<PAGE> 1
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
Commission File Number 0-14278
PANAX PHARMACEUTICAL COMPANY LTD.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3754005
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Park Avenue
New York, NY 10022
(Address of principal executive office)
Registrant's telephone number, including area code: (212) 319-8300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such
filing requirements for the past 90 days. Yes /X/ No / /
==============================================================================
<PAGE> 2
PANAX PHARMACEUTICAL COMPANY LTD.
TABLE OF CONTENTS
Page
PART 1 - FINANCIAL INFORMATION
BALANCE SHEETS -- For December 31, 1996 (unaudited) and
June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 3
STATEMENT OF OPERATIONS (unaudited) -- For the Three and Six Months
Ended December 31, 1996 and December 31, 1995 and the Period
from July 1, 1993 (Commencement of Operations) through
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 4
STATEMENT OF CASH FLOWS (unaudited) -- For the Six Months Ended
December 31, 1996 and December 31, 1995 and the Period From
July 1, 1993 (Commencement of Operations) through
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . 5
NOTE TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 6
PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE> 3
Part I - Financial Information
PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,1996 June 30, 1996
---------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . $ 158,593 $ 398,689
Certificate of deposit . . . . . . . . 300,000 200,000
Investments to be held on maturity. . . 1,820,155 2,457,979
Other current assets . . . . . . . . . 64,890 37,558
---------- ----------
Total current assets . . . . . . . . 2,343,638 3,094,226
---------- ----------
Equipment
Research equipment . . . . . . . . . . 111,534 109,733
Other equipment . . . . . . . . . . . . 15,872 15,872
---------- ----------
127,406 125,605
Less accumulated depreciation . . . . . . 85,462 66,344
--------- ---------
41,944 59,261
Other Assets . . . . . . . . . . . . . . 37,961 38,069
---------- ----------
TOTAL . . . . . . . . . . . . . . . . $2,423,512 $3,191,556
========== ==========
LIABILITIES
Current liabilities:
Accounts payable and other
accrued expenses . . . . . . . . . . $ 41,970 $ 71,419
---------- ----------
Management fees payable . . . . . . . 0 112,500
---------- ----------
Accrued salary - stockholder . . . . . 0 28,000
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value;
authorized 10,000,000 shares;
outstanding 3,342,327 and
3,315,710 shares respectively. . . . . . 334 331
Additional paid-in capital . . . . . . . . 5,646,773 5,460,543
Unamortized value of warrants. . . . . . . (119,643) (138,819)
Deficit accumulated during the
development stage . . . . . . . . . . . (3,145,892) (2,342,400)
Less common stock held in treasury
(0 and 180,000 shares) . . . . . . . . . 0 (18)
----------- -----------
Total stockholder's equity . . . . . 2,381,572 2,979,637
----------- -----------
TOTAL . . . . . . . . . . . . . . . . $2,423,542 $3,191,556
=========== ===========
</TABLE>
<PAGE> 4
<TABLE>
PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Period from
July 1, 1993
(Commencement
of Operations)
Three Months Six Months Through
Ended December 31, December 31,
----------------------------- -------------
1996 1995 1996 1995 1996
----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C>
Sales . . . . . . . . . . $ 1,425 $ 1,425 $ 1,425
Cost of Goods Sold . . . 900 900 900
------- ------- ------- ------- ---------
Profit from Sales . . . . 525 525 525
Costs and Expenses:
Research and
development . . . . . $227,722 $138,798 $424,624 $233,055 $1,590,966
General and
administrative . . . . 223,138 234,575 444,801 423,928 1,865,354
Write-off of
debt discount . . . . - - - - 75,000
Interest expense. . . . - - - - 6,160
------- ------- ------- ------- ---------
450,860 373,373 869,425 656,983 3,536,580
Interest (Income) . . . . (39,180) (97,484) (65,408)(140,574) (390,163)
------- ------- ------- ------- ---------
Net Loss . . . . . . . . $411,155 $275,889 $803,492 $516,409 $3,145,892
======== ======== ======== ======== ==========
Net loss per share. . . $.13 $.08 $.25 $.16
====== ====== ====== ======
Weighted average number
of common shares
outstanding . . . . . . 3,223,298 3,315,750 3,179,504 3,315,710
========= ========= ========= =========
</TABLE>
<PAGE> 5
PANAX PHARMACEUTICAL COMPANY LTD.
(a development stage company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
July 1, 1993
(Commencements
of Operations)
Six Months Ended Through
December 31, December 31,
------------------------ -------------
1996 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Cash flows from
operating activities:
Net loss . . . . . . . . $ (803,492) $ (516,409) $ (3,145,892)
Adjustments to reconcile net
loss to net cash (used in)
operating activities:
Depreciation and
amortization . . . . . . . . 19,120 16,177 85,963
Write-off of debt discount. . 75,000
Value of services paid by
options & warrants . . . . . 80,000
Accretion of compensatory
options and warrants . . . . 64,925 24,792 143,606
(Increase)decrease in
prepaid expenses and
other assets . . . . . . . (27,224) (76,327) (102,282)
Increase (decrease) in
accounts payable and
accrued expenses . . . . . . (29,449) 1,357 69,970
Expenses paid by affiliate. . 96,682
Increase in management
fees payable . . . . . . . . (112,500)
--------- -------- ----------
Net cash (used in)
operation activities. . . (776,120) (550,410) (2,584,453)
--------- --------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of investments . . . 537,824 354,565 (5,430,155)
Acquisition of equipment. . . . (1,800) (24,233) (127,404)
Organization costs . . . . . . (1,069)
Net cash (used in)
investing activities. . . 536,024 (330,332) (2,248,628)
-------- --------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of common stock -
net of expenses . . . . . . . 4,991,674
Proceeds form note payable -
affiliates. . . . . . . . . . 14,000
Proceeds from notes payable -
stockholders. . . . . . . . . 96,300
Proceed from notes payable -
other . . . . . . . . . . . . 300,000
Repayment of notes payable -
stockholders and other. . . . (410,300)
-------- --------- -----------
Net cash provided by
financing activities . . . 4,991,674
-------- --------- -----------
NET INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS . . . . . .(240,096) (220,078) 158,593
Cash and cash equivalents -
beginning of period . . . . . . 398,689 458,534 - 0 -
CASH AND CASH EQUIVALENTS -
END OF PERIOD . . . . . $ 158,593 $ 238,456 $ 158,593
========= ========= =========
</TABLE>
NON-CASH ACTIVITY: Conversion of management fee payable and accrued salary
into 206,617 shares of common stock (26,617 newly issued shares and 180,000
shares held in treasury).
<PAGE> 7
NOTE TO FINANCIAL STATEMENTS
(unaudited)
The unaudited financial statements of Panax Pharmaceutical Company Ltd.
(the "Company") as of December 31, 1996 and three and six months ended
December 31, 1996 and December 31, 1995 have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") and,
in the opinion of management, reflect all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the results of
operations for the interim periods presented. Certain information and
footnote disclosures normally included in financial statements, prepared in
accordance with generally accepted accounting principles, have been condensed
or omitted pursuant to such rules and regulations. However, management
believes that the disclosures are adequate to make the information presented
not misleading. These financial statements and the notes thereto should be
read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1996. The results for the interim periods are not necessarily indicative
of the results for the full fiscal year.
PLAN OF OPERATIONS
General
Panax Pharmaceutical Company Ltd. ("the Company") has been primarily
engaged in the discovery and development of new pharmaceutical compounds
identified in and isolated from plants. The Company takes the ethnobotanical
approach to the study of plants which is supplemented by medical science and
natural product chemistry. Many of the plants targeted by the Company are
indigenous to Russia and other States of the Commonwealth of Independent
States.
The Company conducts its research activities in Russia, under its long-
term agreement with the Komarov Institute, and in the United States under
agreements with the National Cancer Institute, University of Kansas and Case
Western Reserve University, as well as under arrangements with other
university laboratories and contract research organizations. As of December
31, 1996, the Company collected and catalogued approximately 1,400 species of
plants and fungi and accumulated a library of pure compounds which consists of
hundreds of molecules, some of which appear to have novel structures and/or
previously unknown pharmacological activity. The Company's testing program
has focused on targets in the following therapeutic areas: anti-fungal, anti-
bacterial, anti-viral, immune system stimulation and suppression, anti-cancer,
and the central nervous system (CNS). Currently, four compounds are
undergoing preclinical testing for toxicity and efficacy in the anti-fungal
and anti-bacterial areas.
Significant Events
In 1996 the Company determined to expand its research and development
effort through the acquisition and licensing of new technologies and products.
In January 1997, the Company entered into an agreement in principle to acquire
Sangen Pharmaceutical Company ("Sangen") and signed a letter of understanding
with Dr. Craig Aronchick to acquire rights to a preparative tablet used to
clear the colon prior to colonoscopy.
Agreement in principle to combine with Sangen Pharmaceutical Company:
In January 1997, the Company entered into an agreement in principle to
acquire Sangen ("Combination"), a corporation recently organized to engage in
the discovery and development of pharmaceutical products for the treatment of
infectious and inflammatory diseases and cancer. The Combination is subject
to several contingencies including: (i) execution of a definitive agreement,
<PAGE> 7
(ii) agreements for the acquisition of licenses to Sangen's technologies, and
(iii) the completion of a new debt or equity financing of at least $7,500,000
by late 1997. Following the Combination, Dr. Leonard S. Jacob, Sangen's sole
stockholder and Chief Executive Officer, will become the Chairman of the Board
and Chief Executive Officer and will execute a long term employment agreement
with the Company. Dr. Taffy Williams, currently President and Chief Executive
Officer will become President and Chief Operating Officer of the combined
Company. Pursuant to the Combination, the Company will acquire rights to two
technologies for a combination of royalties, warrants and cash payments.
Warrants for the purchase of up to an aggregate of 2,564,540 shares of the
common stock of the Company at an exercise price of $.61 per share, the
average market price of the Company for the period immediately prior to the
execution of the agreement in principle, will be issued upon completion of the
Combination. A total of 1,783,340 shares will be exercisable upon completion
of the Combination, with 900,000 initially subject to buy back, with the
remaining 781,200 dependent upon certain milestones. Prior to the completion
of the Combination, the Company has agreed to provide a non interest bearing
loan to Sangen for research and development expenses of up to $100,000.
In consideration of his efforts with respect to the foregoing
transactions, the Company granted to Dr. Taffy J. Williams upon consummation
of the Combination an employee stock option to purchase 500,000 shares of the
common stock of the Company, the grant of which is subject to the consummation
of the foregoing $7,500,000 financing and the approval by the Company's
shareholders of amendments to the Company's Stock Option Plan providing for an
increase in the shares subject to the Plan and expanding the adjustment
provisions under the Plan.
Letter of understanding to acquire the colonic preparation:
In January 1997, the Company signed a letter of understanding to acquire
the exclusive worldwide license to manufacture and sublicense a novel
preparative tablet product for clearing the colon prior to colonoscopy from
Dr. Aronchick. In addition to the payment of royalty fees, the Company
has agreed to engage Dr. Aronchick as a consultant under a long term agreement
pursuant to which he is to receive cash fees and options to purchase up to
750,000 shares of common stock exercisable at a price of $.61 per share, with
the ability to exercise options to be subject to the satisfaction of certain
financing and sale contingencies and the approval of the shareholders of the
Company of a Consultant Option Plan recently adopted by the Board of Directors
under which the options were authorized.
Results of Operations
The Company incurred a loss of $411,155 and $275,889 for the three month
and $803,492 and $516,409 for the six month periods ended December 31, 1996
and 1995, respectively. The Company expects to incur additional losses in the
foreseeable future. The per share loss was $0.13 and $0.08 for the three
month and $0.25 and $0.16 for the six month periods ended December 31, 1996
and 1995, respectively. The increase in the weighted average number of common
shares outstanding in the three and six month periods ended December 31, 1996
is the result of the issuance of 206,617 shares of the Common Stock of the
Company for conversion of certain liabilities held by certain officers and
directors.
The Company had revenues of $1,425 for the three months ended December
31, 1996 with no revenues in prior periods. The revenues were derived from
chemical synthesis services provided by the Company and its contractors.
Interest income amounted to $39,180 and $97,484 for the three month
and $65,408 and $140,574 for the six month periods ended December 31, 1996 and
1995, respectively and $390,163 for the period from inception through
December 31, 1996. Interest income was earned on the proceeds of the
Company's initial public offering in January 1995 of its commonstocks and
warrants. Interest income has been decreasing reflecting reduced cash
balances.
Research and development expenses amounted to $227,722 and $138,798 for
the three month and $424,624 and $233,055 for the six month periods ended
December 31, 1996 and 1995, respectively. The increase was attributable to
the expansion of operations including research conducted under an agreement
with the University of Kansas, an agreement with Case Western Reserve
University, as well as agreements with contract research organizations for
preclinical testing of the Company's compounds. Research and development
<PAGE> 8
expenses are expected to increase substantially in future quarters following:
(i) the acquisition of the world-wide rights of a preparative tablet for
clearing the colon prior to colonoscopy (see Significant Events) and (ii)
completion of the proposed Combination with Sangen in which the Company will
license and develop two platform technologies (see Significant Events).
General and administrative expenses amounted to $223,138 and $234,575
for the three month and $444,801 and $423,923 for the six month periods ended
December 31, 1996 and 1995, respectively. The Company anticipates an increase
in general and administrative expenses following completion of the Combination
following which Dr. Leonard S. Jacob will become the Chairman of the Board and
Chief Executive Officer of the Company.
Liquidity and Capital Resources
Cash and investments totaled $2,278,748 as of December 31, 1996. The
Company estimates that the cost of operations for the year ending June 30,
1997 will be approximately $2,000,000, of which approximately $1,100,000 will
be expended for research and development.
In November 1996, the Company agreed to issue 206,617 shares of common
stock in satisfaction of contingent obligations totaling $140,500 consisting
of: (i) 165,441 shares for $112,500 as to management fees payable to Amercom
Funding Ltd. ("Amercom"), which affiliates are certain officers, directors and
shareholders, of the Company, all of which came from the Company's treasury
stock and, (ii) 41,176 shares for $28,000 as to accrued salary payable to an
officer and director of the Company, of which, 14,559 shares came from the
Company's treasury stock and 26,617 were newly issued. The stock was
converted at $0.68 per share, the market price on that date.
In January 1997 the Company employed Amercom, which was previously
engaged to provide management services pursuant to a Management Services
Agreement expiring February 1, 1998, to assist in assigning of the Company's
office lease at 425 Park Avenue, New York, New York. Amercom may receive
warrants to purchase up to 398,750 shares of common stock of the Company based
on the date and extent of its success in assigning the lease, at an exercise
price of $.61 per share. In the event the Sangen Combination acquisition is
successfully consummated, the Management Agreement is to be extended for a
two year period with the compensation for the first year to be $100,000 and
for the second year to be warrants to purchase 175,000 shares of the common
stock of the Company at an exercise price pf $.61 per share.
The Company's future capital requirements depend on numerous factors
which cannot be quantified, including continued progress in its research and
development activities, progress with pre-clinical studies and clinical
trials, prosecuting and enforcing patent claims, technological and market
developments, the ability of the Company to establish product development
arrangements, the cost of manufacturing scale-up, effective marketing
activities and arrangements, and licensing or acquisition activity. The
Company will seek to obtain additional funds through equity or debt financing,
collaborative or other arrangements with corporate partners and others, and
from other sources. No assurance can be given that additional financing will
be available when needed or on terms acceptable to the Company. If adequate
additional funds are not available, the Company may be required to delay,
scale back or eliminate certain of its research, drug discovery or development
activities or certain other aspects of its business. If adequate funds are
not available, the Company's business will be materially and adversely
affected.
The Company anticipates incurring additional losses over at least the
next several years, and such losses are expected to increase as the Company
expands its research and development activities relating to its novel
preparative tablet product for clearing the colon prior to colonoscopy and its
contemplated acquisition of two technologies for the treatment of infectious
and inflammatory diseases and cancer. To achieve profitability, the Company,
alone or with others, must successfully develop and commercialize its
technologies and products, conduct pre-clinical studies and clinical trials,
obtain required regulatory approvals and successfully manufacture, introduce
and market such technologies and products. The time required to reach
profitability is highly uncertain, and there can be no assurance that the
Company will be able to achieve profitability on a sustained basis, if at all.
<PAGE> 9
PART II -- OTHER INFORMATION
Item 4 -- Submission of Matters to a Vote of Security Holders
At the 1996 Annual Meeting of Shareholders of the Company held on
December 19, 1996 the following action, were taken by the shareholders:
(a) The Directors of the Company were reelected by the following
votes:
<TABLE>
<CAPTION>
Name FOR Abstain
------- ------- --------
<S> <C> <C>
Dr. Taffy J. Williams 2,622,132 27,500
Dr. Tanya G. Akimova 2,622,132 24,050
Mr. J. Robert LeShufy 2,625,132 24,050
Dr. Armen L. Takhtajan 2,625,632 24,050
Mr Norman Eisner 2,625,132 24,050
Mr. Bernard Nagelberg 2,622,382 27,300
Mr. David Zaretsky 2,622,382 24,550
Dr. Leonid Shpilenya 2,622,632 27,050
</TABLE>
(b) The approval of an amendment of the Stock Option Plan to increase
the number of shares subject to the Plan from 500,000 to 800,000 by vote of
1,652,585 shares FOR, 47,500 shares AGAINST and 3,800 shares ABSTAINED.
Item 5 -- EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
10(a)-1 Amendment to 1993 Stock Option Plan as approved on December
19, 1996.
10(j) Copy of press release announcing a letter of understanding to
acquire a product for clearing the colon prior to colonoscopy.
10(k) Copy of press release announcing agreement in principle to
effect a business combination with Sangen Pharmaceutical
Company.
(B) Report of Form 8K
No report of Form 8K were filed with respect to events during the
three months ended December 31, 1996.
<PAGE> 10
Signatures
Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PANAX PHARMACEUTICAL COMPANY LTD.
/s/ Taffy J. Williams, Ph.D.
-----------------------------------------
Taffy J. Williams, President and
and Chief Executive Officer
/s/ Norman Eisner, Vice President
----------------------------------------
Norman Eisner, Vice President, Treasurer
and Chief Financial Officer
Date: February 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENT AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 158593
<SECURITIES> 2120155
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2343638
<PP&E> 127406
<DEPRECIATION> 85462
<TOTAL-ASSETS> 2423542
<CURRENT-LIABILITIES> 41970
<BONDS> 0
0
0
<COMMON> 334
<OTHER-SE> 2381238
<TOTAL-LIABILITY-AND-EQUITY> 2423542
<SALES> 0
<TOTAL-REVENUES> 1425
<CGS> 900
<TOTAL-COSTS> 525
<OTHER-EXPENSES> 804017
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (803492)
<INCOME-TAX> 0
<INCOME-CONTINUING> (803492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (803492)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
<PAGE> 11
Exhibit 10(a)-1
Amendment to 1993 Stock Option Plan
Article 4 of the Stock Option Plan is hereby amended to read as follows:
"4. Stock Reserved for Plan. Subject to adjustment as provided in
paragraph 6 hereof, a total of 800,000 shares of the common stock, $.0001
par value, of the Company ("Stock") shall be subject to the Plan. The shares
subject to the Plan shall consist of unissued shares, and such number of
shares shall be, and hereby is, reserved for sale for such purpose. Any of
such shares which may remain unsold and which are not subject to outstanding
Options at the termination of the Plan shall cease to be reserved for the
Plan, but until termination of the Plan the Company shall at all times
reserve a sufficient number of shares to meet the requirements of the Plan.
Should any Option for any reason expire or be canceled prior to its exercise
or relinquishment in full, the shares theretofore subject to such Option may
again be subject to an Option under the Plan".
EXHIBIT 10-(j)
Panax to Acquire Novel Product used for Clearing the Colon prior to
Colonoscopy
NEW YORK, NY; January 15, 1997 -- Panax Pharmaceutical Company Ltd.
[NASDAQ: PANX, PANXU, PANXW] today announced that it has signed a letter of
understanding to acquire the world-wide exclusive rights to manufacture, sell
and sublicense a novel preparative tablet product for clearing the colon
prior to colonoscopy. During a colonoscopy, the doctor views the colon
through a camera to screen for polyps or pre-cancerous tissue. In order to
be able to perform the procedure, the colon must be completely cleared of
fecal matter. Currently, the colon is cleared through the consumption of
unusually large volumes of liquid containing polyethylene glycol (PEG) or
noxious tasting solutions of salts which induce diarrhea. The existing
products are routinely difficult to tolerate.
Clinical studies on over 300 patients suggests that Panax's
investigational purgative tablet was as effective, but better tolerated,
than two leading commercial liquid products. Panax plans to conduct
confirming phase II/III clinical trials and anticipates filing a New Drug
Application (NDA) with the Food and Drug Administration (FDA) within 18 to 24
months.
Rights to the product have been acquired from Craig Aronchick, MD for a
royalty on product sales, a warrant to purchase 250,000 shares of Common Stock
and a cash payment of $100,000. Additional warrants and cash payments are based
on progress in commercializing the product. Dr. Craig Aronchick is an attending
gastroenterologist and Head of the Endoscopy Unit at Pennsylvania Hospital in
Philadelphia, and an Associate Professor of Medicine at Jefferson Medical
College. Dr. Aronchick will consult for the Company and serve as an advisor
during the product development.
Dr. Taffy Williams, President & Chief Executive Officer, of Panax stated
that "we look forward to working with Dr. Aronchick to complete the development
of this important product. We believe that our tablets will offer distinct
advantages over current commercial purgative preparations which require the
patient to consume as much as one gallon of a liquid containing PEG.
Gasteroenterologists conducted over 4.5 million colonoscopies in just the United
States in 1992 and it is estimated that this number could double by the year
2000. The market for the product may be even larger when other potential
markets such as cleansing of the colon prior to X-ray studies or surgery are
addressed. A lower dosage form may also be useful in the relief of
constipation."
Panax Pharmaceutical Company Ltd. is engaged in the research and
development of pharmaceutical products.
<PAGE> 12
Exhibit 10(k)
Panax Pharmaceutical Company Ltd. to Combine
with Sangen Pharmaceutical Company
NEW YORK, NY: January 21, 1997 -- Panax Pharmaceutical Company Ltd.
[NASDAQ: PANX, PANXU, PANXW] today announced that it has agreed in principle to
effect the combination of its business with Sangen Pharmaceutical Company,
Penn Valley, Pennsylvania, a privately held corporation organized to engage in
the discovery and development of pharmaceutical products for treatment of
infectious and inflammatory diseases and cancer. The transaction is subject to
the satisfaction of several contingencies, including the execution of a
definitive agreement and completion of new debt or equity financing for the
combined entity. Leonard S. Jacob, M.D., Ph.D., President and Chief Executive
Officer of Sangen, will become the Chairman of the Board and Chief Executive
Officer of the new company. Taffy Williams, Ph.D., President and Chief Executive
Officer of Panax, will become the new company's President and Chief Operating
Officer. The new company's Board of Directors will initially include persons
designated by both Panax and Sangen.
At the closing of the transaction, Dr. Jacob and certain others associated
with Sangen will receive, in the aggregate, a combination of 2,350,000 shares
of, and warrants to purchase, Panax Common Stock. Pending the receipt of the
new financing, Panax has agreed to provide financial support for research and
development of the technologies described below.
Sangen owns the right to acquire an exclusive worldwide license to the
soluble CD14 inflammation suppression technology developed by Dr. Sanna Goyert,
Associate Professor of Medicine at Cornell University Medical College and
Director of the Laboratory of Molecular Hematology at North Shore University
Hospital. Dr. Goyert discovered the CD14 receptor on monocytes and elucidated
the receptor's fundamental role in the spread of bacterial infections and
inflammation. Pre-clinical data indicate that drugs which block the CD14
receptor could be used to treat inflammatory diseases like inflammatory bowel
disease (Crohn's disease and ulcerative colitis) or complications from life
threatening infections by inhibiting the release of TNF and other
pro-inflammatory mediators. Dr. Goyert is currently working to isolate new
molecules which appear to inhibit this receptor.
Additionally, Sangen holds the rights to acquire an exclusive worldwide
license to the Thrombospondin (TSP-1) technology owned by Allegheny University
of the Health Sciences and discovered by Dr. George Tuszynski, Professor of
Surgery, Medicine and Pathology at the University. Dr. Tuszynski's discovery of
the TSP-1 receptor and his pre-clinical demonstration of its critical role in
promoting metastasis may have a major impact on the treatment of cancer. The
Company initially expects to develop a drug which blocks this receptor to
prevent the spread of lung cancer. Certain Sangen compounds shown to block
metastasis in animal models via the TSP-1 receptor also exhibit
anti-angiogenic activity.
Drs. Goyert and Tuszynski will co-chair the new company's Scientific Advisory
Board.
Dr. Jacob, who previously was co-founder and Chief Operating Officer of
Magainin Pharmaceuticals, Inc. and prior to that Vice President, Worldwide
Clinical Research & Development, SmithKline & French Pharmaceutical Company,
commented that "the recent acquisition by Panax of its novel preparative tablet
product for clearing the colon prior to colonoscopy provides the new company
with a valuable late stage drug candidate. Additionally, Panax provides
excellent established chemical synthesis capabilities which will be necessary
to exploit the full potential of our technologies."
Dr. Williams, President of Panax, stated his belief that "the combination
would allow Panax to accelerate its commercialization strategy by the addition
of two platform technologies that have potential to yield several IND
candidates, including one in the GI-field (a primary focus of the combined
company) and one in the cancer field."
The enabling technologies of Sangen coupled with Panax's recent acquisition
of the rights to the GI-purgative product will provide the new company the
opportunity to more rapidly develop and commercialize its products.
