LICENSED COMPOUNDS
Criteria for Licensed Compounds will be determined by the Research Committee and
will be decided based on [*]. The following criteria [*] :
[*]
v.
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our reports dated January 22, 1998 (except
Note 9, as to which the date is May 19, 1998), in Amendment No. 7 to the
Registration Statement (Form S-1) and related Prospectus of RiboGene, Inc. for
the registration of 3,105,000 shares of its common stock.
Palo Alto, California ERNST & YOUNG LLP
May 19, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF COUNSEL
The undersigned hereby consents to the use of our name and the statement
with respect to us appearing under the heading "Experts" in Amendment No. 7 to
the Registration Statement on Form S-1 of RiboGene, Inc.
/s/ Pennie & Edmonds LLP
- ---------------------------
PENNIE & EDMONDS LLP
New York, New York
May 19, 1998
